Insights Archives - Alkane Resources Ltd
Level 12, 37 Bligh Street +61 2 8233 6168

As smartphones switch to ceramic cases, look to zirconia supply

Ask the average person about the applications of ceramics and you’ll probably get a list like this: kitchenware, decorative objects, bricks, tiles and pipes. This is a good summation of the first 20,000 years of ceramic technology, but in recent decades the list has lengthened dramatically to include specialised ceramic materials with advanced applications ranging from biomedicine to armour, electronics to jet engines.

The latest addition to the list is ceramic smartphone cases. Apple looks likely to wrap its next generation of 5G smartphones in thin but outstandingly tough zirconia ceramics instead of aluminium, and most competitors will follow suit. China’s Xiaomi and Oppo, and  Korea’s Samsung and LG are already selling smartphones using ceramic cases. Add in tablets, PCs, watches and other devices that would benefit from zirconia ceramic cases and it’s clear that demand for zirconia could skyrocket. However, zirconia supply chains are not ready to meet high demand.

What’s so great about zirconia ceramic smartphone cases?

They enable stronger signals, faster data download and wireless charging. They also look great in a multitude of surface textures and colours, and can be ultra-thin yet scratch-resistant because zirconia scores 8.5 on the Mohs scale of mineral hardness (only diamond scores a perfect 10). Should your smartphone case still somehow sustain an injury, it could even self-heal. Production costs should be similar to existing materials when mass-produced.

The magical substance delivering these highly desirable attributes is Yttria-stabilised zirconia (YSZ), a ceramic in which the crystal structure of zirconium dioxide (a.k.a zirconia) is stabilised at room temperature and above by adding yttrium oxide. It was called ‘ceramic steel’ when it was invented by CSIRO in Australia in the 1970s, and it’s even better today.

The exceptional mechanical properties of YSZ permit ultra-thinness to minimise weight, while excellent thermal shock resistance protects your device against sudden changes in temperature. YSZ is transparent to radio waves, which is essential for fast data download at the high frequencies used for 4G and 5G networks. Current materials are hitting their speed limits but YSZ is ready for 5G, when download speeds will increase by 10 times. Being non-conductive, YSZ also permits wireless inductive charging, freeing us from annoying cables.

What happens when everyone wants a YSZ smartphone case?

In 2017, smartphone sales were 1.54 billion. Assuming just 37g of zirconia per case, for all smartphones to move to YSZ cases would require at least 54,000 tonnes of zirconia (plus 3,000 tonnes of yttrium oxide) annually. To meet this demand, global zirconium chemicals supply would need to increase by 75%

Australia remains the leading source of raw zircon worldwide, but China captures the real value from our resources by converting zircon to zirconia (and other zirconium chemicals) and using these materials to manufacture advanced products, which Australians purchase at retail prices – not smart!

Anticipating a tsunami-like surge in zirconia demand, Western and Chinese producers are already investing in new production facilities. But how will increased demand for zirconia be met when Chinese supply of zirconium materials is stalling?

Fortunately, Alkane Resources’ Dubbo Project offers an alternative, sustainable source of supply. Not just another zircon extraction facility, the Dubbo Project will value-add in Chinese fashion and produce over 16,000 tonnes of zirconia and over 1,000 tonnes of yttrium oxide annually, both of which will be needed for YSZ smartphone cases.

The oldest ceramics in the world were found in China. The newest ceramics could come out of Australia, but to progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here

Investors in the clean metals megatrend will clean up

The megatrend towards clean energy sources and industrial processes is driven by consumers and governments holding industry accountable for environmental sustainability and accelerated by research and innovation.

A major source of greenhouse gas emissions is the extraction of metals from their ores, traditionally involving reduction with carbon at high temperatures, or electrolysis. Both processes are ‘dirty’ because they produce carbon dioxide, a greenhouse gas. Unless renewable energy is used, these processes also contribute to greenhouse emissions through the burning of fossil fuels to generate the electricity consumed in metal extraction.

Under social and political pressure to reduce greenhouse emissions, clever researchers and innovative companies are developing cleaner metal extraction techniques.

Canada goes carbon-free in aluminium production

Aluminium is often called ‘solid electricity’ due to the huge energy demands of its extraction. Global production of aluminium last year was over 60 million tonnes[i] consuming 14,151 kWH of energy per tonne.[ii]

In May, Alcoa and Rio Tinto announced the world’s first carbon-free aluminium smelting process that eliminates all direct greenhouse gas emissions from the traditional extraction process, producing oxygen as a by-product instead.[iii]

To commercialise the process, a joint venture company, Elysis, has been formed with combined investment of CAD188million from Alcoa, Rio Tinto, the Canadian Government, the Government of Quebec, and Apple. Use of the Elysis technology could eliminate 6.5million metric tonnes of greenhouse gas emissions in Canada alone, equivalent to taking 1.8million cars off the road.

YSZ? Because it’s clean and there are SOMany high-tech applications

Producing zero direct carbon emissions and reducing energy consumption by up to 50%, another new, clean means of metal extraction is energy-efficient electrolysis using solid oxide membranes (SOM) made from yttria-stabilised zirconia (YSZ). YSZ is a ceramic comprising zirconium dioxide made stable at room and elevated temperatures with yttrium oxide. Using an yttrium flux for electrolysis extends the life of the YSZ.

SOM electrolysis can purify aluminium, magnesium, and titanium – key industrial and aerospace metals – as well as rare earths, zirconium, hafnium, and niobium. The high-tech applications of these latter elements include permanent magnets for electric vehicles, wind turbines, robots and medical devices, semiconductors used in photovoltaics and electronics, surgical implants and electrical capacitors, and lightweight structural materials with aerospace applications.

Expect a rush on yttrium and zirconium

Commercialisation of SOM technology for extraction of any of the major industrial metals would create unprecedented demand for both yttrium and zirconium. Currently, China dominates global zirconium production with doubtful sustainability.

China also has a stranglehold on yttrium supply, as a by-product from rare earths processing. The Industrial Minerals Company of Australia estimates current global yttrium oxide production is 10,000 tpa in 2018, with supply exceeding demand by 30%. Yttrium was previously in high demand due to its applications in television cathode ray tubes, other luminescent displays and energy-efficient lighting, but demand slumped due to adoption of LEDs, with prices falling to USD3/kg.

This is likely to change fast with increasing demand for YSZ and yttrium fluxes for SOM technology. In addition, YSZ is used in gas and aviation turbines, automotive sensors, fibre-optic connectors, fuel cell components, and various ceramic products including knives and smart phone cases.

All this bodes well, not only for the planet, but also for Alkane Resources’ Dubbo Project, which is able to produce over 16,000 tpa of zirconia and over 1,000 tpa of yttrium oxide at full capacity.

A clean metal future

Carbon-free, energy-efficient metals production complements other clean, green megatrends. Consumer choice is based on price and performance, but growing awareness of responsible manufacturing and supply chain sustainability is increasing demand for products with small carbon and energy footprints too.

You’ll want to know that your electric vehicle or smart phone was manufactured using clean metals production – without a cost penalty – won’t you? Expect more exciting announcements about clean metals technologies as they scale up to meet global demand.

Australia 2030: Lithium can’t do it alone

Australia is finally waking up to the economic potential of its in-ground high technology elements, with the launch of the Lithium Valley report in Western Australia, by Regional Development Australia – a partnership between the Australian, state and territory and local governments. This report looks beyond the domestic extraction of lithium-rich ores, supporting value-added processing and manufacturing in Australia, to produce chemicals and components required for lithium batteries, for which global demand is growing exponentially.

But we need a new vision that stretches further, beyond lithium, to realise our full potential in high-tech materials markets and secure Australia’s future. Geoscience Australia estimates that in 2016-17, Australian mineral exports, dominated by iron ore, coal, gold, copper, and alumina/aluminium, had a value of A$173.6billion (excluding oil and gas), representing around half the annual value of total Australian exports. This figure could be massively increased by processing our raw resources on which advanced technologies depend, adding value and creating new industries and jobs for sustained economic security.

The world loves lithium

Lithium is the celebrity element capturing media attention worldwide, as global companies scramble to secure long-term supplies, buying up Australia’s raw resources, while most of the downstream benefits are derived and enjoyed elsewhere.

Demand for lithium is being driven by demand for solar/wind energy storage batteries, mobile phones and tablets, and medical devices powered by lithium batteries. In addition, exponential demand for electric vehicles could increase global demand for lithium – and other elements needed for electric vehicles – by at least 10 times by 2025. This has sparked a ‘lithium rush’ to develop lithium-rich spodumene mining projects in Western Australia, backed by foreign companies intent on securing strategic, long-term supply.

In the Lithium Valley report, Infranomics estimates that Australia captures just 0.5% (A$1.1billion) of the total lithium value chain by simply processing ores, while Australia’s trading partners enjoy the remaining 99.5% (A$213 billion) by providing electrochemical processing, battery cell production, and product assembly.

Other elements are essential too, as China knows

Although Lithium hogs the spotlight, cobalt, vanadium, and copper are also attracting attention.  Critical rare earths – essential to many advanced technologies and able to extend lithium battery range by delivering EV motors with outstanding efficiency – are being oddly and precariously overlooked, creating potential for devastating supply disruption. Disruption to the supply of rare earths and equally critical zirconium materials will be inevitable if China’s stranglehold on global supply (90%+) continues.

Made in China 2025 is a long-term government policy to promote development of China’s high-technology industries through subsidies and infrastructure investment. This national policy has attracted leading global companies to undertake their R&D and manufacturing in China, creating Chinese jobs and wealth. Soon, China’s industries will consume all the high-tech elements mined domestically, leaving no raw resources available for export, forcing international consumers to pay premium prices for finished Chinese products.

Dig it, process it, use it and ship it

The ‘dig it and ship it’ mentality of the old Australian economy must change. We’re still a lucky country, with most of the critical high-tech elements available in large reserves at multiple sites across the country, numerous operating mines and many new mines under development. But we must stop relying on luck (and mining) alone and take a smart step forwards with a Made in Australia 2030’ vision to: add value to our raw resources, stop the ‘brain drain’ from our research organisations, take a leading role in the development of advanced technologies, grow new industries to sustain employment, and reduce our reliance on imported, finished products.

Alkane’s Dubbo Project is an important alternative to Chinese supply, processing 18 high-tech elements, including zirconium, hafnium, rare earths and niobium. It has long-term potential to reduce the threat of Chinese dominance to Australian and international security, providing a strategic opportunity to produce downstream value-added materials, devices, and products in Australia and allied countries.

Concerned about EV battery supply? What about the motor magnets supply?

This article is based on Alkane Resources MD Nic Earner’s presentation at the 7th Annual InvestorIntel Summit held in Toronto, Canada, in May 2018.

The EV megatrend is driving demand for rare earths

The exponentially increasing demand for electric vehicles (EVs) is one of the most fundamental and rapid shifts in consumer behaviour in this generation. When we think about EVs, we tend to focus on batteries and concern ourselves with the critical Lithium and Cobalt supply chains. But we should also focus on what the EV battery drives – the traction motor – and the critical supply of Rare Earths for that motor.

0.7kg of Rare Earths (REs) are needed for the permanent magnets in an EV traction motor (such as that in the Tesla Model 3). Another 0.8kg of REs are needed elsewhere in the vehicle, e.g. for other motors in windows and seats, and for sensors and screens. That’s 1.5kg of REs per EV.

In a 100% EV world, we’d need 655% of the current RE supply. Annual sales of 10million EVs are predicted by 2023-24, requiring additional annual supply of 15,000 tonnes of REs, a 35% increase on all current production or a 75% increase on current legal production – see below. Other burgeoning technologies need REs too, including wind turbines, smartphones, computers and magnetic resonance imaging.

Growing rare earths deficit, rising prices, no substitute

We’re already facing a deficit of the principal REs needed for permanent magnets: Neodymium and Praseodymium or Nd/Pr. Last year, this deficit was about 3,000 tonnes. By 2020, the deficit will be 5,000 tonnes, equivalent to the entire production of Lynas, the largest non-Chinese manufacturer of permanent magnet REs.

Consequently, Nd/Pr prices have risen by around 30% this year. Demand for these materials is driving other REs into surplus due to concurrent production, so we’re seeing stagnant or falling prices for some REs. Fortunately for Alkane Resources, our Dubbo Project will generate 80% of its RE revenue (30% of overall revenue) from increasingly valuable Nd/Pr.

With rising demand and prices and a supply deficit, people naturally start to talk about substitution. But the EV market is all about range and that depends on the vehicle’s weight and efficiency. At the moment, there are no viable alternatives for RE permanent magnets that deliver the same high motor efficiency at low weight.

Think outside China for rare earths

China currently supplies 85% of the RE market and has been moving steadily down the manufacturing chain over the past 40 years. Recently, China has been clamping down on illegal and dirty RE production, reducing supply and increasing costs and therefore prices. China won’t rise to meet increasing global demand for REs because it can’t. A Chinese monopoly would be undesirable in such a critical market, anyway.

The global RE market value is US$4-5billion per year. Big companies won’t get out of bed for that, so it’s up to SMEs to meet the RE demand. Several non-Chinese companies, including Alkane Resources, are proposing new RE projects. All of these projects need to enter the supply chain or we will face massive RE deficits and aggressive price increases.

Think outside rare earths too

Alkane Resources’ Dubbo Project can supply 1,200 tonnes of REs annually, for 70+ years, but it’s not just a REs project. The product range includes Zirconium, Hafnium and Niobium, essential materials for a broad range of industries facing similar supply/demand issues and consequent rising prices.

The Dubbo Project is construction-ready, with the mineral deposit and surrounding land acquired. All government approvals are in place and the project has a well-established flowsheet. As the most advanced poly-metallic project of its kind outside China, it offers a strategic, independent supply of critical minerals for a range of sustainable technologies and future industries.

The bottom line

Increasing RE prices + supply disruption = strong incentive to invest in the Dubbo Project.

Chinese Zirconium supply is stalling, so how about an Australian alternative?

Disruptions to the supply of Zirconium (Zr) materials from China look set to continue, due to stricter environmental standards being applied to production processes. This is good news for our environment, but as China supplies more than 75% of global Zr materials, it also brings problems for dependent industries and end-users around the world. Meanwhile, dwindling raw material (Zircon) supply also threatens the production of Zr materials. Australia has a unique, long-term Zr materials supply solution, but investment is needed immediately to address a looming global shortage.

Industries and products that depend on supply of Zr materials include:

  • mobile communications
  • clean energy technologies
  • catalytic converters used in the automotive industry
  • jet turbines
  • bioceramic dental, knee and hip implants, and
  • waterproof and fire resistant fabrics.

Learn more about the industrial applications of Zr here.

As China cleans up, supply of Zr materials dries up

In the past, lax environmental standards and enforcement allowed the Chinese Zr industry to undercut prices and drive Zr materials producers in Japan, Europe, the USA and elsewhere, out of business. Everyone has come to rely on China to supply Zr materials for the high-growth industries listed above.

Now, as more stringent environmental standards are applied to China’s industries, compliance costs are increasing and some plants will close rather than upgrade. China is likely to introduce stricter rules to reduce radioactive residues in waste streams from Zirconium Oxychloride (ZOC) production. ZOC is the key precursor for Zr materials, so while this a welcome step towards environmental sustainability, it’s also a threat to growing global industries that depend on Zr materials supply.

 Supply of Zr materials is also threatened by a shortage of Zircon

The major (94%) raw source material for the Zr materials industry is Zircon (Zirconium Silicate). The Chinese import almost all of the Zircon they process, mostly from Australia and South Africa.

Demand for Zr materials is increasing; therefore demand for Zircon is increasing – at around 3% compound annual growth. This year, an additional 30-40,000 tonnes of Zircon is needed. Growth like this requires at least one new mine to come online every year, but major Zircon producers such as Iluka, RBM, and Tronox have little or no capacity to increase supply in the near future.

While demand is rising, ore grades are falling, increasing production costs: as the ore grade drops, more ore must be processed to recover the same amount of Zircon. It costs even more to recover premium (purer) Zircon, and Zircon with desirably low radioactivity is in especially short supply.

As the price of Zircon rises, consumers find short-term solutions

Zircon prices rose by 40% in 2017. 2018 spot prices are significantly higher than contract prices, suggesting this trend will continue.

Consumers minimised their stocks when Zircon was relatively cheap and readily available, but have since reversed their strategy, buying more than they need now, in anticipation of higher prices in future. Zircon producers tend to allocate available Zircon according to past loyalties, so supply now depends on long-term relationships.

There is an alternative, long-term solution

The world-class Dubbo Project is a new and unique source of Zr materials, independent of Zircon supply and the Chinese industry, with a mine lifespan of 80+ years. Operated by Australian Strategic Materials, a subsidiary of Alkane Resources Ltd, the Dubbo Project will produce high-purity Zr materials to bespoke specifications, for use in a range of high-tech industries.

Mined and processed entirely within Australia, these Zr materials are derived from Eudialyte, not Zircon. Eudialyte is low in Uranium, so all Dubbo Project Zr products emit very low levels of natural radiation. With a sustainable supply chain, Australian Strategic Materials offers customers transparency, reliability, product value and shorter lead times.

To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here

Another megatrend accelerating demand for rare earths: aging population

Megatrends are massive social, environmental and technological changes that present both challenges and opportunities. For example, electric vehicles are a megatrend in transportation. Currently, many global megatrends are in motion that will dramatically reshape the way we live over the coming decades, including: urbanisation, automation, clean energy, the Internet of things, and aging population. All of these megatrends will also have a dramatic effect on the global supply of rare earths and Zirconium (Zr), Hafnium (Hf) and Niobium (Nb). Here, I’m going to focus on the impact of our aging population. First, however, you may be wondering…

Why should I care about the global supply of rare earths and Zr, Hf, Nb?

We rely on rare earths every day. Rare earths are 17 elements collectively labelled the ‘vitamins of industry’ because they play a small but vital role in a wide range of modern technologies. They’re in every smartphone, tablet and computer, for example, along with Zr, Hf and Nb.

These elements also play a major role in the manufacture of permanent magnets, which have multiple applications in advanced technology for transport, information and communications, defence and medicine. We use permanent magnets in motors, generators, actuators, alternators, bearings, brakes, separators and holding devices, torque drives, magnetos, meters, loudspeakers, relays… you get the picture!

Elements essential to high technology are to the 21st century what oil was to the 20th century: global economic and political stability depends on a steady, sufficient supply.

What does our aging population have to do it?

Let’s start with some startling figures… In 2015, 8.5% of humans were aged 65+. By 2050, 16.7% will be in that age bracket, due to declining fertility and increasing longevity.  China is predicted to have 330 million citizens aged 65+ by 2050, compared to 110 million today. India’s current older population of 60 million is projected to exceed 227 million in 2050. A century ago, there were fewer than 14 million people this age on the entire planet!  Exponentially growing numbers of elders will place enormous strain on health care and pension systems, with massive consequences for wellbeing and economies.

Simultaneously, the global trend to have fewer children means there will be less potential support for older people from their families in the future. In some European countries, more than 40% of women aged 65+ live alone. Even in societies with strong traditions of elder care, such as in Japan, traditional shared living arrangements are becoming less common. To reduce the old-age-dependency ratio (old-age dependents: working-age population) which is 30% and rising in some European countries, governments are increasing retirement ages and seeking means of extending careers and promoting independent living.

Many of the potential solutions to these burgeoning problems involve high technology.

A robot buddy for Grandma

If family members can’t look after their elders, perhaps automated care is the answer. Smartphones, tablets and computers can be filled with software and apps designed to support seniors in independent living – reminding them when to take medications, for example. Smart watches and other sensor systems can monitor health and behaviour in real time and alert remote caregivers in an emergency. Smart pendants can register when the wearer falls and contact aid providers.

Amazon has launched Alexa and many new companies are developing other voice-activated companion technologies for assisted living, to keep elders active and connected to their communities, like ElliQJibo or Kuri. Some are promoting robotic pets. Mobile robots, including drones, can fetch or carry objects and complete household chores. The i-Support project is developing an integrated, intelligent, automated bathroom system to help seniors wash and toilet themselves safely.

Elders are adopting automated assistance faster than younger people might expect. Retirement villages and other care facilities are eager to test these technologies. There seems little doubt that it will soon be standard practice for seniors and their human carers to be assisted by smart devices and robots… and all these technologies require rare earths and Zr, Hf, Nb.

Timely treatment for Grandpa

Whereas in the past, infectious diseases affecting the young were the primary global health concern and cost, in this century, non-communicable diseases that affect older people – such as heart disease, cancer and diabetes – will impose a far greater burden. Alzheimer’s Disease International projects that 115 million people worldwide will be living with AD/dementia in 2050. To combat these old-age diseases, early detection and intervention are essential.

Rare earths have health and medical applications ranging from diagnosis to drug treatments and surgical equipment. They are used in imaging techniques such as CAT scans, Magnetic Resonance Imaging (MRI), Positron Emission Tomography and X-rays. An average MRI machine contains 700 kg of rare earths. Drugs based on rare earths are providing treatments for lung, prostate, breast and bone cancer and rheumatoid arthritis. Rare earths are also used in modern surgical technology, such as cochlear implants and robot-assisted surgery. Clearly, in the field of medicine alone, the aging megatrend will increase demand for elements essential to high tech, far faster than Grandpa can ride his mobility scooter to the pharmacy.

Prolonged youth for boomers

Aging baby boomers will do everything possible to feel and look young, spending their considerable retirement funds freely on high technology for enhanced bodies and assisted living. This technology ranges from electric bicycles (to keep pace with younger push-bikers) to robotic limbs (for easier walking and greater strength) and smart glass in vehicles (to help older eyes adjust to light changes). To keep the bloom on the boomers, an increasing supply of high tech materials will be needed.

Where will we find enough rare earths to meet accelerating demand from the aged?

The cost of rare earths and Zr, Hf, Nb in these technologies is a very small fraction of the total materials cost, but their presence is essential, so uninterrupted supply is critical. I have explored the threat to global security presented by China’s current near monopoly of high tech materials supply in a previous post. Right now, Australia has an excellent, long-term opportunity to secure our supply of rare earths and other essential elements through Alkane Resources’ Dubbo Project. The wisest investors –­ old or young ­– will move their money into high tech materials ahead of the aging megatrend.


Critical Elements for Future Technologies

Today’s global economy is being driven by several disruptive ‘megatrend’ industries that will change the world as we know it. This is part of the quest for technologies and solutions that are faster, stronger, cleaner, smaller, lighter and safer. For example:

  • Clean energy – power generation with low emissions and enhanced energy storage
  • Transportation – electric vehicles and aerospace developments using new materials
  • Ageing population – new detection and treatment methods in healthcare
  • Internet of Things – data networking of smart devices, vehicles and buildings
  • Automation and robotics – the road to artificial intelligence

Growth of these megatrend industries is escalating; moreover, several are converging, creating growth rates much higher than historical levels. They all rely on myriad new and emerging technologies that in turn rely on materials containing specific elements and minerals that are essential to their production. These ‘critical elements’ become even more so when they are subject to restricted supply – whether due to general scarcity or the economic constraints of a dominant producer.

Zirconium, hafnium, niobium and rare earths have each been identified by many countries as critical elements that are essential to many future technologies. They are also playing a key role in the above megatrend industries. For example:

  • Zirconium – Zirconium-based ceramics are used in solid oxide fuel cells, special alloys, dental replacements and jet turbine coatings; zirconium is also used in kidney dialysis and smartphones.
  • Rare earth elements – Praseodymium/neodymium alloys are used in permanent magnets for wind power turbines, electric vehicles and industrial robots; rare earth elements are also used in medical imaging techniques, smartphones, fibre optics, special alloys, ceramics and electronics.
  • Hafnium – Hafnium is used in several aerospace alloys and ceramics, while hafnium oxide is emerging as a material of choice in semiconductors and data storage devices.
  • Niobium – Niobium’s main use is in high strength low alloy steels (HSLA); niobium alloys are being used in aerospace rocket engine nozzles (with hafnium); niobium is also used widely in engineering steels (including turbines), MRIs, capacitors for electric motors and mobile electronics.

The global markets for most of these critical elements are controlled by China’s vast manufacturing industry. China currently produces more than 75% of the world’s zirconium products and over 90% of high-value rare earths used in permanent magnet production. Hafnium, which is currently produced as a by-product of nuclear-grade zirconium, is also controlled by China. On the other hand, 85% of niobium is produced and manufactured in Brazil.

Single country domination of these elements, which are essential for clean energy and advanced tech (including defence) applications, could negatively impact the economy and security of all nations. The global economy needs the introduction of reliable, independent, long-term suppliers outside the dominant markets.

Eye on China

In reinforcement of the global market’s sensitivity to China’s manufacturing sector, recent domestic developments are expected to have far-reaching effect. The Made in China 2025 policy aims to move Chinese industry away from low-value, polluting industries to manufacturing for higher-value, downstream markets. This is likely to have the unintended consequence of restricting rest-of-world supply of certain critical elements (including zirconium and rare earth elements) due to consumption by downstream Chinese manufacturers. Moreover, supply of technology components containing these elements (such as rare earth permanent magnets and electric motors) would potentially cease as China focuses on selling finished products (such as electric vehicles or total wind turbine systems).

Compounding this, the Chinese government’s ‘war on pollution’ is leading to stricter enforcement of environmental laws across the sector. The imposition of additional regulations, along with environmental inspections and audits, are causing temporary plant closures and are also likely to curb some illegal mining. In the case of rare earths, illegal mining accounts for more than 50% of supply. China will also be looking to recoup a US$30-40B industry clean-up cost.

This all means the period of low prices and oversupply is probably now over for rare earths and zirconium materials. Moreover, demand is predicted to escalate – demand for rare earth magnets alone looks set to grow at 9% or more. Insatiable demand for these critical elements from both China and the rest of the world means global manufacturers will need to seek alternatives and develop complete mine to market supply chains in order to continue and guarantee production.

This makes the Dubbo Project a highly significant long-term, reliable and independent supply option outside China.

Hafnium: you’ve never seen it, but your future depends on it

Most people in developed nations have no idea how much the technology they use everyday depends on Hafnium, nor how access to this minor but critical element will shape future world economics and politics.

Shiny, silver and resisting corrosion, it’s named after the place where it was discovered in 1923: Hafnia (that’s Copenhagen, in Latin). Mendeleev predicted Hafnium’s existence when he developed the periodic table in 1869, but didn’t live to see any, because pure Hafnium (symbol Hf) doesn’t occur in nature; it’s always bound with Zirconium (Zr) compounds – usually in a Hf:Zr ratio of 1:50 – and it’s hard to extract. Until recently, Hafnium was just a low value by-product of the nuclear industry, separated from the Zirconium alloys used to clad fuel rods.

You’ve probably never seen Hafnium either, but it’s a sure bet you’re close to some right now: it’s inside the device with which you’ve accessed this article. The special properties of Hafnium oxide have recently permitted further miniaturisation of microprocessors, enhancing processing speed while eradicating overheating problems.

Hafnium is critical to advanced and developing technologies, due to its remarkable chemical and physical properties.

Chemically inert (i.e. resistant to corrosion), the metal and oxide forms of Hafnium also withstand extreme temperatures. Consequently, Hafnium is used in plasma cutting tips for welding, and is essential to the advancement of the aerospace industry, because it improves heat and creep resistance of its alloys in current and future Next Gen aircraft and rocket engines.

Hafnium carbide, with a melting point of about 3,900C, is one of the highest temperature resistant and hardest known materials known to man. Potentially suitable in a nuclear thermal rocket (NTR) for faster spacecraft propulsion.

Hafnium oxide films could be used for passive cooling, or to make air-conditioning and refrigeration systems requiring little or no electricity. And the potential of Hafnium oxide nanoparticles to destroy cancer cells through radiation therapy is being explored.

So clearly, a high tech future will require more and more Hafnium. The global market for Hafnium is currently small (about 70 tonnes annually), and demand is predicted to double by 2025. Tight supply has already driven prices higher.

Where will we get all the Hafnium we’ll need?

The Chinese currently produce 75% of the world’s zirconium supply, which is the source of Hafnium. China’s stranglehold on the supply chain of a material essential to advanced technology for transport, information and communications, medicine and defence, weakens the economic and political security of other nations. I have explored this issue in detail in a previous post.

Ideally customers need a Hafnium supply chain that is:

  • sustainable and traceable
  • independent of the nuclear fuel industry
  • not monopolised by China, nor any single nation or bloc
  • independent of the Zirconium supply chain
  • has the potential for ‘urban mining’ (i.e. recycling materials from technology at the end of its useful life)
  • designed for complementary sourcing of other essential materials.

Alkane Resources’ Dubbo Project in western NSW, Australia, will tick all these boxes. It will produce 50 tonnes of Hafnium per annum at start up, rising to 200 tpa at full capacity. The project is construction-ready, having received all necessary government approvals, and has an estimated mine life of 70+ years. Enough supply to build a safer, cleaner, high tech future, while benefitting from a burgeoning market for essential Hafnium.

How to secure our critical rare earths supply: lessons from China

Not to advance is to drop back – Chinese proverb

Rare earths are a group of 17 elements, known as the ‘vitamins of industry’ because many applications require only minute – but critical – amounts. Permanent magnets are an exception, being composed of 31% rare earths. Permanent magnets are the main driver of the US$3-4billion global rare earths market, accounting for just 20-25% of volume, but 80-85% of value, due to their multiple applications in advanced technology for transport, information and communications, defence and medicine. Permanent magnets are critical for high performance electric vehicles, wind turbines, smartphones, computers, and magnetic resonance imaging, for example.

Dig the well before you are thirsty – Chinese proverb

In 1992, Deng Xiaoping said ‘There is oil in the Middle East. There is Rare Earth in China.’ China’s rare earths industry began with mining and extraction and extended to downstream manufacturing. China has now conquered more than 90% of the rare earths market.

Most people are unaware of the critical role of rare earths in technologies we use daily, and on which our future industries and wellbeing will depend. Consequently, they are unaware of the threat presented by China’s near monopoly in rare earths supply. Single country domination in the production of minerals essential for clean and efficient energy generation, advanced computing and communications, and high-tech defence applications, has the potential to disrupt economies and the security of all nations. While the US, Canada, Japan, Korea and Europe are taking action to secure their rare earths supply, Australia has no such strategy in place.

When you drink the water, remember the spring – Chinese proverb

Companies who buy materials and technology without concern for the origins of their components are enabling China’s dominance of supply. Purchase specifications usually focus on performance criteria and prices, ignoring the source of components. A traceable supply chain from mineral sources through to products requires elemental mapping of materials and devices, and is the first step to addressing the risk of supply monopoly.

There are three truths: my truth, your truth, and the truth – Chinese proverb

Industry platforms quote daily rare earths prices, and news items about market developments provide other price data. Estimating supply is more difficult, as actual rare earths production appears to be much higher than official Chinese government production quotas. Inspections by China’s Ministry of Environmental Protection have identified widespread non-compliance, illegal activities and corruption in rare earths production.

The best way to determine the true state of the rare earths market is to study demand for the rare earths in permanent magnets, which leads price increases. Prices for praseodymium/neodymium (Pr/Nd) oxide, the main magnet rare earths, have increased by over 70% since the beginning of this year.

When the winds of change blow, some build shelter while others build windmills – Chinese proverb

Based on data provided by Professor Dudley Kingsnorth from the Industrial Minerals Company of Australia, some of the big changes affecting the price of rare earths in recent years are as follows:

  • In 2011, China had more than 150 companies involved in mining, processing and marketing rare earths. Consolidation since 2014 has resulted in just six state-owned enterprises, and their subsidiary companies, controlling the rare earths market.
  • In 2011, China had more than 150 companies involved in mining, processing and marketing rare earths. Consolidation since 2014 has resulted in just six state-owned enterprises, and their subsidiary companies, controlling the rare earths market.
  • In 2015, China removed export taxes of 15-25% from rare earths.
  • The Made in China 2025 initiative is providing $US hundreds of billions in Chinese government support for ten high-tech industries to achieve 70-80% domestic supply by 2025. Electric vehicles, wind power and industrial robots are included industries, which require permanent magnets.
  • Demand for Pr/Nd oxide for permanent magnets has increased from 27,500t in 2011 to an estimated 46,500t in 2017 – a compound annual growth rate of 9%.
  • China’s ‘war on pollution’ (announced in 2014) is showing signs of being a permanent campaign. The cost of rectifying the environmental damage caused by mining and processing over the past 30 years is estimated at US$30-40 billion, driving up rare earths prices.
  • Since 2011, illegal Pr/Nd oxide production has increased by around 3.3 times to 24,500t, or 50% of total supply. (This is a conservative estimate, based on Chinese domestic consumption only.) The Chinese government’s attempts to stop illegal mining – partly to prevent further environmental damage – have driven prices up as customers compete to secure legal supplies.
  • Production shortfall for Pr/Nd oxide has increased from 35-40,000t to 100-120,000t.

Opportunities multiply as they are seized – Chinese proverb

In summary, China’s ‘war on pollution’ appears to be reducing its illegal rare earth supply while domestic demand is increasing with support from government policies. With demand for permanent magnets set to grow at 9% p.a. or more, where will extra supply come from to feed insatiable demand from China and the rest of the world? Chinese companies are not waiting for legal Chinese supply to increase to match demand, but are actively seeking foreign sources of rare earths to fill the gap.

Alkane Resources’ Dubbo Project is construction-ready, having received all necessary government approvals. With an estimated mine life of 70+ years, it will produce critical zirconia, niobium, and light and heavy rare earths.

It doesn’t require the wisdom of Confucius to know that Australians should seize this opportunity to secure our high-tech future and economic wellbeing.

The best time to plant a tree was twenty years ago. The second-best time is now – Chinese proverb

Exponential growth of Electric Vehicles make rare earths Extremely Valuable

Electric vehicles (EVs) have existed since the mid-19th century, but now – due to technological advances and the threats of peak oil and climate change – their time has come and the era of the internal combustion engine (ICE) is ending. Just as demand for ICE vehicles drove up the value of fossil fuels in the 20th century, increasing demand for EVs is about to launch the value of rare earths through the roof.

With rapidly falling prices, improving performance, minimal operating and maintenance costs and reduced carbon emissions compared to ICE vehicles, demand for EVs is climbing an exponential curve like demand for TVs, computers and mobile telephones did (see Figure 1), but on a far tighter time frame. Global electric car stock surpassed 2 million vehicles in 2016, after crossing the 1 million vehicles threshold in 2015.

China leads the growth in EV sales and has mandated targets for New Energy Vehicles of 8% for 2018, 10% for 2019, and 12% for 2020. A new study produced in partnership between Carbon Tracker and the Grantham Institute at Imperial College London predicts that ‘EVs account for approximately 35% of the road transport market by 2035… By 2050, EVs account for over two-thirds of the road transport market.’ Although cars like the Tesla 3 and the Hyundai Ioniq attract most attention, EVs include buses, trucks, bicycles, motorbikes and sundry other carts, trolleys and conveyances.

Global attention should be on the supply chains for materials critical for the construction and operation of EVs, like rare earths.

Rare earth permanent magnets (REPMs) are critical components in high performance electric motors. Debate has raged for years over the relative merits of REPM motors and induction motors, but Tesla has chosen an REPM motor for their just-released Tesla 3, to achieve higher power density, enhanced efficiency, faster acceleration and greater range.

A standard model electric car requires around 5 times the REPMs as an ICE vehicle (see Table 1). REPMs contain approximately 31% rare earths (Neodymium and Praseodymium). A standard model electric car needs about 2.0kg of REPMs for its motor, or around 750g Neodymium / Praseodymium oxide. Luxury models use more REPMs in motors for seats, windows, side mirrors and the boot/trunk. (Rare earths are also needed for the proximity, infrared, motion and other sensors that make driverless vehicles possible.)

The price for a standard electric car is currently around USD30 000, while the price for the rare earths in its motor is about USD50. The price of electric cars is expected to continue to drop, due to the falling cost of batteries and efficiency gains from mass production, but by 2020, the cost of the rare earths in their motors may increase significantly, as demand outstrips supply.

Price-sensitive applications of rare earths will be forced to seek alternatives. But even if rare earth prices increase significantly, they would still represent a tiny fraction of the cost of a standard electric car, so the use of REPMs to achieve superior motor performance by electric car manufacturers seems likely to continue.

In its Global EV outlook 2017, the International Energy Agency indicates that the electric car stock is likely to range between 9 million and 20 million by 2020. When EV sales reach 10 million per year, this will require up to 16,500 tonnes per annum of rare earth oxides on top of current production, equivalent to a 35% increase on all current production, or a 75% increase on current legal production. With a continuing crackdown on illegal rare earth mining, supply is likely to decrease, raising prices even further.

The value of Alkane’s Dubbo Project, which will produce at least 1,300 tonnes per annum of rare earth oxides for magnets, is clearly set for dramatic increase. It should attract investors like a magnet.

Figure 1: The rate of adoption of new technologies is accelerating

Table 1: Demand for Praseodymium and Neodymium in Electric Vehicles