Aims to update investors on developments in the world of strategy metals – crucial inputs to industry, defense and technology innovation
Terence van der Hout, december 4 – 10, 2011
This week’s bulletin is the final set of commentaries on the Hong Kong Rare Earth Conference, and covers the REE processing steps as described by ANSTO, summarizes the Ferro Corp presentation, and makes some concluding remarks on the conference.
ANSTO
The processing of rare earths (REE) into a product worth selling is, due to its complex nature and subsequent impact on operational costs, the make-or-break for a junior. Although I have touched on the topic of processing a lot in the past, I feel I should summarize the points laid out to us by Karin Soldenhoff from the Australian Nuclear Science and Technology Organisation (ANSTO), the institute that has been involved in designing and testing the processing flowsheets for Lynas, Arafura and Alkane.
Dr. Soldenhoff identifies five stages in coming to a viable REE concentrate:
- Batch testing small volumes of REE helps understand the mineralogy and determines what is gangue material.
- Designing a conceptual flowsheet, including various sub-stages through bench scale testing. This also helps in making preliminary cost assessments with regard to chemical agents. Chemical agents can contribute two-thirds of the operational costs of REE processing, so this is a crucial step.
- In a mini pilot plant, the continuous processing of the flowsheet is tested, and scale-up issues identified. Data is collected that is used for a Preliminary Feasibility Study.
- In a subsequent pilot plant, volumes testing is done in combination with the testing of different feeds. First steps are made in integration of various steps in processing.
- Continuous testing of the fully integrated circuit at higher volumes is done in a demonstration plant. This delivers end-products for client testing.
Dr. Soldenhoff was there are numerous considerations to make during testing, and each will have impact on economics. These pertain to whether the mineralogy is well known, whether there is just one mineral or many, whether REE is a by-product or not, whether the processing is complex or not, where does the thorium/ uranium get separated, and whether a mixed concentrate will be produced or separated into individual elements.
Dr. Soldenhoff concluded that REE processing is NOT simple, and is not amenable to short cuts. As a reference, Lynas has taken over 10 years to get past this stage, and Alkane has needed 7 years to define a process for extracting two REE concentrates from their fine-grained zirconium-containing minerals.
Ferro Corp
In what was possibly the most interesting presentation in Hong Kong, Jai Subramanian of Ferro Corp introduced us to the world of polishing powders and ceramics.
Mr. Subramanian looked at strategies for coping with the price explosions for cerium in the glass polishing sector, and in ceramics. Glass polishing is highly sensitive to price. Where in the past cerium, at $7 per kg, was a low cost input, it has now become an input subject to efficiencies. In the polishing of flat glass, cerium has been eliminated completely. In other applications such as LCDs and camera lenses where replacement of cerium is not feasible (both price and performance are critical), manufacturers have been forced to improve upstream processes, reduce cerium usage to the benefit of zirconium, extend the life of polishing slurries, and take more liberties in what previously were the cost bottlenecks in the process. In all, the added processing costs that are the consequence of these measures are more than off-set by the reduction in cerium costs that are achieved.
In the world of ceramics (capacitors used in virtually every electronic device), Mr. Subramanian said cost is a very important factor. Because of innovation advancing towards further miniaturization, tiny volumes of material are needed to manufacture something which is a low cost high performer. Raising the price of an input ten-fold has severe consequences for the price of the end-product. Mr. Subramanian distinguishes between various classes of capacitors, ranging from those where performance is critical and the REE content is largest, to those where the input of REE does not constitute a necessary improvement to the operation of the capacitor. In the former, neodymium will remain a necessary element because of its properties of remaining stable in a range of temperatures. In the lesser performance-oriented capacitors, the usage of neodymium is more one of accidental development. Palladium was originally used, and when that got too expensive, a mixture of nickel, copper and neodymium was applied. Should neodymium remain too expensive or supply-constrained, Mr. Subramanian predicts that it will be engineered out of these capacitors, possibly replaced by magnesium. This would take two to three years of innovation, but once it is out, it will not retu.
Hong Kong conclusions
The sum of the Hong Kong Rare Earth presentations leads me to conclude that the application of REE will become more selective. REE production is destined to shift towards a split into two worlds. One route leads up the commodity path, where the input of REE is conditional on low pricing. We have seen that in the big (in REE terms), cost-driven markets for low performance capacitors, glass polishing of flat screens and the low performance magnets, the current pricing of REE is much too steep to be sustainable. It is here that REE will eventually be engineered out of the products, in favour of lower cost inputs with similar characteristics. Innovation in this commoditized section is already in full swing, and whether the prices of rare earths drop or not, I would assume that given the insecurities involved as well as the politicization that has become inherent in REE, this development will continue, leading to a sustainably lower demand in these sub-sectors. If the REE isn’t price-competitive, it’s out. It is here that large volumes of future REE demand will probably be lost.
The second route that REE will take, is where performance is a precondition for the quality of the end-product. Where the product is subject to harsh environmental conditions such as high temperatures, corrosion, etc. This is where REE are irreplaceable. Rising costs are considered a nuisance, and may lead to reduction strategies and other efficiencies, but REE will be needed for an indefinite period. Particularly in high performance magnets and phosphors, demand will remain strong and may even strengthen given the particular unique characteristics of some elements. And despite current market conditions that see speculators offloading their stocks and lower demands due to unsure global economic conditions, supply is not likely to keep up for such elements as dysprosium, europium and terbium for a while.
It is these sectors that presentors at the conference refer to when they say that there will be no new and high technology without rare earths. Period. A few of these technologies, such as magneto resistance and magnetic refrigeration have the potential to tap into multi-billion dollar markets. Other markets have yet to be discovered. All it takes is a steady supply of a specific set of rare earth elements, and this is where the challenge lies for juniors: find and develop deposits containing these elements, preferably economically, and don’t get too distracted by the mixed signals that are currently being sent out to confuse uninformed investors.
Terence van der Hout
Twitter: @GoldDiscFund
Disclaimer: The author is a researcher for the Gold&Discovery Fund, and neither he nor the Gold&Discovery Fund has commercial ties to, or shares in, the companies reviewed, unless explicitly stated in the text. The information in this bulletin is the author’s independent opinion of developments in markets and at companies, and hence may contain factual errors, and may not reflect the opinions of the Gold&Discovery Fund. The content of this bulletin is not intended as an investment recommendation.
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