Rare Earth Elements
Enablers of High – Tech Applications &
Green Energy Technologies
Used in relatively small amounts, rare earths allows magnetic, electrical, and
chemical processes to occur at significantly lower energy levels, allowing for
increased energy efficiency and smaller scale products. Over the next decade,
demand for rare earths is expected to grow at 7-9% pa, driven largely by a
continued shift to energy efficient ‘green’ products, increased use of mobile
electronics, and electric vehicles.
China currently produces ~97% of global rare earths. In July 2010 China
announced significant reductions to rare earths export quotas (~40%) claiming
protection of a strategic and dwindling resource. At the same time China has
made efforts to reduce illegal rare earths mining (~25% of production).
Collectively, this has resulted in a sharp increase in prices and a signal to the
rest of the world to secure new sources of production. Since
2006 rare earths prices have increased 1,000-10,000%.
Rare Earths Markets
In July 2010, ‘rare earths’, the largely unheard-of metals, made
mainstream news headlines as China announced significant reductions to
rare earths export quotas. China, which accounts for ~97% of global rare
earths production, began imposing export quotas on rare earths in 2004.
The July 2010 ~40% reduction in rare earths quotas resulted in a sharp
increase in prices and a signal to the rest of the world to secure new
sources of production. Since 2006 rare earths prices have increased 1,00010,000%.
Used in relatively small amounts, rare earths allow magnetic, electrical,
and chemical processes to occur at significantly lower energy levels,
allowing for increased energy efficiency and small scale products. We
estimate that demand for rare earths will grow at an average of 7-9% pa
over the next decade, increasing from ~125,000 t in 2010 to
239,000-288,000 t in 2020. It is estimated ~25% of rare earths production
in China was sourced from illegal mining (~50% of ‘heavy’ rare earths). In
an effort to improve environmental standards and consolidate the industry,
China is likely to see minimal increase in rare earths production.
The greater challenge in meeting forecast rare earths demand is the
over/under supply of individual rare earth metals.
A large shift is
forecasted in relative demand of individual rare earths metals, but expect
new projects entering production to have a similar distribution to current
supply, leading to significant oversupply risks for individual rare earth
metals. Projects with a significant heavy rare earths grade (not relative
distribution, just grade) are our focus for development potential.
The most advanced rare earths mine developers range in production
potential from 5,000 tpa to 20,000 tpa. It is expected that all of the dozen
most advanced rare earths projects are needed to meet forecast demand.
Based on the development timeline of these projects the ‘critical’ rare
earths (neodymium, europium, terbium, dysprosium, and yttrium) look to
remain in short supply.
Prices for rare earths have increased 1,000-10,000% from their 2006
levels, but for consumption to grow at 7-9% pa over the next decade
prices must fall significantly. Molycorp and Lynas have the opportunity to
realize 3-4 years of high pricing, but rare earths prices have likely peaked
and a slow decline is expected until the bulk of new projects achieve
production (2016-17).
Similar
to
other
industrial
commodity
booms
such
as
uranium,
molybdenum, and lithium; almost overnight the number of rare earths
exploration companies jumped from a handful to more than a hundred.
Within two years the world has figured out that, “rare earths are not rare”.
Despite the relative abundance of rare earths deposits, it is near-term
production from workable projects that is likely to remain in short supply
for the next decade. High capital costs, difficult metallurgy, marginal ‘heavy’
rare earths grades, and a lack of people with significant rare earths
processing experience are major hurdles to bringing new mines to
production.
The combination of an abundance of projects and peak pricing should not
be interpreted as a sector in decline, instead a maturing of the sector and
shift in focus to development assets. The rare earths sector differs from
past industrial mineral booms in several ways: current producers are not
increasing production, capital and technical hurdles to production are
much higher, and advanced rare earths development projects remain
attractive when an +80% drop in prices is forecast.
Rare Earth Metals
Used in relatively small amounts, rare earths allow magnetic, electrical,
and chemical processes to occur at significantly lower energy levels,
allowing for increased energy efficiency and smaller scale products. Over
the last decade rare earths have seen rapid growth for use in technology
and are critical to continued growth in mobile and ‘green’ industries.
The term ‘rare earths’ generally refers to 17 elements of the periodic table
(see Figure 1); 15 elements of the lanthanoid group as well as
yttrium and scandium which are chemically similar and/or occur within
rare earths deposits.
Figure 1 Period Table Of Elements With Rare Earth Elements Highlighted
Sources: Technology Metals Research, LLC. (2011)
Rare earths (“TREO”) can be segmented into ‘light’ and ‘heavy’ on the
basis of atomic weight with yttrium generally grouped in with heavy rare
earths (see Figure 2). Light rare earths (“LREO”) are more often found in
carbonatites while heavy rare earths (“HREO”) tend to occur in a number of
less common mineral types or in ion-absorbing clays.
The division of light and heavy rare earths is also used as a measure of
relative scarcity; light rare earths tend to be more commonly occurring
and significantly lower priced versus the less commonly occurring and
significantly more expensive heavy rare earths. Yttrium is often grouped
with heavy rare earths due to its geologic occurrence and physical
properties, though it is significantly lower priced.
The global hunt for rare earths deposits has had a strong focus on heavy
rare earths mineralization due to their much higher value, critical need in
end uses, and significantly lower risk of long-term oversupply. While
advertising that rare earths deposits have a high percentage of heavy
rare earths relative to total mineralization has become popular, it is
misleading. Having a high heavy rare earths grade can be significantly
different than having a high percentage of heavy rare earths relative to
total rare earths grade.
Figure 2 Definition Of Light & Heavy Rare Earths
Sources: Technology Metals Research, LLC. (2011)
Rare Earths Role in Technology
Rare earths have a broad range of uses; the most common uses being
catalysts, magnets, and phosphors. Catalysts have historically been the
largest end use for rare earths but the growth of mobile electronics and
‘green’ technologies has spurred the development of compact and high
efficiency motors, utilizing rare earth magnets, which now consume the
largest amount of rare earths (see Figure 3).
Sources: Technology Metals Research, LLC. (2011)
Rare Earths Role In
Technology
Figure 3 Rare Earths
Figure 3
Rare earths have a broad range of uses; the most common uses being catalysts, magnets,
and phosphors. Catalysts have historically been the largest end use for rare earths but the
growth of mobile electronics and ‘‘green’’ technologies has spurred the development of
compact and high By
efficiency
utilizing rare earth magnets, which now consume
Consumption
Endmotors,
Use (2010)
the largest amount of rare earths (see Figure 3).
Rare Earths Consumption By End Use (2010)
Consumption By Value
Consumption By Volume
Glas s
9%
Polis hes
15%
Ceram ics
6%
Phos phors
7%
Other
6%
Glas s
Other
Ceram ics
Polis hes 4%
2%
2%
10%
Magnets
20%
Magnets
39%
Phos phors
12%
Alloys
18%
Catalys ts
19%
Alloys
15%
Catalys ts
16%
Sources: Cormark
Securities
Inc., Technology
Metals Research,Metals
LLC. (2011)
and IMCOALLC. (2011) and IMCOA
Sources:
Cormark
Securities
Inc., Technology
Research,
The most notable use of rare earths is in magnets; rare earth magnets are much more
powerful than ferrite magnets providing the ability to manufacture smaller, lighter, and
more energy efficient motors. A 31:68:1 ratio of neodymium, iron, and boron is used to
The most notable use
ofrarerare
earthswithissmall
in amounts
magnets;
rare and
earth
produce
earth magnets
of dysprosium
terbiummagnets
added to
increase the magnets strength at high temperature and praseodymium to augment
magnetic field
strength.
Compactmagnets
and high efficiency
motors allow
increased to
are much more powerful
than
ferrite
providing
theforability
capabilities in mobile electronics, electric vehicles, and wind turbines. Virtually all
permanent magnet based electric motors can be made smaller and more energy efficient
manufacture smaller,
lighter, and more energy efficient motors. A 31:68:1
using rare earth metals. Not only mobile electronics benefit from rare earths, household
items such as washers and dryers can be made more energy efficient using rare earth
ratio of neodymium,
iron,
and boron
iscarsused
rare
earth
magnets.
The development
of electric
relies onto
both produce
powerful batteries
and energy
magnets with small amounts of dysprosium and terbium added to increase
5
the magnets strength at high temperature and praseodymium to
augment magnetic field strength. Compact and high efficiency motors
allow for increased capabilities in mobile electronics, electric vehicles, and
wind turbines. Virtually all permanent magnet based electric motors can be
made smaller and more energy efficient using rare earth metals. Not only
mobile electronics benefit from rare earths, household items such as
washers and dryers can be made more energy efficient using rare earth
magnets. The development of electric cars relies on both powerful
batteries and energy efficient motors to provide driving range and power
comparable to combustion engine vehicles.
Lanthanum and cerium, the most commonly occurring of the rare earths,
are used in the petroleum industry to covert heavy crude oil into gasoline
and other refined products due to their ability to interact with hydrogen
atoms in long-chain hydrocarbons. Cerium, and to a lesser degree
lanthanum and neodymium, are used in catalytic converters, in
combination with platinum group metals, to reduce the emission of
pollutants from an internal combustion engine.
Phosphors are materials that emit light when exposed to an electrical
current. LCD, LED, and plasma displays make use of compounds
containing europium, yttrium, and terbium for their specific color properties
and high electricity to light conversion efficiency. The ever
capabilities of
each
generation of
mobile
phones
are
improving
a
great
demonstration of the ability of rare earths to increase energy efficiency and
reduce size.
Beyond the three major uses for rare earths noted above, other end
uses include such items as glass, fiber optics, ceramics, plastics, polishes,
and lasers (see Figure 4).
Figure 4
End Uses Of Rare Earths By Element (2010)
Element
Symbol
Main Applications
Lanthanum
La
FCC catalysts, alooys/mischmetal (for niMH batteries, hydrogen
absorption, & creep resistent magnesium), optical glass,
additive to produce nodular cast iron, lighter flints, phosphors
Cerium
Ce
Catalytic converters, glass, ceramics & plastic pigments,
polishing, deoxidant and desulfurizer in the steel industry, selfcleaning ovens, carbon-arc lighting, michmetal
Praseodymium
Pr
NdFeB magnet corrosion resistance, high-strength metals,
yellow glass and ceramic pigment
Neodymium
Nd
NdFeB magnets, glass and ceramic pigments, autocatalysts,
lasers
Samarium
Sa
Magnets, carbon arc lighting, lasers, biofuel catalysts,
mischmetal, gological dating, nuclear application, medical uses,
optical glass
Europium
Eu
Phosphors, fuel cells, neutron absorbers
Gadolinium
Gd
Contrast agents to enhance MRI imaging, GdY garnets,
superconductors, phosphors, glass and ceramics
Terbium
Tr
Phosphors, fuel cells, lighting, magnets
Dysprosium
Dy
Holmium
Ho
Erbium
Er
Colorant in glassware & ceramics, metal alloys, repeaters in
fibre optic cables, muclear applications (medical)
Thulium
Tm
medical imaging, phosphors, lasers
Ytterbium
Yb
Bibre optics, radiation source for x-ray machines, stress gauges,
lasers, doping of stainless steel, doping of optical materials
Lutetium
Lu
Specialist x-ray phosphors, single crystal scintillators (baggage
scanners, oil exploration)
Yttrium
Y
Phosphors, stabilized zirconia, metal alloys, garnets, lasers,
catalyst for ethylene polymerization, ceramics, radar
technology, superconductors
NdFeB magnets, lasers, chalcagenide sources of ifrared
radiation, ceramics, nuclear applications, phosphors, lighting,
catalysts
Magnets, nuclear (control) rods, medical uses, lasers, red &
yellow pigments in glass & zirconia, calibration of gamma ray
spectrometers
Sources: Technology Metals Research, LLC. (2011), Roskill and IMCOA
Rare Earths Demand and Forecast
Since 2000, demand for rare earths has grown at ~4.7% pa (see Figure 5).
Over the next decade we forecast an average growth rate in rare earths
demand of 7-9% (see Figure 6). By examining the growth potential for
SEPTEMBER 13, 2011
different rare earths end uses and the percentageEDWARD
of each
metal used (see
OTTO 416·943·6748
Figure 7) we can forecast underlying metal demand growth rates. On this
basis
Rare Earths
Demand Forecast
we
observe
significantly
growth
demand
Since
2000, demand
for rare earths has higher
grown at ~4.7%
pa (see in
Figure
5). Over the for
next rare earths
we forecast an average growth rate in rare earths demand of 7-9% (see Figure 6).
such asdecade
dysprosium,
terbium, europium, neodymium, and yttrium,
By examining the growth potential for different rare earths end uses and the percentage of
each metal
used (seetoFigure
7) we ‘critical’
can forecastrare
underlying
metal (“CREO”)
demand growth (see
rates. Figure 8).
collectively
referred
as the
earths
On this basis we observe significantly higher growth in demand for rare earths such as
dysprosium, terbium, europium, neodymium, and yttrium, collectively referred to as the
rare earths
(““CREO””)
(see Figure
8).
Figure 5 ‘‘critical’’ Rare
Earths
Demand
Growth
(2000-2010)
Figure 5
Rare Earths Demand Growth (2000-2010)
9.5%
Magnets
8.8%
Ceram ics
Metal Alloys
5.8%
Other
5.8%
5.1%
Polishes
Phosphors
3.5%
Catalysts
3.4%
Glass
(2.4%)
4.7%
Total
(5.0%)
(2.5%)
0.0%
2.5%
5.0%
7.5%
10.0%
Sources: Cormark Securities Inc., Technology Metals Research, LLC. (2011), Roskill and IMCOA
Sources: Cormark Securities Inc., Technology Metals Research, LLC. (2011), Roskill and IMCOA
Over the last decade the use of rare earth magnets has grown at an average of 9.5% pa.
The significantly higher strength of rare earth magnets has allowed for higher energy
efficiency,
greater performance,
and reduced
size inearth
motors, loudspeakers,
Over the
last decade
the use
of rare
magnetshard-disks,
has grown at an
cordless power tools, and mobile electronics. We expect demand for rare earth magnets
averageto of
9.5%
pa.at similar
The rates
significantly
higher
strength
of rare earth
continue
to grow
due to the continued
transition
from traditional
magnets to rare earth magnets in all applications. In addition to growing market share of
magnetsthehas
forcarshigher
efficiency,
performance,
magnetsallowed
market, electric
and directenergy
drive wind turbines
will furthergreater
accelerate the
growth in demand for rare earth magnets.
and reduced size in motors, loudspeakers, hard-disks, cordless power
Demand for rare earths in catalyst applications has grown slightly faster than the global
tools, and
mobile
electronics.
We of
expect
demand
earth magnets
economy
in the last
decade. As production
oil continues
to shift to for
heavyrare
oil sources
we see demand for catalysts growing at above average rates. Catalysts used in
to continue
to grow at similar rates due to the continued transition from
automotives to reduce environmentally harmful emissions will also see above average
growth
rates as theto
world
shiftsearth
to higher
tier engine emission
Demand forIn addition to
traditional
magnets
rare
magnets
in all standards.
applications.
catalytic converters is likely to grow faster than the underlying demand for vehicles and
generators.
Rare earths demand in metal alloys has grown at an average of 6.8% pa over the last
decade. While we expect continued growth for use in non-battery alloy applications,
battery applications are likely to grow in line with the global economy. Rare earths are
used in nickel metal hydride batteries which have been supplanted by lithium batteries as
the performance battery of choice. Nickel metal hydride batteries are likely to continue to
growing market share of the magnets market, electric cars and direct drive
wind turbines will further accelerate the growth in demand for rare earth
magnets.
Demand for rare earths in catalyst applications has grown slightly faster
than the global economy in the last decade. As production of oil continues
to shift to heavy oil sources we see demand for catalysts growing at
above
average
rates.
Catalysts
used
in automotives to reduce
environmentally harmful emissions will also see above average growth
rates as the world shifts to higher tier engine emission standards.
Demand for catalytic converters is likely to grow faster than the underlying
demand for vehicles and generators.
Rare earths demand in metal alloys has grown at an average of 6.8%
pa over the last decade. While we expect continued growth for use in
non-battery alloy applications, battery applications are likely to grow in line
with the global economy. Rare earths are used in nickel metal hydride
batteries which have been supplanted by lithium batteries as the
performance battery of choice. Nickel metal hydride batteries are likely to
continue to be used in applications that favor cost savings over energy
and power performance and will see growth in demand in line with the
economy.
As the world shifts to higher energy efficiency lighting we expect demand
for rare earths in phosphors to grow at accelerated rates. The global shift
away from incandescent lighting to CFL and LED sources will see
increased demand for rare earth metals. Growth in LCD, LED, and
plasma screen displays as well as mobile electronics with large and fullcolor displays, will result in increased demand for phosphors and rare earth
metals.
13, 2011
Rare earths based polishes are used in the manufacture of CRT and
some types of LCD monitors, as well as high-quality mirrors and
architectural glass products. The secondary and fast growing use of rare
earths based polishes is in electronic components which has grown at 812% pa over the last decade. Collectively demand for rare earths based
polishes should continue to grow slightly faster than the global economy.
The notable exception to large growth in the rare earths sector is for use
in glass. CRT monitors are commonly made using cerium oxide stabilized
glass. The rapid transition to LCD, LED, and plasma displays has led to a
significant drop in demand in CRT monitors and subsequently
for rare
EDWARD OTTO 416·943·6748
earths in glass. To offset the decline, lanthanum has seen a growing
large and full-color displays, will result in increased demand for phosphors and rare earth
use
in glass to reduce passage of UV rays and is now commonly used in
metals.
Rare earths
based polishes are used in the manufacture of CRT and some types of LCD
camera
lenses.
monitors, as well as high-quality mirrors and architectural glass products. The secondary
and fast growing use of rare earths based polishes is in electronic components which has
grown at 8-12% pa over the last decade. Collectively demand for rare earths based
polishes
shouldare
continue
slightly faster
the global
economy.
Rare
earths
usedtoingrow
ceramics
for athan
range
of applications;
from coloring
The notable exception to large growth in the rare earths sector is for use in glass. CRT
additives
tocommonly
improving
refractory,
electrical,
and glass.
hardness
properties.
monitors are
made
using cerium
oxide stabilized
The rapid
transition toWe
LCD, LED, and plasma displays has led to a significant drop in demand in CRT monitors
expect
this sector
world
economy
growth
and subsequently
for to
raregrow
earthsslightly
in glass.above
To offset
the decline,
lanthanum
hasrates
seen adue
growing use in glass to reduce passage of UV rays and is now commonly used in camera
tolenses.
increasing demand for high technology products and continued
Rare earths are of
used
in ceramics
for a range
development
new
applications.
of applications; from coloring additives to
improving refractory, electrical, and hardness properties. We expect this sector to grow
slightly above world economy growth rates due to increasing demand for high technology
products and continued development of new applications.
Figure 6
Rare Earths Demand Forecast By End Use
Rare Earths Demand Forecast By End Use
End Use
2010
2010 Demand
Rare Earths Demand Forecast
Growth Rate
2020 Demand
(t)
Magnets
Catalysts - Petroleum Refining
Catalysts - Automotive
Alloys - Batteries
Alloys - Excluding Batteries
Phosphors
Polishes
Glass
Ceramics
Others
Total
26,000
7,800
16,700
13,400
8,600
8,500
19,000
11,000
7,000
7,000
125,000
(t)
12% - 14%
8% - 10%
6% - 8%
2% - 4%
4% - 6%
8% - 10%
4% - 6%
2% - 4%
6% - 8%
4% - 6%
7% - 9%
80,800
16,800
29,900
16,300
12,700
18,400
28,100
13,400
12,500
10,400
- 96,400
- 20,200
- 36,100
- 19,800
- 15,400
- 22,000
- 34,000
- 16,300
- 15,100
- 12,500
239,000 - 288,000
Note: Totals may not sum exactly due to rounding.
Source: Cormark Securities Inc.
Source: Cormark Securities Inc.
The exciting potential for rare earths is how many new uses have yet to be
commercialized or discovered. Above and beyond the current uses and growth rates for
rare earths are the exciting opportunities for new applications. One such example is
Molycorp’’s rare earths based water purification technology. Many of the least common
rare earth elements have never been thoroughly investigated for potential applications
simply because the metals were unavailable. As new mines enter production and global
production of erbium, holmium, thulium, and ytterbium increase it is likely that new
applications will be found for their unique physical, chemical, thermal, and electrical
The exciting potential for rare earths is how many new uses have yet to be
commercialized or discovered. Above and beyond the current uses and
growth rates for rare earths are the exciting opportunities for new
applications. One such example is Molycorp’s rare earths based water
purification technology. Many of the least common rare earth elements
have never been thoroughly investigated for potential applications simply
because the metals were unavailable. As new mines enter production and
global production of erbium, holmium, thulium, and ytterbium increase it is
likely that new applications will be found for their unique physical,
chemical, thermal, and electrical properties. Forecasts for individual rare
earth metals demand is based on the current distribution of rare earths in
the major end uses (see Figure 7). New technologies and end uses for rare
earths are upside to the estimates.
SEPTEMBER 13, 2011
Figure 7
Figure 7
EDWARD OTTO 416·943·6748
Percentage Of Rare Earth Metals Used Per End Use (2010)
Percentage Of Rare Earth Metals Used Per End Use (2010)
End Use
Magnets
Catalysts - Petroleum Refining
Catalysts - Automotive
Alloys - Batteries
Alloys - Excluding Batteries
Phosphors
Polishes
Glass
Ceramics
Others
La
Ce
90.0%
5.0%
50.0%
26.0%
8.5%
31.5%
25.0%
17.0%
19.0%
10.0%
90.0%
33.4%
52.0%
11.0%
65.0%
67.0%
12.0%
39.0%
Rare Earth Metals
Sm
Eu
Gd
Pr
Nd
23.0%
69.0%
0.8%
2.0%
3.3%
5.5%
3.0%
10.0%
16.5%
3.3%
4.9%
3.5%
1.0%
6.0%
4.0%
3.0%
12.0%
15.0%
2.0%
Tb
Dy
2.0%
0.2%
5.0%
1.8%
4.6%
1.0%
Y
Other
69.2%
3.0%
53.0%
19.0%
1.0%
1.0%
Sources:
Cormark
Securities
Inc. and IMCOA
Sources:
Cormark
Securities
Inc. and IMCOA
Combining our forecast growth rates (see Figure 6) with the relative amounts of each rare
earth metal
consumedrates
(see Figure
7) we Figure
arrive at our6)
forecast
demand
of the rare
Combining the forecast
growth
(see
with
thefor each
relative
earth metals (see Figure 8). Our forecast for individual rare earth metals demand is based
the current
distribution
of rare earth (see
metal inFigure
the major end
and new
technologies
amounts of each rareonearth
metal
consumed
7) uses
gives
forecast
and end uses are an upside to our estimates.
demand for each of the rare earth metals (see Figure 8). The forecast for
Figure 8
Rare Earth Metals Demand Forecast
individual rare earth metals demand is based on the current distribution of
Rare Earths Demand Forecast
Demand
Growth Rate
2020 Demand
rare earth metal in the major end uses2010
and
new technologies
and end
uses
are an upside to our estimates.
Lanthanum
Cerium
Praseodymium
Neodymium
Samarium
Europium
Gadolinium
Terbium
Dysprosium
(t)
28,770
48,980
8,700
23,420
790
420
740
440
1,300
(t)
5% - 7%
4% - 6%
10% - 12%
11% - 13%
6% - 8%
8% - 10%
11% - 13%
9% - 11%
12% - 14%
45,930 - 55,490
75,460 - 91,260
22,700 - 27,150
63,840 - 76,300
1,390 - 1,670
900 - 1,080
2,050 - 2,450
1,010 - 1,200
4,040 - 4,820
25.0%
17.0%
19.0%
67.0%
12.0%
39.0%
1.0%
6.0%
4.0%
3.0%
12.0%
15.0%
2.0%
3.0%
53.0%
19.0%
1.0%
1.0%
1.0%
ormark Securities Inc. and IMCOA
Combining our forecast growth rates (see Figure 6) with the relative amounts of each rare
earth metal consumed (see Figure 7) we arrive at our forecast demand for each of the rare
earth metals (see Figure 8). Our forecast for individual rare earth metals demand is based
on the current distribution of rare earth metal in the major end uses and new technologies
and end uses are an upside to our estimates.
Figure 8
Rare Earth Metals Demand Forecast
Rare Earth Metals Demand Forecast
2010 Demand
Rare Earths Demand Forecast
Growth Rate
2020 Demand
(t)
Lanthanum
Cerium
Praseodymium
Neodymium
Samarium
Europium
Gadolinium
Terbium
Dysprosium
Yttrium
Other
28,770
48,980
8,700
23,420
790
420
740
440
1,300
11,250
180
Total
125,000
(t)
5% - 7%
4% - 6%
10% - 12%
11% - 13%
6% - 8%
8% - 10%
11% - 13%
9% - 11%
12% - 14%
7% - 9%
3% - 5%
45,930 - 55,490
75,460 - 91,260
22,700 - 27,150
63,840 - 76,300
1,390 - 1,670
900 - 1,080
2,050 - 2,450
1,010 - 1,200
4,040 - 4,820
21,740 - 26,090
240 - 290
7% - 9%
239,000 - 288,000
Note: Totals may not sum exactly due to rounding.
Source: Cormark Securities Inc.
Figure 8 demonstrates the ‘‘critical’’ ranking of rare earth metals such as dysprosium,
Figure
8 demonstrates
the ‘critical’
ranking
of rare
earth
metals
such
as
neodymium,
terbium, and europium,
and yttrium,
which
have high
forecast
growth
rates.
Compounding the issue for ‘‘critical’’ rare earths is the potential supply side reaction. The
dysprosium,
neodymium,
and europium,
have
dozen most advanced
rare terbium,
earths projects
collectively and
have yttrium,
a similarwhich
rare earths
distribution to current production and the relative percentage of each rare earth metal
high
forecast
growth torates.
Compounding
thebetween
issue for
rare earths
produced
is unlikely
change.
This imbalance
rare‘critical’
earths metal
supply
distribution and forecast demand distribution will result in oversupply issues for select
iselements
the potential
supply
(see Figure
9). side reaction. The dozen most advanced rare earths
In a balanced
supply/demand
new rare
mines earths
would continue
to entertoproduction
projects
collectively
have scenario
a similar
distribution
current
until the basket value of their production reached break even. On this basis we expect the
basket valueand
of rare
to decrease
over time.
Rarerare
earths
such metal
as lanthanum
and
production
the earths
relative
percentage
of each
earth
produced
cerium are likely to sharply decrease in price as they enter significant oversupply. Rare
such to
as dysprosium,
terbium,
and europium
are more
likely
to see metal
a small supply
decline
isearths
unlikely
change. This
imbalance
between
rare
earths
in prices as they remain in short supply.
distribution and forecast demand distribution will result in oversupply
issues for select elements (see Figure 9).
9
In a balanced supply/demand scenario new mines would continue to
enter production until the basket value of their production reached break
even. On this basis we expect the basket value of rare earths to
decrease over time. Rare earths such as lanthanum and cerium are
likely to sharply decrease in price as they enter significant oversupply.
Rare earths such as dysprosium, terbium, and europium are more likely to
see a small decline in prices as they remain in short supply.
ER 13, 2011
9
EDWARD OTTO 416·943·6748
Figure 9
Rare Earths Demand Distribution Forecast
Rare Earths Demand Distribution Forecast
2010 Production
Distribution
2020 Demand
Distribution
Change In
Relative Demand
Oversupply
Risk
Lanthanum
Cerium
Praseodymium
Neodymium
Samarium
Europium
Gadolinium
Terbium
Dysprosium
Yttrium
Other
23.0%
39.2%
7.0%
18.7%
0.6%
0.3%
0.6%
0.4%
1.0%
9.0%
0.1%
19.2%
31.6%
9.5%
26.6%
0.6%
0.4%
0.9%
0.4%
1.7%
9.1%
0.1%
(16%)
(19%)
36%
42%
(8%)
12%
44%
19%
62%
1%
n/a
High
High
Low
Low
High
Low
Low
Low
Low
Low
n/a
Total
100.0%
100.0%
Source: Cormark Securities Inc.
arths Supply
Since the 1980s China has gradually increased rare earths production while the rest of the
world has declined. By-product light rare earths production from iron ore mines in the
Bayun Obo region of China have been the primary source for low-cost production
undercutting
global
competitors.
Without
significant
revenue
light rare of
earths
The
estimated
demand
for rare
earths
will grow
at from
an average
7-9% pa
production, global producers were forced to shut down and by-product production of
over
increasing
~125,000
t inearths
2010
239,000heavythe
rarenext
earthsdecade,
ceased outside
China. As from
demand
for heavy rare
has to
grown
production has been sourced through mining of exceptionally low grade ion-absorption
288,000
in 2020.
One
of (~50%
the many
challenges
meeting forecasted
clays in thet south
provinces
of China
estimated
to be illegallyinmined).
10
Rare earths
Earths Supply
Historyis the over/under supply of individual rare earth
rare
demand
150
Rare Earths Production (000 t)
metals.
125
China
Res t of World
100
75
50
25
0
1985
1990
1995
2000
2005
2010
Sources: Cormark Securities Inc. and Roskill
China currently accounts for ~97% of rare earths production and is the only significant
source of heavy rare earths. In 2004 China began implementing export quotas on rare
earth metals, claiming protection of a dwindling resource and a focus on increasing value
add manufacturing within the country. The export quota has decreased from (66,000 t) in
2004 to the current level of ~30,000 t. The July 2010 announcement that full year export
quotas were being reduced 40% from 2009 levels sent shockwaves through the market
and has resulted in the dramatic rise in rare earths prices.
In addition to imposing export quotas on rare earths production, China has worked to
improve environmental standards in the rare earths mining sector by shutting down more
10