The problem of rare metals and rare earths

Conférence du 6 février 2012 à l’Institut de France – Académie des Sciences Morales et Politiques

 

Natural resources are a source of industrial dynamism for producing countries, while consuming countries have entered into competitive consumption. That is why I propose, without delay, to review what I believe a national doctrine on mineral raw materials should be before discussing a scenario related to German energy policy.

1. National Raw Materials Doctrine
1) Definitions

Three elements form the basis of a national commodity doctrine: energy independence, food self-sufficiency and mineral independence. The absence of one of them prevents sustainable economic development.

For metals, this doctrine is based on a thesis that will be active (Asia) or passive (Europe):

  • Japan and Korea are seeking a stable supply for the country’s economy.
  • China seeks to maintain a stable domestic supply through centralization of needs, industrial consolidation and less smuggling.
  • The United States is seeking to diversify supplies, substitute and recycle to industrialize.
  • Europe is seeking to avoid a shortage.
  • Naturally, a producing country, Australia or Canada, will encourage investment to maximize income.

Countries importing natural resources will implement a doctrine using several tools: a precise definition of materials, dynamic mining companies, privileged partnerships with producer states, strategic stocks, public or private trading companies in charge of national supply.

a) What is a critical resources?

It is a resource for which the industrial risks associated with a supply shortage are high and for which there is no possible substitution. A subject will be critical in one industry but not in another, in one country but not in another and this evolves over time.

b) What is a strategic resources?

It is an indispensable resource for state policy or national defence.  Here again, a subject will be strategic in one country, but not in another, and this evolves over time. In France, there is no strategic material except uranium, which benefits from a law, a decree and classified directives. At European level I cannot find a common policy or common defence that would justify this list. China, the USA, Korea and Japan have a list of strategic metals. In the wrong order, these materials are: copper, nickel, iron, coal, platinum, palladium, rhodium, rhenium, antimony, beryllium, cobalt (solo, nickel, copper), gallium (bauxite and zinc), germanium, graphite, indium (zinc), magnesium, niobium, rare earths (cerium, lanthanum, neodymium, terbium, europium, yttrium, terbium, lutetium…) tantalum, tungsten, lithium, tellurium, etc.

c) Which industries consume these materials?

We were all familiar with the slow contagion model for steel consumption, from the construction of the Eiffel Tower to the towers of Chinese cities. Here, for these materials, we are witnessing a galloping epidemic. It’s unique. Everyone wants it for everything and at the same time: in electric cars, new aircraft models, light-emitting diodes, electronic chips, smart phones, OLED screens, solar panels, wind turbines, electricity storage, fuel cells, national defense, steel, optics, lasers, petrochemicals, nuclear, etc.

The example of rare earth-based permanent magnets illustrates this growing consumption. Composed mainly of neodymium, dysprosium and praseodymium, their demands were a few grams in computers, but now they are 200 grams for an electric bicycle, 1-2 kg for an electric car and nearly 200 kg/MW for direct drive wind turbines.

We will understand this immediately, these consumptions will be in competition with each other and it is the producer of raw materials who will direct the flows according to price criteria – the different criticalities will be in competition – or strategic notions of the producing states. These choices will be safe if you have to choose between a phone or a computer that also makes a phone. But what to do when it comes to choosing between energy production dependent on rare metals, or if there is a national security dimension?

(d) Why does the supply of critical metals not immediately meet demand?

In production forecasts, simplistic reasoning accounts for the resources available in the earth’s crust without regard to the economic reserves to be discovered or extraction models. Although sometimes these metals are not rare, they are co-products of other major metals and some of these production chains are opaque. Thus, there is no indium mine but zinc, tellurium but copper, molybdenum but copper, gallium but bauxite, rhodium but nickel or platinum. Of course, these metals are dependent on the dynamics of the major metal, they are not profitable in themselves and, if they are not produced for technical reasons, it may be for economic reasons.

Sometimes the mines of major metals are insufficient, or at the end of their life, and mining renewal has not been prepared: future new deposits have not been sought, so not yet discovered, a mine is 10-20 years of work before production, but some countries refuse to open mines.

Recycling these metals in the industrial cycle is the simplest step. Then, a wait of sometimes 20 years will precede the recycling of the carrier products. Moreover, on the latter, the deposits of materials are sometimes so thin, the alloys so complex or the contents so low, or even all at once, that we will not be able to recover them well. Recycling alone will therefore not satisfy consumer needs.

2) Tools to address deficits
(a) The mining industry

The dynamism of energy and mining companies is measured through their investments in the exploration and/or acquisition of new deposits. The French mining industry is a disappointment. For lack of vision, she remained prostrate, small and frozen while mining giants were being born elsewhere. This week two companies that did not exist twenty years ago, Glencore and Xstrata, announced a $90 billion merger while our older mining companies are thirty times smaller. In addition, our mining projects are less dynamic.

A new starting point on our territory would still be possible. The opening of small mines by innovative exploration SMEs in the Pyrenees, the Massif Central and Brittany for copper, zinc and tin from tungsten would allow the modern production of “strategic metals” co-products while respecting the environment.

Moreover, with the exception of coalfields, the French geological horizon is not known below 100 metres. The KGHM copper mine in Poland is 1000-1200 metres away, the Las Cruces copper mine in Spain is under a 150 m waste rock, the Neves-Corvo copper and zinc mine in Portugal is 700 metres away. In the rest of the world, mines commonly reach 1000-2000 metres, or even 4000 metres in South Africa. In France, the geological context of Brittany, the Massif Central and the Vosges is favourable, a deep exploration of the subsoil has the potential to lead us to discover more important deposits.

For small mines, a first step can represent 5,000 direct jobs, while the second step can represent large deposits, twice as many for each discovery. There is a factor 5 between direct and indirect employment.

But it takes courage because the question of prospecting arises: the abandonment of exploration for oil and shale gas in France, and its potential of hundreds of thousands of jobs with indirect jobs, questions us.

The first obstacle to prospecting in France is that today we no longer listen to the engineer’s word. The second is administrative: the new Mining Code will adopt the principle of public inquiries from the Environment Code, but these innovations have not yet been formalised. In addition, mining activity is isolated in the Ministry of the Environment and not integrated into the Ministry of Industry. Finally, the Regional Directorates of Environment, Development and Housing, which receive mining applications, are no longer trained in this activity. This loss of technical skills complicates the processing of cases. Indeed, the generation of geologists, miners and energy experts of the 1950s and 1960s who had the knowledge because they had exploited what could be exploited in France, before gaining territories abroad, is no longer in activity; the next generation leaving the formations is not yet in function. This is why French geology students are looking for a professional dynamic in foreign mining companies, or even in large metal-consuming industrialists who wish to complete their skills.

Need we remind you that the industrial cycle is: exploration, exploitation and transformation of natural resources, then industrial manufacturing, marketing, then service and finally recycling. Are we prepared for mining jobs in France for products made in France? It should be recalled that the industrial model of the consumer products of global nomadic electronics was largely built on the extraction, disrespectful of the environment, of Chinese rare earths (97% of production, 49% of known reserves). In this context, it is difficult to blame the Chinese authorities for putting their house in order despite the development of a ridiculous anti-Chinese “conspiracy” hysteria. We should be able to do things differently with local products that are immediately environmentally friendly.

Let’s summarize this first idea in one question: Why does Mongolia know a mining El Dorado and not France?

(b) Privileged partnerships between producer and consumer States

Producers are sovereign over a soil or subsoil and exercise power strategies.
Consumers are sovereign over industrial sectors and the associated influence strategies. In the future, producers of metals, agricultural products and energy will export less and consume more locally. The latter idea, resource nationalism, is illustrated in a short article with the provocative title: “When the African consumer wakes up China will tremble” (See www.lesechos.fr and International and Strategic Review N°84 winter 2011)

And, if producers consume more, we must find a strategic geological depth. We will come back to this in conclusion.

(c) Strategic stocks

They are a fragile offer for several reasons. This is a temporary proposal, which cannot be shared, requiring a significant investment and permanent dialogue between administrations and companies. They are set up for the long term, but their managers have a duty to navigate on sight, anticipating a market environment where speculation reigns because of their raison d’être. Experienced professionals are needed to ensure this management.

Who has stocks? China, Japan, South Korea, the United States, but also States in the Middle East or Asia for food….

France had built up a strategic stock of metals, but it was sold off in the last decade of the twentieth century. It is said that rules of engagement were forgotten and market-based procurement was one of the peace dividends after the fall of the Berlin Wall. The economic war had not been anticipated.

(d) Public or private trading companies

The trading companies in charge of national supply offer the benefits of an invasion without military war, it is economic war. In this field of metallurgy and trading, France has suffered a recent and serious handicap since the astonishing, mysterious and sudden disappearance of the factories, jobs and metals of its leader, the Comptoir Lyon-Alemand-Louyot after 200 years of existence.

When these few simple concepts are ignored, misused or misinterpreted, industrial sectors complain of mineral shortages when they are forced to rush together towards the same solutions without worrying about mining supply.

2. German energy policy

In my presentation, we come to the scenario that I would like to explore quickly: German energy policy. I am well aware that simplification has its imperfections, but this is the way to illustrate some ideas in such a short time.

In 2011, Germany has about 102 GW of installed capacity and an electricity mix of 58% carbon (lignite, coal, gas), 20% renewable energy and 21% nuclear. By 2022, it plans to close its 21 nuclear power plants, while reducing consumption and increasing the share of coal, gas and also renewable energies (35%), in particular wind power.

The film of the last few weeks is instructive in this respect.

This winter, the world leader in the manufacture of wind turbines is in financial difficulty, laying off 10% of its global employees: bad weather at sea prevented it from installing as many wind turbines as it wanted, government subsidies have sometimes disappeared, the situation is difficult.

In the future, overpowered wind turbines will be in the majority: in 2009, 60% of wind turbines were less than 2 MW; in 2012, 70% are above 2MW. Large offshore wind turbines are in full development and each one uses rare earths that allow compact nacelles and reduced maintenance.

Germany is becoming aware of its dependence on critical metals and, last year, a junior mining explorer was formed by major German groups to discover and reserve future deposits of three elements (rare earths, tungsten, coal coke). The German government will finance mining exploration, but the companies will be responsible for the exploitation.

Two questions are necessary:

How to manage offshore wind turbine troubleshooting in winter storms? What will it cost? At 35% renewable energy, we are in the electrical tape and no longer in lace.
Will the German junior face the nationalism of the natural resources of the countries it will prospect?

Two ideas open two discussions.

In the minds of some, electric cars, wind turbines or solar panels mean partial or total independence from uranium, coal, oil or gas. But they do not realize that they are becoming dependent on lithium, indium, gallium, rare earths, etc. These are indeed new dependencies that are still poorly understood, or even for some unknown people.

Secondly, I would like to ask a question – and I will be told if it makes sense – to be said slowly and to meditate at length: is it a riskier energy policy than nuclear energy to base its economic development on renewable energies that are still immature, particularly wind power, with meteorological models that are becoming obsolete as the climate changes?

One answer is obviously the rejection of the bipolar – with or without nuclear power, with or without renewable energy – and the acceptance of the multipolar: renewable energy must progress, especially solar energy, and the atom retains a future that is in the atom itself.
Conclusion

If there were only two elements to remember from my speech, they would be independence and access to resources.

If French consumption of critical metals increases, France will have to gain independence, take charge and open mines on its territory.
The mining sector of tomorrow will be new exploration campaigns, lower grades, rising costs due to increased energy and water consumption, and stricter environmental regulations. In France, we have energy, water, infrastructure and ecology. In our country, mines will be mainly jobs, they will be deep, non-polluting and they will propose a solution to the renewal of the industry.

If French mines are insufficient, resources will have to be accessed at a new geological depth. In other words, a territory without demographic tension, depopulated, with raw materials and whose access conditions we would accept. I see only one of them: Russia. This is the subject of a short article “Russia and critical issues” (Revue Géoéconomie N°59 autumn 2011) where I cross my knowledge of natural resources and my political understanding of Russia.

Finally, the concept of nation is embodied if statesmen decide on mineral, agricultural and energy dependencies or independence that are fair in price and availability for populations, whether urban or rural.

Let us not be afraid to choose our independence and our dependence on natural resources, freely and with a good reason.

Didier JULIENNE

Linkedin: Didier Julienne

Twitter:  @didierjulienne

Questions and answers after the conference :

En français  :  http://www.asmp.fr/travaux/debat/D12-02-06%20Julienne.pdf

REMARKS made following Didier Julienne’s presentation (meeting of Monday, February 6, 2012)

Marianne Bastid-Bruguière: You told us that the geological horizon in France was at most 100 metres deep. Do we really have no idea where deposits of these much-needed rare metals and rare earths could be found? How do you explain the shrinking of the French mining industry? And when did it start? You mentioned a generation problem and an image problem. Do you think that the education provided today is distracting engineers from mineral exploration? What about other countries?

Answers: With regard to the geological horizon, an inventory was made by the Bureau of Geological and Mining Research (BRGM) in the 1970s. But this inventory, on the one hand, did not exceed a certain depth and, on the other hand, was not exhaustive, moreover it focused on the first discoveries and was never the subject of a complete and scientific synthesis. However, it is not surprising that the same BRGM discovered, for example, the Neves-Corvo mine in Portugal or the Yanacocha mine in Peru and that at the time no French company wanted to acquire them to build a French mining group like the oil companies. This remark is already an answer to your second question. The mining industry in France does not have the same dynamism as abroad. There is no Ministry of Mines in France. A student geologist who leaves the ENAG Orléans, the ENSG Nancy or the Lasalle Beauvais Polytechnic Institute risks inactivity in our country, whereas in Australia or Mongolia, to cite just two examples, he would have about ten job offers, because, first, there are mining giants there, second, these giants have known not to be limited to the borders of their country alone and third, the offers are pragmatic. These groups own and operate mines around the world. I have already mentioned Glencore and Xstrata; they are companies based in Switzerland, but there are, as far as I know, no major mining deposits in Switzerland. Do we have a generation and image problem? There is a mining engineer in Germinal who says that he has learned at the School how to calculate the resistance of materials and that therefore for such a gallery, etc.. Today, mining engineers are mainly active in finance.

Georges-Henri Soutou: Even before the First World War, the Germans, who did not own any raw materials in Germany, except coal, had founded a Metallgesellschaft in Frankfurt whose purpose was not to acquire mines, but to trade by playing on the markets in order to avoid
that the London City does not set the prices. The Allies were well aware of the power of Metallgesellschaftet and much of the action taken in the economic war against Germany was to prevent Germany from accessing raw materials once the military war was over. At the time, we were therefore fully aware of the industrial, economic and strategic stakes involved in access to raw materials. But very quickly, in France – and not in Japan, the United States or other countries – the mining sector was considered no longer as important as before and was allowed to wither gradually. With the exploitation of new deposits, is the same phenomenon not being created as with oil, namely that any discovery of new deposits lowers prices and consequently reduces the incentive to carry out new research? Most recently, Malaysia has opened a rare metals refinery that accounts for about one-third of China’s production and is likely to lower prices and discourage exploration efforts. Is it possible to imagine, in the current legal and regulatory framework of the European Union, which is very hostile to cartels, a return to either national or European policies on strategic raw materials?

Answer: Do new deposits lower prices? You take the example of the Lynas plant in Malaysia, which is a rare earth plant. The world production of the seventeen rare earths listed is about 120,000 tonnes. Lynas will add 3000 or 4000 tons in the first year, then gradually increase to around 20000 tons, but in several years. This is therefore not the way to lower prices, as these quantities are already reserved by long-term contracts for new uses, particularly in Japan and Germany. This is also true for other metals; for example, in the next 40 years, we will consume as much copper as we have in the last 3000 years, and it must be taken into account that environmental and safety measures, which are gradually being required everywhere, make the opening of any new plant much more expensive than in the past. These costs are of course passed on in the selling price and we see that a new mine does not necessarily lead to a reduction in costs, quite the contrary. One illustration is the metal price curves in response to financial crises. Copper, for example, was at $1500 per tonne in 2003; it rose to nearly $9,000 in 2008, then declined to $3,000 at the height of the crisis in 2009. It rose to nearly $8,000 in 2010, then fell back to a level close to $6,000; finally, it rose to $10,000 in early 2011 before returning to around $7,000 in the fall of 2011. And, at the moment, the price is rising again. The lows are getting higher and higher, the 2011 low is four times higher than the 2005 low and more than twice as high as the 2008 low. With regard to your comment on the Metallgesellschaft, I would remind you that in France, at that time, there was still a mining metallurgical industry worthy of the name, with companies such as Pennaroya. It is regrettable that Pennaroya sold deposits to Rio Tinto, the world’s third largest mining company today, which took off at a higher rate when it acquired assets held by a French mining company! Going back in time, it appears that the first company to have had platinum mines in Russia, under the tsar and then under the revolution, was the
Compagnie Industrielle du Platine, a French company incorporated in Paris in 1898, the traces of which I found in Moscow in the archives of the Russian Federation administration.

Emmanuel Le Roy Ladurie: Isn’t one of your central ideas that mines have a negative image in French culture?

Answer: The idea widespread in France, in unsophisticated circles, is that a mine is dirty and polluting, whereas today a mine can be carbo-positive, i.e. it can consume more carbon than it emits. A perfect illustration of the misunderstanding of what these activities are is given to us by the French refusal not to extract shale gas, but simply to drill to see if there are any, to explore. In addition, I believe it is desirable to produce metals here under strict environmental conditions, rather than continue to consume the same metals in our everyday products while remaining blind to the distant, sometimes degraded and sometimes polluting production conditions.

Jean-Claude Trichet: You have two criticisms: first, the French do not explore the French subsoil; second, they do not have global multinationals in the mining sector. On the second point, I would note that our country cannot necessarily have multinationals in all areas. However, if we compare France to Germany, Italy and even England, we find an over-representation of global multinationals in the industrial sector and an under-representation of small and medium-sized companies.
In a similar vein to geological exploration limited to only 100 metres, I recently learned that in France, dramatic avalanches are only considered over the last 100 years, while in Switzerland, Austria or Germany, the statistics cover the last 300 years. It therefore appears that our country is apparently showing real negligence in important areas. On renewable energies in general, the most convincing argument I have heard is that investments in renewable energies are currently unprofitable, but that they will one day become profitable thanks to technological progress; it would therefore be necessary to invest massively and exclusively in research and development to be present in these new technologies when they mature. What is your opinion on this point? I understand you are in favour of nuclear power. Can you give us the reasons for this?

Answer: I regret that we do not have multinationals in the mining sector, we have many assets and I do not believe that we can talk about negligence about our limited geological horizon. In fact, when we did some scouting, we looked for some things and not others. As a result, there was no need to descend to a great depth. The V representing the Brittany, Massif-Central and Vosges axes could be a V of victorious geological discoveries. In terms of strategic stocks, I had a first-hand experience of what was happening. When I was at the Lyon-Alemand-Louyot counter in the late 1980s and early 1990s, I received a telex every week from GIRM auctioning stocks of precious metals, palladium and platinum, among others. And I noticed that my competitors for the purchase of these metals were generally Anglo-Saxon banks that bought for resale. I don’t know if renewable energy is or will be profitable. This is not my area of expertise. On the other hand, I know that they need so-called strategic or critical metals and that they are not mature, which means that it is necessary, on the one hand, to reduce unit quantities – to reduce thin films when it comes to solar energy or to reduce rare earths in wind turbines – in order to have an acceptable cost of raw materials and, on the other hand, to increase the energy efficiency of the equipment. I believe more in the potential of solar energy than wind energy for the reasons given in my presentation. Finally, I would prefer the construction of renewable energies with metals as much as possible produced in good conditions in France and which would therefore travel as little as possible around the planet. Yes, absolutely. I have written it many times in the newspaper Les Échos, which has led me to be admonished by some individuals. It is difficult to understand the hysteria that, in France, seizes some minds as soon as we express ourselves on nuclear power without second thoughts. I am against the bipolar, with or without, and for the multipolar, with nuclear and with competitive renewable energies. I would add that after speaking at a UN conference with Carlo Rubbia, 1984 Nobel Prize winner in Physics, and then after having discussions with researchers at the Grenoble Laboratory of Subatomic Physics and Cosmology (LPSC), I was convinced that considerable progress had been made.
were possible in the nuclear sector (see my article “Thorium, nuclear of the future” in https://didierjulienne.eu/le-thorium-nucleaire-du-futur/)

Bertrand Collomb: You deplore a decline in the position of the engineer and the coordinated technical thinking in our country. I have heard more often about an excess of power on the part of engineers and, in particular, mining engineers. If the French mining industry is far from having been as successful as the other branches of industry, it is undoubtedly because too much effort has been devoted to French mines which, in fact, were not really profitable. The very French mistake of always defending what has been achieved, and that alone, has certainly weighed very heavily on the evolution of the mining industry. In France do we have rare earths or metals? And if that is the case, are we not faced with the problem that arises for other energy sources, namely that their exploitation costs much more than importing from abroad? You said that French companies do not have the idea of forming alliances with each other to find the metals they need. It is true that our companies have more confidence in the market and consider that prospecting and mining are not part of their business. Today, there is a high concentration of rare earths in China, but if we fear a strangulation situation, is it not because we have not yet explored all possible deposits elsewhere? What about the rest of the potential reserves and the plasticity of the market, i.e. its ability to wait for new deposits to be discovered?

Answer: I have nothing against mining engineers, quite the contrary. I simply deplore the fact that, unlike Anglo-Saxon Mining Engineers, the most creative do not intend to work in mining, but rather in financial services. I believe that France could have done better in the field of mining. It has deposits and know-how; it has three banks that are the first in the financing of raw materials and which could therefore have assisted the mining sector if it had wished to acquire deposits abroad to exploit them, including mines that were French discoveries. Are there rare metal deposits in France? Yes, there are major metal deposits – copper, zinc – with their critical co-products as well as rare earths that could provide some of the needs of the country’s industry. In response to your question on plasticity, a rare earth or metal mine requires ten to twenty years of preparatory work to operate. But the industries using these elements do not have time to wait ten to twenty years. Electric cars will be manufactured in China since the deposits are already being exploited there. France may not have enough rare earths, unless it is seriously looking for them. But in France, we don’t have the right to search. All mining drilling is subject to authorization and, today, authorization is systematically refused. This is sadly reflected in the experience of exploratory drilling for shale gas.
Should French companies have verticalized? When they trust the market, they endure it when it is temporarily in tension – and sometimes the temporary can be tenacious. The whole thing is to buy cheaper than the competitor and at this point upstream integration is an advantage. When I successfully sold precious metals to Japanese companies, especially in the automotive industry, and at the same time I only had failures in France, I of course wondered what it was all about, until I realized that these Asian groups were investing in platinum groups in South Africa. The Chinese and Korean companies had the same reasoning for other matters. Another example of verticality is provided by the world of steel: the latest movement of EDF towards the Areva uranium mines is in line with this axis; this is normal, it is the only French strategic metal that meets the definition of my presentation. I explained this to you in June 2011 in a short article available free of charge in Les Echos (“EDF must save Areva’s mines” )The approach to raw materials is very different between the mindset that anticipates the risks of a shortage of goods and the one that only manages a price risk

Marcel Boiteux: You told us that we had not been able to exploit the resources of our subsoil or create the necessary companies on a sustainable basis, whereas in Australia, for example, large mining companies had developed that had spread all over the world. How is it that, during this spin-off, these companies did not come to France? Was our deposits too expensive for what we could get out of them – which would explain their abandonment – or is it for another reason, but which one?

Answer: Here is a scoop: the very dynamic company that is currently filing exploration files in France is Australian. But it is subject to lengthy responses, as few people understand mining exploration; the administration, politicians, politicians, the media and ill-informed public opinion confuse exploration and exploitation and also consider that mines in Frances are dangerous, polluting and at the limit useless.

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