Kazakhstan ramps up rare earth production

Foreign investors are helping Kazakhstan become a significant competitor to China in producing rare earth elements, key ingredients of the high-tech economy.

One Kazakh venture, Summit Atom Rare Earth, will ensure that the sprawling Japanese conglomerate Sumitomo (thinly traded as SSUMF, quote) will get access to the rare earth resources it needs to make everything from high-end computer magnets to electric cars.

Toshiba (TOSBF, quote) has lined up its own Kazakh partners, forming a venture called KT Rare Metals to do so.

The Sumitomo mine is currently on track to start production of various rare earth elements next year at an annualized rate of 1,500 tons of material.

While this may seem like a tiny amount in the face of annual global production, the fact is that China retains a near-monopoly on this market and is tightening its export quotas month by month.

As it stands, Chinese sources have committed to sell barely 15,700 tons of rare earth alloys to all the world’s consumers this year, making Japanese buyers especially eager to lock down new sources of supply after last year’s diplomatic dispute between the two countries.

Sumitomo’s deal takes enough pressure off its rare earth needs that the company has stopped negotiating with U.S. rare earth miner Molycorp (MCP, quote) over a proposed $130 million strategic investment.

Molycorp has said it will be fully funded even without the Sumitomo investment, but its shares have still sunk 39% since the talks ended, dramatically underperforming the broad rare earth ETF (REMX, quote):

Other large rare earth consumers such as General Electric (GE, quote) and Toyota (TOYOY, quote) have gotten around China’s tightening export regulations by scaling back their use of these materials in their products.

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