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2008 SME Annual Meeting

Rare Earths Supply:


Alternatives to China
by

Dudley J Kingsnorth
Industrial Minerals Company of
Australia
February 2008
IMCOA

DISCLAIMER
The statements in this overview represent
the considered views of the Industrial
Minerals Company of Australia Pty Ltd. While
the Company has made every effort to
ensure the veracity of the information
presented it cannot expressly guarantee the
accuracy and reliability of the forecasts and
conclusions contained therein. Accordingly,
the statements in the slides should be used
for general guidance only.
IMCOA

Summary of Presentation

The RE Industry today


China
Historical demand
Forecast future supply and demand
Opportunities for new producers

IMCOA

The Rare Earths Market Today

Total demand: 120,000te REO pa (2007)


Average price: US$10-12/kg REO
Total value: US$1.3 billion pa
Constraints on Chinese rare earths
supply are creating opportunities for
non-Chinese projects

IMCOA

China: Still Dominant

Reserves: >25M tonnes REO


Excess secondary processing capacity
Access to cheap processing chemicals
Leading edge RE technology
Rapidly growing manufacturing sector
Largest rare earth consumer (~60%)
IMCOA

China: Industry Constraints

Production quotas reserves limited


Export quotas falling annually
15-25% export tax
VAT rebate on exports withdrawn
No new rare earth mining licences
Environmental legislation enforced
Shortage of Dy, Nd, Eu and Tb
IMCOA

Global RE Consumption 2006


Global Rare Earths Consumption in 2006 (t REO 10%)
Application

China

Japan and
SE Asia

USA

Europe

Others

Total

Catalysts

6,500

3,500

6,000

5,000

500

21,500

Glass

7,250

3,500

1,000

1,000

250

13,000

Polishing

7,000

4,500

1,000

1,000

500

14,000

Metal Alloys

10,750

4,000

1,500

1,000

250

17,500

Magnets

15,500

5,000

750

500

250

22,000

Phosphors

4,500

2,750

500

500

250

8,500

Ceramics

2,000

2,000

1,000

500

negligible

5,500

Other

6,500

1,000

250

250

negligible

8,000

Total

60,000

26,250

12,000

9,750

2,000

110,000

IMCOA

2006 REO Consumption


Ceramics
4%

Other Catalysts
3%
6% Glass
3%

Polishing
3%
Metal Alloys
11%

Phosphors
33%

Magnets
37%

REO Consumption by Value 2006

Phosphors
8%

Ceramics
5%

REO Consumption by Volume 2006

Other
7%

Catalysts
20%

Glass
12%

Magnets
20%

Polishing
12%

Metal Alloys
16%

IMCOA

Forecast Demand in 2012


Global demand for rare earths in 2006 & 2012 (t REO) 10%
Application

Growth Rate

Consumption tpa REO


2006

2012f

% pa

Catalysts

21,500

30-34,000

6-8%

Glass

13,000

14,000

Negligible

Polishing

14,000

20-22,000

6-8%

Metal Alloys

17,500

44-48,000

15-20%

Magnets

22,000

45-50,000

10-16%

Phosphors & Pigments

8,500

13-14,000

7-10%

Ceramics

5,500

8-10,000

7-9%

Other

8,000

12-14,000

7-9%

110,000

185-195,000

9-11%pa

Total/Range

IMCOA

2012 REO Consumption


REO Consumption by Value 2012

Ceramics
3%

Phosphors
24%

Other
2%
Catalysts
3%
Glass
1%

Magnets
51%
Metal Alloys
12%

Polishing
4%

REO Consumption by Volume 2012


Phosphors
7%

Ceramics
5%

Other
7%

Catalysts
18%
Glass
7%
Polishing
11%

Magnets
22%
Metal Alloys
23%

IMCOA

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200,000

200,000

175,000

175,000

150,000

150,000

125,000

125,000

100,000

100,000

75,000

75,000

50,000

50,000

25,000

25,000

China Supply

ROW Supply

Global Demand

IMCOA

20
12
f

20
11
f

20
10
f

20
09
f

20
08
f

20
07
f

20
06

20
05

20
04

20
03

20
02

0
20
01

0
20
00

Demand tpa - REO

Rare Earths Supply & Demand

China Demand

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Potential Impact of Hybrid


Vehicles on the RE Market

Toyota committed to produce 1M hybrid


vehicles in 2010, considering 2M
Assume global total of 3M hybrids in 2012
Typically an NiMH battery for a hybrid vehicle
contains 10-12kg rare earths
If NiMH batteries achieve a 60-70% market
share; as a result, additional demand could
be 20,000t REO p.a.
IMCOA

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Potential Impact of Ongoing High


Demand for NdFeB Magnets

Demand for rare earth magnet alloys grew


from 2,500tpa in 1990, to 12,000tpa in 2000
to 22,000 in 2006.
2003/06 growth in demand was 15-25%pa
Demand for rare earth magnets for voice coils
(i-pods), for drives of equipment in vehicles
and for electronic equipment remains high.
At current rates of growth, total demand for
Nd2O3 could be 55,000tpa in 2012, but price
and supply considerations mean it is more
likely to be 45-50,000tpa.
IMCOA

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Approximate Occurrence &


Demand for Individual REs
Occurrence (%)
in China

Demand (%)
2006

Demand (%)
2012 (f)

Lanthanum

22-24

24-26

26-28

Cerium

44-48

37

29-31

Praseodymium

4-6

4-6

Neodymium

16-18

18-20

21-25

Samarium

1-2

Europium

1-2

1-2

1-2

1-2

10-12

Gadolinium
Terbium
Dysprosium
Yttrium

IMCOA

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The Problem of Balance


in 2012

Total REO demand in 2012: 190,000t REO


Nd2O3 demand @ 21-23% Nd2O3 : 45-50,000t
Nd2O3 produced @ 18-20% Nd2O3 : ~30,000t
Extra production to meet Nd2O3 :40-50,000t
The extra ore processed would also solve the La,
Dy, Eu and Tb shortage .

Conclusion: To meet demand of 190,000t REO


in 2012 a total of 220-240,000t REO will have
to be produced. Assuming that China will
produce 140-160,000t REO; Others will have
to produce 60-80,000t REO in 2012
IMCOA

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New Producer #1
Project: Mountain Pass
Company: Chevron Mining (Molycorp)
Resource(1): 50Mt @ 8-9% REO (4.3Mt cont. REO)
Capacity: 2008 - 2-3,000t REO 2010 - 4-8,000t REO
Products: Separated rare earth oxides
Capital Costs: Not available
Note: (1). The resource figure is an indicative summary and does not necessarily comply
with local stock exchange guidelines. For details refer www.molycorp.com

IMCOA

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New Producer #2
Project: Mt Weld

Mine & Concentrator Australia


Separation Plant - Malaysia

Company: Lynas Corporation (Australia)


Resource(1): 7.7Mt @ 12.0% REO (0.92Mt cont. REO)
Capacity: 2009 - 10,500t REO

2010 - 21,000t REO

Products: 100% separated REOs (except Heavy REOs)


Capital Costs: US$375 million (Stage #1 + Infrastructure)
Note: (1). The resource figure is an indicative summary and does not necessarily comply with local
stock exchange guidelines. For details refer www.lynascorp.com

IMCOA

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Potential New Producer #1


Project: Dubbo Zirconia Project (Australia)
Company: Alkane Resources Ltd (Australia)
Resource(1): 73.2Mt @ 0.89% REO (0.65Mt cont. REO)
Capacity: 2010/11 1,200-2,400tpa REO
Products: Separated REOs (co-products Zr & Nb)
Capital Costs: $100 - $200 million (depending upon capacity)
Note: (1). The resource figure is an indicative summary and does not necessarily
comply with local stock exchange guidelines. For details refer
www.alkane.com.au

IMCOA

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Potential New Producer #2


Project: Nolans (Australia)
Company: Arafura Resources Ltd (Australia)
Resource: 18.6Mt @3.1% REO (0.58Mt cont. REO)
Capacity: 2011: 5,000t REO

2013: 20,000t REO

Products: Separated REOs (co-product Phosphate & U3O8)


Capital Costs: US$675 million (30% incl. infrastructure)
Note: (1). The resource figure is an indicative summary and does not necessarily
comply with local stock exchange guidelines. For details refer
www.arafuraresources.com.au

IMCOA

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Potential New Producer #3


Project: Hoidas Lake (Canada)
Company: Great Western Minerals Group Ltd. (Canada)
Resource(1): 1.15 Mt @ 2.83% REO (0.03Mt cont. REO)
Capacity: 2011/12: 3,000 tpa REO
Products: Separated REOs
Capital Costs: TBA
Note: (1). The resource figure is an indicative summary and does not necessarily
comply with local stock exchange guidelines. For details refer www.gwmg.ca

IMCOA

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Potential New Project


Project: Thor Lake (Canada)
Company: Avalon Ventures Ltd (Canada)
Preliminary Resource: 14Mt @ 1.23%REO (0.2Mt cont. REO)
Capacity: 2013(?): 3,000 tpa REO
Pre-Feasibility Study: To commence 2008
Note: (1). The resource figure is an indicative summary and does not necessarily
comply with local stock exchange guidelines. For details refer
www.avalonventures.com

IMCOA

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Potential Non-Chinese Production


2006/7

2012

tpa REO

tpa REO

Russia

3-5,000

4-8,000

India

2-4,000

2-6,000

Mountain Pass/USA

Nil

5-10,000

Mt Weld/Australia &
Malaysia

Nil

20,000

Dubbo/Australia

Nil

1-2,000

Nolans/Australia

Nil

10,000

Hoidas Lake/Canada

Nil

3,000

4-8,000

45-60,000

Project/Country

Total

IMCOA

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The Issues

Can China maintain control of:


rare earth mining & production
environmental management practices
rare earth exports
Will higher prices impact demand?
How quickly can the new projects come onstream to meet a potential shortfall in
excess of 60,000t REO in 2012?
IMCOA

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2008 SME Annual Meeting

Rare Earths Supply:


Alternatives to China
Sources of Reference
Data from Roskills 13th Edition The Economics of Rare
Earths (to be published in October 2007)
CREIC Newsletter

IMCOA

2008 SME Annual Meeting

Rare Earths Supply:


Alternatives to China
by

Dudley J Kingsnorth
Industrial Minerals Company of
Australia
February 2008
IMCOA