Dot-com deja vu muddies the rush for rare earths

Mon Nov 8, 2010 5:17pm EST
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By Julie Gordon

TORONTO (Reuters) - Rows of moss-covered concrete bricks block the opening of the Monmouth rare earth mine in Canada, keeping curious hikers from entering the long-abandoned shaft.

From the early 1940s to the late 1970s, a now-defunct company called Amalgamated Rare Earth Mines explored the site for uranium and a then-obscure cluster of 17 elements known as rare earths.

The mine, 340 km (215 miles) north of Toronto, never went into commercial production and by the early 1980s the company abandoned the project, scared off by an aggressive Chinese campaign to corner the rare earth market.

Two decades after the Monmouth mine shut, China accounts for 97 percent of the world's rare earth ore production, empowering Beijing in a way that was unimaginable in the 1980s.

Rare earths have become crucial components for some of the world's consumer and industrial icons: the Toyota Prius, General Electric wind turbines, the Apple iPhone and hundreds of other devices.

Until recently, the global dependency on China for rare earths was a well-kept secret. But word started to spread fast after Beijing cut export quotas by 70 percent for the second half of 2010, sending prices of some oxides -- the purified form of rare earth elements -- up as much as 850 percent. The need for alternative supplies from outside China suddenly became obvious.

Dozens of companies all around the world are now aiming to fill the coming void in supplies, and investors have poured billions of dollars into their projects.

Rare Element Resources, which owns a promising rare earth deposit in the U.S. state of Wyoming, is a good example. Its shares have risen almost 400 percent in less than 90 days, and over 2,000 percent since April 2009. In that time, the 495,000 shares belonging to one director have jumped in value to more than C$5.4 million ($5.4 million) from C$247,500.   Continued...

<p>Various rare earth samples are shown in this undated handout image. REUTERS/Great Western Minerals Ltd./Handout</p>