testimony to parliament

Standing Committee on Natural Resources
House of Commons, Tuesday, February 25, 2014
Hearing on “Rare Earths Industry in Canada”

AL SHEFSKY, PRESIDENT – Pele Mountain Resources Inc.

Thank you, Mr. Chairman.

In 1992, Chinese leader, Deng Xioaping said, “The Middle East has oil, China has rare earth.”

China recognized back then that rare earths would be profoundly important in the future. Since that time, China has decisively executed a National Strategy that has allowed it to dominate global rare earth production, processing, and intellectual property.

China now produces 99% of the global supply of heavy rare earths, and almost 90% of light rare earths. China restricts the export of rare earths in order to use much of its domestic production in manufacturing value-added products within its borders.

China’s rare earth National Strategy has played an important role in its achievement of extraordinary economic growth and high levels of domestic employment. China leads the world in the manufacture and export of many strategically important products made with rare earths. It has effectively leveraged its control of rare earth resources to dominate many clean energy and high technology value chains.

Of the 17 rare earth elements, several are forecast to have supply challenges for the foreseeable future. The United States Department of Energy has found that supply challenges for the “critical rare earths”, including Dy, Eu, Tb, Y & Nd, may affect the timely deployment of clean energy technologies. Critical rare earths are also vital for applications that we Canadians take for granted - including our smart phones, our computers, and our nation’s defense systems.

Access to a reliable rare earth supply chain is essential to Canada’s strategic and economic security. With world-class deposits of its own, Canada is in a unique position to not only produce rare earths, but to create its own rare earth supply chain, thereby creating billions of dollars of economic activity along with thousands of high-paying jobs.

The governments of other countries, including the United States, Japan, the European Union, and Korea are, in aggregate, spending hundreds of millions of dollars to support the rapid development of rare earth resources outside of China to secure their strategic and economic interests.

However, Canada, despite the considerable advantage of being endowed with world-class rare earth deposits, does not have a National Strategy for its rare earth industry.

Without a National Strategy, emerging developers of Canada’s advanced rare earth projects have agreed to export unrefined mixed rare earth concentrates and have established plans to separate Canadian-sourced rare earths in foreign countries. Lacking a National Strategy, Canada is relinquishing immense economic growth and employment opportunities to foreign competitors.

Canada has a compelling opportunity to leverage its critical rare earth resources into a powerful engine of innovative economic growth. To do so, Canada must implement a National Strategy for its rare earth industry that supports the achievement of commercial production of separated, critical rare earths - in Canada - as quickly as possible. Achieving production and separation of rare earths in Canada will spawn the creation of a rare earth supply chain to support downstream value-added manufacturing in Canada.

Canada must recognize that it is in a race. Canada has significant advantages in this race - we can lead and win, but we must act decisively. If Canada does not adopt such a National Strategy it will lose an extraordinary opportunity for economic growth and employment to foreign competitors who are investing heavily to seize this opportunity.

Canada’s National Strategy should include the following three (3) specific actions:

  • First, Canada should publicly declare its commitment to achieving commercial production of separated critical rare earths in Canada within 3 to 5 years. This is an achievable goal and will motivate end-users to work with Canadian rare earth developers as a source for their product lines.
  • Second, Canada should prioritize financial and technical support to emerging developers of critical rare earth deposits who can supply the market within 3 to 5 years and whose development plans are aligned with Canada’s interests, i.e. those developers that are able to produce critical rare earths in Canada, to be separated in Canada, supporting downstream value-added manufacturing opportunities in Canada.
  • Third, Canada should provide logistical support for a strategic alliance with a non-Chinese company that has the expertise and experience to build and operate a rare earth separation plant in Canada. The rare earth separation plant is an essential link between Canada’s resources and downstream value chains.

Mr. Chairman, we respectfully submit that the history of Canadian rare earth production should be a major consideration in determining how and where such a National Strategy should be implemented.

Pele Mountain Resources is developing the Eco Ridge Mine Rare Earth and Uranium Project in Elliot Lake, Ontario. Elliot Lake is home to one of Canada’s great historic mining camps, and offers several competitive advantages in the race to develop an early-to-market rare earth supply chain.

Elliot Lake…

  • is Canada’s only proven historic critical rare earth mining camp and it also produced more than 300-million pounds of uranium;
  • has vast and accessible critical rare earth resources and the geology, mineralogy, and pathway to production are well understood;
  • has outstanding regional infrastructure already in place including highways, railway, electricity, natural gas, airport, and deep-water ports.

The City of Elliot Lake supports the development of Pele Mountain’s Eco Ridge Mine Project and has said so publicly. Our development team has operational experience in Elliot Lake from some of its most productive years.

Pele is collaborating with all levels of government, local First Nations, the private sector, and academia to advance the sustainable development of Canada’s first critical rare earth supply chain.

In the global race to create a rare earth supply chain outside of China, Canada’s strategic and economic interests are best served by a National Strategy that prioritizes support to the development of critical rare earth deposits and the separation of rare earths into refined products.

It may be tempting to believe that just by funding research Canada will solve its rare earth crisis.

In reality, however, this is a race in which Canada has been so slow out of the blocks that it must now use triage to prioritize its actions, secure its interests, and achieve its proper objectives.

Research is necessary, but research alone will not produce critical rare earths nor will it bring essential separation facilities to Canada. Research alone will not protect Canada’s poorly capitalized rare earth developers from predatory foreign interests seeking to control Canadian deposits in order to export Canadian rare earths as low value, unrefined, mixed concentrates. A National Strategy that relies solely on research will result in Canada losing the race to develop a rare earth supply chain outside of China.

While we are great believers of free market principles, in view of the poor capital market conditions for Canada’s junior resource sector, we respectfully ask how Canadian rare earth developers are to compete unsupported in a market dominated by a powerful sovereign nation pursuing a calculated strategy and where other governments are spending vast sums on rapid development of rare earth deposits to support their national interests?

Mr. Chairman, We respectfully submit that the time has come for Canada to be proactive in supporting Canadian rare earth developers, such as Pele Mountain, whose rare earth development plans are aligned with our Nation’s vital strategic and economic interests.

What Canada does or does not do to support the rapid development of a domestic rare earth supply chain will determine our country’s vulnerability to future supply disruptions of these critical materials, and will have a significant impact on Canada’s future standard of living and its ability to compete effectively in the global economy.

Canada has much to gain by implementing a National Strategy to develop a rare earth supply chain in Canada and much to lose by continued procrastination.

Thank you.