Demand for specific minerals set to jump more than 60% in the next five
MONTREAL, May 11 /CNW Telbec/ - Soaring demand for rare earth metals -
used in the production of everything from smart phones to computer
hardware to energy-efficient lights - is generating new but risky
opportunities for mining companies in Canada and around the world,
Ernst & Young says.
"Rare earth metals are feeding the production of high-tech and green
products. Demand is expected to jump more than 60% in the next five
years alone," says Zahid Fazal, partner and leader of Ernst & Young's
mining practice in Quebec. "The problem is China accounts for virtually
all rare earths production, and their export restrictions are driving
prices higher. What's more, Chinese domestic consumption of rare earth
materials is predicted to outpace supply between 2012 and 2015."
Fazal says the situation represents a unique opportunity for Canadian
and other companies to rebuild the supply chain outside of China. While
this could help prevent a supply shortage and keep a lid on soaring
prices, these projects are higher risk and that brings additional
challenges into the mix.
"We're already seeing companies crowd the market with new projects aimed
to fill the estimated supply gap," Fazal explains. "But because these
projects are risky, getting the right financing in place can be
difficult, and we could see a fierce fight for cash in a limited
In a new paper, Technology minerals: The rare earths race is on!, Ernst & Young found besides financing, speed to market and choice of minerals will be
vital to a company's success in this new sphere.
"It's going to be a race to the finish line to develop the next
producing asset. Companies that enter production first are more likely
to capture the current price premiums, with the market likely to be
very sensitive to future increases in supply," says Fazal. "Of course,
at the end of the day, high risk endeavours like this can equal
significant potential rewards for those that are successful."
For example, early movers like US-based Molycorp and Australia's Lynas
are expected to potentially produce well over 20% of 2013E world
supply. However, while they may have taken the lead in the light rare
earths sector, there is still time to develop a number of vertically
integrated players in the heavy rare earth space where first mover
advantage could generate real benefits.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 141,000 people are united by our
shared values and an unwavering commitment to quality. We make a
difference by helping our people, our clients and our wider communities
achieve their potential.
For more information, please visit ey.com/ca.
Ernst & Young refers to the global organization of member firms of Ernst
& Young Global Limited, each of which is a separate legal entity. Ernst
& Young Global Limited, a UK company limited by guarantee, does not
provide services to clients.
For further information: