KNOWLEDGE about rare earths among investors - and even many seasoned mining veterans - is about as uncommon as the name would suggest.

Since almost all of the world's rare earths - a group of heavy elements towards the bottom of the periodic table - are mined in China by Chinese companies, there isn't much of an understanding about the commodities outside the chemical industry in the West.

The blanket term rare earths refers to elements with hard-to-pronounce names like lanthanum, praseodymium and neodymium among others which all tend to occur together in the same deposits, despite difference uses - and prices - for different metals.

The elements are used in products like compact fluorescent lights, catalytic converters in cars, flat panel displays, disk drives and MP3 players. And in a world increasingly focused on emissions reduction, hybrid car motors and batteries cannot be built without rare earths.

China's stranglehold over 95 per cent of the world's rare earth supplies - with the remainder from small mines in India and Russia - has started to worry some companies in the West and in other East Asian nations like Japan and Korea. China has put in place hefty tariffs on rare earth exports to help encourage foreign companies to build their factories within the nation.

Not surprisingly, multi-national chemical companies and end users like car companies are fairly eager to gain access to non-Chinese sources of supply. So this week, The Drum has examined a few Australian-listed companies with rare earth projects.

 

Mount Weld advanced

The standard-bearer for new rare earth production outside China is clearly Sydney's Lynas, which has a project much further advanced than its competitors in Australia and North America.

Lynas is constructing the Mount Weld mine in Western Australia and a processing plant in Malaysia which would produce intermediate rare earth products. It hasn't received much attention locally but the $700 million company has attracted the attention of hedge funds in North America looking to profit from the boom in hybrid car production.

Mount Weld, which has a resource of 917,000 tonnes of rare earths at a grade of 12 per cent and was discovered by Rio Tinto, should enter production by the end of next year. The $400 million project will initially produce 10,500 tonnes a year, expanding to 21,000 tonnes by 2011 - representing around one-sixth of global supply.

Lynas executive chairman Nick Curtis said his company considered building its processing plant in China rather than Malaysia, but saw there was a clear advantage in being a non-Chinese supplier.

He noted the rare earths price based on the mix which will be produced at Mount Weld had risen from around $US4 a kilo in 2000 to $US13.52 ($14.75) a kilo in February.

"These metals have not run to the extent other metals have run yet, but they have had significant price increases," he said.

 

Lower grade at Nolans

Perth's Arafura Resources is another Australian rare earths hopeful through its Nolans project in the Northern Territory, which would also produce phosphate, calcium chloride and a small amount of uranium as byproducts.

Arafura completed a pre-feasibility study on the $750 million project last year, although it noted the cost estimate was only accurate within 30 per cent. It said Nolans could produce 5000 tonnes of rare earths starting in 2011, rising to 20,000 tonnes by 2013.

The project so far contains around 580,000 tonnes of rare earths at an average grade of 3.1 per cent - a much lower grade than the Mount Weld project. But its viability would be boosted by the potential annual production of the byproducts.

Arafura has also attracted interest from the North American market. Earlier this month, managing director Alastair Stephens outlined funding options to New York fund managers, including attracting a cornerstone investor, adding a joint venture partner or possible debt financing and forward sales of uranium.

 

Drilling at Cummins

Perth's Navigator Resources attracted a mention from The Drum a while back on the strength of its gold project in Leonora. At the time chief executive Tom Sanders was quick to mention Navigator also owns the Cummins Range rare earths project in WA.

Earlier this month Navigator released a preliminary resource of 69,000 tonnes of rare earths at an average grade of 2 per cent, including a higher-grade section of 38,400 tonnes at 3.5 per cent. Like Nolans, Cummins Range also contains uranium and phosphate, which are likely to add value as byproducts.

Like Mount Weld, Cummins Range contains very low levels of thorium and therefore low background radiation levels. High thorium levels make it difficult to gain permission to transport concentrate and to process the ore.

Navigator is continuing to drill at Cummins Range in hopes of adding more resources and does not yet have a targeted date for first production.