Rare metals with names rarely heard

After a year of falling prices and depleting customer inventories, buyers of Rare Earth Elements (REEs) are coming back into this $10B market, but now supplies are getting scarce and prices are beginning to soar.

With populations consuming metals and minerals on the rise, especially new middle-class consumers in China and India, demand is set to skyrocket.

Future supply chains and national economies will witness major disruptions, according to a PricewaterhouseCoopers (PwC) study: Minerals and metals scarcity in manufacturing: The ticking time bomb.

Three deep-ocean mining companies, Nautilus Minerals; UK Seabed Resources (the British division of Lockheed Martin); and DeepGreen Resources, plan to mine the sea floor under the Pacific Ocean (most notably in the Bismarck Sea off Papua New Guinea) using a combination of remotely operated or autonomous underwater vehicles, pumps, suction and riser pipes to extract the minerals.

These REEs, with odd monikers like lanthanum, cerium, praseodymium, promethium, neodymium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium, are not household names, but what they do makes every household–and the people in those households–live better lives.

For example, most of our fancy electronic gadgets–like our Smartphones and laptops–depend on REEs to operate.

Better yet for this Pacific sea hunt, the REEs aren’t alone on the sea floor: “staggering” levels of magnesium, gold, silver, cobalt, nickel and copper are there for the taking as well; much of which are easy pickings as mineral-rich nodules scattered over the sea bottom.

Frontrunner: Nautilus Minerals

Of the three contenders, the Canadian company, Nautilus Minerals (TSX:NUS), is the more ready to mine.

“Nautilus plans to deploy three machines, operated by remote control. Operators sitting on a ship stationed above the deposit will control mine-bots on the seafloor: an initial cutter for clearance; a bulk cutter to do most of the work; and a machine to collect and transport the material to a pumping station.

“The material will then be pumped up in slurry form to the ship, where it will be de-watered and set to shore for processing. For nodules, robots will roam the seabed.”

Critical to high-tech everything

REEs are metals with unique physical, chemical and light-emitting properties vital to hybrid vehicles, rechargeable batteries, wind turbines (renewable energy) mobile (cell) phones, compact fluorescent light bulbs, laptop computers, disk drives, catalytic converters, and LED, Plasma, and LCD display panels.

Neodymium, for example, is responsible for ensuring that the likes of Smartphones, hard drives, earphones, even MRI scanners, do the job they are designed to do.

Far from abundant on land

With over 30 percent of the world’s known REE deposits and by far the cheapest extraction process, China supplies 95 percent of the world’s REEs.

However, China, with a rising middle class and booming domestic market, is steadily reducing export quotas.

The Word Trade Organization (WTO), of which China is a member, ruled in March of 2014 that China was hoarding and taking unfair advantage of the market. That decision was two years in coming, and now China will appeal the current WTO judgment, which might take another two years.

Byron Capital analyst, John Hykawy said “I’ve heard from so many critical materials buyers at large corporations that they want security of supply. And security of supply to them means avoiding Chinese supply at all costs because they got fooled once. They don’t want to get fooled again.”

2- to 3-miles down: REEs not alone on the seabed

In the meantime, REEs are again getting to be in short supply, and with demand forecast to progressively increase, the world drastically needs new suppliers of REEs.

The London Metal Exchange lists neodymium at $800 Kg; terbium metal at 1,900 Kg; and scandium metal 15,500.00 per Kg. Relatively inexpensive is lanthanum at $13 Kg.

However, the battery in a Toyota Prius hybrid requires more than 10kg of lanthanum. Now multiply $130 times millions of Toyota’s and the need for lots of lanthanum comes into focus.

Stephen Ball, chief executive officer of Lockheed Martin UK, owner of UK Seabed Resources, told the BBC “It’s another source of minerals…there’s a shortage and there’s difficulty getting access, so there’s strategic value for the UK government in getting an opportunity to get these minerals.”

UK Seabed Resources says surveys have revealed huge numbers of nodules–small lumps of rock rich in valuable metals–lying on the ocean floor south of Hawaii and west of Mexico.
The exact value of these resources is impossible to calculate reliably, but a leading UN official described the scale of mineral deposits in the world’s oceans as “staggering” with “several hundred years” worth of cobalt and nickel.

“These tennis-ball sized nodules, found approximately four kilometers (2.5 miles) beneath the ocean’s surface, can provide millions of tons of copper, nickel, cobalt and manganese, as well as rare earth minerals, that are used in the construction, aerospace, alternative energy, and communications industries, among others,” reports Lockheed Martin.

The Japan Agency for Marine-Earth Science and Technology and the University of Tokyo confirmed the discovery of a “huge new deposit” on the Pacific seabed, claiming the “deposit can be mined at very low cost and will be able to produce materials that are 20 to 30 times more concentrated than those currently being mined in China.”

Robot submersibles hold the key

Located approximately 5,700 meters or 3.5 miles down, the Japanese scientists “claim the deposits to be approximately 6.8 million metric tons of rare earths, equivalent to 230 years of local demand.”

Although subsea mining at depths of 500 feet or less has been carried out for some time, deep sea projects have had to await technology, which is now coming on line, funded by companies like Nautilus Minerals, with subsea robot mining tools built by technology partners like Soil Machine Dynamics.

Then too, there are plenty of environmental issues about the potential impact on an ecosystem 3-miles deep–the flora and fauna of that lightless place we know little to nothing about. An adverse report was published in 2012: Out of our Depth: Mining the Ocean Floor in Papua New Guinea.

Also, according to Mining Magazine, The UN’s International Seabed Authority (ISA) is involved, reporting that these new sea floor mining areas “provide the habitat for a variety of animal life previously unknown to science, and that over 500 new species have been discovered–and are of great interest to science.”

Yet the ISA didn’t say no to the Bismarck Sea (Solwara I) operation.

The ISA basically said “be careful?”: “The uniqueness and fragility of this geographically fragmented ecosystem, and the value it holds for fundamental biological studies of metabolism, evolution and adaptation, will have to be taken into account in planning for mineral exploration and exploitation.”

Below is a Nautilus-produced video that explains the Solwara I mining venture in depth.

A Canadian registered company, Nautilus is listed on the Toronto Stock Exchange TSX:NUS. Its corporate office is in Brisbane, Australia. Its major shareholders include MB Holding Company LLC, an Oman based group with interests in mining, oil & gas, which holds a 28.00% interest, Metalloinvest, the largest iron ore producer in Europe and the CIS, which has a 20.75% holding and global mining group Anglo American, which holds a 5.95% interest.