By John Kemp
LONDON, Aug 1 (Reuters) - The United States has resumed mining rare earths after more than a decade, ending its total reliance on imports, mostly from China, for raw minerals Washington says are critical for the economy and national security.
Responding to a quadrupling of prices between 2005 and 2011 and growing anxiety about supplies from China, Molycorp's Project Phoenix has sought to resurrect domestic production.
In 2009, the company started processing stockpiled concentrate. Last year it resumed mining at Mountain Pass in California's Mojave Desert, which it had suspended in 2002.
Molycorp plans to raise output to 19,050 metric tonnes of rare earth oxide per year by the middle of this year, enough to satisfy more than 10 percent of worldwide demand.
The resumption of domestic production comes after a period when shortages stoked tensions between the United States, the European Union and Japan and their main supplier, China.
In March 2012, the three consumers complained to the World Trade Organization (WTO) about China's export restrictions on rare earths, tungsten and molybdenum, which they claimed were intended to reserve scarce elements for its manufacturers, discriminating against users in their own countries.
But the price cycle for niche commodities such as rare earths can be brutal, with sudden booms followed by equally traumatic busts.
China has already eased its restrictions, and with new supplies also becoming available from Mount Weld in Australia, prices have slumped since 2011, leaving producers struggling.
"After we achieve our full production run rate, it may make sense to dial back production until we can run the facility at lower cost," Molycorp's chief executive admitted to investors in May.
The National Research Council, the leading science and engineering adviser to the U.S. government, has identified rare earth elements as among the most "critical minerals". In many applications rare earths have no practical substitutes and there are just a handful of sources of supply. ("Minerals, critical minerals and the U.S. economy" 2008)
Before 1990, the United States was largely self-sufficient. But increasingly stringent environmental regulations and growing competition from low-cost producers in China with access to high-quality deposits led to a collapse in domestic production.
By 2000, the United States had come to rely on imports for 100 percent of its requirements.
Relying on just a few sources for minor metals is quite common. According to the U.S. Geological Survey (USGS), a single mine in the United States produces 86 percent of the world's beryllium. Two mines in Brazil account for 92 percent of world niobium production.
But it is highly unusual for the United States to depend on imports for 100 percent of its requirements and for 94 percent of global production to be concentrated in just a single country, in this case China.
The National Research Council worried that relying so heavily on China for imports, while China's own demand for rare earth elements is growing rapidly, could mean that insufficient supplies might be available at any price.
Those fears seemed to be borne out when China enforced a series of progressively tighter controls on exports between 2000 and 2012.
Rare earth elements (REEs) include 15 elements in the lanthanide series of the periodic table, ranging from lanthanum (with an atomic number of 57) to lutetium (atomic number 71).
Most deposits contain a mix of different elements. But the light rare earths (lanthanum, cerium, praseodymium, neodymium, promethium, samarium and europium) are far more common than the heavy ones (gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium).
Yttrium is not an element in the lanthanide series but is generally included among the heavy rare earths because it has similar chemical and physical properties.
Rare earths have an increasingly wide range of applications, and consumption is rising rapidly. For example, cerium is used to polish almost all mirrors and lenses. Europium provides the red colour in displays used in all modern tablets and smart phones, and there are no known alternatives.
Fibre-optic cables use erbium to boost the signal carried over long distances. Other REEs such as gadolinium are used for the miniature, high-performance magnets employed in portable disc drives, popularly known as memory sticks.
REEs also have many national security applications. Super strong neodymium-iron-boron magnets are essential to military weapons systems, and samarium-cobalt magnets are vital to precision-guided missiles, smart bombs and aircraft, according to the Congressional Research Service. ("Rare earth elements: the global supply chain" June 2012)
Despite the name, rare earths are not actually that rare. The average concentration in the Earth's crust ranges from 150 to 220 parts per million, which exceeds the concentration of many other metals mined on an industrial scale such as copper (55 parts per million) and zinc (70 parts per million).
Cerium, the most abundant, is more common in the Earth's crust than copper or lead, according to the USGS. All the REEs except promethium are more abundant than silver or mercury. Even the rarest, terbium and lutetium, are nearly 200 times more common than gold ("Rare earth elements: critical resources for high technology" 2002).
But there are several catches. Unlike base and precious metals, which tend to occur in concentrated deposits, REEs are not often found in high enough concentrations to make it worthwhile to mine them. In many instances, REEs are found in ores along with radioactive elements such as uranium, thorium and radium, making them difficult and expensive to handle safely.
Separating REEs from ores is far more complex and costly than the process for base metals such as zinc. Most base and precious metals occur in a single mineral. The technology for separating them from the ore is fairly standardised.
But REEs often occur in multiple minerals, each of which requires a different separation process. Separation facilities therefore have to be custom-designed and built for each different REE deposit.
Once separated, the rare earth oxide must be further separated again into as many as 14 different elements, adding more cost. The 1995 flow diagram for Mountain Pass shows no fewer than 34 separation processes within the facility. ("Principal rare earth elements deposits of the United States" 2010)
Because of the difficulties associated with extraction, production of REEs has been concentrated at just a handful of sites with world-class deposits.
Production is dominated by China's giant Bayan Obo mine in Inner Mongolia, which produced 55,000 tonnes in 2009, and a string of smaller mines in its tropical south, which totalled 45,000 tonnes.
Mountain Pass and Australia's Mount Weld, which started production in 2011 and is owned by Lynas Corporation, are now producing significant tonnages. Brazil, India, Malaysia and Russia also produce REEs but in much smaller quantities.
Deposits vary enormously in composition. Mountain Pass produces mostly cerium and lanthanum, which are relatively abundant. Bayan Obo yields a higher share of neodymium, which is far more valuable. But by far the most prized deposits are those in southern China, which produce a high proportion of scarce REEs including gadolinium and dysprosium.
Mountain Pass and Mount Weld remain at a slight disadvantage because they produce mostly cerium, lanthanum and other light REEs, rather than heavy elements, though Molycorp claims that it will be a lower-cost producer than China once its restart is complete.
New mines typically take seven to 10 years or more to acquire the necessary permits and reach first production. Nonetheless, in response to higher prices, investment is pouring into exploring and developing new deposits around the world.
Provided that prices remain reasonably high, China's domination of rare earth supplies seems set to ease by the early 2020s.