Canadian Rare Earth Element R&D Initiative

The State of Global Rare Earths Industry: A review of market, production, processing and associated environmental issues

May 25, 2016

March 31, 2016

This work was completed through funding provided by Natural Resources Canada as part of the Canadian Rare Earth Element R&D Initiative.

Disclaimer: Canada makes no representation or warranty respecting the results or reports, either expressly or implied by law or otherwise, including but not limited to implied warranties or conditions of merchantability or fitness for a particular purpose.

© Her Majesty the Queen in Right of Canada, as represented by the Minister of Natural Resources, 2016.

The State of Global Rare Earths Industry : A Review of Market, Production, Processing and Associated Environmental Issues

Document #: NRC-EME-55766 Date: May 24, 2016 Authors:

Sevan Bedrossian Giovanna Gonzales-Calienes Christopher Baxter

Protected A

Contents Contents........................................................................................................................................ 2 List of Figures ............................................................................................................................... 4 List of Tables................................................................................................................................. 4 1.

Disclaimer .............................................................................................................................. 5

2.

Executive Summary ............................................................................................................... 5

3.

An Overview of Rare Earth Sector ......................................................................................... 6

4.

5.

3.1

Introduction ..................................................................................................................... 6

3.2

Global Rare Earth Production and Market Trends ......................................................... 7

3.2.1

Global Rare Earth Production ................................................................................. 7

3.2.2

Rare Earth Prices .................................................................................................. 10

3.2.3

Rare Earth Global Market ...................................................................................... 12

3.2.4

Global Rare Earth Industry Structure .................................................................... 13

3.2.5

Secondary Sources, Recycling, and New Frontiers .............................................. 18

3.2.6

Rare Earth Substitutes .......................................................................................... 18

3.2.7

Alternative Mineralogy ........................................................................................... 19

Case Study (Molycorp – Mountain Pass Operation) ............................................................ 20 4.1

Introduction ................................................................................................................... 20

4.2

Problem Statement and Challenges ............................................................................. 22

4.2.1

Operational Performance ...................................................................................... 23

4.2.2

Design Challenges ................................................................................................ 23

4.2.3

Stringent Environmental Regulations .................................................................... 24

4.2.4

Market Challenges ................................................................................................ 25

Rare Earth Processing Technologies .................................................................................. 26 5.1

Beneficiation ................................................................................................................. 26

5.1.1

Monazite ................................................................................................................ 26

5.1.2

Bastnasite.............................................................................................................. 26

5.1.3

Xenotime ............................................................................................................... 26

5.1.4

Loparite ................................................................................................................. 27

5.2

Chemical Treatment ..................................................................................................... 27

5.2.1

Monazite ................................................................................................................ 27

5.2.2

Bastnasite.............................................................................................................. 29

High-Efficiency Mining

Page 2 of 58

Protected A 5.2.3

Ion-Adsorption Ore ................................................................................................ 30

5.2.4

Xenotime ............................................................................................................... 31

5.2.5

Loparite ................................................................................................................. 31

5.2.6

Apatite ................................................................................................................... 31

5.3

5.3.1

Selective Oxidation ................................................................................................ 32

5.3.2

Selective Reduction ............................................................................................... 32

5.3.3

Fractional Crystallization ....................................................................................... 32

5.3.4

Fractional Precipitation .......................................................................................... 33

5.3.5

Ion Exchange ........................................................................................................ 33

5.3.6

Solvent Extraction ................................................................................................. 34

5.4

6.

Emerging Technologies ................................................................................................ 34

5.4.1

Bioleaching ............................................................................................................ 34

5.4.2

Microwave Assisted Leaching ............................................................................... 35

5.4.3

Molecular Recognition Technology ....................................................................... 35

5.4.4

Continuous Ion Exchange - Continuous Ion Chromatography .............................. 36

5.4.5

Electrodeposition from Ionic Liquid Extraction....................................................... 37

5.4.6

Membrane Assisted Solvent Extraction ................................................................. 37

5.4.7

Free Flow Electrophoresis ..................................................................................... 38

Environmental Impacts ........................................................................................................ 39 6.1

7.

Separation Processes .................................................................................................. 32

Contaminants in Rare Earth Ores ................................................................................ 39

6.1.1

Radioactive Contaminants .................................................................................... 39

6.1.2

Hard-Rock Mining Contaminants .......................................................................... 39

6.2

Environmental Risks and Impacts in REE Mining and Processing ............................... 40

6.3

Lessons Learned .......................................................................................................... 43

6.3.1

Legacy from China ................................................................................................ 43

6.3.2

Legacy outside China (U.S., Australia) ................................................................. 44

6.4

Next Steps .................................................................................................................... 45

6.5

R&D Gaps .................................................................................................................... 46

Bibliography ......................................................................................................................... 48

High-Efficiency Mining

Page 3 of 58

Protected A

List of Figures Figure 1: Classification of LREE and HREE ................................................................................. 6 Figure 2: Global Rare Earth Oxide Mine Production 1960-2010 .................................................. 7 Figure 3: Comparison of Rare Earth Production Share between 2006 and 2014 ......................... 8 Figure 4: Forcast Global Rare Earth Production by Country in 2019 ............................................ 9 Figure 5: Historical CIF Unit Prices for Major REOs, 1992 – 2003 ............................................. 10 Figure 6: Historical FOB Unit Prices for Major REOs, 2003-2011 .............................................. 11 Figure 7: REO FOB Unit Price Forecast to 2019 ........................................................................ 11 Figure 8: Rare Earth Global Market Supply and Demand Balance ............................................ 13 Figure 9: Timeline of Major Events at Mountain Pass ................................................................ 22 Figure 10: Cross Section of Hollow Fiber Tube .......................................................................... 38 Figure 11: Summary of Environmental Risks for REE Mining and Processing ........................... 41

List of Tables Table 1: Rare Earth Production by Country for 2006-2014 ........................................................... 8 Table 2: Rare Earth Production by Country (2014-2019) ............................................................. 9 Table 3: Rare Earth Global Demand Forecast by Industry to 2019 ............................................ 12 Table 4: Advanced Rare Earth Projects ...................................................................................... 14 Table 5: Development-Stage Projects ........................................................................................ 16 Table 6: Exploration-Stage Projects ........................................................................................... 17 Table 7: Mountain Pass Typical Ore Composition ...................................................................... 20 Table 8: Molycorp REO Production Estimates ............................................................................ 23 Table 9: Summary of Pollutants, Impacts, and Emmision Sources ............................................ 41 Table 10: Environmental Risks in REE Mining and Processing .................................................. 42 Table 11: Life Cycle Impact of Production of 1 kg REO .............................................................. 43 Table 12: Frequency of Various Types of Impacts from CERCLA Sites ..................................... 44

High-Efficiency Mining

Page 4 of 58

Protected A

1.

Disclaimer

The material, analysis and results presented in this publication are for the readers’ information and should not be treated as advice. All information is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Nothing herein shall to any extent substitute for the independent investigations and the sound technical and business judgment of the reader. In addition, the NRC does not warrant that technical information delivered does not infringe the rights of third parties under a present or future patent and no claim may be made for indirect, consequential, or contingent damages as a result of the use of information contained in this report. L’information, les analyses et les résultats présentés dans le présent rapport visent simplement à informer le lecteur et ne devraient pas être interprétés comme des conseils. Tous les renseignements sont communiqués « en l’état », et aucune garantie n’est donnée quant à leur exhaustivité et leur exactitude ni quant aux résultats qu’il est possible d’obtenir en les utilisant. Aucune garantie de quelque sorte, implicite ou explicite, n’est donnée non plus quant à leur rendement, leur qualité marchande ou leur adaptation à un usage particulier. Aucun élément d’information contenu dans le présent rapport ne peut, de quelque manière, remplacer les résultats de recherches menées indépendamment ni l’exercice par le lecteur d’un jugement technique ou commercial éclairé. Par ailleurs, le CNRC ne garantit d’aucune manière que les renseignements techniques communiqués ne portent pas atteinte aux droits de tierces parties en vertu d’un brevet actuel ou à venir, et le CNRC se dégage de toute responsabilité en cas de dommages indirects ou consécutifs découlant de l’utilisation par qui que ce soit de l’information contenue dans le présent rapport.

2.

Executive Summary

The imbalance between increased demand for rare earths in clean energy and high tech industries and their supply reliability and availability has resulted in growing concerns about their criticality. This has in turn motivated a number of different responses by the consumer and resource countries to establish a secure value chain for critical rare earths. While this report is centered on the current and emerging processing technologies, it also describes how various countries have responded differently to the global problem of securing a stable supply of critical rare earths minerals. Furthermore, this report presents the global state, historical price and market trends, future market outlook, disruptive and novel technologies, and environmental impacts. It should be noted that the report contains the expression of the professional opinion of the authors, based upon information available at the time of preparation. While the work, statistics and projections herein may be considered to be generally indicative of the nature and quality of this report, they are not definitive. Nowhere is this more pertinent than time dependent information such as market and price projections since they are based on information published up to early 2015.

High-Efficiency Mining

Page 5 of 58

Protected A

3.

An Overview of Rare Earth Sector

3.1

Introduction

Rare earth elements (REE) are a group of 17 chemical elements in the periodic table including 15 lanthanides elements plus Scandium and Yttrium [1, 2]. As is shown in Figure 1, the lanthanides can be grouped in Light REEs and Heavy REEs depending on their atomic weight. The light REEs are lanthanum to samarium and the heavy REEs are europium through lutetium [1, 3].

Source: [4] Figure 1: Classification of LREE and HREE Since 1960, the number of REE’s applications has increased significantly. At the present, these elements are essential components in technological devices and everyday electronics. Six key sectors have been identified where REE are applied [2]: 

Mechanical/metallurgical



Glass and ceramics



Electronics, optics and optoelectronics



Chemical



Energy



Others: life sciences, sensors and instrumentation, and consumer.

High-Efficiency Mining

Page 6 of 58

Protected A

3.2

Global Rare Earth Production and Market Trends

3.2.1 Global Rare Earth Production 3.2.1.1

Historical Production

Since 1960, mine production of REE as equivalent rare earth oxides (REOs) has been consistently increasing (Figure 2). The United States was the main global rare earth producer for the period of 1965 through 1985, after which its production share declined. In the early 2000s, China became the largest producer of rare earths and leveraged its control of both rare earth resources and the supply chain. This was accomplished throughout a national strategy which included rare earth export restrictions in order to use most domestic production in manufacturing of value-added products within China, especially in clean energy and high technology domains [1, 6].

Note: estimated data Source: [7] Figure 2: Global Rare Earth Oxide Mine Production 1960-2010 Table 1 provides the annual rare earths production by country for 2006 through 2014. From the data, it can be seen that in 2006, China’s production share was 97% of the global production (Figure 3). Production increased until 2011, from which point it was held constant at around 130,000 t per year. Consequently, by 2014, China’s production share had decreased to 85% of the global production of 152,160 metric tons of equivalent REOs (Figure 3). United States production of REO did not start until 2010. Due to strict environmental and manufacturing regulations in order to preserve rare earth resources from illegal and excessive exploitation, China is committed to reduce production and export quotas [2]. Wang et al. [7] performed a production forecast of China’s rare earths based

High-Efficiency Mining

Page 7 of 58

Protected A on the Wang model. The results show that during the period of 2020 through 2024, China’s rare earths production will start to decrease steadily by 4% until 2050 as a result of the overexploitation of Chinese rare earth resources [8]. Meanwhile, the rare earths production is increasing in other countries such as United States, India, Russia, Australia and Brazil due to the demand and prices escalation [2, 9]. Table 1: Rare Earth Production by Country for 2006-2014 Country

2006 China        119,000 USA                 ‐ India             2,700 CIS NA Other countries             1,300 Total        123,000

2007        120,000                 ‐             2,700 NA             1,300        124,000

Production by Year (Metric Tons) 2008 2009 2010 2011  125,000  129,000  120,000      133,800           ‐           ‐           ‐          3,060       2,700       2,700       2,700          2,800 NA NA NA          2,240       1,300       3,570       6,100              530  129,000  135,270  128,800      142,430

2012  133,250       2,340       2,900       2,930          460  141,880

2013  133,800       3,470       2,900       3,000       1,610  144,780

2014 (est)      130,000          7,000          2,900          3,900          8,360      152,160

CIS: Commonwealth of Independent States Other countries: Brazil, Malaysia, Australia NA: not available Source: [2, 9]

2006

2014

Other countries: Brazil, Malaysia, Australia

CIS: Commonwealth of Independent States Other countries: Brazil, Malaysia, Australia

Source: [9]

Source: [2] Figure 3: Comparison of Rare Earth Production Share between 2006 and 2014

3.2.1.2

Global Rare Earth Production Forecast

Based on a status report of main projects around the world outside of China, it has been estimated that the global rare earth production will increase to 263,600 t by 2019, of which 133,600 t/a will be produced outside of China (Table 2). China’s production will drop slightly until

High-Efficiency Mining

Page 8 of 58

Protected A 2017 and then continue to increase smoothly, as China struggles with illegal production and preservation of its REO resources [2]. Table 2: Rare Earth Production by Country (2014-2019) Country China Australia USA Russia Canada Other countries Total

2014      130,000           7,800           7,000           1,600               ‐           5,760      152,160

Production by Year (Metric Tons) 2015 2016 2017 2018      125,000      125,000      125,000      127,000         11,000         15,000         25,000         30,000         10,000         13,000         16,000         20,000           2,000           7,000         12,000         17,000               ‐               ‐               ‐           2,000           9,740         15,650         22,750         31,300      157,740      175,650      200,750      227,300

2019      130,000         35,000         25,000         22,000           7,500         44,100      263,600

Other countries: Kazakhstan, Vietnam, India, Sweden, Turkey, Tanzania, Greenland, South Africa, Brazil, Malaysia Source: [2] In 2019, China will continue to be the largest rare earth producer; however, its share of production will decrease to 49% of the global rare earth production (Figure 4). Australia and the United States will increase their production shares to 13% and 10% of the total, respectively.

2019

Other countries: Kazakhstan, Vietnam, India, Sweden, Turkey, Tanzania, Greenland, South Africa, Brazil, Malaysia

Source: [2] Figure 4: Forcast Global Rare Earth Production by Country in 2019

High-Efficiency Mining

Page 9 of 58

Protected A

3.2.2 Rare Earth Prices 3.2.2.1

Historical REO Market Prices

The cost, insurance, and freight (CIF) unit prices for 99% purity of major REOs for the period of 1992 through 2003 is shown in Figure 5. It can be seen that unit prices of REOs decreased from 1992 to 1998 as consequence of China entering into the global commodity market. However, after 1999, REO prices stabilized due to two factors. Firstly, Chinese production quotas were introduced. Secondly, a decline in technology markets reduced demand, causing manufacturers of REEs to accumulate larger inventories, thus buffering price changes [2]. After 2003, major REOs market prices, as Free on Board (FOB) China prices, started to increase until 2008 as shown in Figure 6. This was seen especially with prices for REE used in the magnets and batteries manufacturing industries (i.e. Nd, Pr, La and Tb). Later, as consequence of new, tighter Chinese production and export restrictions on the REE market at the end of 2009, prices grew rapidly. In 2011, REOs prices reached a highest historical level [2].

CIF: cost, insurance, and freight prices for U.S.(99% purity, US$/Kg) Source: [2] Figure 5: Historical CIF Unit Prices for Major REOs, 1992 – 2003

High-Efficiency Mining

Page 10 of 58

Protected A

FOB: free on board prices for China (99% purity, US$/Kg) Source: [2] Figure 6: Historical FOB Unit Prices for Major REOs, 2003-2011

3.2.2.2

REO Market Prices Forecast

Figure 7 shows the average FOB unit prices for all the REOs from 2011 to 2014 and a forecast for 2019. After the “Rare Earth Crisis” in 2011, REO prices have declined at an average compound annual growth rate (CAGR) of -41% [2].

FOB: free on board prices for China (99% purity, US$/Kg) Source: [2] Figure 7: REO FOB Unit Price Forecast to 2019

High-Efficiency Mining

Page 11 of 58

Protected A In the forecast of REO unit prices, the following factors have been taken into consideration: 

A lower Chinese production level is expected because of China’s production and export policies.



Production outside China is increasing due to potential completion of several projects. Established operations are also planning to increasing production.



Rare earths recycling and substitution help to reduce dependence on China’s REOs resources and provide more sustainable REOs unit prices.



An increase is expected in rare earths market demand.

The REO unit prices forecast for the period 2014 through 2019 shows that unit prices will start to increase again and this increase will be proportionally larger for those elements with expected shortages [2].

3.2.3 Rare Earth Global Market 3.2.3.1

Supply and Demand Balance

REE market demand is shown by industry in Table 3 from 2012 to 2014, with a forecast to 2019. Global demand grew moderately from 2012 to 2014, corresponding to a CAGR of 2.7% during the two-year period. In 2014, the mechanical/ metallurgical sector represented 36.8% of total rare earth consumption, while glass and ceramics was the second largest sector with 23% of the total. The energy, chemical, and electronics/optics/optoelectronics sectors represented 16%, 15% and 7% of global consumption, respectively. As noted before, global market demand did rise between 2012 and 2014, although it was restrained slightly as a result of industry market strategies to both reduce rare earths consumption and dependence on China. Consequently, demand for rare earths is expected to increase at a CAGR of 6.2% from 2014 to 2019, with a total consumption of 207,205 t/a of REOs in 2019 [2]. Table 3: Rare Earth Global Demand Forecast by Industry to 2019 Industry Mechanical/methallurgical Glass and ceramics Energy Chemical Electronics, optics and optoelectronics Others Total

2012

2013

2014

2019

            53,025             35,790             21,655             21,095             10,265                3,550           145,380

            54,450             35,410             22,705             21,995             10,620                3,660           148,840

            56,350             35,210             23,930             22,970             11,020                3,780           153,260

            81,430             43,990             31,760             31,235             14,235                4,555           207,205

CAGR %  2014‐2019                    7.6                    4.6                    5.8                    6.3                    5.3                    3.8                    6.2

Values in metric tons of REO Source: [2]

High-Efficiency Mining

Page 12 of 58

Protected A The rare earth global supply and demand balance through 2019 is shown in Figure 8. If global demand continues to increase, while supply remains mostly steady, prices are also expected to rise until new players enter into the market, which is currently expected to occur around the end of the forecast period. Price stability depends on how well these new producers will be able to meet their scheduled timetables for starting production [2].

Figure 8: Rare Earth Global Market Supply and Demand Balance

3.2.4 Global Rare Earth Industry Structure 3.2.4.1

Rare Earth Market Key Players

Based on a recent market analysis [2], 25.4% of companies involved in REE extraction are headquartered in Asia Pacific, 13.6% in the United States, and 8.5% in Europe. The remainder (52.5%) are located elsewhere, mainly in Australia and Canada. Roughly half of REE key market players are focused on exploration and development, with the remainder consisting of rare earth mining, production, refining, and trading companies. In the second category, over half are headquartered in China.

3.2.4.2

Current Rare Earth Projects

Based on the most recent data (Table 4), the ongoing REE projects consist of 58 rare-earth mineral resources, associated with 53 advanced rare-earth projects, 49 companies, and located in 35 regions within 16 countries. These projects have been formally defined as a mineral resource or reserve, under the guidelines of a relevant scheme such as NI 43-101, the JORC Code or the SAMREC Code [10].

High-Efficiency Mining

Page 13 of 58

Protected A Another reference has classified 53 projects of those listed in Table 4 as 27 exploration-stage projects (post- resource estimate, pre-preliminary economic assessment (PEA)) and 26 development-stage projects (post-PEA, pre-production) (Table 5 and Table 6). Table 4: Advanced Rare Earth Projects Project Brockmans

Country

Company

AUS

Hastings Technology Metals Limited

MR (million tonne) 36

0

TREO (million tonne) 0.076

TREO (wt. %)

Browns Range

AUS

Northern Minerals Limited

9

1

0.057

Charley Creek (JV)

AUS

Crossland Strategic Metals Ltd.

805

0

0.235

Charley Creek (JV)

AUS

EMMCO Mining Sdn Bhd

805

0

0.235

Cummins Range

AUS

Navigator Resources Limited

5

2

0.085

Dubbo Zirconia Project

AUS

Alkane Resources Ltd.

73

1

0.651

Milo

AUS

GBM Resources Ltd.

187

0

0.115

Mount Weld CLD

AUS

Lynas Corporation Ltd.

15

10

1.454

Mount Weld Duncan

AUS

Lynas Corporation Ltd.

9

5

0.435

Nolans

AUS

Arafura Resources Ltd.

56

3

1.45

Yangibana (JV)

AUS

Hastings Technology Metals Limited

7

2

0.103

Yangibana (JV)

AUS AUS Total BRA

Rare Earth Minerals PLC

7

2

0.103

MBAC Fertilizer Corp.

28

4

1.19

Mining Ventures Brasil Ltda.

909

0

1.454

Ashram Main

BRA BRA Total CAN

Commerce Resources Corp.

240

2

4.549

Ashram MHREO

CAN

Commerce Resources Corp.

9

2

0.151

Araxá Serra Verde

2014

4.999

937

2.644

Buckton

CAN

DNI Metals Inc.

3434

0

0.878

Buckton South

CAN

DNI Metals Inc.

497

0

0.124

Clay-Howells

CAN

Canada Rare Earth Corp.

9

1

0.062

Eco Ridge

CAN

Pele Mountain Resources Inc.

59

0

0.093

Elliott Lake Teasdale

CAN

Appia Energy Corp.

52

0

0.098

Foxtrot

CAN

Search Minerals Inc.

14

1

0.146

Grande-Vallée

CAN

Orbite Aluminae Inc.

1210

0

0.606

Hoidas Lake

CAN

3

2

0.068

Kipawa (JV)

CAN

27

0

0.107

17

1

0.197

267

1

3.878

Lavergne-Springer

CAN

Great Western Minerals Group Ltd. Matamec Explorations Inc. / Ressources Québec Inc. Canada Rare Earth Corp.

Montviel

CAN

Geomega Resources Inc.

Nechalacho Basal

CAN

Avalon Rare Metals Inc.

126

1

1.799

Nechalacho Upper

CAN

Avalon Rare Metals Inc.

178

1

2.353

Niobec

CAN

Magris Resources Inc.

1059

2

18.363

Strange Lake Enriched

CAN

Quest Rare Minerals Ltd.

20

1

0.288

High-Efficiency Mining

Page 14 of 58

Protected A

Country

Company

MR (million tonne)

TREO (wt. %)

Strange Lake Granite

CAN

Quest Rare Minerals Ltd.

473

1

4.118

Two Tom

Canada Rare Earth Corp.

41

1

0.48

Kvanefjeld

CAN CAN Total GER GER Total GRL

Sarfartoq

GRL

Sørensen

GRL

TANBREEZ

GRL

Zone 3

Project

Storkwitz

7731 Seltenerden Storkwitz AG

5

38.358 0

5

0.02 0.02

673

1

7.369

Hudson Resources Inc.

8

2

0.143

Greenland Minerals and Energy Ltd.

242

1

2.667

Rimbal Pty Ltd

4300

1

28.058

GRL GRL Total

Greenland Minerals and Energy Ltd.

95

1

1.106

Mrima Hill High Grade

KEN

Pacific Wildcat Resources Corp.

27

7

1.893

Mrima Hill Main

KEN KEN Total KGZ KGZ Total MDG MDG Total MOZ MOZ Total MWI

Pacific Wildcat Resources Corp.

133

3

4.252

Lynas Corporation Ltd.

3

4

0.107

MWI MWI Total NAM NAM Total SWE

Mkango Resources Ltd.

32

1

0.469

Kutessay II

Tantalus

Xiluvo

Kangankunde Songwe Hill

Lofdal

Norra Kärr Olserum

Aksu Diamas

Ngualla Wigu Hill Twiga

Bear Lodge

High-Efficiency Mining

SWE SWE Total TUR TUR Total TZA TZA TZA Total USA

Greenland Minerals and Energy Ltd.

TREO (million tonne)

5319

39.343

159 Stans Energy Corp.

18

6.145 0

18 Tantalus Rare Earths AG

628

0.047 0

628 Promac Lda.

1

2

0.023 0.023

34 2

0.562 0.562

1

Namibia Rare Earths Inc.

0.047

0.576 1

2

0.01 0.01

Tasman Metals Ltd.

31

1

0.188

Tasman Metals Ltd.

8

1

0.048

39 AMR Mineral Metal Inc.

494

0.236 0

494

0.345 0.345

Peak Resources Ltd.

42

4

1.748

Montero Mining and Exploration Ltd.

1

5

0.025

42 Rare Element Resources Ltd.

58

1.773 3

1.553

Page 15 of 58

Protected A

Country

Company

Bokan

USA

Ucore Rare Metals Inc.

MR (million tonne) 6

1

TREO (million tonne) 0.035

La Paz

USA

AusROC Metals Ltd.

128

0

0.056

Mountain Pass

USA

Molycorp Inc.

32

7

2.072

Round Top

Texas Rare Earth Resources Corp.

906

0

0.573

Glenover (JV)

USA USA Total Zaf

Galileo Resources PLC

10

2

0.221

Glenover (JV)

ZAF

Fer-Min-Ore (Pty) Ltd.

10

2

0.221

Steenkampskraal

ZAF

Thorium Foundation

1

14

0.093

Zandkopsdrift (JV)

ZAF

Frontier Rare Earths Ltd.

47

2

0.886

Zandkopsdrift (JV)

ZAF ZAF Total Grand Total

Korea Resources Corp.

47

2

0.886

Project

TREO (wt. %)

1129

4.289

115

2.307

18668

101.677

MR: Mineral Resource; TREO: Total Rare Earth Oxide Table 5: Development-Stage Projects Project

Country

Company

Aksu Diamas

Turkey

AMR Mineral Metal Inc.

Araxá

Brasil

MBAC Fertilizer Corp.

Ashram Main &MHREO

Canada

Commerce Resources Corp.

Bear Lodge

USA

Rare Element Resources Ltd.

Bokan Dotson Ridge

USA

Ucore Rare Metals Inc.

Buckton Main

Canada

DNI Metals Inc.

Charley Creek (JV)

Australia

Crossland Strategic Metals Ltd./ EMMCO Mining Sdn Bhd

Dubbo Zirconia Project

Australia

Alkane Resources Ltd.

Eco Ridge

Canada

Pele Mountain Resources Inc.

Foxtrot

Canada

Search Minerals Inc.

Glenover (JV)

South Africa

Galileo Resources PLC/Fer-Min-Ore (Pty) Ltd.

Grande-Vallée

Canada

Orbite Aluminae Inc.

Kipawa (JV)

Canada

Matamec Explorations Inc. / Resources Québec Inc.

Kvanefjeld

Greenland

Greenland Minerals and Energy Ltd.

Milo

Australia

GBM Resources Ltd.

Nechalacho Basal

Canada

Avalon Rare Metals Inc.

Ngualla

Tanzania

Peak Resources Ltd.

Nolans

Australia

Arafura Resources Ltd.

Norra Kärr

Sweden

Tasman Metals Ltd.

Round Top

USA

Texas Rare Earth Resources Corp.

Sarfartoq

Greenland

Hudson Resources Inc.

Steenkampskraal

South Africa

Thorium Foundation

Strange Lake B Zone

Canada

Quest Rare Minerals Ltd.

High-Efficiency Mining

Page 16 of 58

Protected A

Project

Country

Company

TANBREEZ

Greenland

Yangibana (JV)

Australia

Zandkopsdrift (JV)

South Africa

Rimbal Pty Ltd Hastings Technology Metals Limited/Rare Earth Minerals PLC Frontier Rare Earths Ltd./ Korea Resources

Source: [11] Table 6: Exploration-Stage Projects Project

Country

Company

Browns Range

Australia

Northern Minerals Limited

Brockmans

Australia

Hastings Technology Metals Limited

Buckton South

Canada

DNI Metals Inc.

Clay-Howells

Canada

Canada Rare Earth Corp.

Cummins Range

Australia

Navigator Resources Limited

Elliott Lake Teasdale

Canada

Appia Energy Corp.

Hoidas Lake

Canada

Great Western Minerals Group Ltd.

Kangankunde

Malawi

Lynas Corporation Ltd.

Kutessay II

Kyrgyzstan

Stans Energy Corp.

La Paz

USA

AusROC Metals Ltd.

Lavergne-Springer

Canada

Canada Rare Earth Corp.

Lofdal

Namibia

Namibia Rare Earths Inc.

Montviel

Canada

Geomega Resources Inc.

Mount Weld DLC/Duncan

Australia

Lynas Corporation Ltd.

Mrima Hill High Grade/Main

Kenya

Pacific Wildcat Resources Corp.

Nechalacho (Upper zone)

Canada

Avalon Rare Metals Inc.

Niobec

Canada

Magris Resources Inc.

Olserum

Sweden

Tasman Metals Ltd.

Serra Verde

Brazil

Mining Ventures Brasil Ltda.

Songwe Hill

Malawi

Mkango Resources Ltd.

Sørensen

Greenland

Greenland Minerals and Energy Ltd.

Storkwitz

Germany

Seltenerden Storkwitz AG

Tantalus

Madagascar

Tantalus Rare Earths AG

Two Tom

Canada

Canada Rare Earth Corp.

Wigu Hill Twiga

TZA

Montero Mining and Exploration Ltd.

Xiluvo

Mozambique

Promac Lda.

Zone 3

Greenland

Greenland Minerals and Energy Ltd.

Source: [11]

High-Efficiency Mining

Page 17 of 58

Protected A

3.2.5 Secondary Sources, Recycling, and New Frontiers Countries lacking primary rare earth resources are increasing their efforts in REE recovery and recycling from secondary resources. These potential resources range from the hi-tech wastes (electronics such as cell phones and computers), lamp phosphors, and magnets. At the present, however, only a small percentage of rare earths are recycled and thus the full potential of many of these resources is not being exploited [12, 13]. For example, there are several studies about the possibility of easily recovering REEs from spent Ni-metal hydride batteries [14, 15]. In another example, Dowa Holdings in Kosaka (Japan) has built a recycling facility that performs the smelting of old electronic parts where precious metals and other minerals, like indium, gold, silver, antimony, neodymium, dysprosium, and other REEs can be extracted [16]. Several metallurgical studies have been carried out to recover value metals including titanium, zirconium, and REEs from secondary sources such as froth flotation tailings slurry obtained from bitumen extraction processes, commonly known as oil sand or tar sand, such as is found for example in the Athabasca region of Alberta. The tailings solids contain about 0.3% - 0.4% by weight rare earth elements such as lanthanum, samarium, praseodymium, gadolinium, yttrium, cerium, and neodymium [17]. Deep-sea mining is also emerging as a possible “new frontier” in some countries. Recent discoveries by the Japan Oil, Gas and Metals National Corporation (JOGMEC) and the licensing of deep seabed mineral deposits 1500m below sea level in Papua New Guinea, offer new opportunities for REE exploitation. While the exact amount of deep-sea REEs is unknown, it is believed such discoveries could significantly alter current distribution figures if their extraction is deemed viable [18]. In the Indian Ocean, India and China have begun offshore exploration for REEs. China initiated such efforts by winning a bid for exploration rights from the International Seabed Authority (ISA). India is building a rare earth mineral processing plant in the coastal state of Orissa and is investing in deep water exploration [19]. Furthermore, geological surveys have indicated potential resource in countries that have never been exploited for REEs in the past such as Afghanistan, Iran, and some countries in Central Asia [21, 22].

3.2.6 Rare Earth Substitutes Doubts over availability and price fluctuations have made some end users attempt to reduce the need for heavy rare earth elements in their productions or to find artificial substitutes of REEs. For example, a joint research effort that includes the University of Delaware, Hitachi Metals, and GE are exploring nano-composites that would make alternative, strong magnets that do not need REE ingredients [13, 23]. In another effort, led by the University of Nebraska, scientists are trying to enhance permanent magnets with FeCo alloy [13, 24]. In the meantime, a team of researchers from Tohoku University in Japan, led by Professor Akihiro Makino, recently succeeded in producing a completely rare-earth free high-quality FeNi magnet [25].

High-Efficiency Mining

Page 18 of 58

Protected A

3.2.7 Alternative Mineralogy Recovery of rare earths from ion-adsorption clay deposits is more economically feasible than recovery from other types of rare earth sources due to the easier mining and processing as well as the very low content of radioactive elements. This has led some companies to extend their explorations to find similar clay deposits. While at the present time China is the only country actively developing ion adsorption clay resources to commercially produce REEs, recent geological surveys have led to the discovery and investigation of similar deposits in South America [26] and Africa [27] located in the similar subtropical weathering belt outside of China. For example, the Serra Verde deposit in the Goiás province of central Brazil contains rare earths in a layer of clay-bearing saprolite produced by the deep weathering of granite [28].

High-Efficiency Mining

Page 19 of 58

Protected A

4.

Case Study (Molycorp – Mountain Pass Operation)

4.1

Introduction

Molycorp Inc. is a vertically integrated company across the rare earth and rare earth metal material world’s supply chain. The company is headquartered in California and owns the Mountain Pass facility, which is also the only supplier of LREEs in the USA [29]. The typical ore composition at Mountain Pass is predominantly cerium, lanthanum, neodymium, and other light rare earth concentrates as it is shown in Table 7 [2]. The production of Neodymium (Nd) and Praseodymium (Pr), used in permanent magnets, represents 16% of total production at Mountain Pass. These REEs are the core of Molycorp’s vertically integrated supply chain representing the one highest relative value of any product line at Molycorp [30]. Table 7: Mountain Pass Typical Ore Composition REO % of total REO Lanthanum 33.3 Cerium 49.2 Praseodymium 4.3 Neodymium 12 Samarium 0.8 Europium 0.1 Gadolinium 0.2 Terbium 0 Dysprosium 0 Holmium 0 Erbium 0 Thulium 0 Ytterbium 0 Lutetium 0 Yttrium 0.1 Source: [2] Molycorp has more than 60 years of history in the rare earth industry since Mountain Pass facility started commercial operations in 1952. The company led world supply of REE during 1980’s through 1990’s while Mountain Pass facility was producing approximately 40% of the global rare earth production in 1990. However, due to poor market conditions and environmental issues, the Mountain Pass operation was suspended in 1998. In 2007, Molycorp merged with Chevron Mining Inc. while simultaneously restarting Neodymium/Praseodymium production at the Mountain Pass. Production of other REEs at the site did not recommence until 2013 (Project Phoenix) [31]. In 2010, Molycorp launched the Phoenix I project to modernize, expand, and conduct process optimization of the Mountain Pass facility to increase environmental performance and to optimize operational economics [30, 31]. The Phoenix I project was planned to increase the name plate capacity of the facility from approximately 3,000 metric tons to 19,050 metric tons of

High-Efficiency Mining

Page 20 of 58

Protected A rare earth oxides per year. The project was expected to take eighteen months, cost $531 million, and was scheduled to be completed during the fourth quarter of 2012. However, the total cost of project ultimately rose to an approximate $1.1 billion dollars and was greatly delayed [32]. In 2013, the new Mountain Pass facility was operational to ramp up its production to meet customer demand. Some special features of the process innovations at Mountain Pass facility were: a) Reduced wastewater discharge via waste stream recycling Before the recent modernization, wastewater was transferred to evaporation ponds far from the plant. Instead, the new process collects the wastewater, purifies the sodium chloride (NaCl) brine, and then feeds the high-quality brine to an onsite Chlor-Alkali plant. This facility was designed to help recycle wastewater from separation processes as well as use the brine feedstock to regenerate chemical reagents needed for REE production, including hydrochloric acid (HCl), caustic soda (NaOH), and sodium hypochlorite (NaClO). By this means, external purchases of these chemical reagents would be reduced. This new process also eliminates the need for additional wastewater evaporation ponds, minimizes the impact to both land and ground water, and protects the existing habitat [30]. b) Reduced electricity costs via a natural gas powered combined heat and power generation (CHP) plant Because Mountain Pass is located at the edge of the regional electric grid, the facility faced frequent power outages and brownouts during peak hours causing higher operational costs. In order to mitigate this issue a new CHP plant was constructed to provide more reliable power with lower energy costs. Cogeneration (power and steam) enabled high operational efficiency, reducing greenhouse gasses emissions [30]. c) New tailings disposal Molycorp used conventional methods to manage tailings produced from the milling process from the 1960’s through 2002. After the facility modernization, the new tailings technology removes most of water from the tailings, converting it to a low moisture paste, which can be deposited in successive layers. This technology innovation leads to environmental benefits such are recycling water, eliminating the necessity of a tailings dam and decreasing environmental risks at the tailings storage facility [30]. In spite of Molycorp’s modernization, capacity expansion, and process optimization efforts from 2010 through 2015, Molycorp filed bankruptcy in June 2015 and has started a reorganization plan since last November 2015. A chronology of important events at Molycorp’s main facility, Mountain Pass is shown in Figure 9.

High-Efficiency Mining

Page 21 of 58

Protected A

1949

• Rare earth mineralization (bastnasite) is discovered at Mountain Pass and Molybdenum Corporation of America (MCA), then changes name to Molycorp INC, purchases mining claims. • Mountain Pass facility starts commercial operation.

1952 • Production of light and heavy rare earths is ramped up, leading the world’s supply. 1980’s • In 1990, facility produced about 40% of the global rare earths production. - 1990 1998

• Rare earth separations operation suspended due to poor market conditions and environmental issues. Recovery of rare earth concentrates from past inventories begins. • Active mining suspended due to reaching capacity in the tailings basin. Mill tailings impoundment area is closed after 30 years of service.

2002 • Production of Neodymium/Praseodymium restarted for first time since 1998. Molycorp merges into Chevron Mining, Inc. 2007 • Project Phoenix is launched to pursue modernization and capacity expansion of Mountain pass facility. 2010 • The new Mountain Pass processing facility is operational. The facility ramped up its production to meet customer demand. 2013

2015

• June 2015 Molycorp files bankruptcy. • August 2015, Molycorp announces suspension of its operation at Mountain Pass mine. • November 2015, Molycorp files restructuring plan.

Source: [31] Figure 9: Timeline of Major Events at Mountain Pass

4.2

Problem Statement and Challenges

Molycorp and its North American subsidiaries, together with some of its non-operating subsidiaries outside of North America, filed voluntary petitions under Chapter 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware on June 25, 2015 [33]. In November 2015, the company filled a restructuring plan to pursue sale of its assets as a whole or through the separate sale of its business units. The Company’s four business units are Chemicals & Oxides, Magnetic Materials & Alloys, Rare Metals, and Resources, which consists primarily of its assets at Mountain Pass. This is expected to significantly reduce the company’s $1.9 billion of debt and cut its interest expenses [33]. The following factors are understood to have contributed to the company’s failure, and are discussed in more detail in the following sections: 

Poor operational performance



Design deficiencies



Stringent environmental regulations



Market challenges

High-Efficiency Mining

Page 22 of 58

Protected A

4.2.1 Operational Performance Molycorp showed poor financial growth in 2014, with an income of US$ 475.6 million decreasing 14% from 2013, and a pessimistic estimate of its financial performance for 2015. In 2014, the company reported an operating loss of US$451 million as a consequence of a weak operational performance of the Resources (Mountain Pass facility) and Chemicals and Oxides business segments [34, 35, 36]. Considering that the ore composition at the Mount Pass facility is mostly LREEs (99.6% of LREE) [2] and that LREE prices are low, the contribution to the company’s consolidated revenues from LREEs was only 3% [37]. Meanwhile, the operational loss from the Mountain Pass operation had been increasing since 2012 as a result of unforeseen production costs related to its expanded leach system, the Chlor-Alkali plant, and the multi-stage cracking plant [37, 38]. The operational loss in 2014 was US$ 225 million, representing a staggering 50% of total operational loss for the company [37]. In addition, this project incurred significant debt service costs, which couldn’t be satisfied with operating activities. The debt as of December 2014 was US$1.7 billion [37]. Therefore, Mountain Pass facility not only represented a marginal source of revenues but also it caused significant operational losses that affected the company’s profit margins (i.e. net profit margins were -127%, -68%, -91% in 2014, 2013, and 2012 respectively) [34].

4.2.2 Design Challenges At the end of Q4 2014, the company expected to ramp up its Mountain Pass production as result of a strong local and external demand [39]. However, it is evident that the company faced several delays and technical issues as a consequence of defective engineering work. Therefore, its production since 2012 has been substantially lower than expected, negatively impacting operation results, revenues, and cash flows. The Mountain Pass’s installed capacity (initial run rate capacity) of 19,050 MT of REO/year has never been achieved since the new facility was launched in 2013 [37, 38].

Table 8: Molycorp REO Production Estimates    Metric Tons of REO Produced  % Initial run rate capacity  (*) Operations suspended Source: [31, 35, 36, 37, 38]

High-Efficiency Mining

2013  (3Q‐4Q)  2,099 11%

2014  4,769 25%

1Q15E 2Q15E 3Q15E  4Q15E*  1,632 9%

3,047 16%

3,536  19% 

0  0% 

2015E  8,215 43%

Page 23 of 58

Protected A This lack of optimal production rate and production interruptions at Mountain Pass facility are explained in the Molycorp 2014 annual report as operational and engineering issues related to the modernization, expansion, and optimization efforts at this facility, as it is explained below. Molycorp terminated its primary engineering company M&K Chemical Engineering Consultants in charge of Phoenix project in May 2012 in a dispute over the quality of the work by M&K and sued the engineering company for damages in excess of $45 million. According to another document submitted to the court, the damages claimed to be in excess of $150 million. The Chlor-Alkali facility experienced operational efficiency issues. According to the claims filed at the court, the initial plan was to commission the plant in October 2012. However, this was accomplished only in late 2013 [32]. One of the main reasons for the project time overrun was the delay in delivery of the major equipment, such as the hydrochloric acid burner. The ChlorAlkali plant was a facility that was supposed to save the company the cost of shipping waste offsite, which amounts to approximately $48 million per year. The total additional cost savings provided by this plant were estimated to be an approximately $440 million per year because the process discharge could be recovered as HCl, NaOH and NaClO and supplied back to the operation [32]. Due to the delay in commissioning and testing of the Chlor-Alkali plant in 2013, the company incurred excess wastewater transportation expenses that temporarily increased its average production costs. Eventually when the plant was commissioned, there were quality issues (high impurity levels) with the feed (brine) to the Chlor-Alkali plant, causing additional operational costs because it took several months of optimization before resuming on-site HCl production [38]. Furthermore, the expanded leach system started operations at the end of 2014. The improvements made to the leach system included the installation of additional leach tanks that Molycorp expected would increase the system's retention capacity. However, this new system experienced construction and installation problems that limited leaching operations and resulted in significant controversy. According to claims filed at court, the caustic carking process was scaled up from small laboratory experiments with limited proven results and without any pilot scale experiments. In this document it is stated that by January 2013, the leaching process was running at a fraction of the normal capacity because, among other things, there were problems with the process’s filtration system [32]. As of April 2016, this court action has yet to be resolved.

4.2.3 Stringent Environmental Regulations Changes to and strictness of environmental and waste management legislation is an economic and operational risk for all companies operating in the resource sector, but is particularly relevant for Molycorp’s Mountain Pass Operation, which operates in California. Non-compliance with construction process regulations and material utilization can result in huge penalties and fines [34]. In fact, at Mountain Pass facility, the company incurred approximately US$19.1 million, US$25.9 million and US$26.8 million in 2014, 2013 and 2012, respectively, and was expected to incur approximately US$11.8 million in 2015, for ongoing operating environmental expenditures (salaries, monitoring, compliance, reporting and permits) and for the removal and

High-Efficiency Mining

Page 24 of 58

Protected A disposal of wastewater generated in excess of the existing evaporation capability of all ponds. These wastewater transportation and disposal costs were incurred to allow the facilities under construction at Mountain Pass to become fully operational [37].

4.2.4 Market Challenges In addition to the operational and environmental factors explained above, there were external factors that contributed to the current Molycorp’s financial situation such as: volatility of REE prices, China’s monopolistic position to manipulate international prices through export restrictions, fluctuations in demand, and difficulty to develop enough sources of demand for rare earth products manufactured at Mountain Pass facility [37]. As illustrated previously in Table 7 (page 20), nearly half of the rare earth content of the Mountain Pass ore (approximately 49%), is cerium with a low value. In 2010, Molycorp developed a cerium-based filtration product called SorbX in an attempt to build commercial potential for the large amount of cerium in the Mountain Pass mine. However, the market couldn’t support the SorbX demand and thus Molycorp couldn’t reach the commercial potential of cerium during Mountain Pass operation [32].

High-Efficiency Mining

Page 25 of 58

Protected A

5.

Rare Earth Processing Technologies

5.1

Beneficiation

5.1.1 Monazite Monazite is an anhydrous orthophosphate mineral which contains between 50–68% REO, and thorium. In particular, monazite contains large amounts of the LREE, including lanthanum (10– 40% La2O3), cerium (20–30% Ce2O3), praseodymium and neodymium. A thorium content of 4– 12% is most common for monazite. Uranium is also commonly present in monazite in small values (0.1 - 0.5%) although there are examples as high as 14 wt. %. Monazite is found throughout the world in placer deposits, beach sands, and is also a component of the Bayan Obo deposit in Inner Mongolia, China [40]. The most important deposits for monazite, however, are the beach sand deposits which are mined for ilmenite and zircon. Typically monazite is found in very low concentrations compared with the accompanying ilmenite, and as such the availability of monazite is typically dependent upon demand for ilmenite. Typically the ilmenite and monazite are recovered by dredging or typical open pit mining techniques [41]. Monazite is recovered using gravimetric (monazite has a specific gravity greater than 5, while the typical gangue minerals in these deposits have specific gravities less than 3.5), magnetic, electrostatic and occasionally flotation separation techniques. In some cases the monazite content is upgraded by means of flotation [42, 43, 44, 45, 46].

5.1.2 Bastnasite Bastnasite is a flurocarbonate mineral from which the majority of the world’s REE products are produced [40, 41, 47]. The world largest deposit of this mineral is located at the Bayan Obo mine in China. This major source of rare earths is in fact the tailings of the iron ore processing scheme at this mine [46]. Another major source of bastnasite occurs at Mountain Pass in southeastern California [41]. Both the Bayan Obo mine and the Mountain Pass mine utilise froth flotation processes for the primary recovery of the bastnasite [41], although the Bayan Obo process also utilises magnetic separation techniques. Bastnasite ore from Turkey has been upgraded by sieving, and investigations have been made into the use of an attrition scrubbing and cyclone desliming process [48].

5.1.3 Xenotime Similar to monazite, xenotime contains REO as phosphates; however xenotime has a higher proportion of heavy rare earths. Additionally, xenotime (like monazite) is produced as a byproduct of ilmenite mining, however it can also be sourced from cassiterite deposits (tin ore). Typically, xenotime is recovered by gravimetric or magnetic separation techniques from dredged beach sands [41].

High-Efficiency Mining

Page 26 of 58

Protected A

5.1.4 Loparite A large deposit of loparite is located on the Kola Peninsula in Russia, where production is estimated at 6500 tonnes/year. Loparite contains over 30% of REO, in addition to