China’s rare earth export curbs push Australian miner to fast track Africa project as nations step up diversification plans

Su-Lin Tan
·4-min read

Amid geopolitical concerns over China’s plans to curb exports, Australian rare earth miner Ionic Rare Earths, which has previously fielded interest from governments, has secured commitments to raise A$12 million (US$9.3 million) in new funding to fast track its Makuutu project in Uganda.

The concerns over China’s intentions were heightened on Monday when Chinese sources indicated that Beijing could restrict the export of rare earth metals to the United States, a move that could hurt its weapons manufacturing industry.

The race to stockpile rare earth metals has intensified in recent months, sending prices soaring, as countries, including the US, increased their holdings and looked for new sources outside China following souring geopolitical relations and China’s export and production restrictions.

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The Australian-listed Ionic, which told analyst S&P Global last year that it had been approached by global entities representing government interests, said China’s continued restrictions on rare earth metal exports have ignited strong interest in production outside China.

Recent policy to prioritise and stockpile critical and heavy rare earths for Chinese domestic supply means less exports

Tim Harrison

“Makuutu, we believe, will become an increasingly important strategic asset as the implemented export restrictions in critical and heavy rare earth from China take effect,” managing director Tim Harrison said in a statement to the Australian Securities Exchange after Ionic’s call for funding was oversubscribed by both local and foreign institutional investors.

“The Chinese dominance in supplying over 95 per cent of the world’s heavy rare earths production comes from their depleting reserves of ionic adsorption clays. Recent policy to prioritise and stockpile critical and heavy rare earths for Chinese domestic supply means less exports.”

Rare earth metals are used in strategic and hi-tech products such as military equipment, smartphones, televisions, magnets, X-ray machines and electric vehicles.

China dominates the global rare earth production, with the US, Australia and Myanmar distant contenders.

China tightens export rules for sensitive tech, boosts power to retaliate against foreign sanctions

China’s strength lies in its lower-cost refining of rare earth metals, with much of the global production shifting to China due to its lower production costs and concerns in some countries over environmental damage, although it only holds around 40 per cent of the world’s reserves.

In December, China’s new Export Control Law took effect, limiting the export of sensitive materials and technology, including military and nuclear products.

Last month, China’s Ministry of Industry and Information Technology also introduced new quotas to further control and lower the domestic mining and refining of rare earth metals.

Chen Zhanheng, deputy head of the Association of China Rare Earth Industry, told the Global Times last month that the implementation of the rare earth quota rules formalised the volume control of rare earth production that had been in motion since 2006.

With rare earth supply increasingly a strategic question, a number of measures are being enacted at the policy level to promote the production of rare earths outside China

BMO Capital Markets analysts

“In anticipation of such a measure, key customers in the US [or perhaps the State Reserve] have seemingly been buying up as much material as possible … with rare earth supply increasingly a strategic question, a number of measures are being enacted at the policy level to promote the production of rare earths outside China,” BMO Capital Markets analysts Colin Hamilton, Timothy Wood-Dow and Diego Oliva-Velez said in a note in December after China passed its export-reduction law.

The increased stockpiling led to a bounce in prices since December.

“Rare earths do like a sudden rally, and with tension between the developed world [most notably in Australia of late] and China at its highest in recent history, we are seeing another bout of sudden price gains,” the BMO analysts added.

“The last time we saw such a rally in prices was in mid-2019, with market speculation on potential export restrictions in China again to blame.”

Then, the threat to curb rare earth metal exports was seen as a retaliation for US tariffs on Chinese imports as part of their escalating trade war.

According to S&P Global, the US Department of Defence held talks with various companies in mid-2019 to secure strategic minerals, including rare earth metals, with mining ventures such as the Songwe Hill project in Malawi and the Gakara mine in Burundi considered.

Last month, the largest producer of rare earth outside China, the controversial Australian-listed Lynas Corporation, signed a deal with the US Department of Defence to build a rare earth separation plant in the US.

Lynas had previously faced concerns over the negative health and environmental problems related to its rare earth metals processing plant in Malaysia.

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