Review Of A Proposed New Method For Evaluating Rare-Earth Deposits

by Gareth Hatch on November 2, 2010 · 21 comments

in News Analysis, Rare Earths, Tools & Metrics

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The Russian Academy of Sciences publishes a journal called "Geology of Ore Deposits", which is available in both English and Russian language format. In the most recent edition of the journal (yet to appear online), Dr. Vladimir Seredin published an intriguing paper titled "A New Method for Primary Evaluation of the Outlook for Rare Earth Element Ores" [1]. Dr. Seredin works under the auspices of the Academy's Institute of Geology of Ore Deposits, Petrography, Mineralogy, and Geochemistry, based in Moscow.

The author starts by covering an issue on which I have also previously written - in an article, in the interests of full disclosure, which is cited in this paper  - specifically the somewhat-arbitrary classification of rare earth elements as "light" and "heavy" or even "middle". The paper does a good job in reviewing the various perspectives on this point, and the advantages and disadvantages to each approach, as it relates to evaluating the prospects for any given rare-earth deposit.

The paper then goes on to describe the proposed new method of ore-body evaluation, using what Dr. Seredin calls the outlook coefficient, Koutl, for each rare-earth ore deposit. This coefficient is a ratio of the relative presence of two groups of rare-earth elements (REEs) in each deposit:

  • Those REEs whose future demand is likely to outstrip supply (referred to as "critical" REEs), and
  • Those REEs who future supply is likely to be in excess of demand (referred to as "excessive" REEs).

Dr. Seredin uses forecast data published by Dudley Kingsnorth of IMCOA to determine which of the rare earths fall into which category. There is a third group of REEs that is not used in the coefficient - specifically the remaining REEs that are likely to be in balance (referred to as the "uncritical" REEs).

The paper defines Nd, Eu, Tb, Dy, Er and Y as being critical REEs, and defines Ce, Ho, Tm, Yb and Lu as being excessive REEs. The outlook coefficient is defined as the ratio:

(critical REEs as a fraction of total REEs present) : (excessive REEs as a fraction of total REEs present)

The author goes on to then categorize 40 different rare-earth deposits, by comparing the outlook coefficient for each deposit to the critical REEs present as a percentage of total REEs present (REEdef). The deposits are further categorized by type of deposit. The resulting figure is shown below, extracted from Dr. Seredin's paper, with his original description of the graph:

Classification of ore objects by outlook for individual REE composition [1]. (1) Hydrothermal and magmatic ores related to carbonatite, alkaline, and alkali-granite complexes; (2) hydrothermal ores presumably related to mafic magmatism; (3, 4) placer deposits: (3) monazite and (4) xenotime; (5, 6) chemogenic sedimentary ores: (5) ferromagnesian nodules and crusts of ocean floor and (6) fish bone detritus replaced with apatite; (7) supergene clay ores in mantles of weathering; (8) hydrothermal clay ores, products of argillic alteration; (9) polygenetic metalliferous coals; (10) REE objects of unspecified origin.

Clusters of ore objects distinguished by outlook for REE composition (numerals in figure): I, unpromising; II, promising; III, highly promising.

Ore objects (numerals in figure): 1, Bayan-Obo, China; 2, Mountain Pass, USA; 3, Lovozero (loparite ore), Russia; 4, Bear Lodge, USA; 5, Mount Weld, Australia; 6, Kukisvumchorr, Russia; 7, Steenkampskraal, South Africa; 8, Hoidas Lake, Canada; 9, Nolans, Australia; 10, Thor Lake (upper ore zone), Canada; 11, Maoniuping, China; 12. Tomtor, Russia; 13, Dubbo, Australia; 14, Thor Lake (lower ore zone), Canada; 15, Benjamin River, Canada; 16, Lovozero (eudialyte ore), Russia; 17, Vergenoeg (apatite–magnetite ore), South Africa; 18, Kutessay II, Kyrgyzstan; 19, Lemhi Pass, USA; 20, Kichera, Russia; 21, Brockman, Australia; 22, Vergenoeg (fluorite ore); 23, Abramovka (kimuraite–lanthanite ore), Russia; 24, Deep Sands, USA; 25, Placers of Malaysia; 26, Northwestern Pacific Ocean; 28, Huashan; 29, Guposhan; 30, Heling; 31, Longnan, China; 32, Tenyakovo, Russia; 33, Dolna Ves, Slovakia; 34, Abramovka, Russia; 35, Zhijin, China; 36, Aduun-Chuluun, Mongolia; 37, Rakovka, 38, Pavlovka, 39, Vanchinsk, Russia; 40, Douglas River (xenotime ore), Canada.

Dr. Seredin categorizes the three broad "clusters" by their potential for exploitation on the basis of the proportion of critical REEs present.

I took the liberty of double-checking the approach here, by taking the data published in the 13 most advanced rare-earth projects currently underway (i.e. those with a mineral resource whose definition is compliant with 43-101 or JORC guidelines, and / or which have been historically mined and have reliable associated data). The results can be seen below, and indeed match the placement used by Dr. Seredin in his analysis (click to enlarge):

One potential criticism of the approach in the paper is that the outlook coefficient does not directly take into account the economic feasibility of exploiting any of these rare-earth deposits, challenges associated with infrastructure, logistics or the extractive metallurgy required to develop these projects. It would be useful to be able to factor such parameters into such a coefficient, though of course this might bring further complications. The author does acknowledge these limitations in the paper, also adding that

"the level of radioactivity in any given deposit, and the environmental consequences of mining and processing of ore also exert an effect on the eventual estimate of the outlook of a deposit for its development. Therefore, the proposed method of evaluation based on relationships between demand and supply of individual REE should be regarded as only preliminary".

In addition, one might argue that certain REEs should be categorized differently than the ways proposed. For example, in his original categorization, Dr. Seredin placed Pr in the middle-of-the-road "uncritical" group, when it might be considered for placement in the "excessive" group by virtue of its likely supply to demand ratio being higher than that of Ce. Eu was placed in the "critical" group, even though its likely supply to demand ratio is very close to that of La, which was designated as an "uncritical" REE.

However, in subsequent correspondence, Dr. Seredin indicated that he took into consideration not only the ratio of likely supply to demand, but also the longer-term picture as it related to technology trends. Pr, as a constituent of didymium (Pr-Nd), may increasingly replace pure Nd in permanent magnet alloys; increasingly wide usage of Eu as a phosphor and further long-term growth in that market would mean Eu will likely be a critical REE. Obviously there may be further discussion on the specific categorization of each REEs, but the overall approach seems reasonable.

The specific utility of this approach, as a means of comparing rare-earth deposits, is obviously up for debate, but overall I think that Dr. Seredin's proposed method is worthy of further consideration and evaluation. If nothing else, it gives some clues as to how the development of early-stage deposits might be prioritized, given the finite resources and capital available to do so.

[last updated Nov 3, 2010 to remove erroneous references to Dr. Seredin being a professor at Perm State University - that would actually be his namesake. Dr. Seredin is a senior researcher at the Institute of Geology of Ore Deposits, Petrography, Mineralogy, and Geochemistry.]

Disclosure: the author is neither a shareholder of, nor a consultant to, any of the companies mentioned in this article.

[1] Seredin V. V., Geology of Ore Deposits, 2010, Vol. 52, No. 5, pp. 428–433.

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{ 21 comments… read them below or add one }

1 daniel hartley November 2, 2010 at 11:50 pm

hello, excellent article,very informative,may GOD bless you and keep you always. daniel

2 Fred November 3, 2010 at 12:01 am

Why is the presence of uncritical rare earths used as a denominator? I would think that the absolute value of "critical" rare earths should be the defining separating feature for distinguishing different deposits. (they could be equalized relative to importance to normalize them). The only reason I see it necessary to use "uncritical" rare earths as a denominator is if their presence hinders the recovery of the critical rare earths... Which should then include anything in the host ore that would do this.

3 Barry Zern November 3, 2010 at 12:09 am

Thanks, Gareth. This rigorously shows what many of us are trying to get to by back of the envelope methods. From here it is easy to apply our own criteria, such as minimum level of project advancement, or political stability of jurisdiction, etc.

4 Kris November 3, 2010 at 1:50 am

Thank you Gareth. Very interesting and it confirms my opinion about RUU/Stans Energy as being way undervalued compared to the famous names. Not only do they have a valuable deposit, but the geo-political position between Russia, Germany and Japan is excellent. It's too valuable not to succeed. Metallurgy, a relatively cheap processing plant, it's all in an advanced stage compared to the competition.

Bubble or not, there will be a few winners in the next 24 months. This kind of research is very helpful to discover the potential winners.

5 Jim November 3, 2010 at 4:15 am

Gareth, the mathematics in this paper are spurious. The graphs (his and yours) have the points on them aligned at a 45% degree angle simply because the Y and X axis are so highly correlated - the Y axis is (critical/critical+excess) and the X axis is (critical/excess). So all that's really being illustrated is the % of critical. So the point that it may be more useful to look at "critical" or supply/demand, rather than "heavy" or atomic weight, may be a good one, but the graphics are simply silly. My question to you (and Jack) is, does he define "critical" the same way you would, or is he just including the elements that will put more Russian deposits in cluster III.

6 Jim November 3, 2010 at 4:20 am

Actually, you could make a more interesting and objective ranking by just putting a value on each deposit, where you'd multiply pounds X price for each element (including non-REs) and then add them all up. In a spreadsheet of course, where you could hypothesize various future prices. But then, isn't that what the miners have to do to determine economic feasibility? And like you say (and the miners well know), that doesn't mean much unless you know the costs.

7 Henk Mol November 3, 2010 at 4:57 am

Dear Gareth, Very nice start indeed, although I do not understand the way the data is ranked. I would have expected less cross correlation between the two data sets, so much more spread or at least a few of the data points far of the statistical Y=mX line. As an engineer I dealing with much worse datasets than this one. Is there any other way that you proposed that shows the ranking of importance? How about short term and longer term effects? How about REEs as by-product of some other main mineral (after all, Gallium as well as Lithium are not mined for themselves most of the time, and so the REEs could suffer the same fate). Keep up the good work and keep us public informed! Regards Henk

8 Gareth Hatch November 3, 2010 at 6:45 am

Thanks for the feedback so far.

Fred: it is the "excessive" REEs that are used as the denominator - those whose supply are likely to be greater than actual demand in the foreseeable future. The third group, the "uncritical" REEs, are not included. There is a school of thought (not specifically expressed in the paper by Dr. Seredin) that there are REEs on which you make money, on which you lose money, and those on which you break even when processing. If you're not making money on the excessive REEs (and of course it all depends on the prevailing market prices), then they would detract from the potential value of the deposit in question.

Jim: there is indeed a high degree of correlation because the y-axis values do appear in the calculation used for the x-axis. However, a slight correction - the y-axis is (critical/critical+uncritical+excessive) - it does include the uncritical elements too. I think it is useful to be able to see the actual specific proportion of so-called critical REEs as a value, so I'd respectfully disagree that the graphs are simply "silly". As for what I would consider critical elements... I certainly think that the magnet-related elements Nd, Dy and Tb are particularly critical in the sense that growth in permanent magnet production will be very robust for the forseeable future, given their pervasiveness in so many forms of technologies. Given my own background in magnetics I am perhaps a little biased though, in this regard :-)

Also, we do look at a range of metrics for rare-earth deposits, factoring in current and past market pricing, including rock value (value per tonne of mineral resource) and the overall theoretical maximum of a mineral resources (rock value multiplied by in-situ tonnage of mineral resource), though generally we focus only on the REEs present. The other valuable metals are certainly a consideration as well.

Henk: we're looking at some other ways to present some of this data - we're already doing this as part of a paid-subscription-based advisory service that we're currently "testing" with a small group at the moment, and which we'll be rolling out in the next couple of weeks to folks who are interested.

9 Henk Mol November 3, 2010 at 7:23 am

Thanks for answering fast Gareth. Lacking the hard data itself, but having experience with some of the magnet applications, I have the odd feeling that until now we have been receiving rare earth based goods for far too few money especially from Chinese sources. It just does not reflect the true costs at all. The question is - how much too cheap? In other words what will be a real price? I bet if we take into account the environmental, health, safety and financing costs, we must be more than a factor of 2 away now. Coming Friday I will travel to Shenzhen to the EVS25 symposium and learn more about the e-vehicle scene, which is examplary for any emerging cleantech operation that depends heavily on technology metals. Probably I'll post a message after visiting the conference to check the validity of what I learned. Regards Henk

10 Jesse November 3, 2010 at 9:15 am

Seredin qualifies Erbium as critical, yet few companies ever discuss the potential of Erbium in the future. Can you elaborate on this Gareth?

Very interesting paper by a highly qualified man. Thanks for posting!

11 Chris November 3, 2010 at 10:32 am

Read this report this morning ( thanks very much by the way ) was laughing to myself how once again, Ucore isn't mentioned in a report.

Then I just saw this article along with Molycor.

I agree with the author " stealh heavy".

12 Fred November 3, 2010 at 11:47 am

Thank-you for the clarification Gareth. The negative impact of the "excessive's" is an interesting point. I would still maintain that this analysis should be focused on absolute numbers and not percentages of TREO. This type of comparison supports the previous hypothesis put forward by Jack and yourself regarding the "small is beautiful" principle in rare earth mining.
I also second Jim's concerns about placing the critical% variable in both the x and y axis... this isn't very sound and confounds the comparison.

13 trevor hughes November 3, 2010 at 3:23 pm

Thank you Gareth,
I agree with you that the circumstances surrounding any deposit are very important in execution. For example Ucore may be in the US, but their drill results suggest that mining will be very difficult due to the narrow and discontinuous bands of ore. Mickey Fulp has been the only one to point this out as far as I am aware. I would be interested in your and readers analysis of this specific point re Ucore.

14 Ian London November 3, 2010 at 10:17 pm

HI Gareth... I generally like the concept but as you point out, there is no discussion on cost of extraction or political stability of the country in which the project is located.

I have not had the benefit of reading the comments received by others, so the point may have already been raised.. I would suggest that the dimension that is missed completely is how advanced a project is and the the notion of time. There is a relatively limited space for ROW production. The nature of the industry is such that it is driven by private contract so supply will be contracted for if and when it is available and the first to market will quickly change the needs going forward.

While some of the leading projects may not rate as good deposits based on the methodology, but will probably be developed because they are advanced. While others may look like winners, when you look at location and stage of developement... will there be a demand when they are ready to bring into production. So the relative rankings will change very quickly as each new producer comes on line.

The method may work for well more traditional metals. For rare earths, with the notion of time to market, it may be a bit less so.

Until soon... Ian

15 Kris November 4, 2010 at 3:10 am

I often read that the political stability of the country in which the project is located is very important. I think that's true, but unlike many Western investors I think it's an advantage to have deposits in emerging countries. Is it a coincidence that GWG/Rareco in South-Africa and Stans Energy in Kyrgyzstan already are fully permitted? GWG even has a permit to store thorium. Why is Toyota all over Vietnam? Why does Angela Merkel say Germany has to look for deposits in Eastern Europe and Central Asia?

I think the REE world will follow the same pattern as is already happening in general. These days it's happening in emerging countries and most of the Western world is in a gridlock still suffering from the financial crisis...

I predict there will come a time investors will realize it's happening faster in countries where politicians realize there are big opportunities in REE business (i.e. the whole REE supply chain!) that cannot be missed. Again, think of South Africa, Kyrgystan, Vietnam, etc. The first mover advantage is crucial and emerging countries do realize this.

So my question is: how would people rate political stability of countries like Vietnam, South-Africa, Kyrgystan when evaluating the potential of REE deposits? Cause IMO it's not a disadvantage at all to have deposits in those countries.


16 Vladimir Seredin November 4, 2010 at 7:19 am

Thanks Gareth for the review and all people who have joined the discussion of my work.

To all: The method does not apply at exhaustive estimation of REE deposits and is exclusively a method of a primary estimation of quality of REE ores composition from industrial point of view. It is directly reflected in the paper’s name. I wished to look at this problem by eyes of geologist having only data on all REE content at an initial stage of studying of his deposits. I was in such situation several times when it was necessary to make the decision on the further works having only analytical data. So, I have written following phrase in the last paragraph of the article partially quoted by Gareth.
«Obviously that many additional parameters - structure and depth of ore body, possibility of ore beneficiation, simplicity and degree of hydrometallurgical recovery of REE, grade and resources of metals, necessary infrastructure, level of radioactivity that determines environmental consequences of mining and processing of ore - exert an effect on the eventual estimate of the outlook of a deposit for its development. Therefore, the proposed method of evaluation based on relationships between demand and supply of individual REE should be regarded as only preliminary» (an author's translation of the Russian version).
To Jim+Fred:. The type of plot: Y =A, X =A/B is widely used in geology and geochemistry. For example, Zr vs Zr/Hf or Nb vs Nb/Ta etc. In our case A is Crucial REE/Sum REE (crucial REE+uncrucial REE+excessive REE) in %, B - Excessive REE/Sum REE. Direct correlation between these data is absent. You have not noticed that axis X is given in logarithmic scale. Hence, if to construct the plot in the same scales as it has made Gareth, distribution of 40 deposits will be approximate by logarithmic curve. Good correlation on Gareth’s plot is caused by that he used data only for 13 deposits well known to the western readers. They get to narrow interval of values where direct correlation between Ddef and Koutl is really observed. However it is no more than a special case.
To Jim: The obvious hint that REE classification has been specially adapted to place Russian deposits in the highly promising cluster III, probably, is connected with the inattentive analysis of the plot and review also («Dr. Seredin uses forecast data published by Dudley Kingsnorth of IMCOA to determine which of the rare earths fall into which category»). By the way, the single REE deposit that is mining in Russia now (Lovozero, loparite ore), as well as some other Russian deposits, including Tomtor (the world's largest REE deposit) have got in unpromising cluster I. Cluster III includes some Russian REE properties only together with deposits and occurrences of Australia, Canada, RSA, China, and Malaysia.
To Henk: You are absolutely right. In my opinion the problem REE recovery during mining, benefication and extraction of other minerals as by product has big importance today. In Russia, the method of by product REE recovery has developed in relation to Uranium ores of sandstone type that is mining by underground leaching. I have been studying of possibility of by product REE recovery at the coal deposits for many years. Now it is known about 20 deposits in the world with anomaly high REE content (0.1–1.2 %) in the host rocks and coal combustion wastes. These concentrations not are as high as in carbonatite REE deposits, however its often exceed REE content in ion-adsorption REE deposits (0.05–0.2 %) that is now source approximately 35 % of REE to the world market, including almost 100% of HREE and Y. If to take into consideration a high share critical REE and ion-exchangeable mode of REE occurrences typical for some REE-bearing coal deposits, REE recovery as by product looks quite really. Now this problem is active studying by Chinese scientists, and knowing everything that is made in this area, I believe that “dirty” coals can become a new source of REE for “clean” energy in the future.
To Chris: Bokan deposit (Ucore) that is not presented on my diagramme, apparently, occupies third place in the world on quality of ores (after Douglas River and Abramovka properties). REEdef in Bokan’s ores (Hole LM08-32, thickness-6.25 m) is 80.4 %, and Koutl is equal 5.5. Unfortunately I have met with the data after finishing the paper preparation.

To Jessy: Good question. I have been very surprised, when have learnt from forecast of Dudley Kingsnorth, that supply and demand of Er in 2014 will be absolutely same as for Eu, 1000 and 940 tons, respectively. It is possible to assume only, that such situation is connected with wide Er usage in military areas about which we do not have enough information. Though, it could be just a typing error. It would be good to hear Dudley’s comment on this question.

Thanks again everybody.
Vladimir Seredin

17 Kris November 4, 2010 at 11:35 am

I wonder if this article/research has anything to do with RUU's SP move... Coincidence?

18 Gareth Hatch November 5, 2010 at 1:13 am

Disclosure: For the record (and I apologize for neglecting to originally mention this at the end of the article) - I am not a shareholder of, or consultant to, any of the companies mentioned in the article.

Henk: I look forward to hearing back from you after you return for the EVS25 meeting.

Jesse: As I understand it, erbium is used in components for fiber optics and digital communications, as well as in some types of lasers.

Fred: analysis using absolute numbers should certainly be part of the "arsenal" of anyone doing their due diligence in this space, I would agree.

Ian: another good point - there is a time issue with the rare-earths space, for sure.

Kris (and to everyone): there are a whole bunch of metrics that one should consider when doing serious analysis of a given project. Certainly the political situation is one of them; there are a whole bunch more which Jack and I have discussed in the past (and which we should probably dust off and repost at some point soon :-) ).

I have received a number of other comments via email which I will summarize and post here tomorrow.

19 Henk Mol November 9, 2010 at 11:36 am

Gareth, from Beijing on my way home I write a short message as promised. An amazing amount of technology was visible here. But, apart from the hard core techno which I enjoyed very much I have also a few other observations from EVS25.
- Lithium battery price confusion. VW comes with $200/kWh, but battery makers on the expo floor quoted far higher at least 450 $/kWh. Scientists go up to 600 $/kWh in their inquiries and analyses.
- A credible industrial scientist showed an synchronous electromotor with 97% efficiency and containing no magnets at all. Despite its bulkyness it was able to run with very low inertia and at high speeds and torques. So, if needed we can work around REE based materials for hybrid and electrical cars with a motor simpler and better than the classical AC induction motors.
- China is making serious effort in mitigating its megacity environmental pollution focusing on "noise reduction, exhaust reduction, and heat island effect reduttion". 100s of millions of Chinese are migrating towards the megacities in the coming decades which then ask for clean public transport and taxis as a follow up of the succesfull intro of electrical mopeds replacing the twostrokes that used to blanket cities in an acrid blue haze. Btw China does not seem to allocate top priority to CO2 but to city health and cleanliness.
- CO2 reduction does not necessarily happen when we electrify our car fleets. Model calculations shown by scientists even predicted an increase of CO2 emission in some areas, and a very modest decrease in areas heavily depending on coal. In fact, coal substituted by natural gas is the hidden cause of this improvement as the gas fired systems fill gaps in the modulation of the electrical capacity on the net that is used for charging the cars. Assumed is that people predominantly charge at home. A valid assumption in EU or US, but probably not in China with its low number of cars per person in the megacities.

20 Casual Observer November 10, 2010 at 10:38 am

Thanks for the excellent work Gareth and Vladimir.

21 peter mitchell November 29, 2010 at 12:33 am

i enjoyed the read and comments re REE`s. Has anyone put together who are likely to be the early winners with regard to the 13 mentioned outside of China? I see Lynas is on track to supply last Qtr 2011 and Molycorp is providing 3000 tons as i write. Who has the largest known deposit in the World excluding China? I have noticed several companys make this claim can anyone shed some light on this matter - much appreciated.
Peter Mitchell

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