Subject: Industry Report - HEAVY RARE EARTHS PRICES SET TO SPIKE ON OUTPUT QUOTAS From AGORAavl PostID 475057 On Thursday, May 04, 2006 (EST) at 3:26:07 PM
INDUSTRY BULLETIN FROM METAL PAGES– “HEAVY RARE EARTHS PRICES SET TO SPIKE ON OUTPUT QUOTAS”
Dear Avalon Ventures Shareholder,
In our ongoing efforts to keep you apprised of important developments at Avalon Ventures, or within the rare metals industry, we are pleased to provide you with the following news announcement, disseminated by Metal Pages information service, reporting that rare earth element (“REE”) prices are set to increase dramatically as a result of new output quotas being imposed on Chinese REE producers by the Chinese government.
Since China is responsible for over 90% of current world REE production, any reduction in output will inevitably put upward pressure on prices because demand continues to increase for specific REE’s such as neodymium. For neodymium, the increasing demand is largely from the automotive industry because of its critical importance in hybrid car technology. Rises in neodymium prices are forecast in a second news announcement provided below.
Metal Pages also reports insiders forecasting that the new quotas will have a “huge impact” later this year on heavy rare earth prices such as dysprosium, europium and terbium. This is of particular significance to Avalon because its Thor Lake REE deposit shows relatively high enrichment in the heavy rare earths (as well as neodymium) compared to the light rare earths such as cerium and lanthanum, as illustrated and discussed on Avalon’s website (http://www.avalonventures.com/projects_thor_lake.html ) .
Heavy rare earths prices set to spike on output quotas
LONDON (Metal-Pages) 02-May-06. Prices for heavy rare earths are set to surge in the second half of this year, as leading global producer China looks to implement a dramatic reduction in output.
As Metal-Pages reported, the Chinese government’s Ministry of Land and Resources last month announced for the first time production quotas for both tungsten and rare earths. For light rare earths the quota was set at 78,200 tons, and 8,320 tons for heavy rare earths.
Speaking to Metal-Pages today, industry insiders forecast a “huge impact” on the pricing of heavy rare earths - dysprosium, europium and terbium - once the new policy starts to kick in, most likely towards the end of the next quarter or during the final three months of the year.
According to the China Rare Earth Information Centre rare earth oxide in concentrate output totalled 118,700 tons last year, which represented a rise of over a fifth as compared to 98,300 tons in 2004 on the back of booming demand. This is now set to fall by 27.2% to 86,520 tons if the targets are achieved. Even if the new controls are not wholly successful production will still be significantly below levels in recent years, while demand is continuing to rise. Recovered rare earth production for this year as a whole is forecast dropping by over a quarter, from approximately 100,000 tons in 2005 to nearer 74,000 tons.
The most notable decline is seen in the ionic clay regions of southern China. Last year concentrate output was hiked by almost 50%, from 30,000 tons to 44,000 tons. However, according to the new Ministry of Land and Resources guidelines, this would plunge by nearly three quarters in 2006, to just 8,300 tons.
Production in the less heavy rare earth focused areas such as Baotou and Sichuan will be less effected, with output even seen rising in the latter region, with the controls of light rare earths less stringent, resulting in much less of an impact on pricing. However, with strong growth in demand forecast in the main applications of magnets, hybrod vehicles and most notably LCD and plasma screen televisions, prices are expected to continue upwards for most oxides, most notably neodymium and praseodymium, although these will be steadier increases than the sharp rises anticipated for dysprosium, europium and terbium.
One Western market participant forecast a tightening of supply for lanthanum oxide in the coming months, on the back of higher demand for nickel metal hydride batteries.
As Metal-Pages reported last week, prices for rare earth oxides were up almost across the board in the first quarter. Lynas Corporation - owner of the Mount Weld project in Western Australia, the richest known rare earths deposit in the world - reported that neodymium prices swelled by over two thirds year-on-year during January-March, with dysprosium and lanthanum other notable risers.
The Ministry of Land and Resources has also requested that no new mining licenses are ton be issued for rare earths, or any expansions permitted, with serious penalties threatened.
LYC Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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