Resource World Magazine

20 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 8 Malaysia is another source. Lynas Corp. [LYC-ASX] sells everything to the market from Malaysia. "Lynas shipped rare earth concentrates from their Australia mines to their plant in Kuantan, Malaysia to produce rare earth oxides like lanthanum oxide, cerium oxide, Pr-Nd oxide and mixed rare earth oxides," said Chen. Landlocked Republic of Burundi in East Africa is another import source of REE for China. Caihong (Rainbow) Company is European invested and producing 3,000 tonnes of REE concentrates per year and is to enlarge to 5,000 tonnes in Burundi, according to Chen. In the past, there were 400 REE projects worldwide and now there are only 10 new projects because of the drop in market prices. These projects could be a new source for China from which to import rare earth raw materials. The PRC has "no policy barriers" for imports. There is a production quota policy for the PRC to regulate the rare earth industry. The quota includes a mining quota and a separation quota issued in two batches per year. The first batch issued in the first half of the year had a mining quota of 73,500 tonnes and a separation quota of 70,000 tonnes. Producers using imported rare earth raw materials must provide import documents and their production should not exceed the allocated production quota. If the second batch quota is the same as the first, then the rare earth production might reach 147,000 tons in theory, according to Dr. Chen. To monitor REE market price fluctua- tions, ACREI began a domestic REE price index (REPI) in 2013 available on the ACREI website. The average price index in 2010 was 100. In July 2011, the average REPI was 155 and in 2014 the industry was in profit, while in 2015 the whole industry was in a deficit. A reasonable REPI should be 150-160 or higher and it now is about 135-137, stated Chen. "I am aware of the price index, but it appears (only in Chinese language) that it is only for the use by member compa- nies. I do not know specifically how the data is collected and from what sources," remarked Wolf. PRC policies for the environment and licenses are not the only ones to control the REE market. The consolidation of REE producers into six companies had lim- ited results. "The market reacted to the integration of the six and prices did not go up until after the crackdown of illegal mining," said Chen. They are Northern Group, CHALCO, Minmetal, Southern Group, Guangdong Rare Earth Group and Xiamen Tungsten Group. The smaller pro- ducers are the recyclers from waste of REE magnets and their costs are lower. They compete with the six in their recycling. The small producers in the recycling collect waste REE magnets from magnet users or import from other countries such Japan and Germany among others. These recyclers are legal entities, yet some use illegal rare earth raw materials to recycle rather than waste materials from magnets. "Recycling has always been considered and is probably a good thing. The main problems in magnetics, however, are: 1) the difficulty in achieving a consistent chemistry so a customer does not experi- ence variability in their product purchased and 2) generally, you get a lower grade of properties which is not desired by custom- ers," stated Wolf. For the foreseeable future, China will be the center of supply of rare earths for numerous applications needed by manu- facturers worldwide and for their growing domestic advancements. PRC policies regarding the environment, licenses, quotas and new sources of supply such as imports and recyclers will control the global supply and pricing as demand increases for exist- ing and new applications. "China will, if not already, be a large consumer of magnets for products used within China itself. This will constrict the supply of material used to produce mag- nets for others. However, obtaining higher magnetic grades will allow for designs with smaller magnets using less mate- rial but the higher grades will also come at higher prices," said Wolf. n China building world's largest battery factory Chinese electric auto manufacturer BYD is building the world's biggest battery factory in the northwestern province of Qinghai. Although officially "opened" the factory won't be fully completed until next year. This is BYD's third battery factory and will produce 24 gigawatt- hours of batteries per year and will ramp up to 60 GWh by 2020. This massive effort ties in with China's switch from internal combustion-powered vehicles to electric. In the first five months of 2018, 328,000 electric vehicles were sold, an increase of 141.6% from a year earlier. With both BYD's and Tesla's Nevada Gigafactory in operation making lithium-ion batter- ies, there will be further demand for battery commodities such as lithium. BYD focuses on producing prismatic LiFePO 4 batteries, different from most of the auto industry's NCA and NMC battery cells, according to a report by news website electrek. A significant increase in the price of lithium could drive exploration and mining stocks in that sector higher. A demand for other battery commodities is also expected, including cobalt, manganese and graphite. BYD also wants in on the residential and commercial battery storage market where the company has been successful in European markets, particularly in Germany. RARE EARTHS

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