Avalon Rare Metals Inc. (TSX and NYSE-Amex: AVL) is pleased to issue this Industry Bulletin to share with our readers some perspectives on rare earth market trends presented at the recent Metal-Pages(TM) Minor Metals and Rare Earth Conference held in Beijing, China on September 13-17, 2011, and some perspective on other recent research commentary on the rare earth industry.
The Metal-Pages(TM) Conference was attended by some 300 delegates, from around the world and may have been the best-attended rare earth conference to date. Vice President of Sales & Marketing, Pierre Neatby, represented Avalon at the four-day conference and addressed the delegates with an update on the rapid progress Avalon is making on its Nechalacho Heavy Rare Earth Project.
Independent rare earth market analyst, Dudley Kingsnorth (IMCOA), also addressed the conference, providing an update of his supply-demand forecast to 2015. Kingsnorth has reduced his estimate on total rare earth demand in 2015 to approximately 170,000 tonnes of rare earth oxide per annum (tpa), from 195,000 tpa nine months ago. Kingsnorth believes the extraordinarily high prices have reduced demand in some applications where substitution is possible, citing the example of rechargeable batteries where the lithium ion battery can replace the nickel-metal hydride battery which uses the light rare earth lanthanum. Kingsnorth also notes that the economic slowdown being experienced in many parts of the world will soften demand in the short term but he adds that long-term demand will continue to grow, forecasting 240,000 to 280,000 tpa of global demand in 2020.
Kingsnorth emphasized that the heavy rare earth elements europium, terbium, dysprosium, and erbium along with the light rare earth neodymium will continue to be in short supply. Dysprosium was singled out by several conference speakers as an element whose future supply is a significant concern.
Another prominent theme was the hundreds of new rare earth exploration projects being promoted around the world. Several speakers noted that, regardless of their size and grade, very few new deposits discovered would ever achieve production due to the relatively small size of the global market outside China (50,000 tonnes in 2015 according to Kingsnorth). The consensus view was that perhaps four to six new producers might emerge outside China to serve this demand over the next five to ten years.
In an interview last week on BNN's The Commodities Report, Avalon's President, Don Bubar, reminded viewers that given the small size of the rare earths market outside China, the opportunity to serve this market is really only open to the few first producers or early movers to bring new supply to the market. In this regard, Avalon is very well positioned, having the most advanced heavy rare earth development project in the world outside China, with the potential to bring a significant new supply to the market by 2015.
Further, Bubar observed "much of the recent research commentary published on the rare earths industry does not discuss the importance of early mover advantage to the business opportunity nor highlight it as a risk factor for investors." To be considered "advanced," the consensus view is that a rare earths project must have at least produced a positive pre-feasibility study. Kingsnorth sets the bar even higher stating that only those projects where a successful pilot plant trial has been completed can be considered "advanced." The fact is, very few of the hundreds of exploration projects around the world being characterized as "advanced" by some analysts, actually meet either of these criteria.