Is Someone Manipulating The Story About Rare Earths Under The Pacific Ocean?

by Gareth Hatch on July 4, 2011 · 27 comments

in News Analysis, Rare Earths

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There were a number of reports over the weekend, about a group of Japanese researchers who say that they have found significant quantities of rare-earth elements (REEs) at multiple sites on the seabed of the Pacific Ocean. In a paper published in Nature Geoscience on July 3, 2011, lead author Yasushiro Kato and his colleagues shared the extensive work that was undertaken, to obtain and to analyze 2,037 samples from 78 different sites across the Pacific Ocean.

Reutersthe BBC, Nikkei and others reported that there is an estimated 100 billion tonnes of rare earths in these deposits. Which is rather interesting, because the scientists themselves made no such claim in their paper

What they do report, are two regions of the sea bed with so-called REE-rich muds:

  • one in the eastern South Pacific containing 0.1-0.22% total REEs (including 0.02-0.04% heavy REEs), in layers 10 to 40 meters thick;
  • one in the central North Pacific, containing 0.04-0.1% total REEs (including 0.007-0.02% heavy REEs), in layers 30 to greater than 70 meters thick.

The authors compare these muds to the ion-absorption-type clays found in China, which are presently the world's primary source of heavy REEs. They comment that the mud in the eastern South Pacific has heavy REE content that is "nearly twice as abundant as in the Chinese deposits". Of course, those Chinese deposits are not sitting under "great water depths (mostly 4,000-5,000 meters)" and below the surface of the sea floor. It is because they are readily accessible and processable, that the Chinese ion-absorption deposits are exploited, despite their very low concentrations of REEs (heavy or otherwise).

Doing a couple of rough calculations, the authors estimate that a 10 meter-thick bed of mud in the eastern South Pacific, with an area of 1 square kilometer, could yield approximately 9,000 tonnes of rare earths. They also estimate that a 70 meter-thick bed of mud in the central North Pacific, with an area of 1 square kilometer, could yield approximately 25,000 tonnes of rare earths. These numbers are not too shabby (if we again forget about the 2.5-3 miles of water sat above them, and their remote location from any significant land masses). As I've said elsewhere, I can't see these deposits ever being commercially exploited, but the empirical work done by the Japanese researchers which is presented in this paper, is impressive.

What the authors do NOT estimate, is a size of the total mineral resource, and wisely so. While they mention that the thick distributions of mud at numerous sites might mean that the REEs on the sea floor "could exceed the world’s current land reserves of [110 million tonnes]", they acknowledge the considerable challenges and significant variability present on the seafloor, and thus state that "resource estimates for large regions cannot be made until more detailed data are available for areas lacking cores."

Perhaps the lead author later just threw out a wild-ass, ridiculous guess at the size of the deposits, in response to a reporter's question. But if he did not, and if the scientists themselves are not making the claim that there are "an estimated 100 billion tonnes of rare-earth deposits", as reported by Reuters, Nikkei, and the BBC - just who IS making this claim? Who has inserted these comments into this story, and fed them to the mainstream media, and why might they have done that? Can we find clues in the current pricing turmoil, worries about supply from China, and the increasing politicization of the rare-earths story?

I leave those questions as an exercise for the reader to ponder….

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{ 27 comments… read them below or add one }

1 John Petersen July 4, 2011 at 3:10 am

Since 4/5 of the planet is covered by oceans it seems only natural for the army of Gaia to assume that sub-sea REE resources must be 400% of the original in place surface reserves. Maintaining alternative energy mythology in the face of mounting proof that industrial metals can never replace coal, oil and gas seems like a perfectly logical next step. Heaven knows that if we can't dream up new metal reserves then we may have to make hard choices about things like highest and best use, and we all know that's a non-starter.

2 fran July 4, 2011 at 3:31 am

we'd best first complete access to known sources above the ocean surface. reserve this "dream" for pursuit just prior to mining on a planet in space or salvaging methane crystals from ocean beds.

3 blackjack July 4, 2011 at 3:47 am

i am getting a little tired of these newspapers and reporters lying in their newspapers

Look what they did to LYNAS last week - the share prices tumbled - however over the weekend when people sorted fact from fiction then it was realised that the papers were twisting the news

Good news is that LYNAS went up 8 % and rising
They WILL BE the first to market outside China

4 Johan July 4, 2011 at 4:16 am

What investors never seem to want to recognize is that high prices always cause a supply and demand side response. The REEs are however different from say silver in that there are not any huge ETF warehouses full of the stuff so the supply side response will a bit slower.
I agree that the supply response is not likely to from mining under the sea... it is already known. Lynas and Molycorp will catapult Cerium and Lanthanum into oversupply by 2013.

When it comes to the heavies the window to make money is probably until 2014-2015 even though that could be delayed through the huge technical, infrastructure and political challenge. The first junior in production will probably enjoy a poor 1 year in production before prices begin to fall.

In my view the window to make money in the heavies is between now and 2014-2015. I really do not understand how investors think that choose to invest in juniors that have an extreme risk of failure along the way and are bound to enter production when the Cerium and Lanthanum are way down since a couple of years and when the small markets like Terbium (300 tons world market) and Dysprosium (1300 tons world market) switches from desperate undersupply to oversupply. Investors all seem to hope that all the other juniors will fail except mine...
It is beyond me why not more people choose to invest in the physical metal NOW at a huge discount through Dacha instead. That is the investment that is strongly correlated to the heavies right now when one wants exposure to them. The company doesn´t help the outside China world with its REE problem... but logically investors want to make money when investing, not solve world problems...

5 Kris July 4, 2011 at 4:44 am

Gareth,

Why can't you see these deposits ever being commercially exploited?

Look at this quote:
Extracting the deposits requires pumping up material from the ocean floor. "Sea mud can be brought up to ships and we can extract rare earths right there using simple acid leaching," he said. "Using diluted acid, the process is fast, and within a few hours we can extract 80-90% of rare earths from the mud."

There you go. All our problems solved within a few hours...

But seriously, this quote is all over the news now. It's everywhere on the web. How bizar?

6 John Millington July 4, 2011 at 5:04 am

I notice a company has now started selling heavy rare earth bullion bars. An issue is liquidity as I have read somewhere but could be worth owning as a strategic metal for the next few years?

7 Eamon Keane July 4, 2011 at 6:02 am

While a conspiracy is certainly plausible, I reckon it's probably just this guy throwing out a WAG, considering this quote:

"In an email exchange with AFP, lead author Yasuhiro Kato, a professor of economic geology and geochemistry at the University of Tokyo, said the response from mining companies was as yet unknown, "because nobody knows the presence of the (rare-earth) -rich mud that we have discovered."
"I am not an engineer, just a geoscientist," Kato said. "But about 30 years ago, a German mining company succeeded in recovering deep-sea mud from the Red Sea. So I believe positively that our deep-sea mud is technologically developable as a mineral resource."

There's a gem from the Guardian speculating about an REE share price collapse: "Those shares could now fall back with the huge expansion in available sources."

There are a few nice quotes from the 1965 book "Mineral Resources of the Sea":

"Analyses performed by Arrhenius et al. (1957) have shown several percent of rare-earth elements...... in fish skeletal remains".
.....
"Probably the most interesting of the mineral deposits of the sea are the manganese nodules....very profitable... even at present costs and prices.... rare earth elements... could be recovered as by-products"

Then there's this from a Russian deep sea mining conference last year:

"REEs are present as an admixture in other minerals. In the Medvedev Volcano crusts in one grain of native iron 1.73% of terbium was detected, in barite we found 0.97% of promethium."

Pinksheet PVRE are looking into a near-shore gold-iron-rare earth deposit which their very initial econmic model puts down $85m in RE revenue per year, which would be in the order of 1 ktpa production (pvre.biz/PVRE-Global%20Placer%20Iron-Ore-Gold%20and%20Rare%20Earths%20Mining-nov-2010-b.pdf).

8 Kyle July 4, 2011 at 7:52 am

Kris,

Not wanting to answer for Gareth, but take a look at Nautilus Minerals (TSX, AIM: NUS) As far as I am aware this company is the furthest along when it comes to development of deep-sea mining, and they still have a long way to go yet.

I think it comes down to the fact that whilst there are rare-earth deposits under the sea, and probably on near-earth asteroids, its still going to be cheaper to mine what we have 'easy' access to first.

Kyle

n.b. I have shares in Nautilus

9 GMATRADES July 4, 2011 at 10:36 am

It is obvious that this story and the 100 billion ton rumour came out just in time to ease the shock of the new Chinese export quota which is due for release soon.

10 GMATRADES July 4, 2011 at 10:43 am

Johan
Your comments makes perfect sense, however what you fail to understand that many look at the REE story as a speculation play more than an investment (although I look at it as both). I for one will not be holding any LREE stocks when Lynas or Molcorp is nearing production. "Investment" and "speculation" are two differeant animals with differant mindsets and must be treated as such.

11 RobC July 4, 2011 at 11:39 am

Someone mentioned that there were no stockpiles of HREE, but that is not entirely true. There is one canadian company, Dacha Strategic Metals (DSM) that seems to have a rather unique business model of simply warehousing stockpiles of these materials whilst the value increases due to market demand. If you are looking for an investment that will likely pay off far in advance of the major mining players, this might be one to look into.

12 Gareth Hatch July 4, 2011 at 11:40 am

Thanks for the feedback, folks. I have to commend the efforts of whoever managed to get this story out so far and so wide into the mainstream media, so quickly :-)

@Eamon: it's certainly possible that this was a WAG :-) Or more accurately, I should say that it is indeed a WAG, but the question is, who made it? :-)

I'm familiar with so-called "fish bone" rare-earth occurrences in Kazakhstan and elsewhere. I think my favorite quote though is the "0.97% of promethium" in barite story. Thanks for sharing that. Wow... a rare-earth element not normally found in Nature because of its radioactive half life, found in quantity. Who knew?!

13 Andie July 4, 2011 at 12:23 pm

So any comments on nautilus?

Is it Australian?

Find some of the names very sad to entice people..........ashram, nautilus......as bad as thejapanese Wag story.

Money, power make us have no shame.

Om shanti,

Andie

14 Kyle July 4, 2011 at 1:19 pm

Andie,

Seeing as I mentioned them, perhaps I should add that Nautilus are planning to mine, primarily, for copper and gold, not for rare earth elements.

They are based in Canada and here is their webpage http://www.nautilusminerals.com/s/Home.asp

Kyle

15 Geo_Eng July 4, 2011 at 3:03 pm

Fairly simple calculation to determine net tonnage...

Density*Concentration*Area = Net Mass

1,500kg/m3( could be 1100-2500 I really don't know) * .07% * 55m * 1000m * 1000m = 57,000 tonnes

In mining they often have a term called extraction ratio which calculates into the reserves and is a percentage term that they use. It factors in areas that cannot be mined for whatever reason (mine stability, inaccessability, etc). if 50% extraction ratio is used here you get close to the 25,000 tonne estimate. I work in the potash industry and 30-40% is usually used there as well as further cuts for insoluble compounds etc.

So in other words its really just a conservative estimate of what they think they can extract from this mud.

16 prescient11 July 4, 2011 at 5:17 pm

Thanks Gareth for the great quick post on the issue.

Indeed, this story seems to have spread like mad, eh? All the world's a stage.

We'll wait for the second act, I mean, the 2H quota numbers. If you're comment about the Nd stockpiling is correct, we could well see this area explode.

17 Boris July 5, 2011 at 4:06 am

Gareth

In Slovenia the news title reads "Gre za elemente, kot so neodim, prometij in itrij, in ki so znani tudi kot "zlato 21. stoletja" which translates into "It is about the elements like neodymium, promethium and itrium aka "gold of 21. century" (http://www.finance.si/317368/Japonci-v-tihem-oceanu-na%B9li-redke-kovine). As you said "who knows - mysterious ways of radioactive half life".

18 Randy Hilarski July 5, 2011 at 2:11 pm

We have been fighting the BS story for the last few days. People will believe anything the mainstream media reports. People just eat up the Rare Earth info. Clients have been emailing all worried, I have to remind them that the metals they own are not Rare Earths. The news story has been a great big pain.

19 eva July 5, 2011 at 3:01 pm

There is little doubt that the “discovery” of a “huge” RRE deposit in the sea bed is contrived and, as GMATRADES pointed out, most probably linked to the soon to be announced Chinese export quota. The rumour originates with Kato and his colleagues when they write “We show that rare-earth elements and yttrium are readily recovered from the mud by simple acid leaching, and suggest that deep-sea mud constitutes a highly promising huge resource for these elements”. This statement is a joke and it surprises that a supposedly reputable scientific journal like Nature will allow it. But one has seen worse.

20 Kyle July 5, 2011 at 4:19 pm

Sad to say that the sheep bought it, most of my rare earth stocks down today and the ones on the watchlist too.

Nice to see Pele hold onto some of the gains from this morning, and interesting to note that Dacha closed up - as the proof of the current supply situation is in the price of the metals

21 Vladimir Seredin July 6, 2011 at 3:28 am

Many thanks Gareth for operative presentation very interesting (though only from the scientific point of view) information. Quality and volume of analytical data resulted in appendices cause admiration. Now we see there are not only cerium ores in Fe-Mn concretions and crusts, but also HREE-bearing clay ores with ionic REE on an ocean floor. By the way, similar ores are developed on continents also. They have other nature, than oceanic and South Chinese clays, but have very similar REE content and REE mode of occurrences. Therefore for mining of such REE raw materials it is completely not obligatory to get on some kilometers under water.

22 Janie July 6, 2011 at 4:00 pm

The abstract says this: "We estimate that an area of just one square kilometre, surrounding one of the sampling sites, could provide one-fifth of the current annual world consumption of these elements."

23 Kyle July 7, 2011 at 10:45 am

Germany starting to reject the misinformation

http://www.dw-world.de/dw/article/0,,15209866,00.html

24 Recover July 8, 2011 at 9:09 am

Any idea why not much publicity is given to a Turkish rare earth project that claims a production of 2 kt REOs in 2012 and a full capacity of 5.5 kt?

That is what pages 14 and 39 of their presentation here suggests http://www.amrminerals.co.uk/assets/files/AMR%20July%202011%20Presentation.pdf

25 Baris G Y?ld?r?m July 10, 2011 at 8:36 am

it has to be identified which is the mineralized rock which is the ore. Otherwise you will become a dreamer not miner and There is very little probability to become not the loser for a dreamer in mining.

26 Recover July 11, 2011 at 5:29 am

I do not understand your point

27 Leonid July 14, 2011 at 4:26 am

Indeed, the presence of high concentrations of REEs in the samples from the ocean floor does not mean the big resources. It is necessary to conduct further geochemical studies.

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