In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue this Industry Bulletin, which shares news coverage of recent comments made by Professor Dudley Kingsnorth of Industrial Minerals Company of Australia ("IMCOA"). While delivering an address at a recent conference in Milan, Italy, Professor Kingsnorth, a well-recognized analyst of the global rare earth industry, stated that 40% of China's rare earth supply, for use in high strength magnets, is mined illegally. The news article covering the address, published by Simon Moores, Benchmark Mineral Intelligence, is reproduced below.
World's dominant supplier of rare earth elements reveals a huge portion of supply used in magnets is illegally mined; much larger than initially anticipated.
China - the world's leading producer of rare earth elements - has revealed that 40% of its supply used in high strength magnets is from illegally mined sources in the country.
The figure was revealed by rare earths expert Prof. Dudley Kingsnorth of Industrial Minerals Company of Australia (IMCOA) at a high level conference in Milan, the European Rare Earths Competency Network (ERECON).
Prof. Kingsnorth, who is the leading source of data in the rare earths market, was citing experts within China who are not only involved in the mining of the elements but also the government-led rare earths association.
China continues to dominate rare earth supply despite two new mines opening in the US (Molycorp) and Australia (Lynas) since the well documented crisis of 2010. Although the country's share of global rare earths has waned from 95% in 2013 to 90% in 2014, future supply security for the West is far from being solved.
High strength magnets are the leading market both for today's volume demand and growth projections over the next five years, which is why the revelation about China's sourcing is significant.
Rare earths such as neodymium (Nd), dysprosium (Dy), terbium (Tr) and praseodymium (Pr) are used as the key magnetic components in electric motors that drive some of the world's most important technologies including wind turbines and some electric vehicles.
China is not only the leading supplier of these elements but also of the magnets used by some of the world's largest corporations including Siemens and General Electric.
Prof. Kingsnorth explained that in 2020 the magnet market will consume about 30% of total rare earth elements produced in the world. The magnet market is forecasted to rely on China for 70% of its elements.
The question is whether the country can make up the shortfall from illegal sources if it decides to crack down on these activities.
China's tolerance for illegal mining is quickly diminishing. While the country is not likely to damage its own prospects by cutting a vital source of rare earths to a key industry, the longevity of this illegal source is in serious doubt.
The Chinese government, naturally, dislikes any unlicensed mining activity which occurs in many mineral and metal industries in the country. It is a wasteful process, environmentally damaging and gives the country bad press. It also undermines the larger, licensed miners that the government has hand-picked to become the next generation of more efficient, international suppliers.
And rare earths are about as high profile as it gets for China since the 2010 fishing vessel incident that threw the critical mineral and the country onto the front pages of the international press.
If China has its way as it invariably does, the reliance on illegal sources of rare earths is likely to come to end or significantly diminish sooner than many may expect.
This leaves the industry with a key question to answer: With an alarming lack of investment in new global sources, where will buyers turn to if China's black market supply is eliminated?
Avalon's Nechalacho Project is the most advanced large heavy rare earth project outside of China and Avalon has the potential to become a secure, sustainable global supplier of these critical raw materials used in high strength permanent magnets.
ABOUT AVALON RARE METALS INC.
Avalon Rare Metals Inc. (TSX & NYSE MKT: AVL) is a mineral development company focused on rare metal deposits in Canada, with three advanced stage projects. Its 100%-owned Nechalacho Deposit, Thor Lake, NWT is exceptional in its large size and enrichment in the scarce 'heavy' rare earth elements, key to enabling advances in clean technology and other growing high-tech applications. Avalon is also advancing its Separation Rapids Lithium Minerals Project, Kenora, ON and its East Kemptville Tin-Indium Project, Yarmouth, NS. Social responsibility and environmental stewardship are corporate cornerstones.