How is Russia developing rare earth metals?

Rare earth metals are facing high global demand – so how is Russia responding?

These hard to find, uncommon metals are used in everything from batteries to smartphones; hybrid vehicles to wind turbines; all the hi-tech trappings of the modern world need metals like neodymium, lanthanum, cerium, and praseodymium for important components.

It’s certainly a lucrative market. Estimates by Global Market Insights forecasts the rare earth metals market will be worth a massive $20bn by 2024. That’s growth of over 9% annually.

Russia’s rare earth industry & its development

The potential

As of June 2019, Russia held the fourth largest reserves of rare earth minerals in the world at 12 million tons.

That puts it way above Australia and the United States. Those nations hold 3.4m tons and 1.4m tons respectively.

President Putin, though, believes Russia actually ranks first or second, as a) Russia rates reserves differently to the US, whose Geological Survey produced the most recent global data, and b) Russia’s vast, underexplored territory.

For context, China holds about 45m tons of rare earths, nearly double that of second place Brazil and Vietnam, with roughly 22m tons of reserves each.

However, pointing out Australia and US is important. Both of these are the second and third largest global producers. Australia accounts for about 20,000m tons annually. The US’s annual output amounts to 15,000 tons.

As it stands, Russia only accounts for 2% of global production.

Based on this, there is enormous growth potential for Russia’s rare earth’s industry.

What’s more, these in-demand materials have become a focal point in the ongoing US-China trade war. This brings Russia very much into the eyes of international buyers looking to secure supplies amongst the background of this major trade spat.

State support for rare earth products

The increasing importance of rare earth metals has not escaped the Kremlin.

Since 213, Russia’s government has been supporting development of the industry with a state-sponsored program aimed at ensuring supplies do not run out.

At present, 90% of rare earth materials are imported to Russia – mostly from China.

In 2016, Putin described the metals as “critical to Russia’s defence capabilities” through their use in military equipment. Even so, 80% of consumption is fuelled by the petrochemicals industry.

In its own way, this is potentially more important than use in military equipment for Russia. Oil & gas is its key economic sector, responsible for generating some 40% of government revenues.

Russia’s State Duma, its lower house and Parliament equivalent, has passed a draft law lowering the tax rate on rare earth extraction. This is now 4.8% as opposed to the previous 8%. As of July 2019, this law had been passed onto Putin for final approval.

Work is underway on a draft strategy for continuing state support of the rare earths sector from now until 2035.

Long term, then, rare earth materials are very much on the government’s radar.

So far, it has allocated 4.3bn roubles, roughly $63m, to rare earth R&D. 40 such initiatives were completed by 2016.

Even so, technology challenges are hampering real Russian development of Russia’s significant rare earth reserves.

A lack of technology holds Russian rare earths back

First up is extraction.

Of its limited production, 95% of all rare earth concentrates are exported. This is due to a lack of adequate separation plants.

There is currently only one plant capable of separating concentrates into metals in Russia. Operated by potash producer PJSC Acron, the Veliky Novgorod plant produces cerium, lanthanum and neodymium, with a capacity of 200 tons of rare earth oxides annually.

Processing technology is certainly the main problem area here. Refinement is crucial. There is an astronomical amount of material created during rare earth extraction processes. Sifting through and extraction the desired products takes huge effort – and modern technological solutions – to result in a sellable asset.

There is also the ruggedness of available equipment and machinery. Solutions must be able to cope with the harsh Eastern Siberian climate. It’s in these far flung, sub-arctic regions that the bulk of Russia’s extractable rare earth minerals can be found, thus it’s where most of the project sites are.

The current maturity level of extraction and refinement technologies employed here is high. Essentially, it’s still Soviet-era. As such, costs are high, and efficiency is low.

It’s clear there are many machinery export opportunities for international mining equipment suppliers here. Backed by a long-term government-led sectoral strategy, and the global importance of rare earths, there is tremendous potential here.

Even with limited technological means, however, a number of Russian companies are pursuing rare earth projects.

Current Russian rare earth mining projects

The largest planned development is run by TriArk Mining Co., a joint venture owned by industrial conglomerate Rostec and billionaire Alexander Nesis.

TriArk is currently developing the Tomtor deposit, where it hopes to produce 14,000 tons of ferroniobium and 16,000 tons of rare earth metal oxides annually. According to Rostec spokesperson Andjey Krasutsky, Tomtor alone would account for 10% of global production.

First sellable metals are forecast by 2023 with mining kicking off in 2022.

The second, smaller rare-earth project is being developed by ZAO Technoinvest Alliance, which is partially owned by steel pipe maker ChelPipe PJSC.

The goal is to extract tantalum and niobium as well as oxides of rare earth metals from the Zashikhinskoye deposit in the Irkutsk region and use some of the materials in pipe making.

The project aims to process 1 million tons of ore per year. In January, the regional government said plant opening was delayed to 2023, according to Tass news agency.

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