On The Green Road: Cape Town Capers II – South African Rare Earths As Part Of The Global Picture

by Jack Lifton on February 8, 2010 · 11 comments

in China, Rare Earths, South Africa

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On Friday, February 5, I flew from Cape Town in a small plane, to Springbok, Northern Cape Province, Republic of South Africa, to visit a privately-owned rare earth exploration site there. I was impressed by two aspects of the deposits that the owners had discovered so far:

  1. The grades presented were as high as 21%, and
  2. the proportions of high atomic-numbered, so-called “heavy,” rare earths, such as dysprosium, terbium, and europium were high enough to make these ore bodies, if they are proved to be extensive, valuable enough to bring them into contention, even at current prices, as economically developable today as concentrate producing mines.

The next afternoon, Saturday, February 6, I was walking down the street that runs along a beautiful beach, Camp’s Beach, west of the Cape Town waterfront when I spotted the Chairman, President, and in- house publicist for Canada’s Great Western Minerals Group (GWMG) sitting in a sidewalk café drinking what I can only assume was sarsaparilla, since it was only 1:00 PM, local time.  GWMG had invited me to visit their rare earth property also in the Springbok area at a place called Steenkampskraal, but I was unable to go as I had already agreed to go to the other site when the GWMG invitation was proffered.

I did agree to go to Steenkampskraal in the near future on my next trip to South Africa, and I am looking forward to that visit. Gary Billingsley, the chairman and founder of GWMG, who himself is a geologist , has in my opinion been very good at finding rare earth deposits of excellent potential for commercial development. Gary is also the originator of the “mine to market” strategy for rare earths, which today is recognized as the “must-do” paradigm for any low-volume, high-value technology metal producer, because most often it is only when you vertically add downstream value to a rare metal mining operation that you can achieve enough margin to make the return on the investment in the extended value chain attractive to private capital.

I was surprised to learn from Gary that Steenkampskraal had previously and fairly recently been placed in development by its then owner/operator, South Africa’s Rareco, in the late 1990s and then, like Molycorp, it had become uneconomical because of aggressive Chinese pricing.

Steenkampskraal was developed originally by Anglo-American in the 1950s as a thorium mine, to supply the United Kingdom and the USA with thorium for reactor fuel at a time when the decision had not yet been made whether to go with uranium or thorium for civilian nuclear reactors. The mine shut down new production in 1962 but I was told that it still retains its status as a legal repository for thorium; perhaps the only privately owned such facility in the world. Gary said that he is in negotiation with existing refiners to build a separation plant at or near the Steenkampskraal site, and that although its first priority would be to be designed to process ore from Steenkampskraal, he thought it could be developed as a contract processor also, because of its unique attribute of being able to legally store thorium removed during rare earth ore separating processes.

But the most important aspect of Steenkampskraal is its ore grades. If you look on the GWMG web site you will see the data for the grades, weights, and elemental distributions on the Steenkampskraal ores discovered so far. In addition to that data I was told there have been examined monazite samples assaying at 80% which present as net 48% TREOs. Gary believes that this result is not from an anomolous one time grab sample, but from a substantial body of ore. Such material would be worth as much as $60/kg in concentrate; this is 6 times the values today, theoretically, for other better-known lower atomic-numbered (light) rare earth deposits in Australia and the USA, and 3 times the average values previously stated for high atomic number-enriched rare earth deposits from southern Africa. Even without factoring in the extremes of concentrate value, there is still a greater likelihood of a South African deposit being able, within two or two and a half years, to produce a per kg value high enough to justify investment, than at any other place in the non-Chinese world

GWMG’s web site has quite a bit of data on Steenkampskraal, but Canadian security regulations do not leave much latitude for speculation. I can say though, that I think that the Northern Cape Province of the Republic of South Africa is the best hope in the world for a source in the very near term of high atomic-numbered rare earths to replace the rapidly diminishing Chinese ionic clay sources. By restarting and redirecting the purpose of Steenkampskraal GWMG may well be, as I said in San Francisco in December, the winner of the horse race to be the first outside of China to produce commercial quantities of high atomic numbered rare earths.

GWMG is uniquely situated to gain the most value by winning the horse race, because it is the only truly vertically-integrated rare earth producer. Instead of needing to market its separated rare earths it would be able to use them as feed for its Less Common Metals wholly-owned subsidiary in the UK and the US, where if GWMG also refined the separated rare earths to pure metals, they would be made into permanent magnet alloys, which it makes now from Chinese high purity rare earth metals. The customers of LCM form permanent magnets for various uses from the powdered goods they buy from LCM.

With the known ore bodies at Steenkampskraal, GWMG and LCM would be independent of outside raw material suppliers for 14 years at current capacities. If there were additional resources discovered on the Steenkampskraal property and/or if Canadian resources at Douglas and Benjamin Rivers in Saskatchewan were developed during those 14 years, GWMG would become a player in the global raw material supply  industry.  If, as I think, Avalon Rare Metals comes into production of total rare earths by 2014-15, then South Africa and Canada will join China as dominant players in the rare earth space. At the moment I see Avalon and GWMG possibly emerging by mid-decade to make Canada the dominant rare earth producer outside of China, even if it isn’t then the largest such non-Chinese producing nation in terms of tonnage, because Canada will be able to produce the total resource – but there is tremendous potential for South Africa as Canadians have already realized.  There’s a horse race to produce a total rare earths supply outside of China. The long term winner is Avalon Rare Metals, and in the near term the winner will be Great Western Minerals Group. In the long term GWMG will be able to supply its own upstream needs.

In the long run the supply base for rare earths will surely be and must become global but may, in my opinion, never be sufficient to keep up with the growth of Asia’s economies. Even very good projects  with very long time lines in places like Greenland and Viet Nam and Russia, will be as much as a decade and a half in development. In the near term the race will go to those already under development with the broadest and most comprehensive range  of rare earths. These are Canadian and South African operations. In the US the broadest range of rare earths is held by US Rare Earths, Inc., a privately held junior for which I consult.  It is today America’s only hope for self-sufficiency in total rare earths; it would be best developed as a balancing resource adjunct to Molycorp Mineral’s Mountain Pass operation but even on its own, US Rare Earths could conceivably supply the US with its current needs for total rare earths for a period of about 20 years at contemplated full production. Note that in contrast, Molycorp could supply the entire world with the lower atomic numbered rare earths indefinitely just from its Mountain Pass deposit.  The problem for US self-sufficency is that Molycorp is ready to start and US Rare Earths is 5 to 10 years from production, but for the domestic concerns of the US with regard to making its civilian and military industries safe from supply interruptions, even this time scale may well be appealing because it is critical and thus mandatory.

The USGS predicted 20 years ago, that South Africa would become the world’s major player in rare earths production.  Right at that same time, China pulled out all of the stops to developing the production of rare earths in its Bayan Obo region of Inner Mongolia.  By the end of the century, China dominated the rare earth production space. But Chinese zeal to create jobs in China did not contemplate the realities of the market or of mining engineering. The market growth has now overwhelmed China’s ability to maintain and expand production, with regard to continuous exploration, continuous improvement in refining, and maintenance of peak efficiency while obeying environmental regulations and following environmental common sense. The Chinese government recognizes these issues and is moving to consolidate rare earth mining to achieve efficiencies and environmental control. This must mean a temporary slowdown in production as any consolidation and restructuring means. We can be certain of only one thing: China’s first priority is its own economy. It is therefore entirely our fault if we dawdle while there is a serious threat of supply interruption.

I personally think, based on data, that the sleeping giant of global rare earths has probably already been discovered and its development is underway, but it may take a while to come to large scale production. I do not wish to mention which of the above non-Chinese rare earth ventures I am speaking of at this point. The race to avoid a supply interruption crisis is well in hand. I don’t know if a rare earth supply gap, especially of the high atomic numbered (heavy) rare earths can be avoided due to the long development times needed even for mines that are in development. But I now think that 2015 will mark a turning point in global rare earth supply dynamics.

Canada and South Africa are excellent places to seek out investments in the future of the rare earth supply. I guarantee that the Chinese already know this.

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1 Andrew February 9, 2010 at 10:52 am

Jack,
More great information about rare earth potential. Let’s hope Great Western Minerals Group gets their permit soon and puts this mine back into operation as soon as feasible.

I’d also like you to comment at some point on GWMG’s Douglas and Benjamin River deposits:
Why is Toyota showing great interest and care into looking into those deposits and not say Avalon’s Thor Lake or Quest Uranium’s Strange Lake or Hudson in Greenland, etc?

Is it more important to have a vast deposit or concentrate on richer smaller portions of targeted for maket rare earth deposits?

2 andriette campbell February 9, 2010 at 1:22 pm

LOVE YOUR WORK AND YOUR EXPLANATIONS FOR THIS SUBJECT WHICH IS NEW TO ME. I AM HOOKED! lOVE YOUR DIVERSITY, HONESTY AND BACKING EVERYTHING UP WITH YOUR EXPERIENCE

tHANKS AGAIN.

NAMASTE

SINCERELY,

aNDRIETE

3 William Traster February 9, 2010 at 3:13 pm

Thanks, Jack!

I’m very much interested in beryllium. Do you know of any Canadian juniors that mine beryllium?

Enjoyed the article greatly.

Bill Traster

4 kumanari February 9, 2010 at 5:38 pm

Great work Jack,
I’ve been following your work since 9/08 when I bought RES by recomendation of Dudley Baker. Then Dines made “The Call” in early 09, and backed up by John Kaiser’s research, I knew ree were the future. Unfortunately absolutely no one has a clue about this sector. I have/am studied/studing everything I could get my hands on. You are a true HUMAN. Mahalo for your work, for educating us and for not retiring or selling out. If you ever take a break and happen to be on Maui I would be happy to host you.
A hui hou malama pono
Kumanari
I now hold (for my keiki): ucu,lyc,gdln, HUD, AVL,RES, NEM,GWMG

5 Tek February 9, 2010 at 5:49 pm

Jack,

Thanks for this truly comprehensive report on Great Western and its most promising mine in South Africa. Even among this mostly unknown market of REEs, the outstanding potential of Great Western is just as unknown. However, you have unplugged the cork and the genie is most certainly out.

But your overall point about Canada becoming the gravity center of the REE industry in the next few years should give ample impetus for investors and investment vehicles to start looking seriously at REEs as not only junior miners, but as the burgeoning commodities market which will underly the reindustrialiazation of North America for the 21st century. And as companies begin to plan for all the related value added markets, let’s hope they will spur the economy as well with new applications , new jobs, and new construction to house these resurgent industries.

6 Jack Lifton February 10, 2010 at 7:48 am

Tek,

One of the mining media outlest that covered INDABA called me an “apocolyptic soothsayer” after hearing me talk about the global imbalance between rare metal production rates (supply) and growing Asian demand. I liken those journalists to the advisors to Romulus Augustulus, the last Roman emperor in the West. As Gibbon said in his “Decline and Fall of the Roman Empire” (paraphrased by me) “…at the end 200,000 barabarians which the legions of Caesar’s (Julius) would have swept aside brought to ruin and the end the “Roman” army of 200,000 mercenaries who were paid by the exhausted and effete Romans of the last days.”

So, lets be clear, I am saying that the clueless politicians of our age elected by special interests none of which care about the fate and standard of living of the mass of humanity are bringing us to a critical point in history. If we don’t start setting goals for our economies (of the various nations) in terms of getting the necessary material goods for their health and safety and then the comfort of the most people possible then any hope of a peaceful stable world ends.

The airlines say that when the oxygen masks drop serve yourself first so you can then help others.

The USA must now re-industrialize to save ourselves and this means that we must produce domestically whatever we can to be self-sufficient-THIS IS THE ONLY PATH TO THE CREATION OF WEALTH. After we re-indutrialize we can resume the path to helping keep ourselves and the world safe from self-immolation in resource wars.

Globalization to maximize profit was a mistake, because its negative economic consequences were overlooked.

We must now increase the production rate of those resources we know we have, or we have doomed ourselves to a progressively lower standard of living. We must stop frivolously wasting our increasingly expensive precious resources of rare metals on toys that dissipate them and prioritize closed loop recycling of rare metals as we begin to increase our production rate infrastructure, becasue without this increase there will be no additional supply! This may well be the most expensive re-industrialization in history. It is criminal stupidity for our politicians to assume, as they surely do, that the world of natural resources is of infinite dimension awaiting at the beck and call of our mining technology.

I do not believe that there is any long-term effect from so-called “anthropogenic ” global warming. I do howver believ that global economic stupidity exists and can have dire consequences.

I’m going to soon be seventy and thanks to modern medicine, clean and cheap healthy food, and genetics I could live another generation or more. Please don’t make me watch America’s standard of living decline in that period. Americans please wake up to the consequences of knee-jerk “envuironmentalism,” before you reduce our standard of living to the point of no return. Money like rare metals is a precious resource; it must not be wasted any more.

Jack Lifton

7 Tek February 10, 2010 at 1:49 pm

No disagreement here, Jack. I have been and yet am a “Practical Environmentalist” . Everything we do leaves footprints and fingerprints all over the environment, but that is a fact which cannot be changed. What must be changed is the attitude that progress somehow means unregulated, unmitigated ,wholesale destruction of any and all natural resources in an effort to support and promote an unsustainable lifestyle for a few priveleged groups on the planet.

The real technical WOW in this article is the 80%assay/48% TREO on the Grab Samples at GW’s Rareco mine. Isn’t 48% TREO virtually beneficiated concentrate levels for many deposits? Did I miss a decimal somehwere, or am I misinterpreting what I’m reading?

8 Jack Lifton February 11, 2010 at 3:48 pm

Tek,

You didn’t miss a decimal, but I must emphasize. as Gary Billingsley emphasized to me, that you don’t have a WOW until the extent of material at those numbers is determined. It’s encouraging but not decisive. The indicated resource at Steenkampskraal seems to be, from the data I’ve seen, 35,000 mt net TREEs produced from a deposit that averages 17%. Just to put that in perspective you would have to move 1,400,000 tons of rock at 2.5% to get 35,000 tons of TREEs, but at 17% you need “only” to move 200,000 tons. Clearly there is a very significant production cost differential providing the metallurgy can be resolved. If on top of that differential you have much higher value material due to the distribution having significant HREEs then the project becomes optimal in comparison with most others in the world. If Steenkampskraal mis not an anomolous deposit and is more extensive then it could be one of the world’s most valuable REE deposits, because of the speed with which it could be brought to production.

I’m going to follow this story closely. So should you.

Jack

9 Tek February 11, 2010 at 7:09 pm

Thanks Jack.

Yes I fully realize that the grab sample is likely unusual, but just the idea of any insitu material being of that grade, is pretty amazing. Like you noted, even 17% with a good metallurgical extraction is a significant advantage.

10 William Traster February 13, 2010 at 10:53 pm

Jack,

Interesting article I found tonight about China approving stockpiling reserves:

http://business.globaltimes.cn/industries/2010-02/505098.html

Bill

11 Ron August 1, 2010 at 5:38 pm

Jack,

Just running a compare between AVL and GWG, both show similar patterns, but for the same 5 year period since ’05, AVL is up 1500% and GWG is down 70%. Seems like AVL knows the lay of the land (political and geological) better than GWG.

Is this a fair comparison to make? How does that reflect positive fundamentals for GWG?

Very hard to find much fundamental info on either company, aside from your newsletters and site.

thanks,
Ron

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