18 February 2014
- Game changing new technology and increased investment have the potential to transform global deep sea mining and the supply of rare earth elements (REE) according to a report published by leading global law firm, Mayer Brown. However major legislative and technical challenges will need to be addressed before this potential can be realised.
REEs are used in many electronic devices and products such as hybrid vehicles, wind turbines, smartphones, flat-screen display panels, and lasers and solar panels are dependent on these components.
The Deep Sea Mining report reveals that the sector could provide 5% of total REE supply by 2020 due to growing demand. This is likely to rise to 10% by 2030, worth US$65 billion. China is currently by far the greatest producer of REEs however unless these new supply sources are developed demand could exceed supply by around 40,000 tonnes annually in the coming years.
The investment opportunities associated with deep sea mining for REEs come with a range of challenges that must be resolved if this is to become a commercial reality. To date, the International Seabed Authority (ISA) has awarded 19 exploration contracts, each valid for 15 years, with a further five contracts in the pipeline. The report notes that the ISA will have to take significant steps to move from simply handling bids for mineral exploration to consider how to license the first real mining operations and share the proceeds.
Ian Coles, Global head of Mining at Mayer Brown, said: “The main drivers of this new interest are technological advances in marine mining and processing and increased demand for rare earth minerals that coincides with reduced supply. These new frontiers require new thinking if they are going to materialize. Companies will have to demonstrate a close working relationship with the state and an intimate understanding of the laws as they evolve.”
He added: “Developing a robust legislative framework in the midst of so many scientific uncertainties will be challenging and it remains to be seen whether state party consensus on the exploitation regulations can be achieved. The aim is for companies to be able to apply for licenses for exploitation by 2016 but there is much work to be done before we reach that stage.”
Greenland and Russia both opened new tracts to rare-earths exploration in the past year, and there are significant sites under development in central Australia and northern Canada. The Canadian deposit alone has the potential to supply approximately 10% of North America’s annual US$1 billion REE consumption.
Interested investors should also watch developments in the Cook Islands in the South Pacific, as tenders are expected to be granted by June 2014. The minerals on the bottom of the South Pacific could increase GDP a hundredfold into one of the richest in the world in terms of per-capita income. However, as commercial interest grows, a legislative and institutional framework will need to be developed by each coastal state at the national level to ensure that the exploitation of seabed minerals within its national jurisdiction is controlled and managed.
See full copy of the first in a series of reports: Rare Earth Elements: Deep Sea Mining
for more details.