World No Longer Dependent on China for Rare Earths, Australia’s Peak Resources Enters MOU with Chinese Producer

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By Esther Tanquintic-Misa | December 19, 2013 4:20 PM EST

China is no longer the stronghold of the world's supply of rare earths, according to a latest assessment released by the Pentagon of the U.S.' industrial base.

The report which was sent to Congress last week noted that "an increase in supply of material (has been found stable) from outside of China." Moreover, dependence on China-produced rare earths have been reduced due to substitution of other substances since 2011.

"Global market forces are leading to positive changes in rare earth supply chains, and a sufficient supply of most of these materials likely will be available to the defense industrial base," the Pentagon report released by Elana Broitman, the Defense Department's top official on the U.S. industrial base, said.

"Prices for most rare earth oxides and metals have declined approximately 60 percent from their peaks in the summer of 2011."

Jeff Green, president of J.A. Green & Co. in Washington, a body that represents miners and users of the elements, said the Pentagon report is "not a defense strategy."

"We still have no producers of the more defense-critical heavy rare earths, and significant gaps remain in the domestic production of metal, alloy and magnets, all found in our most critical weapons, with no appreciable investment planned to solve the production problem," he said.

In 2011, the U.S. Congress tasked the Pentagon to scrutinize the application necessity of rare earth materials in defense applications. The legislative body wanted to find out how supplies disruption will affect the country's military operations, as well as identify possible supply sources outside of China.

Meantime, Peak Resources Ltd of Australia announced on Wednesday it has entered into a memorandum of understanding with a Chinese rare earth producer to develop its Ngualla Rare Earth Project in Tanzania.

Without identifying the Chinese firm, Peak Resources said the producer is based in a port city in northeast Jiangsu Province.

The MoU, although non-binding, lays down the framework to formalise arrangements for a long term strategic partnership to develop the project.

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