The transition to zero carbon energy will mean less coal, oil and gas but more of the steel, cement and fiberglass needed for wind turbines, more crystalline silicon for solar panels and lots of lithium and copper for batteries and transmission. Zero carbon certainly won’t mean zero mining and resource extraction.

In this vein, there has been a lot of recent commentary about the so-called Rare Earth Elements (REEs). These are a group of metals that are critical to both the energy transition and the modern digital economy.

Figure taken from Lynas Investor Presentation May 2021 (1)

The REE industry from mining through to end use manufacturing is currently dominated by the Chinese. This, in itself, is a bit unusual as China is such a massive consumer of raw materials that they are typically importers of almost everything – even commodities that they produce domestically in significant quantities such as coal and bauxite. Chinese dominance and willingness to exploit their dominance in REE is making countries like the US, Japan and Korea nervous. If an economy is only as strong as its weakest link then in a decarbonised society relying on wind generation and electric vehicles the weakest link could be China control of REEs.

The story behind Chinese domination of the REE market starts with the fact that China has major mining operations based around large, high quality domestic REE deposits. REEs are not particularly rare and while there are significant deposits in the US, Australia, India and Brazil many of these are not commercialised meaning that in 2021 Chinese mines produced about 55% of total REE ore. This percentage increases if one looks at the more valuable heavy REEs such as NdPr and Tb. Most of the non Chinese production came from the United States and Australia with much smaller amounts spread across a number of other nations.

China has spent decades developing expertise and scale in the downstream refining and processing steps needed to convert REE ore into high purity REE metals and REE based end products. Currently, China produces about 85% of refined REE metal and over 90% of REE products including the permanent magnets needed for electric vehicles and wind turbines.

A key factor behind China’s domination, at least according to western commentary, is not so much access to domestic supply but lax environmental regulations that have allowed China to produce REEs at such low costs that they have been able to drive other producers out of business and create a supply monopoly. More considered analysis suggests that the Chinese government recognised REE as a potential strategic resource several decades ago and promoted investment and development of technical expertise across all aspects of REE production and utilisation.

So how did this happen – or perhaps how was it allowed to happen – and what are the parallels or points of differentiation with OPEC domination of oil markets in the 1970’s? Separately is the environmental footprint of REEs so inherently egregious that alternatives will inevitably be mandated and REEs phased out like coal and oil? Finally, will international government intervention to incentivise and sustain a broader supply basebe needed to overcome Chinese REE dominance?

REE Monopoly

Oil and monopolies have a long history – from the market dominance of Standard Oil in the 1920’s to the oil shock of the 1970’s. From the early part of the 20th century, crude oil became such a vital part of modern society that supply pressure resulted in global tensions and, according to some, war and conflict. It has also created great wealth and influence for formerly impoverished middle eastern nations.

While the breakup of Standard Oil shows that anti monopoly laws can prevent individuals or public companies dominating domestic markets, the ongoing geopolitical power of middle eastern oil producers shows these laws are much less effective at a national level. Chinese domination of REEs is of the latter variety and did not happen by accident.

In 1992, well before most commentators had heard of REEs, Chinese leader Deng Xiaoping observed that “There is oil in the Middle East; there is rare earth in China” (2). Seven years later, President Jiang Zemin turned this observation into a national strategy to “Improve the development and application of rare earth, and change the resource advantage into economic superiority” (3).

Over the same time period the US, which had previously been not only the dominant REE producer but also the source of much of the fundamental and applied research behind the use of individual REEs, lost interest in REEs and effectively left the playing field to the Chinese.

The lesson is perhaps that it takes two to create a monopoly – a proactive and engaged party eager to maximise the value of a natural resource and a compliant customer base happy to abandon the security of domestic production for a cheaper imported alternative. If one believes in international markets and the power of organisations like the World Trade Organisation then perhaps this makes sense – until suddenly it doesn’t.

The decade between 1995 and 2005 was when China took over from the US as the major REE player. As shown in Figure 2 below, Chinese REE output increased from less than 50% of global output to a high of 97% during this period. In parallel with this shift in production, demand for REE’s, specifically Neodymium (Nd) and Praseodymium (Pr), to produce relatively low cost, high strength permanent magnets began to grow, driven in large part by decarbonisation technologies. NdPr magnet production had been pioneered by General Motors and Hitachi who established manufacturing facilities to produce Nd/Pr – Fe – B magnets that became critical in the production of wind turbines and electric vehicles. NdPr magnets also started to be used in advanced military hardware. Perhaps the Chinese were ahead of the game when they purchased the General Motors subsidiary Magnaquench in 1997 and relocated it to China in 2002. In the early 2000’s Chinese corporations also attempted to buy controlling interests in both the Mountain Pass mine in California and the Mount Weld mine in Australia – by this time the only operating mines outside of China. In a sign of emerging concern over China market control, the US and Australian governments vetoed these deals. .

These concerns became more marked between 2006 and 2011 as China consolidated its stranglehold over production. Figure 2 shows that as China increased its share of global REE production export volumes were increasingly restricted. This culminated in a successful World Trade Organisation case brought by Japan, South Korea and the United States in 2011 that prompted an increase in Chinese exports. Since 2011 an increase in non-Chinese REE’s has reduced China’s share of global output to about 80%.

Figure 2 Comparison of Chinese and Rest of the World (ROW) REE production (4)

While many Western commentators subscribe to a view that China has skillfully executed a long term strategic plan aided and abetted by US and Western indifference, there are dissenting views (4). These suggest infighting between central planners and both provincial and local administrations in China resulted in a muddled roll out of this strategy that failed to eliminate illegal mining and improve environmental standards.

If there was a long term strategy to dominate the global REE industry it has clearly been at least partially successful but the fact that Chinese REE mining is a poster child for environmental damage in large part due to a myriad of small scale illegal REE miners strongly suggests a very flawed execution.

It is of course quite possible that China will over time improve environmental performance, keep local opposition at bay and increase regulations and environmental standards. Alternatively, China may be looking to shift the point of dominance downstream, away from mining to manufacturing critical end products like NdPr based batteries. This would leave the dirty job of mining and producing concentrates to other nations (like Australia) with the Chinese importing rare earth oxides as a feed for the smelting and fabrication steps. Market dominance would become a function of technical excellence and economies of scale making it difficult for other nations to compete. If adopted this would be more like the Japanese manufacturing model of the 1970’s rather than the OPEC approach.

REEs and environmental damage

Anecdotally China has a track record across many industries of tolerating poor environmental and safety standards in favour of maximising production to supply a rapidly growing economy. The REE mining and processing industry seems to fit with this sterotype. As mentioned above, this seems rather shortsighted if the goal was long term dominance of a strategically critical raw material, especially given this dominance was based not just on low cost mining but a strong R&D position aimed at achieving excellence all along the value chain.

So are images like the one shown in Figure 3 below an inevitable consequence of REE extraction or is “clean” REE production a realistic goal? Are reports (5) claiming that the production of 1 tonne of RE oxide from the mines in southern China requires the removal of 300 cubic metres of topsoil and the generation of 2,000 tonnes of tailings and 1,000 tonnes of wastewater containing high concentrations of ammonium sulfate and heavy metals? If they are broadly correct could these impacts be reduced with improved technology?

A brief historical context is useful at this point. Rare earth metals were a laboratory curiosity during the 1800’s – of interest only to chemists trying to fill in gaps on the periodic table. It wasn’t until WWII and the applied research into nuclear chemistry that laboratory studies focussed on scalable processes for extracting and separating the individual REEs.

Commercial quantities of REEs were not developed until the 1950’s and even by the standards of the day it would be fair to describe these as cottage industries in comparison with mainstream metallurgical processes used for metals such as copper, zinc, lead and tin. Herein lies a potential reason for the industry’s poor reputation. Commercial scale REE production, which only started in the 1970s and 80s does not seem to have undergone the cycle that sees increased regulatory standards driving technical innovation and improvement. The Mountain Pass mine in the US exemplifies this trajectory – discovered in 1948 by geologists looking for Uranium, it was commercialised in the 1950’s to produce Europium for color TV production and shut around 2000 under pressure from low pricing and with EPA reviews into waste water leaks (6). It has recently reopened, presumably with retooled technology and environmental safeguards, providing the US with a small domestic REE bridgehead.

Given REE production is an immature industry, based on technology that has not been optimised to meet modern environmental standards, does the process present inherent processing challenges that make environmental damage likely or even inevitable? The production of high purity rare earth metals is a complex process involving up to several dozen individual steps. Some of these steps are commonly used in the mining, beneficiation, refining and purification of other metals and minerals and therefore shouldn’t present any special environmental challenges. There are, however, a couple challenges that are worth noting

The REE industry is tiny in comparison with large scale iron ore, copper and bauxite mining operations. While this means that byproduct and waste stream volumes are low in absolute terms it also inhibits the development of customised equipment designed specifically for the industry.

REE’s are found in mixed orebodies containing perhaps a dozen individual REEs. While multi metal deposits are not uncommon (e.g. silver lead zinc deposits), the individual REEs are so chemically similar that separation (typically using solvent extraction) is inherently difficult and a point of differentiation for REEs.

The market for the different REEs has varied over time. Currently the less common heavier REEs, Nd, Pr, Dy and Tb, which are used for permanent magnets are in higher demand than the lighter REEs. Changes in demand can mean adjustments to process strategies to target more desirable REEs and the need, especially for mines with higher proportions of the lighter REE, to stockpile unwanted production of lower value REEs

The combination of 2 and 3 above means that the process flowsheet for individual REE mines and producers tend to be bespoke, limiting the learnings between different operations and the evolution of standardised plant design.

Most REE ore bodies contain thorium and uranium which means tailings and the refining byproducts can have elevated and potentially harmful levels of radioactivity. The exception are the ionic clay deposits such as those found in Southern China. These deposits typically contain low levels of REE and are treated with in situ extraction methods which can create their own set of environmental issues

The actual REE mining operation is pretty benign in relative terms. REE mines are much smaller than larger copper or bauxite mines so while there is a level of surface disruption it is nothing out of the normal. The same applies to standard beneficiation steps, gravity separation or flotation, to produce a mine site product upgrades from 10% REE to about 60%.

As shown in Figure 3 below, the beneficiated concentrate typically undergoes a chemical treatment to dissolve the REE which separates them from the carrier minerals and other impurities – including the Thorium and Uranium radionuclides. The solid waste stream (filtered sludge) from this process has a radioactivity level similar to the concentrate and several times higher than that of the ore itself as a result of the benediction and chemical treatment steps.

The purified REE solution (after a few recycle loops to maximise yield) is transferred to a recovery unit where the REEs are precipitated out as a mixed oxide or carbonate intermediate. The waste liquid streams will contain trace levels of REEs, thorium and other elements like Fe, Al, Si, Na. Mg associated with both the original ore and additives used as part of the process. These liquid waste streams are also likely to be either highly alkaline or acidic (depending on the process used) with elevated levels of chloride, sulphate or phosphate ions. Where possible these streams will be reconstituted and re-used. Liquids leaving the cycle will obviously need to be treated but aside from trace levels of radionuclides this should not be a major issue with modern water treatment technologies.

The ionic clay deposits in southern China are typically very close to the surface and can be accessed with rudimentary excavation equipment with an in situ primary REE extraction that allows sale to downstream processing operations. This is the basis of illegal mining – small, localised REE deposits occurring close to the surface that are exploited by backyard operators using domestic scale extraction systems. In situ leaching can be done using sodium chloride or ammonium sulphate solution. Figure 1 above shows what this sort of operation looks like when done at a micro scale. Remove the topsoil, make a hole the size of a shallow backyard swimming pool, add a few hundred litres of ammonium sulphate solution and mix it all around with a shovel. One imagines that after a day or two, once the REEs have been dissolved, the liquid can be pumped into 44 gallon drums and left to settle for a while to let the solids settle. After decanting, the REEs could be recovered by evaporation or by adding lime and the crude product sold at the back gate of the local REE processing factory. Figure XX shows that a crude in situ concentrate can be easily blended into the primary extraction stage of a legally operating REE facility.

To summarise – the production of mixed REE oxides (or carbonates) for downstream separation and smelting to produce REE metals is not straightforward and generates both solid and liquid waste streams that need to be made safe for disposal. Putting aside for the moment concerns about radioactivity, treatment of these streams does not obviously present insurmountable technical hurdles. The total amount of waste is large, relative to the final amount of refined REE, but pretty low in absolute terms.

Returning to the fact that REE ore bodies often contain radioactive Thorium and Uranium oxides. How big a problem is this?

In the terminology of environmental regulators REE ore containing Thorium and Uranium is classified as “naturally occurring radioactive material” or “NORM”. Beneficiated ores and process waste streams, which have radioactive levels several times higher than the ore itself are “technically enhanced naturally occurring radioactive materials” or TENORM. In addition to Uranium mining, there are other mining and industrial situations where elevated levels of radioactivity are encountered – either due to unusually high NORM levels or processes that generate TENORM. In REE mining and processing there is the potential for both.

Human exposure to radioactivity is measured in Sieverts (S) – this is a measure of the “dose” a worker or resident will receive and combines the level and impact from alpha, beta and gamma radiation – the first being internally generated exposure from inhaling radioactive material and the other two being exposure from external sources. Background radiation varies globally from 1-13 mSv per year depending on local NORM levels. In Australia the maximum workplace exposure level is 1 mSv per year – at levels above this safeguards and procedures are required. The radiation management plan (xx) for the proposed Lynas REE facility in Kalgoolie assumes the mine concentrate and the thorium rich waste stream will have a

The specific radiation activity (total activity) of the ore is 61.0 Bq/g. The thorium and uranium content of the ore are 1600 ppm (as ThO2) and 29 ppm (as U3O8) by weight respectively

The EPA reports (U.S. EPA, 1999) that the radiation levels from waste rock and sludges associated with the production of REOs range from 5.7 to 3,224 pCi/g

Technologically Enhanced Naturally Occurring Radioactive Materials (TENORM)

REE subsidies

Many global mining commodities are produced in multiple jurisdictions with reasonably transparent and open international trade – this applies to all the major hardrock products – copper, nickel, zinc, lead, gold and silver as well as natural gas and coal. While there are economic benefits to nations and organisations blessed with natural reserves or the foresight to invest in downstream processing capability, these benefits have natural limits. In many mature markets there are too many suppliers for prices to be kept artificially high and too many independent producers to prevent nations restricting supply to rivals. The OPEC oil cartel might be the exception that proves the rule – behaviour that drives prices up and threatens supply being used as a geopolitical tool forces customers to find alternatives. The US, which once faced supply threats from middle eastern nations perceived as unfriendly, is now self sufficient in oil and gas production with a booming downstream processing sector

So might REEs be different?

From a mining perspective this is probably unlikely – all theses on REEs make the point that they are not actually rare. Kind of hard to process and with some difficult environmental challenges but not hard to find.

If the Chinese have spent the last couple of decades developing REE refining, smelting and fabrication technologies then they will certainly have a strategic advantage. Under this hypotheses how insurmountable could this advantage be and how might other nations respond.

Free market based economies will look first to free market solutions – can a small amount of government and regulatory encourage local investment in R&D and then production? Maybe but there are a couple of risks. First, the regulatory hurdles for new mining and processing ventures in developed economies are high, this results in part from negative public opinion, a rise in NIMBYism and a response to historic (and not so historic) mining and processing damage. Second, a dominant government backed supplier has the ability to drive down prices and make the economics of a decade long feasibility and permitting campaign problematic. This begs the question for the prospective investor – is the REE prize worth the brain damage? The answer will depend on the investor and their financier.

What could make REEs different is the link to decarbonisation and military technology. Decarbonisation by 2050 won’t happen without market intervention. A price on carbon has been the popular refrain but renewable mandates, generous feed in tariffs for green power, tax breaks for electric vehicles are all examples of government intervention to support low emission technologies. Many believe there has been far too little but that is another discussion. Decarbonisation relies on government intervention and if REEs are key part of reaching net zero by 2050 then ultimately one should expect the industry to receive overt government support. The military implications, if they are significant, will only add tailwinds.

The recent agreement between the US and Australian governments that has resulted in a processing plant being built in Texas for feed produced by Lynas in Western Australia is an indication of this process starting to take shape.

. For the RE industry, according to official data in 2012, the city of Ganzhou, Guangxi province, needed US$ 5.8 billion solely for land reclamation not to mention health costs and other environmental pollution. By contrast, the average annual profit from 2002 to 2012 of Ganzhou’s RE industry was only about 0.3 billion US dollar

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the

country’s industry began moving at full throttle. That same year, the Chinese

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Appendix – Characteristics of major REE deposits

As shown in the table above (A) REE deposits fall into a number of different geologic categories. The primary deposits are typically igneous and result from molten material from the inner core of the earth reaching the surface. Relatively unusual conditions are needed for REEs to be concentrated at a level that produces an economic resource. Secondary deposits, as the name suggests, were formed from the weathering or erosion of primary formations that no longer exist.

The current major commercial deposits – Bayan Obo (China), Mount Weld (Australia), Mountain Pass (USA) and ion adsorption clays (China) cover a number of the different geologic categories and hence the need for different processing routes.

Purification – As discussed in the body of this article, REE ore is dissolved in either acid or alkaline. The figure below shows these processes in more detail.