* Analysts forecast rise in rare earth prices
* Rare earths mainly produced by China, small miners
* Green technology drives demand for rare metals
By Barbara Lewis
LONDON, June 26 (Reuters) - Canada's Mkango Resources , one of a handful of rare earth miners outside China, aims to start production in Malawi in 2020 to catch an expected leap in demand for the metals that are used in electric vehicles and other new technologies.
Demand for rare earths, which range from neodymium used in electric motors to lanthanum used to make batteries, is increasing with the emergence of new, greener technology.
While production of coal, iron ore and other bulk commodities is dominated by major mining firms such as BHP and Rio Tinto , rare earths are mostly produced by China and small mining firms such as Mkango.
"We think we will be in production in three years' time, just at the right time," William Dawes, the chief executive of Mkango, which is listed in Toronto and London, told Reuters.
By 2021, he said Mkango would reach full output of about 3,000 tonnes per year of rare earths from the southern African nation. That would include 1,000 tonnes of praesodymium, neodymium, dysprosium and terbium, used in new electric motors.
Dawes said a rise in rare earth prices was being driven by growing demand, rather than the kind of speculative bubble that drove up prices in 2011 when China dominated production and then prompted a crash that pushed many explorers out of the business.
"Very few rare earth projects made it to the pre-feasibility stage and beyond," he said. "We are one of the few companies to make it over this hurdle, so well-placed as the market recovers."
Ryan Castilloux, an analyst at Adamas Intelligence consultancy, said there were 36 projects at various stages of pre-production development outside of China.
Of these, he said about 60 percent were put on hold in the last three years because of weak rare earth prices, although prices were expected to recover.
Castilloux forecast doubling global demand for neodymium oxide and praseodymium oxide by 2025 compared with 2016 levels, which he said could create another challenge for miners.
If miners could not keep up with demand and prices climbed too high, industries might turn to technologies that did not use rare earths, even if they were less efficient.
Dawes said any rapid surge in the price of neodymium, currently trading around $45 per kilogram, could encourage the vehicle industry to turn to induction motors, which do not contain rare earths but which are heavier and less effective than permanent magnet motors that do use rare metals.
Analysts say the auto industry is building flexibility into its new generation of electric vehicle platforms to allow a switch between either type of motor.
Other rare earth miners outside China include Australia's Lynas Corp, whose Mount Weld is regarded as producing the highest grade of rare earths mine in the world. (Editing by Edmund Blair)