China Rare Earth Quota SetChina Releases Rare Earth Quota & Eliminates New Mining Licenses
By Michael Montgomery—Exclusive to Rare Earth Investing News
Lastmonth Chinese officials stated that information on this year rare earthquotas would soon be released, with a special consideration of theworld’s rare earth needs. The story was covered on Rare Earth InvestingNews on March, 22.Over the weekend China announced that the total output quota for 2011would be 93,800 tonnes, an increase of over 5 percent in comparison with2010. The Chinese output quota of 93,800 tonnes from mines equates to80,400 tonnes of ‘light’ rare earths, and 13,400 tonnes of ‘medium andheavy’ rare earths.The government has also stepped up enforcement of illegal mining whichadded an estimated 10,000 tonnes of material into the market. If thegovernment can eliminate all the illegal sales, this increase inproduction may be null and void in relation of supply and demandfundamentals.
This announcement follows the creation of a new tax on rare earthpurchases, which signaled a paradigm shift in the countries attitudestowards the block of 17 elements, dividing them into two specificgroups, light and heavy rare earths. This is particularly importantbecause the demand levels for the various elements differ greatly, andthe policy made for inequality in the markets. This development wascovered on Rare Earth Investing News on March, 28.
Alongside with the announcement of mining quotas, the government hasalso stated that new licenses for prospecting and mining will not begranted until June 30, 2012, almost certainly ensuring tight supplychains will remain.
“The government is very serious about tidying up this industry inChina, rationalizing it for Chinese use… China is going to turn into anet importer of rare earths over the next four to five years,” stated Nick Curtis, chairman and chief executive officer of Lynas Corp.
The ban on new mining licenses may be the most important part of theannouncement because China has stated a desire to create a stockpile ofrare earth for domestic purposes. The lack of new mining means thatChina, as Mr. Curtis stated, may become a net importer of the metals,further exacerbating supply issues.
The government has yet to release export quota figures for the secondhalf of 2011, which may be the most important figure in the rare earthmarket. It has been proposed that through export controls China istrying to entice foreign firms to move production facilities to thecountry for greater access to the materials needed for their products.This would increase high tech manufacturing jobs in the country,increasing salaries and quality of life for the Chinese worker. No datehas been set for the announcement of export quotas as of yet. Last year,the figures were released in July.
Following this latest announcement shares of many rare earthcompanies have responded positively as the increase in production issmall, and the ban on new mining ensures that tight supply of REE’s willcontinue in the medium term. Rare Element Resources (CVE:RES) and Lynas Corp. (ASX:LYC) both gained more than 5 percent, Avalon Rare Metals (TSE:AVL) gained nearly 3.5 percent on the day. However, the market was not as kind to Quantum Rare Earth Developments Corp (CVE:QRE) and Stans Energy Corp. (CVE:RUU)as both company’s shares dropped 5 percent on the day. For a look athow rare earth companies were affected by the news don’t forget the Rare Earth Investing News Stock Index for a collection of 28 rare earth related firms.
Rare Earth Mining Company News
Molycorp (NYSE:MCP)shares have gained more than 12 percent on news that the company hasacquired Estonian rare earth producer Silmet. The deal with Estonia’sSilmet Grupp worth $89 million gives Molycorp a 90 percent stake in theprocessing facility that processes rare earth from Russia for theEuropean market. Currently, the facility produces roughly 2 percent ofworld supply, producing “up to 3,000 tonnes rare earth products and 700tonnes of rare metal products annually,” reported A. Ananthalakshmi, for Reuters.
For Molycorp, the deal provides a European center for operations, aswell as a larger customer base. Reports of the processing facility donot mention the breakdown between heavy and light rare earths. However,the deal may help the diversification of Molycorp’s rare earth holdings,as their Mt. Pass mine does not have a high concentration of heavy rareearths, such as terbium & dysprosium, which are of higher value butare consumed less than light rare earth like neodymium andpraseodymium.