Many of today's compact electronics and energy-efficient "green" technologies are based on components containing rare-earth elements. Pictured clockwise, from top center, are mounds of praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium. (Peggy Greb/Agricultural Research Service/USDA)

They might look like rubble to the naked eye, but according to Constantine Karayannopoulos, rare earth elements are as precious as rare gems.

Karayannopoulos is president of Toronto-based NEO Material Technologies Inc., one of only two foreign companies that have been allowed to operate in China as processors of rare earth elements (also called rare earths) for export. That's quite a coup in a world where China now supplies 95 per cent of the market for these little-known but essential minerals.

Rare earth elements are used to make materials used to build things ranging from super-strong magnets to more efficient electronic components. They're a crucial part of countless items, including hard drives, television screens, medical scanning equipment, power tools, sound equipment and catalytic converters for cars. They're also essential to the production of increasingly popular green technologies, such as compact fluorescent light bulbs, highly efficient rechargeable batteries and hybrid engines.

Even though rare earths are only a small component of the raw materials that make up these types of goods, the products couldn't be made without them.

"With a few rare exceptions, you're probably talking nickels and dimes per unit," Karayannopoulos says of the value of the rare earth elements used in most consumer products. "But they are absolutely indispensable."

What's a rare earth element?

Despite their name, there's nothing all that exotic about rare earth elements. In fact, they're not rare at all — they can be found everywhere in the earth's crust.

Rare earths are a group of 15 metallic elements on the periodic table. Each has different nuclear, metallurgical, chemical, catalytic, electrical, magnetic, and/or optical properties that make them unique. Some grades used in certain alloys are worth only a dollar or two a pound, while others, such as neodymium, are worth their weight in gold.

Neodymium is an essential element in the production of the compact magnets used in every hard disk drive and CD-ROM in the world, among other uses. One of the rarer of the rare earth elements is dysprosium, used in hybrid car motors, for example. Prices have increased at an annual rate of more than 20 per cent in recent years as demand for dysprosium soars.

Because rare earths are typically found mixed with other elements, they must be separated and extracted before they can be used, which can be a complicated and expensive process.

In many cases, rare earths can be found in mine tailings — crushed stone and other waste that comes out of mines. Over the past two decades, China has tapped into a motherlode of cheap, easy-to-extract, rare earth resources, byproducts of the country's Bayan Obo iron ore operations in the north, and in rich clay deposits in the south. Observers say these "finds" have revolutionized the rare earths industry, and China has established itself as the leading producer of low-cost rare earth elements.

China corners the market

China is the only country with the combined mining and separation capacity to supply large amounts of rare earths today.

"For many years, up to the early 1980s, the bulk of rare earths were obtained from Mountain Pass, Calif.," says Anthony Mariano, a consulting minerals exploration geologist in Carlisle, Mass. "China came in with deposits at much lower labour and production costs. Even though the concentrations were relatively low, the ease of separation provided a phenomenal resource."

According to news service China Economic Net, certain rare earths reserves will disappear in 20 to 30 years at the current speed of consumption. But Karayannopoulos maintains there are enough rare earth deposits in China alone to last 1,000 years.

The fact that China has cornered the market and is making moves to protect its domestic interests is starting to make some observers nervous. In 2005, China cancelled tax rebates on rare earth oxide exports. In November 2006, the country imposed a 10 per cent export tariff. In May, it increased the tariff to 15 per cent, as export volumes continue to soar.

Nevertheless, Karayannopoulos says buying from China still beats other options.

"China may have added about 20 per cent to the export value, but given yttrium oxide [a rare element used in displays and low-energy lighting] was selling at $150 US a pound [$330 per kilogram] in the 1980s and now sells for $6 a kilo — that's what China's entry has done" to improve the world's access to rare earth elements, he says.

Searching for alternatives

That isn't stopping businesses from looking further afield just to play it safe.

"The world is becoming uneasy because of the strategic importance of rare earths, and [manufacturers] are looking for other sources," says geologist Mariano, who is often called upon to consult on finding viable deposits. "I've had more work than I've ever had in my life."

Les Heymann, an independent consultant for the mining industry who is based in Penetanguishine, Ont., says requests for his services have been booming.

"It's all about ensuring continuity of supply. Rare earths is one of those things that only certain people understand where to look. It's not like gold, where everyone knows [how to find it]," Heymann said.

Karayannopoulos, Mariano and Heymann all say there is no shortage of potential deposits in Australia, Africa and North America. The challenge is exploiting these deposits economically.

As Al Shefsky, president of Toronto-based mining and development company Pele Mountain Resources notes, "There are lots of deposits on the planet — just not in concentrations that would be economically viable to mine. But that might change as demand goes up. Given the global push for clean energy applications, the demand will only get higher."

Canada has a number of rare earth deposits under consideration. Major potential sources include Thor Lake in the Northwest Territories and Elliot Lake in Ontario (a region that previously produced rare earths as an offshoot of its uranium mining operations).

Even the confident Karayannopoulos is hedging his bets when it comes to future supplies.

"Over the last few months, we've been looking around the world for deposits that make sense to extract," he says. "We're not panicking that the sky is falling [in the wake of China's increased tariffs], but we do try to keep a balance."

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