Has the rare-earth bubble burst?BY: ROBIN BROMBY From: The...

Has the rare-earth bubble burst?

BY: ROBIN BROMBY From: The Australian June 22, 2012 11:50AM

MORE than 90 per cent of rare-earth junior explorers are about to be wiped out, says one of the world's leading experts on the sector.

Jack Lifton of Illinois-based Technology Metals Research says the rare-earth bubble has burst and valuations are coming down to earth.

Of the 250-plus rare earth companies listed (mainly in North America and Australia) only one is in production. (And, we would add, only one more - Lynas Corp here in Australia - about to get into production; we'll be lucky to see any more until at least 2014 - and that's being optimistic.)

He also spelled out that there is no single rare-earths market - there are 17 of the elements and each one has a different market characteristic. For example, cerium is going into over-production while some heavy rare earths will be in deficit for years to come.

Lifton identifies the elements to watch as yttrium (used in fluorescent lighting among other things), europium (which provides the colour red on your screen), terbium (used in x-rays and also provides colour green in lighting), along with neodymium and dysprosium (used in magnets for wind turbines and electric vehicles).

Dysprosium is a case in point - and the big coming supply crunch was reported in detail in yesterday’s Commodity Watch in The Australian.

“There is not now, nor has there ever been, any production of dysprosium from outside of China,” Lifton said in an interview this week.

It could be two - or as much as four - years before any dysprosium is produced outside China.

This writer would add that much of the problem, so far as Australia is concerned, is that many rare-earth explorers have not had the finance to fast-track their projects, and risk missing the bus. At some point, there is going to be excess quantities of some of the rare elements.

A good example of what Lifton is talking about is illustrated in a presentation by Alkane Resources (ALK), which has its zirconia-rare earths-niobium project in advanced development near Dubbo, NSW.

You have to separate the elements to see where the value lies.

Its distribution is dominated by the low-value light rare earths (cerium, lanthanum and praseodymium) but 14.1 per cent of its rare earth suite is made up of neodymium (which sells for $US150 a kg, against cerium’s $US20/kg). Alkane doesn’t have much of the high-value heavy elements terbium, europium and is likely to produce only about 95 tonnes a year of dysprosium, but it will be able to produce about 700 tonnes a year of yttrium, the element also expected to be in deficit for as far out as 2025.

Alkane’s example illustrates another part of the rare-earth equation: the long time to takes to get these projects up and running. In Alkane’s case, it is now more than 15 years down the rare-earth track and only now in sight of the production goal.

But at least Alkane has done all its ground work - and has its other elements (zirconia, niobium, hafnium) which will counter any fall in rare-earth prices. And that's the other point: rare-earth projects have a better chance when they're part of a multi-commodity proposition.