Friday, August 19, 2011

7.30 ABC - Race for rare earths

Australian Broadcasting Corporation

Broadcast: 18/08/2011

Reporter: Greg Hoy

Australia is aiming to become a producer of rare earths, a group of elements or metal oxides in high demand.


LEIGH SALES, PRESENTER: Australia prides itself in being a world leader in mining, but it's late in joining the international race to produce valuable rare earths.

Rare earths are a group of elements or metal oxides that are crucial in technology and Defence manufacturing. As you'd imagine, the demand and price for them is skyrocketing.

Australia's hoping to break China's dominance of rare earth production, but as Greg Hoy reports, the stakes are high.

GREG HOY, REPORTER: Rare earth, widely scattered across the globe, but rarely in commercial quantities. Rare earths are a group of 17 metal oxides with sci-fi names like europium and neodymium, all highly prized and priced for their wondrous powers.

NICHOLAS CURTIS, CHAIRMAN, LYNAS CORP: The modern world as we know it wouldn't exist without rare earths.

GREG HOY: Their rare qualities can create powerful phosphors to light up smartphones, iPads, TVs, computers, energy efficient light globes, even stadiums, or stronger batteries and powerful magnets to drive hybrid and electric vehicles, wind turbines to make speakers smaller but louder, computer hard drives smaller but faster, more powerful X-ray and MRI scanning systems. And no modern war can be fought without rare earth-enhanced night vision goggles, spy radar, missile guidance and tank navigation systems, lasers, even satellites.

NICHOLAS CURTIS: There are so many applications that are relevant to our life today that are going to be critical in the future that depend on rare earths.

GREG HOY: But there is a big problem: the China syndrome. Now controlling 97 per cent of global supply of rare earths, China has exploited its cheaper labour and lower environmental standards to undercut international rivals and drive them out of business.

MIKE HARROWELL, RESOUCES RESEARCH ANALYST, BBY: They have built themselves a very powerful strategic niche.

GREG HOY: "Rare earths will be to China," vowed the Premier Deng Xiaoping in 1992, "what oil was to the Middle East." His words resonating loudly last year when China suddenly slashed its exports by 72 per cent, boosting export prices and its own plentiful supplies and unveiling China's master plan.

MIKE HARROWELL: China would like the West to continue to move manufacturing capability for rare earth specialty technologies back into China.

GREG HOY: But the China syndrome is fuelling powerful geopolitical tensions. For starters in Washington, where a Government report 'Rare Earths Materials in the Defence Supply Chain' last year stated, "The Department of Defence has not yet identified ... national security risks due to rare earth material dependencies and is in the process of identifying such risks."

MIKE HARROWELL: The military obviously are very concerned because rare earth magnets provide the guidance for their weapons systems on tanks, the tail fins on their smart rockets and bombs. Presently they all come from China.

GREG HOY: But international concern soared higher on September 22nd when China stopped all exports to Japan following the arrest of a Chinese fisherman in disputed territorial waters. Amidst rising tensions the fisherman was quickly released by the Japanese, the world's biggest consumers of rare earths for their high-tech manufacturing sector, who soon pleaded for help from Australia.

SEIJI MAEHARA, JAPAN FOREIGN MINISTER (voiceover translation, Nov. 2010): We're very pleased that Australia is also able to give us a long-term commitment in relation to rare earths.

KEVIN RUDD, FOREIGN MINISTER: The Australian Government understands the strategic significance of rare earths globally.

GREG HOY: But such a big commitment is easier pledged than delivered. Ramping up rare earth production requires a decade of high-tech planning and a mountain of money.

STEVE WARD, CEO, ARAFURA RESOURCES: We believe it will cost about a billion Australian dollars to create the mine and the rare earth complex.

NICHOLAS CURTIS: It will cost about $700 to $800 million in terms of the total journey.

GREG HOY: And that's before facing strong environmental sensitivities.

MIKE HARROWELL: That a by-product of making rare earths generally is thorium, or uranium, and that obviously has disposal issues.

GREG HOY: Leading the race locally to challenge China is Australia's Lynas Corporation, which is facing strong protests in Malaysia, where with the help of a 12-year tax exemption by the Malaysian Government, Lynas plans to process rare earths mined in Western Australia. Public protests triggered an inquiry by the International Atomic Energy Agency.

NICHOLAS CURTIS: The review said that we were safe and that this had no hazard to community.

GREG HOY: Back in Australia meantime, Arafura Resources is gathering a billion-dollar war chest to mine rare earths in the Northern Territory and plans to process in Whyalla, South Australia, in hope of supplying 10 per cent of the global market.

STEVE WARD: Australia is viewed as a country which has very demanding regulations, and they actually give us, we believe, certain credibility in global markets.

GREG HOY: And the potential of Australian companies now entering the fray has aroused powerful international interest.

NICHOLAS CURTIS: We've also recently had the Japanese Government lend us $225 million to double our plant capacity and we have very strong interest from the US, Europe, Japan and other jurisdictions from an investment point of view.

GREG HOY: And the biggest interest of all in Australian companies has come from, you guessed it, China.

NICHOLAS CURTIS: A Chinese Government group wanted to take 51 per cent of the company and the Foreign Investment Review Board declined.

STEVE WARD: We do have a Chinese shareholder who owns 17 per cent of our company. They are one of our largest single shareholders.

GREG HOY: China of course bans all foreign investment in its own rare earths industry, though it does now encourage foreign manufacturers to set up in China if they use Chinese rare earths in joint ventures with Chinese interests. It's a salutary lesson for sleepy governments in shrewd strategic planning. Outside China, the road to rare earth riches remains long and hazardous, particularly given the Middle Kingdom's determination to stay ahead of all competition.

DUDLEY KINGSNORTH, RARE EARTHS EXPERT: China's been processing rare earths now for well over 40, 50 years. By all accounts they have over 5,000 PhDs working in industry, developing new applications, refining their processes. We don't have that expertise here outside China.

LEIGH SALES: Greg Hoy there.

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