The Chinese acquisition of stakes in Australian rare earth...

The Chinese acquisition of stakes in Australian rare earth miners Lynas Corporation and Arafura Resources has “caught the rest of the world sleeping,” said Rod McIllree, managing director at Australian-based Greenland Minerals & Energy (GME).

Following two acquisitions in the past six months for an aggregate USD 163m, Korean, Japanese and Western players may find themselves locked out of the sector, McIllree told mergermarket. Speculation is rife as to what this may mean for the high tech and green industries that rely on rare earth metal resources. With over 90% of the global rare earth resource held by Chinese companies, the country’s monopoly looks unchallenged. The recent Australian acquisitions have brought China control of the majority of the rare earth deposits outside China.

Rare Earth metals are a collection of 17 different metals that occur within the same ore deposits. While China currently produces 95% of the worlds rare earth supply, the metals are also found in the US, Indonesia, Australia and South Africa. Rare earth metals are needed for the manufacturing of wind turbines, plasma televisions, mobile phones, hybrid car batteries meaning the Chinese monopoly could shift the high-tech manufacturing industry bases from Japan and Korea to China.

Acquisitions of Australian rare earth miners are strongly backed by the Chinese Government, a China-based industrial banker said. Since 2004, or even earlier, the Chinese government has treated rare earth resources as strategic. In order to protect the resources available to China, the government employs a three-pronged strategy; rare earth exports are restricted, imports encouraged, and outbound rare earth acquisitions actively encouraged.

GME’s Rod McIllree, said the recent Chinese acquisitions highlighted the importance of the industry. With its multi-commodity ore body, GME is one of the last independent rare earth miners. Companies like GME that lack multi-commodity ore bodies including minerals such as iron ore alongside rare earths will find it hard to operate outside of China’s influence because most of the technology needed for refinement is only produced in China, he said. Japanese, US and European players now face higher barriers to entry which may prevent them from regaining a foothold.

However, Australian-based Lynas, despite now being majority owned by China Nonferrous Metal Mining Co (CNMC), will not sell resources exclusively to China, Vice President Matthew James said. CNMC is on board as an investor, not a buyer of rare earth; it differs in operation to Chinalco, James noted.

Arafura, which recently sold a stake to East China Exploration (ECE), was unavailable for comment.