Trade war may spark rare earth opportunity

An exotic mineral once mined Iluka Resources could bring about a resurgence in demand, as US-China tensions persist.

Western Australia’s role in the global hunt for supplies of rare earths to replace material China has threatened to withhold from the market could trigger another tricky problem for the state government, and a trip down memory lane.

Monazite, a mineral that made headlines decades ago but faded because of complex processing and waste disposal issues, has moved back into the spotlight as a potential source of rare earths.

Most monazite, which is mined in association with heavy mineral sands such as ilmenite, rutile and zircon, found in the South West and along the coastal strip north of Perth, has been stockpiled or returned to the pits from which it was originally recovered.

The reason the monazite never became a significant commercial product in WA is that it generally contains the low-level radioactive mineral thorium, as well as small amounts of a more controversial mineral, uranium.

A number of countries have experimented with thorium-based nuclear reactors because the process is regarded as safer than using uranium. India is hoping to be generating 30 per cent of its electricity from thorium by the year 2050, and Dutch scientists last year started the world’s first experimental thorium power reactor in almost 50 years.

But monazite is much more than thorium because the mineral can also contain attractive levels of rare earths. And while the extraction process to recover material such as neodymium, praseodymium, lanthanum and cerium can be difficult and expensive, the reward could be attractive if prices are high enough.

No-one has recently proposed a fresh look at WA’s monazite resource but it is starting to draw international interest as the China versus US trade war drags on, with rare earths high on the list of materials China might hit with an export embargo.

If China does restrict shipments of rare earths, particularly to the US, then WA’s role in the dispute will take on greater significance, mainly because the Mt Weld mine of Lynas Corporation is the biggest source of high-value rare earth minerals outside China.

Despite being processed in Malaysia, Mt Weld ore has recently become a problem for the WA government because Malaysia wants to return the waste left at the Lynas processing plant, a request that has been rejected.

Requests to start a monazite mine, or to dig up what’s been left after the removal of ilmenite and zircon, would present a similar problem for the state government (as well as an opportunity for WA to become an even more important source of rare earths).

The US has most to lose if China bans rare earth exports, because several minerals in the rare earth family of 17 elements have strategic military applications.

In addition, they are used to produce the best permanent magnets found in most electric motors, including those in electric cars and wind turbines producing renewable energy.

Fear of losing access to Chinese rare earth supplies has shifted Australia to centrestage in the US hunt for alternative supplies, with Mt Weld assuming critical importance while other potential sources, such as the Dubbo zirconia and rare earth deposit of Alkane Resources in NSW, are attracting international interest.

Monazite, however, could be just as valuable as a source of rare earths if prices continue to rise; and the WA government isn’t spooked by the prospect of a business producing a mildly radioactive material for export, much like the ore currently shipped out from Mt Weld.

First signs of a revived interest in monazite surfaced earlier this month when US investment bank Citi singled out Perth-based Iluka Resources as a company with potential appeal for its overlooked rare earths inventory in stockpiled monazite ore.

Iluka itself has shown no interest in extracting rare earth value from the monazite it has produced while extracting ilmenite, rutile and zircon.

But that hasn’t stopped Citi from including Iluka among possible rare earths investment opportunities should Chinese exports be curtailed.

The Citi research report started by asking whether Iluka was a forgotten rare earths play; and while the answer was equivocal, the fact the bank dug up Iluka’s past involvement with monazite could be significant, given the international trade issues swirling around rare earths.

“Iluka, and its antecedent entities (such as Westralian Sands) produced monazite from its WA operations at Eneabba for the extraction of rare earth elements from 1975 to 1995,” Citi said.

While Eneabba has ceased mining and rare earth elements have not been recovered for 24 years, Citi estimates that there could be a monazite stockpile of about 500,000 tonnes of the material.

Theoretically possible as it might be to reprocess monazite already mined and stockpiled, or to start looking for fresh ore, the reality is that those steps would only be taken for strategic purposes and not because of commercial appeal – unless there is another boom in rare earth prices as there was between 2010 and 2012.

Citi noted how the rare earth elements in heavy minerals deposits such as those found along the WA coast are trapped in the monazite, which occurs in minor amounts in heavy mineral concentrates, with the monazite normally assaying between 0.1 per cent and 1.5 per cent.

“As the monazite has a thorium content of between 5 per cent and 7 per cent, the rare earth elements are not recovered because of the cost of thorium disposal,” Citi said.

It’s a long shot but the game could change suddenly if China moves aggressively and cuts rare earth exports as trade war retaliation.

If that happens, a repeat of events that started in 2010 are possible. Back then, China and Japan became embroiled in a standoff over a Chinese fishing boat that had strayed into Japanese waters.

A 40 per cent reduction in Chinese exports led the price of some rare earth elements to rise 10-fold, with neodymium rocketing up from $US20,000/t to more than $US200,000/t, while cerium rose from around $US25,000/t to $US175,000/t.

“The current brouhaha has the potential to see rare earth element prices spike again,” Citi said.

If that happens, interest in Iluka’s monazite stockpile will grow, presenting the company with a commercial option and the WA government with a fresh radioactivity challenge.

Gold troubles

The late Len Buckeridge would be smiling if still alive because the truth behind one of his favourite sayings can be seen in the management mistakes rocking the state’s goldmining industry.

“More people go broke in a boom than in a bust,” Buckeridge used to say.

And while that seems illogical, the cause is easy money and management taking its eye off costs and the details of a business, confident that rising prices will fix any problems.

Three WA-focused goldminers – Gascoyne Resources, Dacian Gold, and St Barbara – have been hit by operational problems, even as the Australian gold price trades at an all-time high of more than $A1,900 an ounce.

Shareholders in Dacian and St Barbara have seen the value of their investments fall sharply, while Gascoyne has collapsed into voluntary administration.