By Adam Currie — Exclusive to Rare Earth Investing News
Not quite a done dealWhile China dominated headlines, a Japanese news source was left red faced when it released a report stating that the Japan-China friendship association Okinawa Prefecture had signed an agreement with its Chinese counterpart at Hohhot in Inner Mongolia under which both parties agreed to cooperate in businesses involving rare earth. An unnamed official in charge of the Chinese People's Association for Friendship with Foreign Countries has since declared that these reports were false and that no agreement was ever signed.
He went on to add that there was no mention of rare earth during the visit. The news agency has since issued an apology for the reports.Despite this incident, the Japanese government has announced plans to spend $65 million in subsidies over the next few years to assist Japanese companies in reducing their dependence on dysprosium and neodymium, while encouraging recycling and development of alternate materials.
Commenting on the move, Kenichi Hasehira, an official at the Japanese ministry's nonferrous metals division said: "After two years, we expect demand for dysprosium to be cut by about 200 metric tons and demand for neodymium by about 1,000 tons a year from this program.”
Analysts suggested that moves such as this are occurring in response to China's tight grip on the global rare earth market.
Legislation under criticismChina's rare earth export quotas have come under increased criticism from the international community. The European Union (EU), Mexico, and the US have filed complaints with the World Trade Organization (WTO) stating that its pricing policies on raw materials, including magnesium and bauxite, violate international trade agreements.
In 2011, Beijing imposed an export quota of 30,184 metric tonnes, marginally reduced from 30,258 metric tonnes in 2010. For 2012, based on analyst calculations, the country's full-year quota may hit approximately 31,130 metric tonnes.The country underlined that it feels that export restrictions are necessary in order to maintain domestic demand and protect the environment. The WTO responded by stating that it considers the argument illegitimate and that China has been “unable to demonstrate” the benefits of its policies on the environment. At present the ruling does not include rare earth metals, however analysts are hoping to see China alter some of its rare earth policies as a result of the ruling moving forward.
Michael Silver, CEO of American Elements, told media sources that the ruling "confirms the existence of the two-tiered price structure that has caused so much concern."
Company newsMolycorp Inc. (NYSE: MCP), owner of the largest rare earth deposit outside of China, announced that it is looking to at least double production to approximately 10,000 tons this year, and underlined that it has successfully launched the sequential start up of its new Project Phoenix rare earth manufacturing facility at Mountain Pass. Lynas Corporation (ASX: LYC) has been granted a temporary operating license allowing it to advance its rare earth processing plant in Gebeng, Kuantan, Malaysia - the final regulatory allowance needed for the Australian miner to fully operate its Mount Weld rare earth mine.
Rare Element Resources (TSX:RES) unveiled a positive Pre-Feasibility Study (PFS) for its Bear Lodge rare earth project in Wyoming. The company said that the results of the PFS show that the Bear Lodge project is technologically feasible with “robust returns” on invested capital.
Total 19-year life-of-mine capital costs for the project have been estimated at $445.9 million. On a nominal case basis based on a rare earth oxide (REO) concentrate price of $17.36, the company forecasts that Bear Lodge will have an internal rate of return of 44.9 percent, a net present value of $1.7 billion, and a payback period of two years.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.China Set to Define Future Market for Rare Earth Metals from Rare Earth Investing News