By Olga Orininskaya and Robin Paxton ALMATY Kazakhstan plans to join the race to supply rare earth metals to a global market squeezed by Chinese export cuts when it launches a project with Japanese trader Sumitomo Corp to treat uranium tailings in 2012.
Summit Atom Rare Earth Co, co-owned by Kazakh state uranium miner Kazatomprom, plans to start producing 1,500 tonnes a year of rare earth oxides, Kazatomprom said in a written reply to questions.
It will also embark on the search for more deposits in the vast Central Asian state and nearby countries.
Japan and other consumers of rare earth metals are rushing to secure alternative supplies after China announced last year it could sharply reduce exports of the 17 elements used in high-tech consumer products from iPhones to electric car motors.
China, which produces 97 percent of the world's rare earths, slashed export quotas last year, saying it needs to protect its reserves from reckless exploitation. Its stranglehold on supply has driven prices up ninefold in the last year.
"This has, in turn, kickstarted dozens of rare earth projects worldwide that would previously have been considered uneconomic," Kazatomprom said.
Kazatomprom is also forming a joint venture with Japan's Toshiba Corp while in neighboring Kyrgyzstan, Canadian junior miner Stans Energy Corp plans to relaunch a mine that supplied 80 percent of the Soviet Union's rare earths.
In particular demand are heavy rare earth elements, especially dysprosium and other metals used in magnets, a sector where global demand has grown 15 percent annually over the past 10 years.
"The heavy rare earth race is on, and the first to produce -- and to be able to continue to produce volume -- will be the big winner," said Jack Lifton, a Detroit-based metallurgist and founder of Technology Metals Research.
Kazatomprom said the Summit Rare Earth joint venture would process tailings from a disused plant in the western Kazakh city of Aktau and export rare earths mainly to Japan and Europe.
"The second stage will be the search for strategic ore resources; deposits for potential development in Kazakhstan and neighboring countries," Kazatomprom said, adding that it did not believe Japan's earthquake would stall progress.
RACE IS ON
Kazatomprom said representatives of Japan, South Korea and several European Union member states had approached it with proposals to work together on new rare earth projects.
Kazakhstan, the world's largest uranium miner, is potentially highly prospective in rare earths, but has yet to define a detailed and guaranteed resource base.
Lifton, with nearly 50 years of experience in the business, said the quality of company working in Kazakhstan could be a telling factor in the country's success against potential rivals in rare earths, such as South Africa, Australia and Canada.
"I don't see Kazakhstan as a competitor, but I see Sumitomo and Toshiba as competitors. If they were mining in Angola, I would say the same thing," he said.
"If Sumitomo were to come to General Motors tomorrow and say: 'We can guarantee to deliver 10 tonnes a month of dysprosium to your magnet makers', then the battle's over."
Dysprosium, along with europium, terbium, yttrium and neodymium, is among the metals that Stans Energy says are most in demand from its Soviet-era Kutessay II mine in Kyrgyzstan.
"Many of the companies that previously purchased oxides and metals from our processing complex are contacting us, wondering when they'll be able to buy product again," said Robert Mackay, president and chief executive of Stans Energy.
With sufficient financing, the Kutessay II pit could begin small-scale production in about 18 months, he said. "At a larger scale, a more likely scenario is 24 to 30 months," he added.
The mine, 140 km (88 miles) from the Kyrgyz capital Bishkek, is one of the few places outside China with a history of mining rare earth metals, and Mackay said a skilled labor pool of former employees still lived nearby.
Stans Energy, which was granted a mining license by the new government of Kyrgyzstan, this week issued a resource estimate compliant with Joint Ore Reserves Committee (JORC) standards.
Mackay said the company was considering two options: early production at a rate of about 500 tonnes per year of rare earth oxides, metals and alloys; or expanding the mine's potential to between 1,500 and 2,000 tonnes per year.
(Editing by William Hardy)