Friday, May 1, 2009

China Has Made An Inroad Into Australia That, If Successful, Will Give It Overwhelming Control of The World's Supply Of Rare Earth Elements For A Long Time To Come.

China today produces at least 95% of the world's supply of rare earth elements from its domestic mines primarily in Inner Mongolia.China today produces at least 95% of the world's supply of rare earth elements from its domestic mines primarily in Inner Mongolia.   At the beginning of 2008 two very large Australian REE mines were well on the way to coming into production. Either one of them would eventually have been the largest single-point mine for REEs in the world. One of the Australian companies was also beginning construction of a REE refinery in Malaysia, which would have been the largest in the world outside of China. Control of the shares of both of the Australian companies is now coming into hands of state owned aggressive Chinese mining and trading entities. It has been predicted that Chinese domestic demand for REEs will exceed its domestic production in the next 2-4 years. That is precisely how long it will take for the two Australian mines and the Malaysian refinery to be brought into production.   Three significant REE mining possibilities, only, now remain out of Chinese control.

[...] Today's announcement that Lynas will receive funding and Chinese bank guarantees for A$515 million enabled  through a purchase of 51% of its shares by CNMC, China Nonferrous Mining Company, a state owned entity that already owns shares in other non-Chinese producers of strategic and critical metals, such as Canada's North American Tungsten, is a dramatic reinforcement of China's strategy to insure that its domestic supplies of REEs are not interrupted by its domestic demand exceeding its domestic production.

Foolish Western financiers and industrialists who ignore the significance of these moves are under the illusion that the object of the Chinese state-owned entities in purchasing non Chinese sources of natural resources is to make money in the free market. In fact the object of these moves is, as i said above, to insure against supply interruption. If and only if there are surpluses of the metals produced will Chinese shareholders vote to sell them into the open market.[...] Read more...

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