Rare-earth reality check

by Joshua Zaffos

Not far from Devils Tower in the Black Hills of eastern Wyoming, work crews are preparing to drill dozens of new holes amid ponderosa pines and rolling meadows. But they're not looking for gold. Instead, they hope to strike neodymium, europium and other exotic-sounding rare earth metals -- a group of 15 elements, plus two others with similar properties, used in clean-energy technology, military hardware and cell phones. Initial drilling on the Canadian company's 2,400 acres of mining claims has revealed concentrations that are "bigger and better than we expected," says Don Ranta, CEO of Rare Element Resources, owner of the proposed Bear Lodge Mine. "It's very likely we'll find a commercial deposit."

Similar optimism has triggered a run on claims in Idaho, Alaska, California, Arizona, New Mexico, Colorado and Utah. A U.S. Geological Survey report released last November outlined 23 "principal" domestic deposits, 19 of them in Western states. Ninety-seven percent of the world's processed rare earth oxides comes from China and the country has been limiting exports and driving up prices since last year -- spurring the rush.

Beyond all the hype and frenzied activity, though, the rare-earths industry must overcome the environmental challenges that shuttered American production a decade ago, as well as a lack of domestic experience in and infrastructure for refining the metals. Lawmakers are scurrying to introduce bills that would help bring the country back up to speed and complete its rare-earths supply chain, from mining to manufacturing. Whatever happens, the West will feel the impacts.

The United States once dominated the rare-earths market, thanks to the Mountain Pass Mine in Southern California's Mojave Desert. The strip mine opened in 1952 and, at its peak, produced 70 percent of the world's supply of rare earth metals. But processing rare earths creates distinctive problems. The tailings that are left behind often contain radioactive thorium and uranium. And highly corrosive hydrochloric acid must be used to help extract the individual elements to make powdered concentrates and then refined oxides, which are used in the manufacturing of alloys and magnets.

The oil company Unocal, which used to operate Mountain Pass, handled the tailings and dealt with about 850 gallons per minute of acid-laden wastewater by piping it to evaporation ponds in the desert. During the 1980s and '90s, pipeline breaks and leaks spilled enough waste to fill an Olympic swimming pool, costing the company $1.4 million-plus in fines. That and a price decline triggered by increased Chinese production led the mine to close in 2002.

Meanwhile, Congress closed the U.S. Bureau of Mines in 1995, halting government mining research, some of which was directed at improving rare-earth recovery. "We lost all our mining expertise and mineral-processing expertise," says Keith Long, a 20-year veteran of the USGS and a co-author of the recent agency report.

By the time mining ceased at Mountain Pass, rare earth metals had become necessary for many products, including compact fluorescent light bulbs, wind turbines, hybrid-electric batteries and missile defense systems. The disparity between U.S. consumption and production finally got the attention of policy-makers, mining officials and would-be investors in the last few years after industry analysts and government reports began highlighting China's market muscle and its implications for national security.

Molycorp Inc. is trying to figure out how to ramp up production at a competitive price, with minimal environmental harm. In 2008, the company reopened Mountain Pass, touting new technologies that eliminate the need for pipelines and reduce water use by 96 percent. Its $531 million redeveloped facility will likely be one of just two outside China that can produce rare earth oxides. The company also expects to manufacture alloys and magnets.

How other mines would deal with processing and the disposal of thorium remains a thorny problem, however, according to Jim Burnell of the Colorado Geological Survey.  Plans to ship radioactive materials -- by train or truck --would likely face tough opposition and could prove expensive. And though Mountain Pass could process metals from other mines after its plant is complete in 2013, says Molycorp spokesman Jim Sims, the facility will be fine-tuned to refine local materials and will not be able to process ores with high thorium contents.

Ranta's company might use Mountain Pass, he says, but the Bear Lodge mine's metals will likely go through initial processing in Wyoming, where the radioactive elements will be removed and stored. Other operations, all of which lag behind Mountain Pass and Bear Lodge, apparently hope the federal government will come to the rescue.

Five years ago, Ed Cowle, a New Yorker with a background in finance, and some partners bought claims along Lemhi Pass on the Idaho-Montana border, where Lewis and Clark first crossed the Continental Divide. After initially launching the business as an investment in thorium, the company renamed itself U.S. Rare Earths Inc. in 2008 and focused on mining the metals at Lemhi Pass and sites in Colorado.

Cowle's company and others are urging Congress to help fund domestic rare-earth mining and processing. U.S. Rare Earths spent $60,000 on lobbying in 2009 and 2010. Meanwhile, a Missouri-based mine is calling for a joint public-private-financed "universal" processing facility, which could cost $1 billion but would be available for all mines.

Members of Congress are already working to address the gaps in supply, infrastructure and know-how. Sen. Mark Udall, D-Colo., has introduced a bill that would create federal educational and research and development programs for "critical materials," including rare earths, with an emphasis on clean energy. Rep. Mike Coffman, R-Colo., just reintroduced a bill which lays out a similar national program oriented toward stockpiling reserves for defense purposes. Yet another, from Rep. Leonard Boswell, D-Iowa, would create a rare-earth research program and extend government loan guarantees for mining and processing to facilitate operations.

Government estimates suggest that the country could add up to a dozen rare-earth mines in addition to Mountain Pass to meet projected global demand, which is expected to increase as countries embrace clean energy technology; current supplies of metals used in wind turbine magnets could be depleted by 2020.  If a coordinated national program gets under way, reserves and a supply chain could be built up within 15 years, observers say. But it depends on how many of the new Western mines prove productive and financially viable.

Most of the rare earth deposits, outside of Mountain Pass and Bear Lodge, are believed to have relatively low concentrations. That could prevent several mines from ever opening, though Burnell notes that rare earths can be mined alongside gold, iron, titanium, or other resources.

"In the long run ... we're not looking at anywhere near the tonnages for rare earths that we see for gold," says Virginia McLemore, an economic geologist with the New Mexico Bureau of Geology. "It's highly specialized, and it's going to require a lot (of effort and infrastructure) compared to what we've got mining now. It's an especially tight market."

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