The Chinese threat has touched off a frenzied international effort to develop alternative mines
A Chinese threat to halt exports of rare minerals — vital for high-performance electric motors in wind turbines, hybrid cars and missiles — appears to have backfired.
With control of more than 99 percent of the world’s production of these minerals, China could try to use a ban to force other countries to buy the crucial motors for these high-tech end products, instead of just the minerals, directly from China.
But other governments and businesses reacted quickly as word of the proposed ban spread late this summer.
The Chinese threat has touched off a frenzied international effort to develop alternative mines, much as the 1973-74 Arab oil embargo’s repeated increases in oil prices prompted a global hunt for oil reserves.
In Washington, the House and Senate amended their defense budget authorization bills to require the Defense Department to review the military’s almost complete dependence on Chinese supplies of rare-earth minerals. In Australia, the government blocked a Chinese state-owned company on Thursday from acquiring a majority stake in a large mine being developed for these minerals, also called rare earths.
Meanwhile, Wall Street is financing exploration as the share prices of rare-earths mining companies soar — as much as sevenfold since March.
“Because of China’s focus on maximizing the benefits of its rare-earth resources for its own industry, there is now a focus on identifying alternatives elsewhere,” said Dudley J. Kingsnorth, a rare-earths production consultant in Perth, Australia.
Unleashing funding elsewhere has undercut China’s ability to take big stakes easily in new mines.
“You couldn’t borrow 10 cents from anybody in the financial community” to develop a rare-earths mine just three months ago, said James B. Engdahl, the chief executive and president of the Great Western Minerals Group, a rare-earths mining and processing company in Saskatoon, Saskatchewan. “We get inundated with calls offering financing these days.”
International pressure — including the possibility that the plan violated World Trade Organization rules — has forced the Chinese ministry drafting the ban to call for further review.
The developer of the largest rare-earths mine in Australia, the Lynas Corporation, did not have the cash to finish its mine and processing facilities after Western investors deserted its bond offering last winter. So Lynas agreed to sell about 52 percent of the company to the state-owned China Nonferrous Metal Mining Company on May 1.
This month, the Foreign Investment Review Board of Australia demanded that the Chinese company take a smaller stake and accept fewer seats on the board under any deal; Lynas announced on Thursday that China Nonferrous had refused and had instead withdrawn from the transaction, valued at $220 million.
Lynas said in a statement that it was “well advanced in finalizing interim funding.”
Nicholas Curtis, the executive chairman of Lynas, said in an interview on Friday that financing opportunities had improved in recent months, declining to elaborate because of a voluntary five-day suspension in its stock trading as the company reviews its options.
Mr. Curtis would not completely rule out the possibility of a transaction with another Chinese company.
But recent Australian government policies “don’t encourage you to go down that pathway,” he said.
Patrick Colmer, the executive member of the investment review board, said in a speech on Thursday that the government wanted foreign state-owned companies to take stakes of less than 50 percent in small or undeveloped Australian mines and less than 15 percent of large mining operations.
Investors had indicated over the summer that the Chinese offer was too low.
Related articles by Zemanta
- China’s Plans for Mines Are Blocked (nytimes.com)
- China to Put New Limits, but Not Export Ban, on Rare Minerals (nytimes.com)
- China comes calling with $2 trillion in its pocket (dailyfinance.com)
- SinoUS tyre row deepens amid falling import claims (telegraph.co.uk)
- China Exports of Rare Earths Fall, Only 40% of Total 2011 Quota (ibtimes.com)
- Shortage of Rare Earths a Crisis Waiting to Explode (ibtimes.com)