German mine for rare earths to be developed

* East German rare earth deposits to be developed

* Drilling to start in spring 2012

HAMBURG Jan 11 (Reuters) - German mining and commodity group Deutsche Rohstoff AG said on Wednesday it will develop mining operations in east Germany to exploit estimated deposits of 38,000 tonnes of rare earths.

Rare earths are ores used by a range of industries whose supply is currently dominated by China, the source of more than 95 percent of global output. China is restricting rare earth exports and the European Union is considering building new stockpiles.

The rare earth deposits in the Delitzsch region of the east German state of Saxony were discovered during the period of the communist German Democratic Republic and include cerium, lanthanum, praseodymium, neodymium, europium and yttrium, Deutsche Rohstoff said.

Rare earths are used in a number of high tech and environmental protection industries, it said.

A new company has been formed called Seltenerden Storkwitz AG to develop the deposits and the new company has received finance of 2.2 million euros from investors from Germany.

In spring 2012, a drilling programme will begin in order to transform the deposit into an internationally accepted resource according to the Australian JORC standard, it said.

An initial public offering in Seltenerden Storkwitz is planned in 2012, Deutsche Rohstoff said.

Germany's government has launched a new commodity strategy to help industry secure supplies of raw materials including rare earths in the face of intense competition from China and other newly industrialised countries.

Seltenerden Storkwitz CEO Bernhard Giessel said the government's new priority towards commodities had supported the new project.

"We are convinced that the deposit will be of interest for German industry," Giessel said. (Reporting by Michael Hogan)