Defining and Winning the HREE Horse Race

by Jack Lifton on November 28, 2009 · 15 comments

in Event Reviews, Rare Earths

Bookmark and Share Print

Last weekend I was in San Francisco, speaking at the Hard Assets Investment Conference. My topic was the production of heavy rare earth elements (HREEs).  The title of my main presentation was “Who will win the race to be the first to produce HREEs outside of China in the 21st century?” My specific answer to that question comes later in this article, but first, I am going to re-post here an article by Gareth Hatch, first posted at RareMetalBlog, which I believe is of relevance to the discussion:

——
Rare Earths Nomenclature: Time to Standardize?
by Gareth Hatch

Let me ask what should be a pretty straightforward question:

“How many rare earth elements are there in the Periodic Table?”

Hmmm – apparently this question is not quite as simple to answer as we might think. Depending on who you ask these days, you could hear a number of different answers, each of them based on not unreasonable assumptions.

Okay – having thrown that first question out there, let me ask a second, which in theory should be just as straightforward to answer:

“Which are the so-called heavy rare earth elements?”

Uh-oh – now we’ve veered into what appears to be even trickier territory, judging by the wide range of answers that are out there. And yet, given the significant difference in monetary values of the various rare earths elements [REEs], shouldn’t there really be a single, consistent definition for the constituent REEs, as well as those that make up the heavy REEs [HREEs]?

Okay – so let’s take a crack at the first of these definitions. Here are the most common numbers that I’ve heard people use, and the reasons why they use them:

a) 15: refers to the number of lanthanide elements sitting in a row towards the bottom of the Periodic Table. This group includes La-Ce-Pr-Nd-Pm-Sm-Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu;

b) 16: refers to the lanthanide series, with the addition of yttrium [Y];

c) 17: refers to the lanthanide series + Y, and the addition of scandium [Sc];

d) 30: refers to the lanthanide series with the addition of the actinide series, which sits below the lanthanides in the Periodic Table. The actinide group includes Ac-Th-Pa-U-Np-Pu-Am-Cu-Bk-Cf-Es-Fm-Md-No-Lr.

My non-scientific survey of usage online by rare earth exploration and mining companies, indicates that option b) 16 above appears to be the most commonly used definition. However, with that said, things get somewhat muddied when companies use the term “TREO + Y” [i.e. total rare earth oxide plus yttrium] when providing quantitative data on their deposits. Does this mean that they don’t actually consider Y to be a rare earth, but, thinking that some folks do, they include it anyway?

In giving this issue some thought, I wondered where we might be able to find some sort of definitive answer to this quandry. Since we’re talking about elements of the Periodic Table, it makes sense to me to see what the International Union of Pure and Applied Chemistry [IUPAC] has to say on the matter. IUPAC is the international body that ultimately decides, among other things, what newly discovered elements should be called, and the standard symbols for existing ones. So, what do they have to say on the matter?

In its 2005 “Nomenclature of Inorganic Chemistry”, IUPAC defines the rare earth metals as “Sc, Y and the lanthanoids”. So by this definition, IUPAC considers there to be 17 rare earth elements. Thus, it makes sense to me that in the interests of standardization, those of us that are involved with the rare earths, should start using this definition also.

An aside: note here, that IUPAC refers to the lanthanOIDs, and not the lanthanIDEs. Per IUPAC:

Although lanthanoid means ‘like lanthanum’ and so should not include lanthanum, lanthanum has become included by common usage. Similarly, actinoid. The ending ‘ide’ normally indicates a negative ion, and therefore lanthanoid and actinoid are preferred to lanthanide and actinide.

Okay, so that deals with the number of REEs overall. Now, what about the HREEs? Which elements are they? Again, I’ve heard and read a variety of definitions, including:

a) Gd-Tb-Dy;

b) Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu;

c) Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu + Y;

d) Sm-Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu;

There are numerous other additional variations too – probably even more numerous than the definitions of number of rare earth elements as a whole. Unfortunately, IUPAC or a similarly-august body does not appear to have an opinion on this one. However, I will note that in the world of magnetics, from which I hail, it is generally definition c) Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu + Y that is used for the HREEs, because of certain magnetic characteristics that they have in common, in comparison to the other REEs

Since a number of the elements included in the various definitions of the HREEs above, sell at very significant unit prices when compared to the other REEs, I would argue that it is really important that all rare earth exploration and mining companies get on the same page with their definition of HREEs. This is even more important when the term HREE or heavy rare earth oxide [HREO] is used without definition. Reviewing the usage online by these companies, it seems that most [but not all] of them are using the same definition that the magnetics community uses. Consequently, I would propose that this definition be used across the board within the industry. I was chatting with Jack Lifton earlier this week on this subject, and we were in agreement on this point. Going forward, Jack will continue to use this definition when discussing HREEs, and I will be doing the same.

——
This is the first coherent discussion of “heavy rare earth” nomenclature that I have ever seen. I could not have said it better myself. Why do I include it here today, in this article?

After speaking on the “race” to be the first to produce “heavy rare earths” outside of China last weekend, I noted from the comments I got both during my presentations and afterwards by email, that there is still a great deal of misunderstanding by the investment community on just what the term, “heavy rare earths” actually means. I hope that the above article provides some illumination of this topic.

Now, to the horse race itself. In my opinion, the winner of the Heavy Rare Earths Derby, the HRED, will be Great Western Minerals Group (GWMG), which, I predict, will begin to produce commercial quantities of HREEs at its Steenkampskraal project in Cape Province, Republic of South Africa, in the fourth quarter of 2011. This is providing that GWMG gets the project’s operating permit renewed by December 31, 2009, and is able to raise the funding for the project and finalize the metallurgy. I believe that all three goals are on target to be met. Avalon Rare Metals will follow GWMG as a producer of commercial quantities of HREEs outside of China sometime in 2012-13.

GWMG is a vertically integrated REEs company; its HREE and light REE production from Steenkampskraal will, after separating and refining, go to its wholly owned subsidiary, Less Common Metals (LCM), in the UK. Here, the REEs in metallic form will be alloyed to produce REE permanent magnet alloys for customers to use to fabricate magnet forms, for end uses.

There will be a period during 2012-2015 during which GWMG/LCM will be the non Chinese world’s only vertically integrated producer of such permanent magnet alloys

When Avalon Rare Metals production begins in 2012-13 I think that its initial total REE production may be sold into the Chinese refining market, which I think by then, may be seriously short of HREEs and may even be short of all REEs.

Avalon’s immense resource at Thor Lake in the Northwest Territories, will ultimately be Canada’s major producer of REEs; but I think that for most of the next decade, it will be a horse race between GWMG and Avalon for the title of top producer, by volume, of HREEs.

This horse race will, I now believe, insure Canadian dominance of the non-Chinese REE production market.

I think it is much more likely now that a Canadian REE producer will be in a position to buy an American or Australian REE producer by 2014-15 than the other way around.

I think that my colleagues and associates in Washington, D.C., are beginning to think the same way as I do. I’m already beginning to hear the phrase strategic and critical “North American” resources in place of S & A “American” resources. Soon I’ll be hearing about reliable allies and ultimately some procurement bureaucrat will say that he never met a Canadian that he didn’t like. Imagine that?

Disclosure: I do not own, nor have I ever owned any shares of either GWMG or Avalon, nor have I ever been paid a fee by either company. Both have paid my expenses for travel to and from their offices or project locations. I don’t own shares directly or indirectly at the present time in any company upon which I comment. I wish all of the potential REE producers, and in fact all of the rare metal projects everywhere, the best of luck, but I don’t want to be beholden to any of them. My opinions are formed by my own research, and I always welcome new or better information.

Bookmark and Share Print
1 Louis Berard November 28, 2009 at 3:28 pm

My money is on Alkane resources of Australia to be the first large scale producer. They have been a small scale producer at their pilot plant for 2 years and have a property with 200 years of Hree reserves. They will be sending out actual samples of refined and processed Hree material to interested prospective buyers in the first half of 2010. They also have 2, million ounce+ gold properties to fall back on if the rare Earth process takes longer than expected.

2 Andrew November 28, 2009 at 3:44 pm

I wonder how GWMG’s Steenkampskraal deposit compares with Avalon’s Thor Lake as to amount of HREE? Also GWMG being vertically integrated should greatly add to their bottom line.

3 John Petersen November 28, 2009 at 3:51 pm

I’m not as concerned about the “who” as the “when and how much”, but I’m happy to hear that you’re thinking GWG will likely be first out of the gate. Irrational expectations for electric drive vehicles have never been higher. Same goes for wind. Between electric drive and wind turbines, the demand for HREE’s is going to skyrocket far beyond our wildest imaginings and the sad fact is that it’s looking like the HREE’s won’t be there at any cost. At least this debacle of needing something they previously condemned will serve as a good object lesson for cult followers of all things green that consecrating sacred ground to the green-goddess Gaia (as opposed to the green-goddess salad dressing) sometimes has major unintended consequences.

Methinks the reality pendulum is getting ready to start swinging in the other direction, and not a minute too soon for my taste.

4 Tim Starns November 28, 2009 at 4:27 pm

I agree with your assessments completely on the horserace.
After I had done my own investigation on the company, and became aware of Molycorp’s attempted buyout of GWMG, it was apparent to me that GW had very shrewdly negotiated their refining operation in Great Britain and the production facility in Troy, MI. And they were smart and tough enough to hang on to those assets during some very tough times when Molycorp was pressuring them. This speaks of a very competent and confident management team, with strong direction from Gary Billingsley, who is also most conscious of the success of the company, their employees, and stockholders. This will be a tough stock to acquire in the not to distant future.
These are assets that are absolutely key to their success in their “Mine To Market” strategy. The fact that the South African mine (and stockpiles I believe) have been quoted as 17% Total Rare Earth compostion, the highest so far documented anywhere, means that this level of concentration will also be a huge boon for processing efficiency, and should provide all the materials their Birkenhead plant could possibly refine.
Avalon’s deposit is simply huge. I can’t help but wonder if they might be focusing on construction 0f an ore processing facility, which necessarily is deposit specific, while developing the mine and infrastructures. Elsewhere, someone will certainly begin constructing a toll refinery for concentrates either in Canada or the US.
There’s certainly more than one race going on here, and soon there will be a lot more horses to cover with bets.
You’re going to be even more busy now Jack.

5 Arlen November 28, 2009 at 4:48 pm

Thank you for this perceptive analysis. I’ve been following your comments now for close to a year. Your disclosure at the end of the article was particularly welcome; for me it adds greatly to the already considerable weight of your opinions.
I’ve seen vague references to REE deposits on the East Asia mainland besides China, including some former Soviet republics, and Russia. The host country’s attitude toward environmental impact, which will influence greatly the time and cost factors in development and production.
Are any of these sites serious potential contestants in the next decade?
Also, have you looked at the Alkane operation?

6 Gardy November 29, 2009 at 1:40 am

Jack

I know you have been talking to J.Mackenzie of Ucore Uranium (Rare Earth One) at the past San Fran conference. Why no mention here of possibly the biggest HREE deposit in North America if not the world ? I’m perplexed.

Regards Gardy

7 Edmund Brooke November 29, 2009 at 5:56 am

I am pleased that clarification is underway……..
From the Avalon website……..
2009-07-20 – News Release
Mr. Don Bubar reports
AVALON MAKING EXCELLENT PROGRESS TOWARD DEFINING A VIABLE METALLURGICAL PROCESS FOR RECOVERY OF RARE EARTH ELEMENT MINERALIZATION FROM LAKE ZONE DEPOSIT, THOR LAKE, NWT

As yet I have found no information that they have ‘cracked’ the process.
So clarify the situation and that the process is proven before investing, further look at the percentage of HREE in comparison to REE and TREO.

As for Ucore (TSX:UCU)
The latest marktwire news release……
http://www.marketwire.com/press-release/Ucore-Uranium-Inc-TSX-VENTURE-UCU-1077875.html

Nov 17, 2009
Ucore Reports Multiple Zones Up to 6.3% Total Rare Earths Including 2.6% Total Rare Earths Over 1.9 Metres From Bokan-Dotson Ridge
C/P $0.375
UCU:TSX Narrow seams BUT we are talking about HREE, not REE, difference in price is $3,200 instead of $300 per tonne. Believed to be staking 50 kilometres.
Public have yet to understand the difference so currently far too cheap.
Edmund

8 Gardy November 29, 2009 at 2:57 pm

More news to come on Ucore, possibly tommorrow , we’ll see. I have a source who has info. on this which I promised I would not leak out. The story here will get out. This is potentially a tremendous asset, Ucore has on it’s hands.

Gardy

9 William Traster November 29, 2009 at 5:45 pm

Jack,

I applaud your work. Hopefully, the lawmakers will unerstand how vital REEs are for everything from energy storage to green energy programs to things vital to North America’s national security to pretty much every gadget we use. Further, magnetic refrigeration is coming down the pike, and I fully expect that to be government backed.

Good to know that your favorite REE company is Great Western Minerals. Hoping what I already have invested in GWMGF will park me in some gated community on an exotic Carribean island in the not to distant future.

10 Jack Lifton November 30, 2009 at 12:56 am

I want to sincerely thank all of the commentors for taking the time to read my posts. I am going to try to answer all of your questions either directly here in the comments section or in new articles where I take your concerns and many times your additional information into account. I am always ready to change my opinion or form a new conclusion when evidence of an appropriate kind is produced. Let’s not argue let’s debate.

By the way I humbly urge all of you to go to http://www.seekingalpha.com and read all of the articles written by my colleague John Petersen. He is, in my opinion, the best and most cogent writer today on all aspects of the economics of the electrification of the motor vehicle as well as on the economics of storage batteries and systems using them.

11 Tim Starns November 30, 2009 at 8:59 am

Jack, the question has arisen about your prediction that Molycorp will be bought out by either GWMG or AVL. How is this possible if Moly is considered to be so large compared to either of the two potential buyers? Since Moly is privately owned, and apparently no longer has a big bank backing them, and the Canadians are publicly traded with the option of large influxes of investment, it this where you see the perceived disparity becoming reversed?

12 zukini April 15, 2011 at 5:35 am

The first will be XXX. All mining business that has been mentioned is promising something in a long future. XXX will become vertically integrated much sooner then has been thought, and will give results on spot . GWG has the potential but not right people on the case that could actually do the business. At the end you still need someone who actually can do it. we know it is not easy to put the mine in operation especially to set up the processing facility. Whoever is predicting that this is possible within 1 year, is talking fairy tales. Birkenhead plant refining the metals means not doing the homework properly, they can produce alloys. continue sinking hundreds of millions into what will return money in X years time, …..ifff. As Jack wrote time will tell and will soon be evident who can put new evidence forward and present a new product on the market….remember it is only those people who actually know the process…. the team of people that i am aware of, can do it ….

Comments on this entry are closed.

{ 3 trackbacks }

Previous post:

Next post: