Rare Earth Element Smuggling, Black Market & Pricing

Arrived in Perth at 6AM yesterday and am just enjoying a stunning sunrise over the harbor here in Fremantle, Australia. Met with Doug Bowie, the Coordinator of the Uranium Conference that I am here for on Wednesday-Thursday yesterday afternoon, and I am informed that we should anticipate protestors on Wednesday at 5:30 PM here at the hotel. The event has 400 delegates registered. Rare Earth Element (REE) companies Minmetals, Alkane, Peak and TUC will all be presenting.

I am here discussing the REE market, but I have been very public on rising bull market anticipations in the uranium market; and in fact, we will be rolling a Uranium & Clean Energy section out in the soon to be launched site, which will integrate the current content.

Dudley Kingsnorth and I had pizza together at a microbrewery that looked like the interior of ANSTO last night and we discussed our presentations on Thursday. One of the topics that I will be referencing is the rare earth black market. We discussed pricing and the challenges therein and thought you may enjoy some interesting facts and research highlights this morning to kick off your week:

  • According to the China’s whitepaper on rare earth elements (June 2012): “By way of special rectification campaigns, more than 600 cases of illegal prospecting and mining were investigated and rectified, more than 100 cases were placed on file for further action, and 13
    mines and 76 smelting and separation enterprises were ordered to cease production for rectification. In this way, the trend of illegal mining and production has been reversed.”
  • At the Industrial Minerals conference in March 2012, held in Budapest, Hungary, delegates were told western consumers of rare earths are more reliant on illegal material than they may realize. According to Vasili Nicoletopoulos, of Natural Resources GP, smuggled rare earths account for 15% of light rare earth element supply to western consumers and up to 50% of heavy rare earth element output.  Japan is China’s largest customer of rare earths and is 20% reliant on illegal exports.    
  • A Reuters article titled, Q&A-Will China’s rare earths sector crackdown work? (August 20, 2011) notes, “China’s dominant role in global production has created incentives for miners to flout rules, especially as global demand surges, with illegal production and smuggling still rampant.”       
  • To circumvent export quotas rare earths are smuggled outside of China. This poses a concern for China as they try to limit the amount of rare earths that enter the market. Many argue that the REE black market is the driver behind China’s push to consolidate its rare earth mining industry.
  • Illegal REE mining and processing is said to be more prevalent with China’s smaller REE companies as they often resort to illegal measures after being denied a license to export. Also
    entrepreneurs wanting to make money may ignore laws and smuggle REE materials that are usually labeled as a different product.
  • An article from the Want China Time (June 22, 2012) called Rare Earth Smuggling Rampant in China notes, “Smuggling of rare earth minerals in China reached 22,320 tons in 2011, far exceeding the quota of exports through normal channels in the country, the
    Shanghai-based First Financial Daily reports.”

There is a chocolateria here that is calling my name, and then I will be heading downtown Perth to meet the Arafura team this afternoon for an update. One of many items I love about being here, is that I am a day ahead here…

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