RARE EARTHS, SPECIALITY& STRATEGIC METALSINVESTMENT SUMMIT

IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY-WEDNESDAY, 13-14 MARCH 2012

www.ObjectiveCapitalConferences.com

Critical metals in strategic energy technologyAdrian Chapman – Consultant, Oakdene Hollins

Oakdene Hollins

Critical Metals in Strategic Energy Technologies

Adrian Chapman

Rare Earths, Specialty & Strategic Metals Investment Summit

Objective Capital, 13th March 2012

Disclaimer

• Oakdene Hollins Ltd believes the content of this presentation to be correct as at the date of writing. The opinions contained in this presentation, except where specifically attributed, are those of Oakdene Hollins Ltd. They are based upon the information that was available to us at the time of writing. We are always pleased to receive updated information and opposing opinions about any of the contents.

• The listing or featuring of a particular product or company does not constitute an endorsement by Oakdene Hollins, and we cannot guarantee the performance of individual products or materials. This presentation must not be used to endorse, or suggest our endorsement of, a commercial product or service.

• All statements in this presentation (other than statements of historical facts) that address future market developments, government actions and events, may be deemed "forward-looking statements". Although Oakdene Hollins believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance: actual results or developments may differ materially. Factors that could cause such material differences include emergence of new technologies and applications, changes to regulations, and unforeseen general economic, market or business conditions.

• We have prepared this presentation with all reasonable skill, care and diligence within the terms of the contract with the client. Although we have made every reasonable effort to ensure the accuracy of information presented in this presentation, Oakdene Hollins cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions herein. Factors such as prices and regulatory requirements are subject to change, and users of the presentation should check the current situation. In addition, care should be taken in using any of the cost information provided as it is based upon specific assumptions (such as scale, location, context, etc.). Clients should satisfy themselves beforehand as to the adequacy of the information in this presentation before making any decisions based on it.

• Background on materials security

• Strategic Energy Technologies:‐ SET Plan‐ Metal screening‐ Bottleneck metals‐ Mitigation options

• Summary

Agenda

Sectors:• Food & Drink• Textiles & Clothing• Metals & Mining• Wastes Management• Chemicals & Materials

Services:• Market Appraisal• Supply Chain Risk Assessment• Technology Appraisal• Protocol & Standards

Development• Economic Modelling• Financial Impact Assessment• Management of Research

Projects• Carbon Footprinting

Consulting to business on sustainable products, services and clean production:

Oakdene Hollins

Materials Security

• Study on by-product metals (International Lead & Zinc, Copper and Nickel Study Groups, ongoing)

• Assessing rare metals as supply chain bottlenecks in priority energy technologies (European Commission Institute of Energy, 2011)

• Expert Review of Criticality Studies (Private Client, 2011)

• Investing in Critical Metals (Report for Investors, 2011)

• Study into the feasibility of protecting and recovering critical raw materials (European Pathway to Zero Waste, 2011)

• Lanthanides resources and alternatives (Department for Transport, 2010)

• Materials security: Ensuring resource availability for the UK economy (Resource Efficiency KTN, 2008)

(Reports available from www.oakdenehollins.com)

EU’s “Critical 14 Materials”

Analysis based on Supply Risk vs Economic Importance

2010 USGS Production Figures, (tonnes)

Large Volumes Small Volumes

Fluorspar – 6,010,000 Indium – 609

Graphite – 925,000 Tantalum – 681

Magnesium – 576,000 Platinum Group – 467

Antimony – 167,000 Beryllium – 205

Rare Earths – 133,000 Germanium – 118

Tungsten – 68,800 Gallium – 182

Niobium – 62,900

Cobalt – 89,500

EU Critical Raw Materials Initiative

Source: EU Raw Materials Initiative

Criticality Ranking – 12 Studies

Most Critical

Moderately Critical

Near Critical Not Critical

Beryllium Antimony Bismuth Aluminium

Gallium Cobalt Chromium Boron / borates

Indium Germanium Fluorspar Cadmium

Magnesium Manganese Lead Copper

PGMs Nickel Lithium Molybdenum

REEs Niobium Silicon / silica Selenium

Tin Rhenium Silver Vanadium

Tungsten Tantalum Titanium

Tellurium Zirconium

ZincSource: Oakdene Hollins

EU Strategic Energy Technology PlanThe SET-Plan is the first step to establishing a European energy technology policy. The principle goals are;

• Accelerating knowledge development, technology transfer and up-take;

• Maintaining EU industrial leadership on low-carbon energy technologies;

• Fostering science for transforming energy technologies to achieve the 2020 Energy and Climate Change goals;

• Contributing to the worldwide transition to a low carbon economy by 2050.

Large policy influence on energy technologies, and therefore raw material demand over the

coming decades.

SET-Plan Technologies

EU SET-Plan Technologies

• SET Plan Technology Map with development plans for 17 technologies

• Six priority technologies:‐ Nuclear Fission‐ Solar Energy (PV and CSP)‐ Wind Energy‐ Bioenergy (power generation, biofuels)‐ Carbon Capture and Storage‐ Smart Grids

• Widest selection of metallic elements quantified:• 60 metallic elements included• Iron, aluminium and radioactive elements are

excluded from study• Assess demand from industry targets for

uptake against current world supply: i.e. To compare most optimistic demand scenario to most pessimistic supply scenario

Metal Requirements

Significance Screening Results

Te In Sn Hf Ag Dy Ga Nd Cd Ni Mo V Nb Cu Se Pb Mn Co Cr W Y Zr Ti0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%Metals Demand of SET-Plan in 2030

% o

f 201

0 W

orld

Sup

ply

19%50%

Significant Metals by Technology

Metal Solar Wind Nuclear CCS TotalTellurium 50.4% 50.4%Indium 18.0% 1.4% 19.4%Tin 9.6% 0.02% 9.6%

Hafnium 7.0% 7.0%Silver 4.8% 0.4% 5.2%

Dysprosium 4.0% 4.0%Gallium 3.9% 3.9%

Neodymium 3.8% 3.8%Cadmium 1.5% 0.03% 1.5%Nickel 0.7% 0.2% 0.5% 1.5%

Molybdenum 1.0% 0.4% 0.02% 1.4%Vanadium 0.01% 1.3% 1.3%Niobium 0.04% 1.2% 1.2%Selenium 0.8% 0.8%

Market Factors Market Measures

Likelihood of rapid global demand growth

Limitations to expanding production capacity

Analysis of demand forecasts

Reserves, supply forecasts, evaluation of by-production dependencies

Political Factors Political Measures

Concentration of supply in few countries

Political risk related to major supplying countries

Production statistics

Political risk indicators (FSI & WGI)

Bottleneck Analysis

Example: Forecasts for Key Metals

Vana

dium

Niob

ium

Hafn

ium

Gal

lium Tin

Silv

er

Sele

nium

Mol

ybde

num

Nick

el

Neod

ymiu

m

Indi

um

Dysp

rosi

um

Tellu

rium

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

20152020

Metal

Market Factors Political Factors

Overall risk

Likelihood of rapid demand

growth

Limits to expanding production

capacity

Concentration of supply Political risk

Dysprosium High High High High

HighNeodymium High Medium High HighTellurium High High Low MediumGallium High Medium Medium MediumIndium Medium High Medium MediumNiobium High Low High Medium

MediumVanadium High Low Medium HighTin Low Medium Medium HighSelenium Medium Medium Medium LowSilver Low Medium Low High

LowMolybdenum Medium Low Medium MediumHafnium Low Medium Medium LowNickel Medium Low Low MediumCadmium Low Low Low Medium

Bottleneck analysis by metal

Role of Metals by Technology: Wind

• Direct Drive Permanent Magnets :• Neodymium• Dysprosium

• Steel Alloying Elements :• Nickel• Molybdenum

Metal Prices: REE

2007

3918

439

268

3935

239

436

3952

739

611

3969

539

779

3986

839

952

4003

640

115

2010

4028

340

367

4045

140

535

4061

940

703

4078

740

871

4095

5

0

500

1000

1500

2000

2500

3000

Dy Oxide Nd Oxide

$/kg

Role of Metals by Technology: Solar

• CdTe Thin Films:• Cadmium, Tellurium, (Indium, Tin)

• CIGS Thin Films:• Indium, Gallium, Selenium, (Tin)

• Crystalline Silicon:• Tin, Silver

• Amorphous Silicon:• (Indium, Tin)

• Concentrated Solar Power:• (Silver)

Metal Prices: Indium

05/0

1/20

01

05/0

1/20

02

05/0

1/20

03

05/0

1/20

04

05/0

1/20

05

05/0

1/20

06

05/0

1/20

07

05/0

1/20

08

05/0

1/20

09

05/0

1/20

10

05/0

1/20

11

05/0

1/20

120

200

400

600

800

1000

1200Indium min 99.99% (EU)

$/kg

Metal Prices: Tellurium

03/11/2009 03/11/2010 03/11/20110

100

200

300

400

500

Tellurium min 99.99% (EU)

$/kg

Data collection and

dissemination

Resource efficiency strategies

(e.g. recycling)

Primary production

Trade and international co-operation

Design and innovation

(e.g. substitution)

Procurement and stockpiling

Responses to Materials Criticality

Source: Oakdene Hollins

Mitigation Strategies for solar

• By-product metals extraction, opportunities for Cu/Al/Zn refineries

Expanding Output

• Indium – Considerable research, but early stage• Gallium – Linked to germanium• Tellurium – Options for low value applications

But technology choice available

Substitution

Recycling• Recycling potential limited due to dispersive

applications

Summary• Greatest risks for six primary SET-Plan

technologies:‐ Solar: tellurium, gallium, indium‐ Wind: dysprosium, neodymium

• No overall bottlenecks – technology mix matters• Mitigation required in long term

• Opportunities for expansion of production/by-production to meet demand

• Recycling, substitution will have a role• Further policy factors – e.g. REACH, revision of

RMI, global trade rules

Adrian Chapman

adrian.chapman@oakdenehollins.co.uk

www.oakdenehollins.com

EU Energy Generation Capacity

European Generation Capacity to 2030 (GW)

Source: EU energy trends to 2030 — Update 2009, DG Energy (2010)

Bottleneck Metals: Dysprosium & Neodymium

HDD; 31%

Motor; 26%

Automobile; 24%

Optical Devices; 5%

Acoustic; 5%MRI; 5% Others; 3%

Applications for Nd Magnets, 2009

Reserves

Mine production

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

48%

97%

17% 11% 19%

Geographical Location of Rare Earths, 2010ChinaIndiaBrazilMalaysiaCISUnited StatesAustraliaOther countries

Source: Shin Etsu

Source: USGS

• Primary product (55%), by-product of iron (45%)

Bottleneck Metals: Tellurium

Source: EU RMI

Sources: USGS & BGS

Metallurgy; 42%

Photo-voltaics, 26%

Chemicals & Pharma-ceu-ticals, 21%

Electronics & Others; 11%

Applications for Tellurium, 2009

Reserves

Refinery production

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10%

6%

14%

10%

73%

8% 7% 65%

Geographical Location of Tellurium, 2010

JapanRussiaPeruCanadaUnited StatesOther countriesUnknown

• By-product of copper (90%) & lead (10%)

Bottleneck Metals: Gallium

Source: EU RMI

Source: USGS

Production Capacity

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Geographical Location of Gallium, 2008 ChinaGermanyKazakhstanJapanRussiaUkraineHungarySlovakia

Integrated circuits; 66%

Lasers & LEDs; 18%

R&D; 14%

Photo-detectors & so-lar, 2%

Applications for Gallium, 2009

• By-product of alumina

Bottleneck Metals: Indium

Source: USGS

• By-product of zinc

Flat Panel Displays; 74%

Other ITO; 10%

Low m.p. Alloys; 10%

Others; 6%Applications of Indium, 2009

Source: EU RMI

Reserves

Refinery production

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

75%

52%

17%

14% 12% 6%5%

Geographical Location of Indium, 2010/2007 ChinaSouth KoreaJapanCanadaBelgiumPeruBrazilRussiaUnited StatesOther countries