China rare earth prices explode as export volumes collapse

China’s exports of rare earth metals burst through the USD100,000-per-tonne mark for the first time in February, up almost ninefold from a year before, while the volume of trade stayed far below historical averages. China’s squeeze on rare earths, which are used in a wide range of hardware including precision-guided weapons, hybrid car batteries and iPads, has forced prices up dramatically since July last year, when each tonne fetched a mere USD14,405 on average.

The apparent price rises have averaged USD10,000 per tonne per month but accelerated in February, galloping ahead by USD34,000 per tonne, according to calculations based on data from China’s Customs office. In February each tonne of exports was valued at USD109,036 on a free on board basis, almost half as much again as the average value in January.

The explosion in export values has coincided with a collapse in volumes coming out of China, the source of almost all the world’s rare earth supplies, which has cut export quotas of the 17 rare earth metals and raised tariffs on exports. China’s actions have infuriated its trading partners but lifted the shares of the few mining and prospecting companies outside China that are well-placed to capitalise on the constriction of Chinese supply. They include U.S. miner Molycorp Inc, Canada’s Rare Element Resources, and Neo Material Technologies and Australia’s Arafura and Lynas.

China exported a total of 750 tonnes in February, slightly more than the 647 tonnes shipped in January but otherwise the lowest monthly volume since February 2009, when demand was hit by the global financial crisis. China’s Customs office changed its method of presenting rare earths exports in its headline data this year, boosting the reported volume by including products made from rare earth metals in the total. By that method, exports were 2,976 tonnes in February, up by 132 percent from a year before, when the figure did not include rare earth products.


China customs detained Glencore trader in oil imports probe

China’s customs authorities recently detained a Glencore trader as part of an investigation into fuel imports and potential tax evasion. Li Buhua, a Chinese national and a member of Glencore’s Beijing-based trading team, was later released on bail. The Swiss commodity trading giant, valued earlier this year by one analyst at about USD60 billion, is continuing to prepare for what could be a record London initial public offering (IPO).
Chinese customs have since late last year been looking into imports of “power kerosene”, a fuel of a quality between diesel and kerosene that can easily be turned into diesel but is not subject to a hefty consumption tax which otherwise applies to diesel or kerosene. The investigation involves a 100,000-tonne cargo Glencore brought in through China’s Zhuhai customs late last year. China levies a consumption tax of about USD125 per tonne on imports of diesel or jet kerosene, but power kerosene is exempt.


Russia to double oil exports to Japan

A senior cabinet official in Moscow has said Russia will double its oil exports to Japan to 18 million tonnes this year to help its neighbour through the aftermath of the earthquake and tsunami. Igor Sechin, deputy prime minister, said that Japanese companies could join Russia’s Gazprom in exploring two massive gas fields, including Kovykta, which contains 2,000 billion cubic meters of gas.
The crisis at the Fukushima nuclear plant has provided an opportunity for Russia as it strives to gain a larger share of far eastern energy markets and sell its oil and gas outside Europe. Sechin has also offered to help Japan avoid energy shortages by providing extra supplies of liquefied natural gas and coal. He said it was ready to export electricity to its eastern neighbour in future. Sechin also offered Japan opportunities to explore for oil and gas in Russia’s far east. “We are ready to proceed in every direction Japan shows interest in,” Sechin said during talks with Masaharu Kono, the Japanese ambassador in Moscow.


ARMZ, Mantra agree to lower-priced deal

Uranium junior Mantra Resources has accepted a new lower bid of AUD7.02 a share from Russia’s Atomredmetzoloto (ARMZ). ARMZ had in December agreed to buy Mantra for AUD8 a share to gain access to its Mkuju River deposit in Tanzania, but pulled out of the deal after it said the Japanese nuclear crisis meant that a condition could not be satisfied. Under the new agreement, ARMZ will pay AUD6.87 a share and a dividend of AUD0.15 a share on closing of the transaction, valuing the Australia-based company at AUD1.billion. Mantra expects the deal to be closed on July 4.
Under the previous agreement, TSX-listed Uranium One had the option to buy Mantra from ARMZ, which is Uranium One’s 51% shareholder, for up to one year. This has now been extended to two years, provided that Uranium One partially exercises its call option and acquires about 15% of the shares of Mantra for USD150 million either by January 2012, or six months after ARMZ has closed the acquisition.
“The Mkuju River project ranks among the best uranium development projects in the world. The amended put/call structure maintains our ability to acquire a world-class uranium development project at a lower cost while providing us with additional flexibility to exercise the option,” Uranium One CEO Chris Sattler said.


China’s Western Mining plans 100,000 T/yr copper smelter

Shanghai-listed Western Mining Co Ltd plans to build a 100,000-tonne-per-year copper smelter in the northern western Chinese province of Qinghai, at an estimated cost of USD347 million, and will seek a partner with  a minority stake. Western Mining was likely to use copper concentrate production in Qinghai and Inner Mongolia for the new smelter but would still need to buy concentrate from other miners.
The mining company operated the Yulong copper mine in Tibet, probably the largest untapped copper deposit in China, and would expand production there. China, the world’s top copper consumer, would add 600,000 tonnes of designed copper smelting capacity to 4.07 million tonnes this year, including 200,000 tonnes of new capacity by Hong Kong- and Shanghai-listed Zijin Mining Group Co Ltd . Zijin has said the company aimed to complete construction of the smelter in the second half of the year and start production. “Copper concentrate purchases is one of the main issues we have to deal with before starting production,” a spoksman said. He added that most of the concentrate for the new smelter in the southeastern province of Fujian would be bought in China and overseas markets as it did not produce enough concentrates itself. He said completion of a new chemical plant, which would take all sulfuric acid from Zijin’s copper smelter, was also a factor for the startup. Sulfuric acid is a by-product of copper smelting.


China enters race for seafloor’s mineral riches

China’s Minmetals has joined the hunt for deep sea minerals including copper and gold.
“China relies heavily on costly raw-material imports, and this will push the country to go for deep-sea mining to explore metals including copper, nickel, sliver and gold,” state-owned China Daily quoted Minmetals president Zhou Zhongshu as saying.
The report said that China applied for its first deep-sea mining permit in May last year, which was pending approval. It did not say where Minmetals was looking to exploit the ocean floor.
Canadian junior Nautilus Minerals aims to start producing at its Solwara 1 deep-sea copper/gold project off the coast of Papua New Guinea in 2013. Earlier this month the country’s government said it would buy a 30% stake in the project.
Deep Green Resources, started by Nautilus founder David Heydon, also aims to mine the sea bed between Hawaii and Mexico, the Financial Post has reported.