Last year was a blockbuster for mining companies listed on the TSX and TSX Venture exchanges, confirming Canada’s status as the world’s top mining capital market.
Canada finished the year with 1,531 listed mining companies, including 208 additions, a record year for new listings. Mining companies completed 2,413 financings, raising $17.8 billion. At the end of the year, aggregate market capitalization of all mining companies listed on Canadian stock exchanges was $563 billion.
Estonia had a blockbuster year, too. On January 1, 2011, Estonia adopted the euro currency. Since the end of Soviet occupation only 20 years ago, this small (1.3 million population) Nordic country’s foreign policy goal has been to guarantee its future independence and security by joining as many western “clubs” as possible. It has been quite successful at this, having joined the WTO, NATO, the European Union, and, most recently, the OECD (Organisation for economic Co-operation and Development), and the Euro currency zone. These formal memberships now make Estonia the most “integrated” country in northern Europe, which surprises a lot of people who remember its terribly bleak Soviet era.
So where is the connection between the Canadian mining industry and Estonia? Rare earth elements.
Rare earth elements, or rare earth metals are increasingly sought after for technology applications, including magnets, superconductors, catalysts, lasers, ceramics, batteries, medical devices, scanners and space technologies.
China has developed its rare earth materials sector extensively over the past 30 years. It owns 30% of the world’s rare earth mineral reserves, but has cornered some 95% of the world market and has started reducing exports – which is alarming the rest of the world that is hungry for these materials.
The only other production facility in the world – with virtually the rest of the market today is AS Silmet in Estonia (www.silmet.ee).
The first facility on the Silmet site began processing shale oil in 1927, but in 1946 the occupying Soviets converted it to “Factory Nr. 7” and began processing uranium, expanding in 1970 into rare earth metals and rare metals. After the fall of the Soviet Union, uranium processing ceased and the facility became RAS Silmet, initially owned by the Republic of Estonia but privatized as AS Silmet in 1997. Its majority owner today is a company controlled by Tiit Vahi, a former prime minister of Estonia, and its CEO is David O’Brock, an American who has lived in Estonia for 12 years.
Silmet’s annual production has ranged up to 3,000 tonnes of rare earth products and 700 tonnes of rare metal products.
Silmet’s most remarkable asset is its skilled and experienced labour force of 500 workers, many of whom have worked there for many years, and in many cases, are the children or grandchildren of former employees. No other such workforce exists in the world outside of China.
Silmet has relied in recent years on a primary raw material source in Russia. Constrained raw material supplies have restricted Silmet’s production potential. This is where the Canadian mining industry can get involved.
As with elsewhere in the world, Canadian miners and investment bankers are looking to mine and separate rare earths to serve the growing world market, and many new deposits of these materials have been found and are in various stages of development around the world. Vancouver-based junior mining companies listed on the TSX Venture Exchange are behind many of these projects.
The missing ingredient for these new sources of raw material is the production capacity and the human capital needed to separate and process rare earths into high-quality products needed by the world’s technology industries.
Silmet sits in the unique position of having the labour force, living in a stable and well-developed community within the EU and inside the euro zone and the proven production capabilities.
I predict that Silmet will soon be joining forces with the Canadian mining industry to both guide the development of new sources of raw material and raise the substantial investment capital needed to modernize its factories to increase production by an order of magnitude. This initiative would add a much needed, seriously capable western competitor for the now-dominant Chinese rare earths players.
Future business plans may even include vertical integration by adding value-added manufacturing facilities to produce certain high-margin end products.
