Evaluation of Rare Earth Projects Using the Real Options Model
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Evaluation of Rare Earth Projects Using the Real Options Model To the Faculty of Economics and Business Administration Of the Technische Universität Bergakademie Freiberg is submitted this THESIS To attain the academic degree of Doctor rerum politicarum (Dr. rer. pol) submitted by Dipl.-Kffr. Jiangxue Liu Supervisor: Prof. Dr. Jan C. Bongaerts Supervisor: Prof. Dr. Leopold Weber Freiberg, 09. 05. 2016. Date of submission Freiberg, 27. 06. 2016. Date of PhD colloquium Acknowledgement First and foremost I would like to thank my first supervisor Prof. Jan Bongaerts for his guidance, the many reviews of my work, his knowledge and experience, but mainly his trust in me, and I am gratefully indebted for his valuable comments on this thesis. I especially want to thank my second supervisor Prof. Leopold Weber, whose support and guidance made completing my thesis work possible. I am very grateful for his interest in this thesis subject and his contribution on the research work, and for his patience, enthusiasm, and immense knowledge in Geology. I also would like to thank Dr Frank Heyde for his support on the mathematical modelling and simulation. I would also like to acknowledge Dr Stefan Bartz for his advice and support. Thank to Alan McDonnell, who reviewed my thesis at the final stage. I would like to thank Mr. Joaquim-Filipe Fünfgeld, Head of Global Procurement of Inorganics of BASF, and the team members of the Procurement department for providing me the opportunity to develop my PhD thesis subject. I must express my very profound gratitude to my friends and the “family members” of IMRE (International Management of Resources and Environment) Programme, especially to Nicoleta Gurita for providing me with unfailing support and continuous encouragement throughout writing this thesis. Lastly, I would like to thank my family for their love and support with approximately 7,800 kilometres distance but in every moment present in my life. The accomplishment of this thesis would not have been possible without them. Thank you! Jiangxue Liu - 2 - Content Content ....................................................................................................................................... 3 Abbreviations ........................................................................................................................... 14 Symbols .................................................................................................................................... 17 Abstract .................................................................................................................................... 20 Chapter 1 Introduction ............................................................................................................. 21 1.1. Outline of the dissertation .......................................................................................... 21 1.2. Objectives of the dissertation .................................................................................... 25 1.3. Structure of the dissertation ....................................................................................... 26 Chapter 2 REE reserves and deposits ....................................................................................... 28 2.1. Introduction and Background .................................................................................... 28 2.2. Mineralogy ................................................................................................................. 30 2.3. Deposit Types and Global Distribution ..................................................................... 35 2.3.1 Primary deposits .................................................................................................... 36 2.3.1.1 Carbonatite-associated deposits ..................................................................... 36 2.3.1.2 Deposits associated with alkaline igneous rocks ............................................ 42 2.3.1.3 Hydrothermal vein deposit ............................................................................. 45 2.3.1.4 Iron oxide copper-gold (IOCG) ...................................................................... 46 2.3.1.5 Apatite-iron deposits (AID) ........................................................................... 47 2.3.1.6 Black shales .................................................................................................... 47 2.3.2 Secondary deposits ................................................................................................ 48 2.3.2.1 Placer deposits ................................................................................................ 48 2.3.2.2 Lateritic weathering deposits ......................................................................... 50 2.3.2.3 Ion adsorption clays (IACs) ........................................................................... 53 2.4. Global distribution of REE resources ........................................................................ 56 2.4.1 Global distribution of REE deposits and world reserves....................................... 56 2.4.2 REE mines and advanced projects ........................................................................ 67 Chapter 3 Supply chain for REEs ............................................................................................ 77 3.1. Mining ..................................................................................................................... 77 3.2. Processing ................................................................................................................ 79 3.2.1 Beneficiation ......................................................................................................... 79 - 3 - 3.2.2 Decomposition processes ...................................................................................... 82 3.2.1.1 Hard rock deposits .......................................................................................... 82 3.2.1.2 Placer deposits ................................................................................................ 84 3.2.3 Separation of individual REEs .............................................................................. 85 3.3. Environmental impact of REE mining and processing ............................................. 92 3.4. Case study .................................................................................................................. 97 3.4.1 The Bayan Obo mine ............................................................................................. 97 3.4.2 Monazite in placer deposits in India .................................................................... 103 3.4.3 Ion adsorption clays (South China) ..................................................................... 105 3.5. World REE production ............................................................................................ 108 3.6. REE applications and demand ................................................................................. 112 3.6.1 Permanent magnets .............................................................................................. 115 3.6.2 Metallurgy alloys ................................................................................................. 116 3.6.3 Catalysts .............................................................................................................. 117 3.6.4 Glass and polishing ............................................................................................. 117 3.6.5 Phosphors ............................................................................................................ 118 3.6.6 Ceramics .............................................................................................................. 118 3.7. Substitution .............................................................................................................. 119 3.8. Recycling ................................................................................................................. 120 3.9. Criticality of the supply of REEs ............................................................................. 122 Chapter 4 REE supply chain risk ........................................................................................... 125 4.1. Market risks ............................................................................................................. 125 4.2. Geological and operational risks ............................................................................. 128 4.2.1 Political risks ....................................................................................................... 130 4.2.2 Project risk ........................................................................................................... 133 4.2.3 Environmental risk .............................................................................................. 136 4.2.4 Social risk ............................................................................................................ 137 Chapter 5 Real Options modelling of REE investments ........................................................ 139 5.1. Real option approach application in REE investment ............................................. 139 5.2. Estimation of project-specific parameters using Monte Carlo simulation .............. 144 5.2.1 Introduction of simulation model ...................................................................... 144