Updated January 18, 2011: I have now set up a new permanent Web page for the Index described below, accessible from the menu bar above, via Metrics & Indices >> TMR Advanced Rare-Earth Projects Index or directly from here.
As of the beginning of November 2010, there are 251 individual active rare-earth projects in the TMR database, being run by 165 companies in 24 different countries outside of China. It will be no surprise that these projects are in a wide variety of development stages, ranging from being prospective for rare earths on the basis of a grab sample or two, to full-blown mining operations.
When working with clients to analyze the sector from a strategic point of view, I generally filter this list of projects and focus much of my attention on what I call advanced rare-earth projects - those that meet one or both of the following criteria:
- The deposit associated with the rare-earth project has been formally defined as a mineral resource or reserve under the guidelines of a relevant scheme such as NI 43-101 or the JORC code;
- The deposit has been subject to past mining campaigns for rare earths, for which reliable historical data is available, even if the data is currently not compliant with a relevant scheme in terms of a resource of reserve definition.
Based on these criteria, at this time the TMR Advanced Rare-Earth Projects Index comprises 13 projects, being run by 12 companies in 6 different countries. These projects, in alphabetical order, are:
- Bear Lodge (Bull Hill Zone) - Wyoming, USA : operated by Rare Element Resources Ltd. (TSX.V:RES, AMEX:REE);
- Dubbo - New South Wales, Australia : operated by Alkane Resources Ltd. (ASX:ALK, PK:ALKEF);
- Hoidas Lake - Saskatchewan, Canada : operated by Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF);
- Kutessay II - Chui, Kyrgyzstan : operated by Stans Energy Corp. (TSX.V:RUU);
- Kvanefjeld - Kujalleq, Greenland : operated by Greenland Minerals and Energy Ltd. (ASX:GGG, PK:GDLNF);
- Mount Weld - Western Australia, Australia : operated by Lynas Corporation Ltd. (ASX:LYC, PK:LYSCF);
- Mountain Pass - California, USA : operated by Molycorp Inc. (NYSE:MCP);
- Nechalacho (Thor Lake Basal Zone) - Northwest Territories, Canada : operated by Avalon Rare Metals Inc. (TSX:AVL; OTCQX:AVARF);
- Nolans Bore - Northern Territory, Australia : operated by Arafura Resources Ltd. (ASX:ARU, PK:ARAFF);
- Steenkampskraal - Western Cape, South Africa : operated by Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF) in association with Rare Earth Extraction Company ;
- Strange Lake (B Zone) - Quebec, Canada : operated by Quest Rare Minerals Ltd. (TSX.V:QRM);
- Zandkopsdrift - Northern Cape, South Africa : operated by Frontier Rare Earths Ltd. (TSX:FRO from 11/17/10 onwards);
- Zeus (Kipawa) - Quebec, Canada : operated by Matamec Explorations Inc. (TSC.V:MAT, PK:MTCEF).
There are a number of ways to compare the technical merits of rare-earth projects; we covered just one potential metric recently in the review of Dr. Seredin's outlook coefficient for rare-earth deposits. Whatever we choose, at some point these have to be translated into economic merits, on the basis of the material grade, distribution of specific elements, and the prevailing market conditions at a point or range of points in time of particular interest - past, present or future. We also of course have to consider the merits of the individual companies that own or operate the projects, as well as the infrastructure, mineralogy and subsequent processing costs for exploiting the deposit and other parameters.
Two common metrics used to give a quick snapshot of the potential value of a deposit are:
- The unit basket price (in US$/kg) : this is the theoretical price that could be obtained for 1 kg of fully separated rare-earth oxides, containing rare-earth oxides in the same proportions as found in-situ within the deposit (e.g. if the proportion of neodymium oxide in the total rare-earth-oxide material grade was 10%, then the unit basket price would include the market price for 100 g of neodymium oxide);
- The value per unit mass of mineral deposit (in US$/t) : also known as the rock value, this is the theoretical value of each tonne of material in the deposit, on the basis of the market value of the rare-earth content present (assuming 100% efficiency of extraction and separation).
There are obvious limitations to these two metrics. Most notably, they do not account for the costs associated with extracting and processing the minerals into separated oxides, and they do not account for the level of difficulty associated with the specific mineralogy of a deposit. They also do not account for the actual efficiency of extraction at each stage, and the associated losses of material that are inevitable at each step.
However, these metrics do provide some basic value to anyone doing their due diligence on a deposit; even more so with a deposit that has a defined mineral resource (such as the 13 deposits listed on the TMR Rare-Earth Projects Index), since there is a reasonably significant degree of confidence in the data that one needs to use, to do the calculations.
The following chart is a comparison of these two metrics for each of the 13 projects named above, based on the average market price for separated rare-earth oxides (excluding oxides of Ho-Er-Tm-Yb-Lu) in October 2010, FOB China published at metal-pages.com (click the image to enlarge):
This second chart consists of the same comparison of metrics, but based on the average prices in 2009. Note the significant differences in scales for these two charts (click the image to enlarge):
There is additional nuance to these metrics that comes out when you start to look at a breakdown of the individual rare earths present in each deposit; but we can quickly see that for the most advanced projects in the rare-earths sector, there is a very general inverse relationship between the unit basket price for each mineral resource or reserve, and their associated rock values. What the charts tell us is that rare-earth mineral resources with high rock values, generally have such values on the basis of a high material grade (i.e. a significant quantity of total rare-earth oxides present, as a fraction of the overall resource); it also tell us that generally, mineral resources with high unit basket prices, have such high values on the basis of a distribution of individual rare earths that skews towards the more-valuable rare-earth elements present, rather than a high overall material grade..
In the future, as current projects in development publish technical reports defining mineral resources that meet the appropriate guidelines, we'll update the TMR Advanced Rare-Earth Projects Index accordingly. We'll also look to update the above charts on a reasonably regular basis too.
Disclosure: the author is neither a shareholder of, nor a consultant to, any of the companies mentioned in this article.