Mining News

Chile Heating up as a Rare Earths Market

Posted by Cheryl Rutledge on 6/18/2015 4:46:09 PM

By Kristine Ramsbottom, Taylor Jackson and Kenneth P. Green

Chilean company Mineria Activa is entering the rare earths market with a new extraction project in Santiago, increasing competition in this Chinese dominated space.

Their project, BioLantanidos, is making waves by not only increasing competition in extraction for rare earth minerals, but by doing so with what they have coined as ‘green mining’ –the use of environmentally sustainable extraction methods.

The minerals involved in the BioLantanidos project are similar deposits with regards to grade and composition to those found in China. These minerals include neodymium and dysprosium, which are commonly used in the production of technological devices and consumer durables such as Plasma TVs.

The project is expected to initially produce 2,500 tons of rare earths concentrate per year, with estimates of future annual production at 10,000 tons per year.

Mineria Activa plans to begin producing rare earths by the end of 2016.

The green production process focuses on cleansing the clay deposits after mineral extraction, followed by re-planting of pine and eucalyptus trees in the area. This is in direct contrast with China’s extraction methods, where operators pump ammonium sulfate into the ground and wait for the chemical to seep out with the minerals.

This new take on extraction methodology may potentially be attractive for investors in the region hoping to strengthen their CSR initiatives.

Mining investment in Chile has been estimated to reach more than $64 billion over the next 10 years. Predictions also include that foreign direct investment is said to grow from $23 billion in 2014 to an estimated $28 billion in 2017.

The Fraser Institute’s 2014 Survey of Mining Companies also shows Chile’s investment attractiveness to be on the rise. Their 2012 score sat at 67 with a rank of 15/96 jurisdictions. As of 2014, their score had improved by 7 percent to 72, ranking 13/122.

Despite these positive indicators, a spokesperson from Stormcrow Capital Ltd. has indicated that it may be difficult for Mineria to attract investment in this green space, as investors would have to pay a premium for minerals that they can get from China at a lower price.

Stormcrow explained that buyers such as Apple Inc. and ThyssenKrupp AG may not want to pay this additional premium for benefits not directly related to the product they are receiving.

That considered, when it comes to investment attractiveness, the Fraser Institute’s survey depicts Chile as being a far more attractive jurisdiction to enter, when compared to China. China’s investment attractiveness ranking has decreased since 2012, where it ranked 69/96 jurisdictions. In 2014 its ranking decreased, and was ranked 97/122 jurisdictions.

When considering uncertainty regarding environmental regulations, 16 percent of respondents indicated that this encourages investment in Chile. Only 5 percent indicated the same for China.

As for investment deterrent in the same category, 39 percent expressed that uncertainty about environmental regulation is a deterrent to Chilean investment, where 58 percent said that this is a deterrent to investment in China.

Chile also outperforms China under the survey’s category of political stability. Of the responses to the survey, 79 percent said political stability encourages investment, 42 percent that it was not a deterrent, and 22 percent that political stability is a deterrent to investment in Chile.

China did not fare as well. Only 11 percent suggested political stability encouraged investment in China, 32 percent indicated that it is not a deterrent and 58 percent reported that it was a deterrent to investment in the region.

It is unclear as to how global investors will respond to Chile’s new green mining initiative; however their overall investment attractiveness and category specific survey performance paints a positive picture for investment in the mining sector in this region.

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