China Cuts Rare-Earths Mine Permits 41% to Boost Control

China reduced the number of permits to mine rare earths by 41 percent, tightening production of the metallic elements used in batteries and magnets.

China issued 67 mining licenses for rare earths and 10 exploration permits, the Ministry of Land and Resources said yesterday in a statement. The nation previously had 113 mining licenses, said Wei Chishan, a Shanghai-based analyst at SMM Information & Technology Co.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111), China’s biggest producer, led gains today by producers in Shanghai trading. Chinese output accounts for more than 90 percent of the global supply of rare earths such as neodymium, used in magnets, and lanthanum, which refiners use to help separate crude oil into gasoline and other products.

“The goal appears to be to gain greater control over the production of rare earths by putting that production largely into the hands of companies that are large enough to not have any real incentive to cheat on their production or export quotas,” Jonathan Hykawy, a Toronto-based analyst at Byron Capital Markets Ltd., said in an e-mail.

Inner Mongolia Baotou Steel gained 2.2 percent to close at 35.49 yuan today in Shanghai. Rising Nonferrous Metals Share Co. (600259) gained 2.1 percent to 51.37 yuan and China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. was up 1.7 percent to 21.81 yuan in Shenzhen. The benchmark Shanghai Composite Index advanced 0.6 percent.

China’s eastern province of Jiangxi, which focuses on the production of so-called mid-to-heavy rare earths, had the most number of mining licenses withdrawn, Cai Hongyu, a Hong Kong- based analyst with China International Capital Corp., said today in an e-mailed note. The cut would benefit rivals including Xiamen Tungsten Co. (600549) and Rising Nonferrous, she said.

Price Surge

Rare-earth prices surged in 2011 after the Chinese government said it would restrict exports. Since then prices have dropped as users work through stockpiles, Byron Capital’s Hykawy said. Neodymium oxide produced in Inner Mongolia has dropped 63 percent in the past 12 months to 425,000 yuan ($67,130) a metric ton, according to data from Shanghai Steelhome Information. Lanthanum oxide fell 55 percent to 62,500 yuan.

Molycorp Inc. (MCP), the Greenwood Village, Colorado-based company developing the largest deposit of rare earths outside of China, rose 5.2 percent to close at $12.71 yesterday in New York.

China said in July 2010 that it would cut rare-earth export quotas to allow it to close polluting and inefficient mines while continuing to meet domestic needs.

To contact Bloomberg News staff for this story: Sonja Elmquist in New York at selmquist1@bloomberg.net; Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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