WASHINGTON, DC - Tuesday, January 04, 2011 -
The great rare earths resource race that exploded onto the global commodities scene in 2010 has accelerated again at the beginning of the New Year. On Tuesday, the South Korean government announced that it had authorized a new prospecting program in Kyrgyzstan.
The news could not have come at a better time for the small, impoverished and landlocked nation in Central Asia. Its new Prime Minister Almazbek Atambayev has enjoyed great success in winning the goodwill of Russia. The second thing he needs for stability is to attract foreign direct investment to develop his country’s potential rich resources of precious metals
China has generally good relations with South Korea but the South Koreans are feeling the pinch on China preempting rare earths for their exclusive use.
China has dominated the rare earths global supply, but now it is drastically curtailing exports, throwing high-tech economies and major corporations in the United States, Germany, Japan and South Korea into a panic.
Rare earths are exceptionally rare elements and minerals that are essential for many high-tech industrial processes. They are vital, for example, to produce smart phones, televisions and hybrid cars.
Rare earths can be produced from uranium tailings, which means countries rich in uranium are the most likely places to find them, or the minerals and elements from which they can be extracted. Kyrgyzstan has uranium. It is also geographically close to the main reserves of rare earths known in the world, found in northwestern China.
The South Korean government is not limiting its search for new supplies of rare earths to Kyrgyzstan. It’s looking to mine them in Vietnam, Australia and South Africa as well.
Rare earth prices soared 700 percent on global commodities markets last year. And that was even before China, the world’s dominant supplier, in December slashed its approved export quota for the first half of 2011 by 35 percent. As we reported in November in Central Asia Newswire (CAN), China reduced its export quotas for the second half of 2010 by 72 percent. Beijing produces over 90 percent of the world's rare earth supplies every year.
The Chinese moves set off a global race to corner the world’s remaining prospective supplies of rare earths.
South Korea announced in December it would try to boost its supply of rare earths and lithium from deposits it controlled directly to 26 percent by 2019 -- almost four times the figure of 7.3 percent in 2009.
As CAN reported in November, the Sumitomo Corporation, the third largest trading house in Japan, has launched a new joint venture (JV) -- the Summit Atom Rare Earth Company -- with Kazatomprom, Kazakhstan's national nuclear corporation, to make rare earths from uranium tailings.
The hunger of China's own rapid and colossal industrial expansion and high-tech progress is now swallowing up most of its domestic production. Therefore, corporations such as Glencore International AG, Stans Energy Corp. and Greenland Minerals & Energy Ltd. have led the rush to prospect and open new rare earth mines, or reopen old ones.
The term "rare earths" refers to 17 chemically similar elements, including neodymium and dysprosium. Neodymium oxide is vital for mini-hard drives in laptops and headphones in Apple’s iPod. Its price was just over $19 per kilogram (2.2 pounds) a year ago. Now that has risen to $80 per kilogram (2.2 pounds).
For Kyrgyzstan, South Korea’s new prospecting and development initiative offers rewards far beyond the immediate discovery of new deposits of rare earths. Kyrgyzstan is known to have significant gold, uranium and other previous metal deposits already and it has been poorly prospected by geologists compared with neighboring Russia, China and Kazakhstan.
The corruption and incompetence of Kyrgyzstan’s authoritarian governments since independence have dampened down the enthusiasm of international investors to invest there. However, with gold and rare earth prices soaring, and uranium looking robust as far into the future as one can see, the investment climate is more favorable now for precious metals mining and metallurgical development than at any time since the country achieved independence 19 years ago.
Therefore, if South Korea’s new rare earths venture proves successful, that could herald at least a mini-mining boom bringing in the foreign investment that the little country so desperately needs. Prime Minister Atambayev and his colleagues will be praying this will happen.