Does the future of high-tech manufacturing lie beneath the forbidding terrain of B.C.’s Northern Rockies? With a global supply squeeze on, a handful of miners race to prove up reserves of rare-earth metals.
Enjoying your new iPad 3? Like all the nice features of the latest version of your BlackBerry? And how’s the picture on that 52-inch flat-screen monster you just nailed to the wall in your living room? Chances are people are very familiar with all the features of these products because they use them every day. But ask them how they feel about yttrium, lanthanum, promethium and a whole bunch more “ums” and their eyes will glaze over.
Welcome to the world of rare, or specialty, metals and rare-earth elements. They are crucial components in all those technological devices, and over the last three or four years they have been hotly pursued by the world’s mining companies, big and small. And it isn’t just the latest laptop that needs this stuff; there are several strategic and military uses that the world’s only fading superpower – the U.S. – is keenly interested in.
Increasingly, B.C. is playing a role in this hunt, and could well be a significant player in the production of some of these rare or specialty metals within the next decade, possibly sooner. About three years ago, a handful of small and medium-sized mining exploration companies in B.C. began staking claims throughout the province, hoping to cash in on what they thought would be an impending supply crunch for some of these metals and elements. Their main focus was, and still is, a region called the Rocky Mountain Trench that stretches along the spine of the Rockies from north of Mackenzie down to the Crowsnest Pass.
David Hodge is president and director of Zimtu Capital Corp., a Vancouver-based holding company specializing in seeking out and investing in junior resource companies. Zimtu’s holdings include Commerce Resources Corp. and Western Potash Corp., and Hodge (who is also president of Commerce Resources) is bullish on rare-metal and rare-earth-element prospects in this province. “B.C. has a strong advantage when it comes to any of the specialty metals,” says Hodge. “And that’s because it’s such a secure, well-known jurisdiction. Many of these rare earths have a small concentrated market, and those markets are very susceptible to security risks. The fact that these deposits are in B.C. means they are in a safe jurisdiction.”
Hodge believes B.C. has a very good shot at developing a rare-earth mine, but he points out that the usual time frame from discovery to mine is seven years. Zimtu’s flagship company, Commerce Resources, has been at it for 11 years now and hasn’t quite made it to the pre-feasibility stage yet.
The B.C. Ministry of Energy and Mines has been promoting the development of these rare or specialty metals and rare-earth elements for about 15 years, but it is only in the last three or four years that a brief “staking rush” blossomed (it has since eased off) and exploration dollars flowed into a number of greenfields prospects. Growing demand and a stated intention by China (which controls about 90 per cent of a growing number of the rare-earth elements) to phase out and ultimately eliminate exports sparked that rush.
According to published material on the ministry’s website, there are now 400 active rare-earth element projects worldwide. While the ministry is focusing on 12 primary rare-earth-element-bearing occurrences staked in the province, there are more than 100 of them province-wide. Despite the recent flurry of exploration activity, the ministry is apparently not expecting a rush for mine permits. The ministry declined to comment for attribution for this article, but a spokesperson said via email: “We expect a minority of the 400 projects world-wide (including those located in B.C.) will reach the advanced development stage, and an even smaller portion of these projects will reach the production stage.”
Ministry officials believe the province’s most promising prospects – the ones that should get priority attention – are specialty metals found in carbonatite and syenite-related ore deposits, and it has singled out the metals tantalum and niobium. Also present in these deposits are rare-earth elements, considered a subset of rare or specialty metals.
Two exploration projects fitting into that category are Commerce Resources Corp.’s Blue River project and Taseko Mines Ltd.’s Aley project. The Commerce project, about 13 kilometres north of the town of Blue River, is a tantalum/niobium project, while Taseko is focusing on niobium at the Aley project, 140 kilometres north of Mackenzie. Neither of these prospects technically fits the description of rare earth, but both are rare metals. Niobium is used for high-strength steel used in a variety of environmentally friendly “green” technologies, while tantalum is primarily used in electronics.
Taseko raised some eyebrows (although it garnered zero media attention) in February, when it announced it would spend $20 million this year to define the ore body, conduct environmental baseline studies and do some preliminary engineering on a mine site at its Aley project. That expenditure alone is a significant chunk of change in what is currently a small piece of the province’s mining sector. No one has any hard numbers, but of the $463 million in mining exploration expenditures in 2011, the rare and specialty metals component would likely be under five per cent, making Taseko’s 2012 program the biggest by far. Conceding that it is his educated guess, Zimtu Capital’s Hodge calculates that Taseko has likely already spent $10 million, Commerce the same, and the rest would add another $10 million.
Brian Battison, vice-president of public affairs with Taseko and former CEO of the Mining Association of B.C., suggests that spending a large amount of money on exploration in B.C., as Taseko is doing with its Aley project, doesn’t really cut it anymore with the media. Says Battison: “It used to be in the old days if you made a discovery, that was big news. It used to be rare and difficult to find a project – that was the holy grail. Now that doesn’t matter. It’s getting the permit; that’s what’s rare and difficult.”
Joining Commerce and Taseko in the B.C. rare and specialty metals games along this Rocky Mountain Trench are nearly a dozen other public companies, and one private venture, including Canadian International Minerals Inc., Bolero Resources Corp., Eagle Plains Resources Ltd., Northcore Resources Inc., International Montoro Resources Inc., Electric Metals Inc., Rara Terra Minerals Corp., Critical Elements Corp., Orange Minerals Corp., Marksman Geological Ltd. and the privately held Spectrum Mining Corp.
Two major global issues are driving rare-earth and specialty-metal exploration in B.C. and the rest of the world. One is China; the other is something often referred to as “conflict metals.”
China has for many years dominated the mining and production of most of the specialty metals – and in particular the rare-earth elements – in demand all over the world, and has effectively dominated the global market by restricting how much of each metal could be exported for use elsewhere. As a result, prices for most rare earths have been climbing as global demand outstripped not supply, but China’s willingness to allow exports to continue.
This has been a major issue for the Western world, as these metals are crucial for the development of ever-more sophisticated electronics, particularly for weapons. The U.S. has been leading the complaint brigade, and in the spring of 2012 filed a formal complaint against China at the World Trade Organization. Supporting the U.S. complaint are the European Union and Japan.
Commerce Resources’ David Hodge believes China’s impact on driving the global hunt for rare-earth elements should not be underestimated. Says Hodge: “China’s clear intent is to move from being an exporter of rare earths to an importer, and they are doing that for very sound fundamental reasons.” Hodge goes on to point out that as the Chinese get more affluent, they want the same tech toys that westerners are obsessed with. With a population of 1.3 billion and growing, that will keep in-house demand for rare earths and rare metals very high. “The fear that China will flood the market is just not realistic anymore,” Hodge says.
According to Hodge, because of Chinese restrictions and its ability to pretty well drive any offshore competitor out of business, the rest of the world is now starting from scratch. At least with the gold-mining business, there are always ready-to-go projects all over the world that can be activated when the price justifies it. But with rare-earth elements, no one has seriously looked for the deposits for about 15 years – until now.
Gavin Dirom is president and CEO of the Association for Mineral Exploration B.C., and he points to China’s determination to control the world’s supply of rare-earth elements and specialty metals as one reason there has been such a push lately to find deposits elsewhere. But he wonders if the wind has now gone out of those sails.
“I think the buzz is off a little bit,” he says. “It may be that ‘rare metals’ are not appropriately named. They’re not so rare after all. There are a lot of places, like B.C., that are well-endowed with these minerals and metals – but there are no mines yet.” Perhaps adding a little weight to Dirom’s comments is the fact that the prices on tantalum – one of the metals that Commerce Resources is pursuing – fell from $150 a pound in 2011 to under $100 in early 2012. That prompted the shutdown of the world’s largest tantalum mine in Australia.
The other issue – conflict metals – puts B.C. in a particularly attractive spot. The 2010 Dodd-Frank financial oversight legislation passed in the U.S. contains provisions that would force publicly traded companies to disclose whether or not they are sourcing any raw materials from the Democratic Republic of the Congo. If so, those companies are required to track the origins of the materials and spell it out in their annual financial reports.
The U.S. Securities and Exchange Commission, reacting to a big corporate lobbying campaign, has backed off what was to be an immediate implementation of these rules this year, and will instead phase in the regulations. Where do Canadian mine projects fit into this? Commerce Resources’ Hodge says: “Being able to say your deposit is in B.C. answers all those questions in a very decisive way. The people at [Research in Motion] we were speaking with – because of the BlackBerry – were quite choked about the fact that the BlackBerry was being called the BloodBerry. They met with us just to gather information and one of the things they told us was that the best way to answer any question in terms of conflict or terms of labour standards or any sort of social questions – say you’re Canadian. No more questions.”
While Dirom recognizes B.C.’s advantage as a conflict-free zone (well, maybe not on the environmental front), he doesn’t see a mine in operation here for at least 10 years. And he argues that rare earths and specialty metals are unlikely to supplant copper, gold, zinc, molybdenum and even coal as the primary targets for mineral exploration in B.C.
As with all mining projects going forward, the hunt for rare-earth elements and specialty metals will also be affected by general economic conditions. The B.C. Ministry of Energy and Mines estimates that global demand for the oxides that produce a multitude of rare-earth elements is between 125,000 and 135,000 tonnes annually, with more than 90 per cent coming from China. The ministry still sees that demand growing rapidly.
But Europe is perpetually on the edge of recession, with Greece, Italy, Spain and others unable to get themselves out of the debt chasms. The U.S. seems incapable of reaching a political compromise to deal with its own debt issues, and growth in China is slackening. All make for strong headwinds faced by those pursuing commercial production of rare-earth elements and specialty metals in B.C.