Japanese Firm Looks to Kazakhstan for Rare Earth Resources

on Nov 14, 2012
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**Joint Venture SARECO Opens Rare Earth Plant**

As of January 2013, Japan begin chipping away at China’s position as the country’s premier supplier of rare earth minerals. That was the message put forwards last week when Japanese trading house Sumitomo Corp. (TYO:8053) officially announced its joint venture with Kazakhstan’s National Atomic Company Kazatomprom for the development of a rare earth plant in the former Soviet republic with the aim of the output being exported primarily to Japan from as early as January 2013.

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According to Sumitomo’s press release published on 5 November 2012, the joint venture between the two companies, called Summit Atom Rare Earth Company (SARECO), was established in May 2010 in Kazakhstan to develop and launch a business recovering rare earth elements from uranium-ore residue. After a total of about $30 million investment and over two years of getting everything into place to commence operations, SARECO has completed construction and opened its first factory in Stepnogorsk, Kazakhstan.

**Capacity Goals and Target Market**
SAECO’s rare earth plant is set to begin full-fledged production by the end of the year. The combined companies aim to produce about 750 metric tons of rare earth elements (REEs) in 2013, and double that by the following year, accounting for about 7.5 per cent of Japan’s annual demand. Sumitomo confirmed that the plant’s mixed rare earth carbonate will have high neodymium and dysprosium content as demand for these rare earth minerals is expected to grow significantly on the back of the rising demand from the electric and hybrid vehicles industry, where these two REEs are predominantly used. According to the Japanese firm, almost all of the production will be Japan-bound, with just a small part to be exported to the European market.

**Japan’s Further Step Towards REEs Supply Independence**
For Japan, ensuring a stable supply of REEs is one of the country’s top priorities as it aims to expand and develop its high-tech and automobile industry. Sumitomo’s alliance with Kazatomprom comes as a further sign that Japan is actively seeking alternative sources of rare earth minerals to curb the country’s reliance on China, whose production of REEs accounts for about 95 per cent of the total global output, giving China almost absolute control of the market.

Apart from its cooperation with Kazakhstan, recently, Japan has also announced that it plans to cooperate with India. In fact, Japanese trading house Toyota Tsusho Corp. (PINK:TYHOY) and a state-owned Indian company have already created a joint project to refine rare earth minerals in India and export them to Japan. And while Kazakhstan is expected to supply Japan with 1,500 tonnes of REEs per year, India’s future exports to the country are estimated at 4,000 tonnes.
According to analysts, both Japan’s aim of reducing its rare earth dependency and the fact that countries like India and Kazakhstan are becoming major new sourcing destinations where the minerals can be found and refined in commercially viable quantities, indicate that investors can expect a surge of interest from Japan in REEs exploration and production projects in these countries.

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