17 (not so) rare earth minerals in Mongolia

Beijing is “funny.” It “shies away” from buyers with whom it cooperated for 20 years by saying that it has folded its policy on rare earth metals export. Those who produce high technology are facing a crisis. They tried to soothe and threaten with no result. It seems that this decision - which has recently attracted the world’s attention - may open a favorable opportunity for Mongolia. Once, the World Bank estimated that Mongolia had resources of rare earth elements worth USD10 billion. In 2009, the United States Geological Survey announced that Mongolia’s resources in rare earth metals took the second place after China. Japanese interests that had been captivated by Mongolia’s land for some time have revived and a research team was sent here. It is generally agreed in Mongolia that it is the right option to put the country’s rare earth minerals into economic circulation within a short period of time - if only not to miss the coach - and use it to improve its citizens’ life. It is also understood that this should be done only by abiding by environmentally friendly policies.

“High technology vitamins”

In 1794, Johan Gadolin, a Finnish chemist, discovered the first rare earth element. Later Martin Klaprot divided the rare earth elements into cerium /light/ group and yttrium /heavy/ group. Since that time, 17 out of the 114 elements of the periodic table have been referred as belonging to the group of rare earth minerals. The name was obtained as the scientists said that “very rare elements” had been discovered. But these elements are not as rare as their name suggests. A look at natural resources throughout the world determined that rare earth elements are 10 fold more than lead, 50 fold more than molybdenum and 165 fold more than tungsten. The rare earth elements are used in many sectors for the manufacturing of explosives, radio electronic products, engineering equipments, household goods, but also in the chemical industry, metallurgy etc. It means that the vehicle you drive, the cellular phone you hold and the TV you watch all hold some of the 17 rare elements. Moreover, two rare earth elements – cerium and lanthanum – will be surely required when Mongolia starts processing its oil domestically.

In recent years, the demand for rare earth elements has steadily increased as the development and demand for high technology products in households throughout the world has become stronger. This explains why rare earth minerals are also called “high technology vitamins;” and the principal consumers of these “vitamins” are the high technology manufacturers or highly developed countries.

Chinese’s “sudden gift”

Mongolia’s southern neighbour holds over 90 percent of the rare earth elements market. Gary Billingsley, Executive Chairman of the Board of Great Western Minerals Group, remarked that however, two thirds of the world total reserves are in other countries. If so, how was China able to have such power?

Until the end of the 1980s, the United States were the leader on the rare earth elements market. But it lost its position as most of its natural resources were depleted. Using this opportunity, China strengthened its monopoly and put its competitors “out of the race” by applying a “cheap price” policy. Once the People’s Republic of China (PRC) supplied developing countries with such minerals at the cheapest price, it became unprofitable for other countries to spend fund for high-cost rare earth metals extraction projects. In 2008, 124 thousand tons of rare earth elements were mined out throughout the world, of which 120 thousand tons were produced by China only.

Last summer, China presented “a sudden gift” to developed countries. In the second half of 2010, the rulers of the PRC reduced its export of rare earth elements by 72% and this year they announced that they will reduce that amount further by 11.4%, while increasing tax levied on rare earth metals export. Xinhua agency informed that all these started from the conclusion made by the country’s scientists that if mining were to be conducted at the current rate, Chinese resources in rare earth minerals would be depleted after 15 to 20 years, forcing the country to import from foreign nations.

A look at the estimation made by a survey organization at the US Congress shows that the world’s annual consumption of rare earth elements is 124 thousand tons, by 2012 consumption will reach 180 thousand tons, and by 2014 it will exceed 200 thousand tons. Therefore, Chinese reduction of rare earth elements export threatens high technology manufacturers. This is why the US Congress issued a decision to render government support to companies running rare earth minerals exploration operations.

Bloomberg reported that Germany considered it a necessity to have a proper and positive mutual understanding with China. “Take a look at reality. At least 5 to 10 years are needed to wait for new Mongolian, African and Greenland resources. Several years are going to be spent deciding infrastructure in these countries,” explained Walker Shteinbach, Head of the Commodity Agency of Germany. In fact, like the US and Japan, the Federal Republic of Germany started to cooperate with India and Vietnam in order to ensure its supply of rare earth elements. Last November, Mongolia’s National Development and Innovation Committee in cooperation with the German Agency for Technical Cooperation (GTZ) organized a conference themed Opportunity for Developing an Industry relying upon Rare Earth Elements. During the conference, Stefan Hanselmann, Project Director, GTZ, told “Our country will provide all the support necessary to Mongolia to start the exploration and mining of rare earth minerals.” It seems that Germany had time include Mongolia in its list too.

Partnering with the Land of the Rising Sun …

Japan is 90 percent dependent on China when it comes to rare earth elements. Since China’s decision to lower its export of rare earth elements, the Japanese government collected funds of USD150 million to conduct exploration and mining operations in the US, Canada, Australia and Mongolia, with the intention of securing its supply of rare earth metals.

Two years ago, the Toyota Corporation founded another joint rare earth elements company in Vietnam, like it previously did in India. The joint venture is expected to start its commercial operations this year. Following in the footsteps of Toyota, Sumitomo and Toshiba corporations also started to develop rare earth minerals projects in Kazakhstan last year. Sumitomo Corporation also signed a contract with the US company Molycorp to ship rare earth minerals in large quantity from the US to Japan. The corporation bought shares worth USD100 million from the shares issued newly by Molycorp and plans to grant it a USD30 million loan in addition to making investment of a value of USD130 million to expand Molycorp’s operation.

Meanwhile, it is interesting to see how successful the Mongolian Japanese cooperation is when it comes to rare earth minerals. S. Batbold, Mongolia’s Prime Minister, was able to obtain a rather good agreement with its Japanese partner who sent a survey team to Mongolia to perform analyses. Information was made public that Japan had decided to sell Mongolia satellite observation images for the purpose of assisting and accelerating the exploration of rare earth minerals and uranium ore on its territory.  

Five large deposits and 246 occurrences of rare earth minerals discovered

According to an estimation made by the United State Geological Survey (USGS) specialists, Mongolia could be in possession of 31 million tons of rare earth elements. In other words, 16.77% of the world’s total resources could be located on the nation’s territory. Experts established five large deposits and about 246 occurrences of rare earth minerals in Mongolia. But domestic geologists state that there is almost no area in the country where detailed studies were conducted and proven reserve established. As it is impossible to determine an exact price for rare earth elements - unlike copper price, for example, at the London Exchange Stock - it is probable that the amount of USD10 billion roughly calculated by the World Bank vary.    
Before 1990, scientists from the former Soviet Union did conduct rare earth elements survey in Mongolia. At that time, reserves of rare earth elements were established in the areas in Khovd, Uvs, Khentii, Sukhbaatar and Khovsgol, allowing us to assume that rare earth elements are abundantly distributed throughout Mongolia.

According to the survey report made by experts of Eurasia Capital Company, it was mentioned that Rio Co. Ltd. spent USD3.6 million on the Luugiin Gol deposit between 2005 and 2009. Before that, explorations were conducted at the Luugiin Gol, Mushgia Khudag, Khotgor and Khalzanburgedei deposits and according to results, it is likely that the deposits hold a total of about 6.6 million tons of rare earth minerals. In 1974, Russian and Mongolian geologists surveyed the Mushigia Khudag deposit in Mandalgobi soum, Omnogobi aimag. That time, it was considered that the reserve of the Mushigia Khudag deposit was 400 thousand tons. But the USGS estimated the reserves to approximate 5.9 million tons. Since 2005, Mongol Gazar Company has been conducting detailed exploration in this area.

According to a study conducted by Technology Metals Research, 251 rare earth metals projects are ready to be implemented in 24 countries worldwide, except China. Although rare earth minerals are sprayed out throughout the world, only a few are on the economic market. The reason being that the prospecting, exploring and mining of rare earth minerals is very expensive as it requires the use of sophisticated and high cost technology. This is why no substantial work was conducted in Mongolia, although surveys were conducted to a certain extent. Moreover, specialists also explain that due to the lack of legal environment regarding the exploration, mining and use of rare earth minerals in Mongolia, these metals are not put into circulation.        

B. Monkhdol, Director of CPS International Company, told that a Mongolian company which conducts operation of lithium exploration was going to make an IPO on the Australian stock exchange. A very favorable  time for good a Mongolian company to raise money on the Australian stock exchange.

For the last twenty years, prices for 1kg of rare earth metal fluctuated between USD5 and USD15. Now, prices exceed USD60. However, the price of minerals on the market can be extremely volatile. Specialists therefore recommend that Mongolia conduct extensive surveys to establish the amount and the location of rare earth minerals on its territory using Japan and Germany know-how while these are interested in diversifying their sources of rare earth minerals. Rare earth metals into circulation have Now is a favorable time for Mongolia to put Rare earth minerals into circulation while their prices are up on the world market.