TORONTO—News that China will start restricting the export of rare earth metals has raised alarms around the world, with some concern in Canada as well, though we won’t be impacted nearly as severely as the United States and other countries with more developed manufacturing sectors.
The move could even prove to be a boon to Canada’s mining sector as countries around the world seek alternative sources of these critical metals.
Rare earth metals, a collection of 17 elements in the periodic table, are critical for the manufacturing of many high-tech goods including super conductors, hybrid cars, fibre-optic cable, and cell phones.
China has come to control 95 percent of the world’s production of rare earth metals after years of underpricing international competitors and forcing them out of business. But with other countries no longer operating rare earth mines, the new restrictions could force many companies depending on the metals to move production to China to gain access to the necessary metals.
Even that may not be enough though, as the regime has indicated it will favour domestic companies over foreign.
The restrictions have been reported by state-run Xinhua news agency and follow just six months after China capped the production levels for the metals and imposed a moratorium on all new mining licenses until June 30, 2011.
While the United States, the European Union, and Japan are deeply concerned about the move, Canada doesn’t face the same level of exposure because of our relatively small manufacturing sector and limited consumption of rare earth metals, said a spokesperson for Natural Resources Canada in an email.
However, those restrictions could present an opportunity to Canadian mining companies as nations look to source their metals elsewhere.
Avalon Rare Metals owns an advanced-development-stage project, Nechalacho Rare Earth Element Deposit, located in the Northwest Territories.
“It is probably the most advanced project in Canada,” said Avalon's senior geologist Chris Pedersen.
The company has said it believes that Nechalacho is one of the highest-quality undeveloped rare earth elements deposits in the world.
Natural Resources agrees and lists it along with Great Western Minerals Ltd. and Quest Uranium Corporation and projects in their advanced states, though still some distance from actual production.
“These exploration properties, while showing positive mineral results, provide no certainty of economic viability and are minimally at least 3 to 5 years away from production,” said Natural Resources.
To date, however, Canada has no domestic production capabilities for these elements and must purchase products containing them from others countries, namely China.
The department says there is no current plan to try to stimulate increased exploration and development of rare earth elements in Canada.
“Other countries, however, such as the United States, whose military has a great need for some rare earth elements, has initiated a legislated incentive package to stimulate development of a domestic rare earth metals production capability. This action, in itself, may stimulate increased exploration within Canada.”
But despite the fact that that Canadian manufacturing is limited, the government is concerned firms here that have invested in manufacturing in China could feel the restrictions if demand within China outpaces current quotas.
“The Government of Canada is aware of reports that suggest China’s export quota reductions fall more heavily on foreign invested enterprises, including Canadian companies, than domestic firms,” notes Jennifer Chiu, a spokesperson for the Department of Foreign Affairs and International Trade.
“Canadian officials are monitoring the situation and are actively engaging the Chinese government on this issue.”