RARE -- CHAPTER 10 -- THE CONCENTRATION QUESTION

CHAPTER 10 – THE CONCENTRATION QUESTION

Much like in the real estate business, “location, location, location” is a much-uttered mantra, the mining industry’s chant, as I interpreted this chapter, can be said to be “concentration, concentration, concentration”.  In the beginning of the chapter, the author challenges the reader to contemplate quantitatively what the implications are of a train car carrying a hundred tons of coal containing 4 ppm uranium in terms of public perception on exposure to this radioactive element.  He used this starting to point, I believe, to prime readers in how concentration plays an important role in determining the viability of mining a region.  He then goes on to describe briefly theories about how deposits of common metals like iron and gold and most of the rare earths formed and arrived at the surface.  In China, much of the 96% of the world’s rare earth supply they mine come from the town of Bayan Obo in the autonomous region of Inner Mongolia.  No single theory holds as to why there is such a vast deposit of rare earth in that region except to say that these elements were probably pushed to the surface by tectonic and volcanic activities.  The rare earths found in the region occur in the same bonding arrangement of stable metal oxides of 2 metal atoms for every 3 oxygen atoms.  The author reiterates that this huge deposit and China’s willingness and ability to sell them at a low price are what contributed to their dominance in the rare earth industry.  In the section, The Man Who Forged a New China, the author credits much of the development and success of the rare earth industry in the more open, more capitalistic views and governing style of Deng Xiaoping.  This section provides a brief synopsis of his career in politics, ascent to premier leader, and philosophies and practices that help open China to more economic advancement.  He is credited with the phrase: “The Middle East has oil, China has rare earth.”  In North America, the “crown jewel” of rare earth mining was to be found in the Mountain Pass site in California’s Mojave Desert.  Through the 1970’s and all the way to the end of the 1990’s, this site was producing well until two events culminated in its closure: the Chinese selling rare earth metals at lower prices and saturating the market and the environmental disaster in 1997 that saw 7 spills totaling 300,000 gallons of radioactive waste that spread across the Mojave Desert.  Clean-up of the spill cost Chevron $185 million.  In 2002, Mountain Pass ceased its mining operations and not long after that Chevron sold it back to Molycorp.  The author was not optimistic about the prospects of Molycorp who has invested $500 million in restoring the mine:  “Mining is a difficult if not damned industry, one where profit margins are eternally slim and political events can change the world stage in a handful of days, if not overnight.  Before Molycorp and other mining entities can earn a single dollar, the corporations must find and acquire a mineral-rich site, tear the prized rocks from the crust of the earth, and then carry out thirty-plus refining steps to isolate a single rare earth metal.”

·         Metals concentration plays a critical role in terms of determining whether investing in mining a certain source of deposits is financially worthwhile.

·         The author provides a scenario to illustrate the importance of correctly interpreting the implications of concentration values.  In this quantitative exercise, he shows that a hundred heavy-duty train cars each containing a hundred tons of coal with 4 ppm uranium is carrying between 20-80 pounds of uranium.  While this sounds alarmingly a huge amount, he points out that at this concentration, “uranium is safely split between millions of pieces of coal spread throughout the train”.

·         He likens this concentration of uranium in coal to the distribution of rare earth metals in rocks and quarries.

·         It takes millions of years and the correct combination of physical and geological events to concentrate high deposits of rare metals in one region.  Some origin of deposition of metals described by the author:

o   Gold pieces make it to the ocean because of the rivers that dump them there.  Gold can also exist in water as gold tetrachloride which is toxic to humans and animals.  The bacteria Cupriavidus metallidurans, on the other, are able to thrive in areas with a high concentration of heavy metals because their metabolic is able to process them.  In the case of gold tetrachloride, these bacteria can reduce the gold ion to metallic gold.  These pieces of gold accumulate eventually into nuggets.

o   Modern deposits of iron are thought to have originated from iron oxides dissolved in the ocean during the Proterozoic era, 2.5 billion to 500 million years ago (as metallic iron reacted with new oxygen being created by cyanobacteria around the same time).

o   Most of the rare earth metals including niobium and tantalum are usually found in igneous rock, suggesting that they were formed underground and arrived at the surface through volcanic action.

·         CHINA’S DOMINANCE IN THE RARE EARTH METALS INDUSTRY

·         In the section Time and Chance at Bayan Obo, the author highlights how economically important China is in the rare earth metals business:  “China’s available supply of rare metals rivals the material wealth of oil underneath the sands of Saudi Arabia and the Middle East”.  The USGS estimates that China holds more than 96% of all available supplies of these metals.

·         China’s main source of rare earth metals is in the town of Bayan Obo in the autonomous region of Inner Mongolia in the north.  This mining district started in 1927 as an iron mining site.  Why is there such a high accumulation of rare earth metals in this site?  No one really has a solid theory but the minerals “containing tantalum, niobium, and other rare metals likely accumulated over the course of a 400-million-year span in the Middle Proterozoic period”.  One theory is that these rare earths were brought to the surface by volcanic and tectonic activity.

·         The rare metals of Bayan Obo represent a typical atomic arrangement of 2 atoms of the metal bonded to 3 atoms of oxygen, a very stable oxide arrangement.

·         Through a variety of tax benefits and other individual incentives, the Chinese government was able to entice scientists and engineers to come to Bayan Obo and to live and work in the 15 square kilometer area known as the Baotou National Rare Earth and Hi-Tech Industrial Development Zone in 1992.  This area used to be a farming region now supplanted by mining and refining activities.  The success of this region and China, in general, as has been mentioned before lies not only in the huge amount of deposits but also China’s willingness to sell them at lower prices.

·         The author ends this section with the same admonition:  “The rest of the world has little recourse in the face of price increases, as any cache of commercially viable rare metals would likely cost more to retrieve than those sold by corporations inside China”.  Even if countries discover new sources, “it could take well over a decade and phenomenal expense before a semblance of self-sufficiency is actually achieved”.

·         In the section, The Man Who Forged a New China, the author credits much of the development and success of the rare earth industry in the more open, more capitalistic views and governing style of Deng Xiaoping.  This section provides a brief synopsis of his career in politics, ascent to premier leader, and philosophies and practices that help open China to more economic advancement.  He is credited with the phrase: “The Middle East has oil, China has rare earth.”

·         Meanwhile, in North America, the author asks the question: “Where did North America’s domestic supply of rare earth metals go?”  The “crown jewel” of rare earth mining was to be found in the Mountain Pass site in California’s Mojave Desert.  Through the 1970’s and all the way to the end of the 1990’s, this site was producing well until two events culminated in the closure of this former “crown jewel” of rare earth mining in North America:

o   The Chinese selling rare earth metals at lower prices and saturating the market

o   The environmental disaster in 1997 that saw 7 spills totaling 300,000 gallons of radioactive waste that spread across the Mojave Desert.

·         Clean-up of the spill cost Chevron $185 million.  In 2002, Mountain Pass ceased its mining operations and not long after that Chevron sold it back to Molycorp.  The author was not optimistic about the prospects of Molycorp who has invented $500 million in restoring the mine:  “Mining is a difficult if not damned industry, one where profit margins are eternally slim and political events can change the world stage in a handful of days, if not overnight.  Before Molycorp and other mining entities can earn a single dollar, the corporations must find and acquire a mineral-rich site, tear the prized rocks from the crust of the earth, and then carry out thirty-plus refining steps to isolate a single rare earth metal.”