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Vol. 15, No. 30 Week of July 25, 2010
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: REEs become rarer on China export cuts

The Far East country chokes global supply of the high-technology metals prompting the U.S. to stimulate domestic production

Shane Lasley

Mining News

China, which mines the majority of the global supply of rare earth elements within its borders, has, over recent years, increasingly restricted its exports of the unique minerals to non-China-based production facilities. This trend has continued with a July announcement that the Far East country intends to slash its exports of the high-technology metals by an additional 72 percent.

Rare earth minerals are made up of 17 elements including terbium, thulium and yttrium. They are widely used in green technology such as wind turbines and hybrid cars; high-tech consumer goods like mobile phones and iPods; and military applications such as guided missiles, lasers, radar systems and night vision equipment.

The United States is nearly 100 percent dependent upon China for imports of nearly all of these vital materials, and this monopoly on metals critical to advanced technology, green energy and national defense has U.S. lawmakers and business leaders worried.

“China accounts for 97 percent of global rare earth production and has held clean energy manufacturing hostage by limiting exports. As a direct result, we risk a future in which wind turbines, solar panels, advanced batteries and geothermal steam turbines are not made in the USA, but somewhere else,” Sen. Lisa Murkowski, R-Alaska, warned senators on Capitol Hill in June.

The United States, which is among the world’s largest consumers of rare earth metals for industrial and technology applications, contains an estimated 15 percent of the world’s rare earth reserves, but has not had an operating REE mine within its borders since 2002.

China cracks down

The Ministry of Commerce of the People’s Republic of China July 8 unveiled plans to cap its REE exports for the second half of 2010 at 7,976 metric tons, a 72 percent decrease from the 28,417 metric tons allowed during the same period a year ago.

The Far East country’s central government also is planning a unified pricing mechanism for rare earth minerals in five provinces and regions known to be rich in the rare metals.

China Daily, the country’s national English-language newspaper, reported that, according to its sources, a unitary price based on negotiation will be published once a month to protect the natural resources from being depleted and to avoid cut-throat competition among the five affected areas. 

The government also cracked down on illegal mining of REEs and has stopped issuing new licenses for domestic exploration of the metals until July 2011.

Illegal REE mining in southern China has been rampant in recent years. Stopping the unauthorized extraction is expected to boost the price of the metals and give the Chinese more control of global markets. The crackdown on unlawful mining of the ionic clays of South China also will help the government enforce its environmental regulations.

According to a July 14 Xinhua News Agency report, the Chinese government arrested seven people on suspicion of smuggling 4,196 tons of rare earth metals and their compounds. Citing customs officials in southern China, the news agency said the smuggling ring was involved in the transport of REEs valued at 109 million yuan, or about US$16 million.

China looks overseas

In addition to tightening the supply of REEs flowing from within its borders, China also has attempted to gain a foothold in overseas projects.

“Countries such as China have undertaken a 50-year, or longer, view of the world and continue to lock down long-term supply arrangements through investments in Africa, Australia and South America. That will help China meet its burgeoning demand for these raw materials, but it could leave our nation out in the cold at the very time we need minerals most,” Murkowski wrote in a Roll Call report last October.

In 2009 China Nonferrous Metals Mining Group made a bid to buy a controlling interest in Lynas Corp., a junior explorer that owns the Mount Weld project in Western Australia, considered to be the richest known deposit of rare earth elements in the world.

The state-owned mining company offered A$252 million, or US$211.55 million, to purchase a 51.66 percent interest in the Australia-based REE explorer.

Australia’s Foreign Investment Review Board stepped in, demanding that China Nonferrous reduce its stake to less than 50 percent and limit its representation on the Lynas board to less than half. The Beijing-based miner found the terms unacceptable and walked away from the deal last September.

In Canada, numerous Asian investors flocked to the Prospectors and Developers Association annual conference in March seeking junior mining companies with REE prospects in their portfolios.

“Lots of investors from Asia came to the trade show. They all were looking for REEs listed on the companies’ displays, and it was the only the thing that they were looking for,” one observer told Mining News.

U.S. leaders consult

China has been reducing its REE exports over the past three years and the rumors that the country may further restrict its global supply of the metals that are important to national security and the manufacture of green technology have been swirling among U.S. government and business leaders for some time.

Last December the U.S. Department of Commerce assembled a 25-member panel – made up of representatives of key end users of rare earth materials such as General Electric and the American Wind Energy Association, as well as interested government agencies such as the Department of Defense and the White House – to hold roundtable discussions on the issue.

According to a report released by the Rare Earth Material Roundtable, China not only holds a near total monopoly over global REE supply but it also controls around 80 percent of worldwide dense rare earth magnet production.

Members of the focus group expressed concerns that a surge in demand for these products, coupled with China’s restrictive trade policies, could put domestic manufacturers at a disadvantage if timely and cost competitive access to these materials is not ensured. Some participants indicated that a crisis point could be reached as early as 2012, a timetable that may be accelerated by the recent Chinese export restrictions.

Murkowski’s “Restart” legislation

Based largely on findings of the roundtable discussions, lawmakers from both sides of the aisle on Capitol Hill are pushing legislation to restart the virtually nonexistent rare earth element mining industry in the United States.

Sen. Murkowski introduced the Rare Earth Supply Technology and Resources Transformation Act, or “Restart” Act, in the Senate in June. Her legislation, which is a companion to the Restart Act presented to the House by U.S. Rep. Mike Coffman, R-Colorado, in April, is aimed at helping the United States regain its position as a leader in the mining and processing of REEs.

“America’s growing reliance on foreign minerals endangers our efforts to advance cleaner energy,” Murkowski said. “We have slowly but surely surrendered the front end of the clean energy supply chain.”

If enacted into law, the two pieces of legislation would involve the U.S. departments of Commerce, Energy, State and Defense as well as the offices of the U.S. Trade Representative and Science and Technology Policy within the Executive Office of the President.

Among proposals in Coffman’s bill are assessments and implementations of “obtaining loan guarantees to support the re-establishment of mining, refining, alloying and manufacturing operations for (rare earth elements) in the United States.”

The legislation introduced by Murkowski proposes assembling a task force chaired by the Secretary of Interior and composed of the secretaries of State, Energy, Defense, Commerce and Agriculture.

The primary objective of the high-ranking panel would be to “monitor and assist federal agencies in expediting the review and approval of permits or other actions, as necessary, to accelerate the completion of projects that will increase investment in, exploration for, and development of domestic rare earths.”

“Rather than further restrict mining in this country, the industry could be creating American jobs and producing minerals that are essential to clean energy technologies. Unless action is taken, we will trade our current dependence on foreign oil for an equally unsettling dependence on foreign minerals,” the Alaska senator advised her colleagues.

Coffman’s bill, H.R. 4866, received the endorsement of 16 co-sponsors and has been referred to the House Armed Services, Ways and Means and Financial Services subcommittees. Murkowski’s legislation, Senate Bill 3521 was referred to the Committee on Energy and Natural Resources, of which she is the ranking Republican.

REEs in Alaska

Murkowski’s version of the Restart Act comes on the heels of two resolutions passed by the Alaska Legislature urging the U.S. Congress to advance the development of new rare earth reserves in the United States.

In April, the Alaska State House of Representatives unanimously passed Resolution 16, which urges the United States Congress to pass H.R. 4866. The resolution – sponsored by Rep. Craig Johnson, R-Anchorage, and co-chair of the Alaska State House Resources Committee – also throws its support behind the expedited permitting and production of heavy rare earth element resources at Ucore Uranium Inc.’s Bokan Mountain project in Southeast Alaska.

“We have known and available rare earths right here in Alaska at Bokan Mountain,” Johnson said. “Passing ‘Restart’ is another way we can provide for domestic energy security and provide for Alaska families, businesses, diversifying our economy and strengthening our mining industry.”

While introducing S.3521 to her colleagues in the U.S. Senate, Murkowski directly addressed Ucore’s Bokan-Dotson Ridge project and the value of the heavy rare earth element-rich deposit to the American efforts to become independent of China’ hold on the sector.

“Ucore Uranium is continuing exploration of a large rare earth deposit found near Bokan Mountain in Alaska, about 37 miles from Ketchikan,” Murkowski explained. “Ucore’s new Alaska subsidiary, Rare Earth One LLC, has been working to study the deposit on Dotson Ridge at Bokan Mountain since 2007. The U.S. Bureau of Mines more than 20 years ago estimated the site contains at least 374 million pounds of recoverable rare earths, which is more than enough to break China’s stranglehold on the market and protect America’s access to the rare earths that are vital to the production of cutting-edge technologies in this country.”

Ucore Uranium Inc. recently changed its name to Ucore Rare Metals Inc.

“The name Ucore Rare Metals Inc. reflects the company’s expanding exploration focus and, in particular, our work advancing the Bokan Mountain heavy rare earth element project in Alaska”, Ucore President and CEO Jim McKenzie said June 28. “As we expect to reach a number of exploration milestones with respect to the Bokan property in the coming 12 months, this is a most appropriate time to reflect this focus in our corporate name.”

Ucore Rare Metals July 15 said it began this year’s 4,000-meter drill campaign at Bokan Mountain. The C$3 million program will include extensive ground mapping, surface sampling and mineral characterization initiatives, as well as ground geophysics activities to assess more than 30 known REE-bearing prospects that have never been drilled.

The Nova Scotia-based explorer also retained Collison and Associates for scoping and prefeasibility work on a prospective heavy rare earth mine at Bokan, and for the planning of progressive underground exploration.  

“Considered by many to be the nearest heavy rare earth facility to production on U.S. soil, our objective for Bokan will be to transition from the delivery of an NI 43-101-compliant Inferred Resource this year to production prefeasibility immediately thereafter,” said Ucore President and CEO Jim McKenzie. “There’s been a strong show of support for expedited rare earth production at Bokan, from both the State of Alaska and at the Senate level in Washington. Thus, the political response to meeting this supply crisis head-on has been very rapid, to say the least, with prospective economic and permitting measures designed to obtain domestic heavy rare earth production within the U.S. as quickly as possible.”

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REE mining activity heats up in North America

Ucore Rare Metals Inc.’s heavy REE mineralization at the Bokan Mountain Project in Southeast Alaska is a complementary source to Molycorp Mineral’s primarily light REE-enriched deposit at Mountain Pass in California’s Mojave Desert.

“The Bokan project is increasingly being recognized as one of two critical domestic deposits with the potential to allow the United States to become self sufficient across the full spectrum of rare earths. Whereas Molycorp’s Mountain Pass facility has an abundance of light rare earths, Bokan provides the alternate piece of a crucial domestic supply puzzle, with its predominant skew towards the highly valuable heavy rare earths,” said Ucore President and CEO Jim McKenzie.

After supplying REEs for about 50 years, mining operations at Mountain Pass were closed in 2002.

Molycorp, the Chevron Mining subsidiary that operated Mountain Pass, was bought by a group of investors in 2008. The privately-owned company is now in the process of resuming operations at the southern California mine and plans to produce about 20,000 metric tons of finished REE products per year from the mine by the end of 2012.

The Bear Lodge Project in Wyoming is another promising REE prospect in the United States. In May, Rare Element Resources Ltd. reported that the Bull Hill deposit at Bear Lodge increased by more than 50 percent from 800 million pounds to 1,210 million pounds at a 1.5 percent rare earth oxide cutoff grade.

“The Bear Lodge project is progressing well and the updated resources will be included in a scoping study (preliminary economic assessment) scheduled for completion this summer. Our 2010 exploration program consisting of a minimum of 30 in-fill and step-out drill holes is expected to further upgrade and expand the resources. We are also excited about advancing the metallurgical understanding of the REE mineralization and determining the preliminary economic potential of the Bear Lodge project,” said Rare Elements Resources President Don Ranta.

Upsurge of exploration in Canada

REE exploration also is heating up in Canada. The U.S. neighbor is host to multiple prospects, including Avalon Rare Metals Inc.’s Nechalacho deposit at Thor Lake in the Northwest Territories.

According to Avalon, Nechalacho ranks as the second-largest rare earth elements deposit in the world by reported total rare earth oxide and the third-largest contained niobium deposit in the world. The inferred mineral resources for Basal and Upper, two zones identified on the property, now total 175.93 million metric tons averaging 1.43 percent TREO, or 2.5 million metric ton of contained rare earth oxides.

A prefeasibility study released by Avalon in June envisions an 18-year mine life at Nechalacho based on an NI 43-101-compliant probable mineral reserve estimate of 12 million metric tons averaging 1.7 percent TREO, 3.16 percent zirconium oxide, 0.41 percent niobium oxide and 0.041 percent tantalum oxide. This comes to 204,000 metric tons of TREO, 379,200 metric tons of zirconium oxide, 49,200 metric tons of niobium oxide and 4,920 tons of tantalum oxide.

True North Gems last November confirmed the presence of REEs and niobium at its True Blue aquamarine property in the Yukon Territory. Grab samples collected from the property, located 55 kilometers, or 34 miles, south of Ross River, returned assays of up to 6.02 percent TREO and 2.52 percent Niobium oxide.

In March, True North optioned True Blue to Great Western Minerals Group, a Saskatchewan-based junior company specializing in REE exploration. Great Western started REE exploration at the Yukon property in mid-July.

“The purpose of the True Blue exploration program, in which GWMG has committed to spend C$1 million in 2010, is to determine the surface dimensions of the currently known rare earth element mineralization and identify new areas of mineralization in the area encompassed by the True Blue syenite and host rocks,” said John Pearson, vice-president of exploration for Great Western.

Quest Rare Minerals Ltd. is currently exploring several high-potential projects in Canada, including the Strange Lake and Misery Lake areas of northeastern Quebec, the Kenora area in Ontario, and the Plaster Rock area in New Brunswick.

Quest has mobilized to begin 15,000-meter drill program at its Strange Lake property. The company also plans to do additional reconnaissance mapping, prospecting and geochemical sampling on the 540-square-kilometer property that straddles the border of Quebec and Labrador. A 20-50 metric ton bulk sample will be collected at the end of the summer for pilot mill studies.

“Our Strange Lake exploration plans are by far the most ambitious that Quest has ever undertaken and exploration personnel have been working diligently throughout the winter months to ensure success of the program,” said Quest President and CEO Peter Cashin. 

—Shane Lasley