By Stuart Biggs
Bloomberg
January 6, 2011
Rare earth metals are key to global efforts to switch to cleaner energy -- from batteries in hybrid cars to magnets in wind turbines. Mining and processing the metals causes environmental damage that China, the biggest producer, is no longer willing to bear.
China's rare earth industry each year produces more than five times the amount of waste gas, including deadly fluorine and sulfur dioxide, than the total flared annually by all miners and oil refiners in the U.S. Alongside that 13 billion cubic meters of gas is 25 million tons of wastewater laced with cancer-causing heavy metals such as cadmium, Xu Xu, chairman of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, said at a Beijing conference on Dec. 28.
"China supplied the world with very cheap and good-quality rare earths for more than a decade at the cost of depleting its resources and damaging its environment," Wang Caifeng, who heads the government-affiliated China Association for Rare Earths, said at the conference. "The world should thank China."
With China now shutting down unregulated rare earth mines and slashing exports, users from Toyota Motor Corp. to Vestas Wind Systems A/S, the world's biggest maker of wind turbines, are concerned that supplies may be constrained. China provides more than 95 percent of global shipments of the 17 rare earth metals, also used in mobile phones, catalysts to reduce automobile exhaust emissions and energy-saving electronics.
The government cut export quotas for the first half of 2011 by 35 percent last month. That follows a 72 percent reduction in the second half of 2010, causing the price of some of the metals to more than double.
Lynas, Molycorp Leap
Mining companies including Lynas Corp. from Australia and Molycorp Inc. in the U.S. plan to make up the supply shortfall. Molycorp said Nov. 1 it restarted processing at a mine in Mountain Pass, California, that closed in 2002. The company's shares have more than doubled since the end of November.
That mine had its own environmental problems, resulting in Molycorp, then a unit of Unocal Corp., paying $1.6 million to settle with state agencies after toxic wastewater leaks in the 1990s.
With rare earths in short supply, Molycorp shares more than tripled last year on the New York Stock Exchange. Lynas also more than tripled on the Australia Securities Exchange in 2010.
Vestas uses the rare earth neodymium in magnets for its V112 wind turbine, which enters production next year, Michael Holm, a spokesman, said in a telephone interview.
Toxic Leakage
Rare earth metals aren't rare. Cerium used in batteries and to cut auto emissions, is more common than copper in the earth's crust, according to the U.S. Geological Survey Minerals Yearbook. The metals got the name because they are difficult to extract, unlike concentrated deposits of copper or gold ore.
The Baotou region in Inner Mongolia produces about half of China's annual output of 120,000 tons of rare earths, with Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. being the country's biggest producer.
A four-story tailing dam containing radioactive waste 12 kilometers (7 miles) from Baotou has been "a serious problem" and polluted rivers, Chen Zhanheng, director of the academic department of the Chinese Society of Rare Earths, said in an interview.
Baotou Steel Group, which operates the Baiyun Ebo mine, has spent 500 million yuan ($75 million) with the local government to relocate five villages after seepage from the dam polluted agricultural land and drinking water, China's official Xinhua News Agency reported on Nov. 7.
Uranium Disposal
"All rare earth ores contain uranium and thorium, which could pose a danger if not disposed of responsibly," said Dudley J Kingsnorth, who managed Australia's Mount Weld rare earths project for Ashton Mining of Canada Inc. for 10 years. He's now an independent consultant on the metals.
Rare earths require more chemicals to separate than base metals such as copper, zinc and lead, said Bernd Lottermoser, a professor of environmental earth sciences at James Cook University in Queensland, Australia.
China toughened regulations in 2009 and set production quotas to bolster prices. Subsequent export restrictions combined with rising demand have caused the price of neodymium, used in Toyota's Prius hybrid car, to surge four-fold to $80 a kilogram from $19.12 in 2009, according to Lynas.
The world excluding China will require 55,000 to 60,000 tons of rare-earth metals this year, of which as much as 24,000 tons will come from China, Molycorp's Chief Executive Officer Mark Smith said in a Jan. 3 interview on Bloomberg Radio. The company may double its planned production to 40,000 tons in 2012 to help meet global demand, he said.
Sydney-based Lynas is building a A$550 million ($550 million) rare earths project at Mount Weld, Western Australia.
Devil You Know
Molycorp's mine won a San Bernardino County permit in 2004 to operate for 30 years and passed another inspection in 2007.
Processing improvements at that California mine will almost cut in half the amount of raw ore needed to produce the same amount of rare earth oxides, Molycorp's Smith said during testimony to the U.S. House Science and Technology Committee in March. Water recycling and treatment processes will reduce the mine's fresh water usage by 96 percent, he said.
"This is one that could be reopened with strong regulatory and environmental oversight," Glenn Miller, professor of natural resources and environmental science at the University of Nevada-Reno, said in a phone interview.
"A lot of these metals are used for environmental purposes that are really important," Miller said. "It's far better to reopen this mine, where you have a known geological deposit, than go into a new country."
