The future of wind farms and hybrid cars may well hinge on what happens to a 22.3-hectare hole in the ground at the edge of California's high desert.
Green hopes rest in rare earth
A US company is about to resume mining for the scarce minerals used in hybrid cars and wind turbines, and its success has become paramount to maintain the boom in renewable energy, especially as China curbs its exports of the precious materials. The future of wind farms and hybrid cars may well hinge on what happens to a 22.3-hectare hole in the ground at the edge of California's high desert.
The open-pit mine at Mountain Pass holds the world's richest proven reserve of "rare earth" metals, minerals crucial in producing the powerful, lightweight magnets used in the engines of Toyota's Prius and other hybrid vehicles, as well as generators in wind turbines. Seeking to replace China as the leading supplier of these scarce materials, Molycorp Minerals, based in Colorado, plans to reopen the quarry to resume extracting and refining thousands of tonnes of rare earth ore in the next few years.
Molycorp last month reached a joint-venture deal with Arnold Magnetic Technologies to make "permanent" magnets from rare metals at Mountain Pass. Backed by hundreds of millions of dollars from equity investors including Goldman Sachs, Molycorp aims to avert a rare earths supply shortage that threatens the green-technology boom. "The world has been looking for an alternative to these rare-earth permanent magnets for over 20 years, and one has not been found," says Mark Smith, the chief executive of Molycorp. "What Molycorp is proposing as a business strategy is to fill that supply chain and go all the way from mining to magnets."
Success hinges on Molycorp's ability to operate the mine and its processing facilities much more efficiently than in the past. At the peak of its operations two decades ago, the mine produced 20,000 tonnes of rare earth oxides a year, accounting for the entire US supply and about a third of the world's total. Most of the rest came from China. But as Chinese production and exports grew through the 1990s, rare earth prices worldwide dropped, undercutting business for Molycorp, then owned by the oil company Unocal.
Mountain Pass operations came under further pressure after a 1996 wastewater spill. Mining there ceased in 2002 when Molycorp's old permit expired. "Most companies that were in the business stopped producing because it wasn't profitable anymore," says James Hedrick, a rare earths specialist for the US Geological Survey. Refinement of previously extracted ore at Mountain Pass resumed on a small scale in 2007, two years after Unocal was acquired by Chevron. Last year, Molycorp was sold to a group of private investors.
Chinese rare earth production, meanwhile, has grown to about 97 per cent of global supplies, or 139,000 tonnes of refined material last year, experts say. Output is expected to reach 160,000 tonnes a year by the middle of the next decade. But global demand is climbing faster, driven by the clamour for clean energy and green cars, leading to projections of a 40,000-tonne annual shortfall by 2015. "We're reaching a crunch point," says Jack Lifton, a commodities analyst and leading authority on metals.
Rare earths go into hundreds of gadgets and consumer goods, usually in minuscule amounts. Some products use more. The electric motor in Toyota's market-leading hybrid car, the Prius, needs 1kg of neodymium, the key component in the alloy for permanent magnets. And each Prius battery uses between 10kg and 15kg of another rare earth, lanthanum. "The Prius automobile is the biggest user of rare earths of any object in the world," Mr Lifton says.
With China sharply curtailing its rare-earth exports to feed rapid expansion of its own industries, the projected global shortage will only grow more acute. Molycorp was given final approval for a new 30-year mining plan in 2004, after a 15-year regulatory review. Mr Smith says his company has since been perfecting an advanced extraction process that will allow Molycorp to nearly double the amount of rare earth metals it can pull from the bastnaesite ore it mines.
"It means I don't have to extract as much ore from the surface pit to have the equivalent amount of material for sale to a customer," he says. "It lowers our costs tremendously." Plans call for mining to resume at Mountain Pass by 2012, at the rate of about 1,000 tonnes of ore a day, enough to produce 20,000 tonnes of rare earth oxides for sale each year. Mr Smith says the mine has approval to double that volume in time. "If we put our facilities into the fully permitted production rates, we could come very close to meeting the needs of most of the rest of the world."