The global financial crisis is affecting supply and driving up prices, claimed speakers at the fourth Living with Minerals conference in London, UK. Michael Forrest finds out what is shaping UK policy.

It has been three years since the Living with Minerals conference last put the spotlight on the state of the minerals industry in the UK and its future. A lot has changed since 2008 and even more in the world economy. Minerals, together with agriculture, form the basis of the UK manufacturing industry, but the global recession has taken its toll. ‘Minerals are the biggest materials flow in the UK, producing 300Mt annually and 70,000 jobs’, says Nigel Jackson, Chairman of the CBI Minerals Group. The majority of UK mineral production is for commodities that support the construction industry – aggregates, cement, bricks and lime, so it is not surprising that these have been hit hard. The purpose of the CBI conference is to identify those minerals where there is an issue of security of supply and seek to ensure that the UK industry is not penalised by taxes and imports. Bricks, ceramic bricks and lime are energy intensive and it is important to ensure there is a parity of costs.

John Cridland, Director-General of the CBI, explained that in the UK the 2009 recession was financially induced and as such would take longer to recover. He stated that the UK economy declined by more then seven per cent over five quarters. Cridland supported the Government’s objective of reducing the deficit and suggested infrastructure development was a key objective to stimulate the economy. One way would be to bring forward existing infrastructure plans. However, this would not be enough and the large balance sheets of private companies might be a way of financing projects. A way must be found to mitigate the costs of energy in domestic ceramic, brick, cement and limebased industries or they are not sustainable. According to CBI data, every pound spent on infrastructure projects is worth £2.84 to the economy.

Supply squeeze

The UK minerals balance is mainly negative, with a large proportion of metals and energy minerals being imported. For some metals, the security of supply has become a major issue, highlighted by an EU report that identified 14 critical metals and minerals. This was the subject of Michael Lynch-Bell’s presentation to the conference. Lynch-Bell is a senior partner of the Mining and Metals Transactions Advisory Services at Ernst and Young, and Chairman of the United Nations Expert Group on Resource Classification. He illustrated the state of the global industry with demand not only being led by the BRICs (Brazil, Russia, India and China) but by other developing countries across the globe. This happens when the supply side is being constrained and costs are increasing.

Some nations are increasing their taxes from mining operations stimulated by the high price of most commodities. The recent debate over the proposed 40% rate in Australia is a case in point. These factors have led mining companies to consider exploring and developing in higher risk countries that offer good potential, but these too have their problems relating to security of tenure of leases and unpredictable regime changes. Added to these are the recent legislation of the Dodds-Frank Wall Street Reform and Consumer Protection Act, and the UK Bribery Act that rightly restrict the corruption practices that can be endemic. Other countries are yet to follow suit.

‘The UK has a long and proud history of mining,’ said Lynch-Bell, something that is now only pre-eminent in the finance sector with London taking the lion’s share of capital raising. Some 40% of the FTSE 100 market is comprised of companies in the extractive industry sector, while at the same time we import 50% of our coal and virtually all our metals. To ensure security of supply, bilateral arrangements are required, and countries such as Japan and China are already investing in projects in developing producing nations, with Africa a particular target. Other policies to ensure raw materials for industry include research into substitution, recycling and stockpiling. The USA has recently re-established a stockpiling agency after disbanding the Defense Logistics Agency in the early 1990s.

Global action

The European Union has similar views relating to the security of supply of not only metals, but aggregates and other construction minerals. Gwenole Cozigou, Director of the European Commission Enterprise and Industry Directoriate-General, illustrated the EU policy by referring to three pillars of support for the minerals sector. Firstly, a policy of fair access to mineral resources must be established not only within Europe but around the world.

Secondly, the policy must allow for the supply of essential raw materials and, thirdly, the EU must support efficient use and promote recycling. In reference to the first ‘pillar’, the 2010 review of critical minerals, including the rare earths that are most quoted, access must be fair and undistorted. To this end the Commission is actively engaging with the USA, China, Chile and Brazil.

Feeding the nine billion

Cozigou also stressed the importance of data on resources and, in particular, the work of national geological surveys in identifying resources globally. Nearer to home, the mineral potential within EU countries must be revisited. He encouraged people to, ‘think globally, act locally’. There are too many barriers for development, including land access, and best practice must be put in place in all members’ countries. He also recommended a reduction in the time and planning consent takes across the Union, and while not advocating unregulated development said, ‘A yes to development of mineral resources in 20 years time is of no interest to investors’.

The world population is predicted to reach nine billion by mid-century. Feeding this population will be a major challenge and farmers will be dependent on the adequate supply of fertilisers. David Manning, Professor of Soil Science at Newcastle University, UK, investigated this problem. ‘We need minerals more than ever,’ he remarked, referring particularly to potash and phosphate rock, the basis of the fertiliser business. Potash comes from limited sources and we need to double the amount of application to balance the off-take from soils that enters food crops. This is prevalent in most developing countries, such as those in West Africa where potash consumption is much greater than production. Potash prices are now three times those of 2007 and look unlikely to drop below US$350/t. Ninety per cent of phosphate production originates in 16 countries and again security of supply to meet global demands is likely to be problematic in the future.

A local issue

The minerals sector in the UK is heavily dominated by construction materials, particularly aggregates from sand, and gravels and crushed rocks. There are four major hard rock aggregate quarries on the Leicestershire stone line (Materials World, July 2010, p26 [1]) that will be depleted by 2030, and this problem is occupying those in mineral planning at local and national levels. The coalition Government’s Localism Bill will shortly be sent for Royal assent and will refocus decision making.

However, Ian Lamond, partner at Stephens Scown LLP, and member of the Law Society planning panel, maintains that planning consultations are a waste of time and slow the decision-making process. Mineral deposits cannot be moved around to fit a localism plan. Furthermore, there is a national need to be met that may not fit with local impact.

Although minerals are out of scope in the Localism Bill, the effect of neighbourhood planning has yet to be felt. The UK Minerals Forum, hosted by the CBI Minerals Group, has looked at the likely impact in a series of working groups of experts. Its findings cover resource identification, particularly the transport of hard rock aggregates and coal to meet requirements in 2030. Significant policy support is needed to maintain the local supply of aggregates, and although transport networks for coal are deemed sufficient until 2025, any shift in the origin of supply, such as replacing imports with deep UK mines, will require a revision of plans. Rail only accounts for 11% of mineral transport, a value that should increase if carbon targets are to be met.

Author : Michael Forrest
Materials World Magazine, 01 Jan 2012
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Rare Earth Plant Ready, But in a Glut

By KEITH BRADSHER

1 February 2012
The New York Times
Copyright 2012 The New York Times Company. All Rights Reserved.

KUANTAN, Malaysia -- The world's largest refinery for rare earth metals has risen out of the red mud of a coastal swamp here and could soon obtain permission to operate -- a step that would help break China's near monopoly on rare earths but also worsen an emerging glut of some of these strategic minerals.

China's suspension of exports of rare earths to Japan during a territorial dispute in 2010 fed a bubble in the market that drove prices up 30-fold by last summer. But prices have slumped by up to three-fifths since then for some of the 17 rare earth elements, which are vital to smartphones, wind turbines and other components of the modern economy. The approaching completion of the Malaysian refinery, with the capacity to meet a fifth of the world's demand, has contributed to the plunge.

The progress toward opening the plant has occurred despite street demonstrations here over radiation worries, regulatory challenges and the withdrawal of a major equipment supplier worried about the safety of the refinery, which is being built by Lynas, an Australian company.

Raja Dato Abdul Aziz bin Raja Adnan, the director general of the Malaysian Atomic Energy Licensing Board, said by telephone Monday evening that the board had discussed at a closed-door meeting earlier in the day whether to grant an initial operating license of up to two years for the refinery, which is a series of more than a dozen sprawling buildings connected by a labyrinth of pipes. He declined to say what the board had decided, but added that an announcement would be made ''sooner rather than later.''

Raja Adnan had said in a phone interview last week that his personal view was that it would be useful to issue the license and then carefully monitor radiation levels at the refinery and in its waste, because he did not trust pilot-scale models designed to predict how the refinery would operate.

''We still have the right to stop them and suspend and terminate'' if the refinery is not running safely, he said. The board also has no obligation to notify the public of its decision, and may not even notify Lynas immediately either, he said.

A delay before announcing the board's decision gives the country's political leaders time to consider whether to postpone or overrule the issuance of a license. But there has been little sign they will do so, as the project is a cornerstone of Malaysia's economic development plan.

Fuziah Salleh, an opposition-party lawmaker from Kuantan who has fought the refinery here, said that opponents of the project planned to file a lawsuit in the coming weeks in a last bid to stop it. Critics filed more than 1,000 objections to the project on Thursday, the last day for public comments, partly in the hope that the board would delay action to read them.

Despite the drop in prices for rare earths in the second half of last year, they remain several times higher than the long-term levels that prevailed until China began severely constricting exports in 2009. With China sharply reducing exports again last year as it closed refineries permanently or began refitting them with better environmental equipment, the underlying economics for the Malaysian refinery remain strong.

Lynas has been trying for several years to find a site for the permanent disposal of the roughly 20,000 tons a year of low-level radioactive waste that will be produced, and is still struggling to do so.

The International Atomic Energy Agency in Vienna recommended last June that a long-term disposal plan be approved by regulators before the refinery starts operations. Lynas now says that it has met this goal with a plan that calls for storing up to 20 years of the refinery's production waste in pits lined with plastic and clay at the refinery, plus a commitment to find a site for a permanent repository and build it. Raja Adnan said that the Malaysian board would require that Lynas meet all of the energy agency's recommendations, but he declined to say whether the company's waste disposal plan complied.

After sending a team here last spring at the request of the Malaysian government, the agency also recommended that the project include greater public disclosure and communication.

Malaysian regulators and Lynas put three printed copies of the revised project plan on public view for two weeks this month at four locations in Malaysia, where they could be viewed on request for only one hour at a time. Volunteers ended up taking turns over 56 hours to copy the entire document by hand, then retyped the information at home to recreate the full document, Mrs. Salleh said.

Nicholas Curtis, the chairman of Lynas, said that the company was using proved Chinese technology, but had paid special attention to improving its safety and environmental performance. ''We simply took Chinese processes, scaled them up and cleaned them up,'' Mr. Curtis said in a speech in Hong Kong in November.

The authorities in China have also cracked down on the industry in recent months after numerous toxic leaks and some radioactive leaks contaminated thousands of acres over the last two decades.

Lynas announced last Tuesday that a heavy monsoon and some engineering work had delayed completion of the refinery again, and that it would be ready in the second quarter of this year. It was originally scheduled to begin production last September.

Lynas plans to mine ore from the Australian desert and concentrate it there, removing dirt but leaving the radioactive contaminants still chemically bound to the rare earth metals. The concentrated ore will then be shipped here, and the rare earth metals will be separated from the radioactive material by using powerful acids at high temperatures.

One setback for the Lynas project is that a crucial contractor, AkzoNobel, pulled out this autumn, according to engineers here and internal company e-mails. The Dutch chemicals multinational had a contract to supply important resins.

The resins are supposed to glue together dozens of fiberglass liners for concrete-walled tanks up to the size of double-decker buses. Hundreds of tons of rare earths with low levels of radioactive contamination will be mixed in the lined tanks with extremely corrosive acids at more than 200 degrees Fahrenheit.

The corrosiveness of acids increases steeply at high temperatures, which makes acids ideal for dissolving ore but difficult to handle.

AkzoNobel has long specialized in making some of the most esoteric resins for the mining industry. It uses a secret chemical formula to help the resins hold together fiberglass even under challenging combinations of heat and corrosiveness. The company said last spring that it would supply chemicals for the Lynas project only if it were certain that it would be safe.

Engineers involved in the project said, and internal e-mails showed, that AkzoNobel withdrew from supplying the chemicals after it was told that the fiberglass liners would be installed in concrete-walled tanks that have a problem with rising dampness in the floors and cracks in the walls. AkzoNobel had been in discussions about the problem of rising dampness, but only became aware of the cracks this autumn, according to the engineers and the memos.

The engineers said they felt a professional duty to voice their safety concerns, but insisted on anonymity to avoid the risk of becoming industry outcasts.

In an e-mail, AkzoNobel said that it was no longer supplying the project, but gave only a brief explanation. ''Due to changes in the project specification, AkzoNobel would only recommend the use of its linings on the project subject to the successful results of longer-term testing,'' the company said. ''That testing cannot be completed within the current project time scale.''

Mr. Curtis, the chairman of Lynas, confirmed that AkzoNobel had pulled out of the project but he insisted that it was not for safety reasons. He declined to elaborate but said that Lynas had found a new supplier for the resins, which he declined to identify.

Engineers involved in the project said that Lynas was building costlier steel-walled tanks for a second phase of the factory, which would avoid the need for concrete-walled tanks with fiberglass liners. Mr. Curtis denied this, and said that all of the separation tanks and piping at the factory are safe and meet international and Malaysian standards.

''They are appropriately engineered,'' he said in an interview.

http://www.nytimes.com/2012/02/01/business/global/rare-earth-metal-refinery-nears-approval-in-malaysia.html