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Are Molycorp,REE Stocks in Trouble as 100 Billion Tons of Rare Earth Minerals found beneath Pacific by Japanese

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Japan has been frantically searching for Rare Earth Deposits in the surrounding sea floor,Vietnam,Mongolia and India after China imposed an unofficial embargo on the exports of Rare Earth Minerals to Japan following a fishing incident.Note Japan is totally dependent on imports from China given that it has little or no reserves.Japanese AutoMajors like Toyota,Nissan and others require high amounts of these minerals in the manufacture of Electric Vehicles.The sharp lowering of Export Quotas has already thrown the plans of the Green and Auto Companies in doldrums.This incident led to a massive frenzy in rare earth stocks like Molycorp,Lynas,Avalon and others which were lying dormant after years of Chinese underpricing had made many of them unviable.As the prices of rare earth minerals like yttrium increased by 4-5x in a matter of months,the stocks of rare earth minerals went hyperbolic.

Japan Efforts start Paying Off

Japan has been looking to develop mines in Vietnam and Kazakhstan to secure these minerals which are essential to the green and defense industries.The desperation seems high amongst the Japanese as they  are also looking to prospect for these minerals in the seas surrounding Japan.Besides these efforts to secure these minerals from newer sources,METI is also looking to recycling and efficiency measures.A University of Tokyo geologist has said that around 100 billion of rare earth deposits have been discovered on the sea floor of the Pacific in international waters.Note around 100-150,000 tons of rare earth minerals are used per year which would imply that just using this deposit would keep the global rare earth demand supplied for 10,000 years.The discovery is said to have a higher concentrate of Rare Earth Minerals in the Ores and there is a large amount of Heavy Rare Earth Minerals which are much scarcer and costlier than the lighter Rare Earth Minerals.

Economic Viability the Key Question

The strongest reason for the rally in REE companies like Molycorp has been the future gap in demand supply.However with the discovery of this huge deposit means that the scarcity factor is no longer valid.Extracting these REE might make it economically infeasible in the short term as the technology for mining underwater is not mature enough and the huge costs might not justify the efforts.But the whole bull argument of peak REE goes for a toss.I think some sanity would return to the Rare Earth Sector and the stocks might start being valued in more realistic earnings terms rather than a speculative play.

Huge rare earth deposits found in Pacific: Japan experts

They found the minerals in sea mud extracted from depths of 3,500 to 6,000 meters (11,500-20,000 ft) below the ocean surface at 78 locations. One-third of the sites yielded rich contents of rare earths and the metal yttrium, Kato said in a telephone interview.

The deposits are in international waters in an area stretching east and west of Hawaii, as well as east of Tahiti in French Polynesia, he said.He estimated rare earths contained in the deposits amounted to 80 to 100 billion metric tons, compared to global reserves currently confirmed by the U.S. Geological Survey of just 110 million tonnes that have been found mainly in China, Russia and other former Soviet countries, and the United States.


Abhishek Shah

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