The TMR Critical Rare Earths Report

by Gareth Hatch on August 16, 2011 · 22 comments

in News Analysis, Rare Earths, Tools & Metrics

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Critical Rare Earths ReportIt's been a few months in the making, but it's finally here. Just a few days ago I put the finishing touches on a brand-new, 75-page report on the critical rare earths. Built with independent data from the ground up, the report features the following:
  • Global supply projections for total rare earth oxides (TREOs), extending out to 2017;
  • Individual global supply & demand projections for oxides of the critical rare earths neodymium (Nd), europium (Eu), terbium (Tb), dysprosium (Dy) and yttrium (Y);
  • The output of individual rare earths from the most advanced new projects outside of China– and the rather ominous implications of the results;
  • A detailed evaluation of which rare earths will be in deficit, and for how long – with projections of when the transition to permanent surplus is likely to occur;
  • Similar metrics for oxides of lanthanum (La) and cerium (Ce), the two most important non-critical rare earths;
  • Quantitative rankings for each of the critical rare earths, of key mineral-deposit characteristics associated with the leading contenders for new sources of supply;
  • A detailed evaluation of how long China will dominate the supply of each of the individual critical and non-critical rare earths reviewed – and the most important regions for new supply; and
  • Dozens of charts, tables and figures to help you to visual the projections, and their implications.

Download your complimentary copy of the Report today, from:

http://www.CriticalRareEarthsReport.com

Be sure to pass the link along to anyone you think might be interested to read it too!

In the next couple of weeks we'll be doing a free Q & A teleconference for everyone who downloads a copy of the Report via the above link - look out for the details soon.

In the meantime, feel free to post your comments and questions in the section below.

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{ 22 comments… read them below or add one }

1 Gordon Clarke August 16, 2011 at 8:25 pm

I haven’t been able to download the report yet. The email doesn’t give any guidance as to how to download it.

2 prescient11 August 16, 2011 at 11:58 pm

Gareth, congratulations!!! This is an insane report, which is going to take an entire weekend to digest.

THANK YOU for your work in putting this together. REally going to have read this through…

3 ATC August 17, 2011 at 6:11 am

A thorough report that covers the sector well.
Given the myriad of resources being drilled out, I have yet to read anywhere what grade ppm is considered economic in general for any particular REEs or on a TREO basis? thanks.

4 Positroll August 17, 2011 at 9:06 am

Very interesting read.

– Given that Western co’s will be ready to pay a premium in order to not being forced moving to China, I don’t think you can leave that part out of the equation when evaluating which Co’s will be successful (which of course is not the major purpose of the report – but my major interest … ;-) )

– Since I didn’t take the whole weekend to read it: it doesn’t seem to consider Baotou’s plans to stockpile 300.000 tons of REE concentrate 2013-2015 (see Byron Hawes’ comment here: http://www.raremetalblog.com/2011/08/baotou-gm-says-high-ree-prices-are-irreversible.html#more ) – or did I read too fast?

– re your metrics p 21: I would have loved to see mentioned that sometimes the other stuff (non-REE) of the ore can contain lots of valuable things like zirconium, niobium … with Alkane mentioned as a prime example of course … ;-)

5 prescient11 August 17, 2011 at 11:18 am

Positroll,

You hit on one of my questions, Baotou will be stockpiling 300k tonnes in the north and in the south there will be at least a 100k tonne stockpile of the HREEs.

What does this do to the demand chart. What happens when Chinese supply falls off the map in ten-fifteen years.

Surely they must be thinking about that.

6 Kyle August 17, 2011 at 6:17 pm

Thank you Gareth, this looks excellent, will leave it to the weekend a large pot of tea to do it justice.

Cheers

7 Positroll August 18, 2011 at 5:16 am

Eh, just realised I left something out in my first critizism – the dangers of copy and paste … Should read:

– The report (expressly) doesn’t consider Chinese export restrictions (p 16): “The issues associated with export quotas and other restrictions clearly have an effect on the pricing and availability of CREOs for use outside of China. However, the level of production of CREOs in China is driven by overall demand for these materials, within China and in the rest of the world, not the export quotas.”
Given that Western co’s will be ready to pay a premium in order to not being forced moving to China, I don’t think you can leave that part out of the equation when evaluating which Co’s will be successful (which of course is not the major purpose of the report – but my major interest … ;-) )

8 Gareth Hatch August 18, 2011 at 2:08 pm

@ATC: that’s a great question. Certain executives in this sector have not been shy in saying that you need a minimum 2% grade (20,000 ppm) for a rare-earth project to be economical. I think that’s too simplistic a response to the question, and that it is going to depend, on a case-by-case basis, on the individual parameters of any given deposit.

@Positroll: the report was not geared towards trying to determine which companies were going to be successful; the rankings for projects were on the basis of parameters associated with the deposits, not the companies. From the strategic point of view, it really doesn’t matter which company owns what project; the rare earths will still be sat there, waiting for someone to exploit them, and the characteristics of some make them more attractive than others, for strategic purposes.

As for stockpiling – I am not sure off the top of my head if the US DOE demand numbers account for any degree of stockpiling, as an aspect of demand. Again, as I said in the report – we’d have to drill down to individual elements, to see what the effects might be, of externalities like that.

@prescient11: where are you getting your figure of 100kt of HREE stockpiles from?

9 prescient11 August 19, 2011 at 10:51 am

Here’s the WSJ article mentioning the strategic reserve, I’ll have to dig to see where I got the 100k tonne figure.

http://online.wsj.com/article/BT-CO-20110615-703713.html

10 Paul San Antonio August 20, 2011 at 11:15 am

Great work Gareth Hatch!
The next logical step for me beyond the report is to see if the higher CREE prices give the top rated mines the highest margins in the non-Chinese rare earth industry. I believe this will be true and it is more important than lowest cost to produce IMO. Generally mining analysts look at lowest cost to produce, but with mutiple elements and by-products being key to REE miners, I think this margin metric will dominate REE mining analysis.

I also think the “minable spectrum of REE’s” is a next step in mine comparisons. Lynas’ Curtis has been way ahead on this key issue. Most of the industry talks tonnage, but Curtis is focused on being a reliable supplier to the rare earth supply chain of new technologies and OEM’s.

Ucore has noted their wide spectrum as well. But at such a low TREO they will need other mining products (uranium and gypsum) to really benefit from their full spectrum IMO.

This issue seems critical to me. Without this approach, an OEM (Original Equipment Manufacturer) might get a few REE’s from a non-Chinese mine but still be very dependent on China for other elements in their manufacturing process. Such a case leaves the manufacturer in almost the same vulnerable position at the end of the day.

Lynas is really the only non-Chinese miner that can avoid much of this vulnerability near term. They will have the operations and multiple mine sources (Kangankunde, Mt. Weld, and the Crown Metalic Resource) for such reliability very soon with the primary CREE resource being Mt. Weld (CLD & Duncan Deposits). If Great Western proves out their resources and builds up according to plan then the same comment would apply to them as well.

By 2015 when oversupply COULD be an issue (if nearly everyone else develops near schedule- which would be a first in the history of any mining that I can recall) then reliability will be the focus. I suspect the issue will arise when miners start “packaging contracts of several different REE’s” to users to minimize oversupply of the common elements.

The “one stop shop” approach is a very logical result with multiple elements needed by a manufacturer in a free economy. Right now China’s command economy and export quota system has deemphasized this issue. Because the entire Chinese system is regulated like a single entity of production and supply to the ROW is regulated by quota in China, the market issue is temporarily masked to some extent IMO.

But right now this key mining issue is not being addressed by anyone but Lynas because no other single resource can satisfy the need besides Mt. Weld. And I’d say no other company is developed enough to think about these issues right now.

Great Western is addressing the issue internally with multiple mines and a “mine to market” strategy. But GW will need time and money to develop multiple mines and their current production plan (Steen) is focused most on supply within the company with further expansion thereafter.

The topic is obviously critical for the future and Lynas and GW are the only companies even capable of addressing the discussion as a stand alone. And on the subject Lynas has near term larger scale answers, while GW has a potential to address the issue and beyond (into the manufacturing area) with even further vertical integration.

11 Positroll August 20, 2011 at 4:30 pm

“Lynas is really the only non-Chinese miner that can avoid much of this vulnerability near term. ”
Um, sorry? Pray tell, did I miss something or were are Lynas HREE’s? Alkane’s suite of resources on offer will be way broader:
– LREEs
– HREEs including Dy
– Yttrium
– Zirconium
– Niobium
– Gold
– Copper

And for many manufacturing co’s, Alkanes output will easily big enough – just compare Arafuras MoU with ThyssenKrupp that only covers 25% of Arafuras production …
So, unless you are talking about macroeconomics, Alkane is way ahead of Lynas wrt their resource.

The big difference in favor of Lynas (which I do consider a buy, except for the fact that I own too much shares in the REE sector already) is of course that Lynas will produce not a concentrate but single elements, while Alkane prefers to get a joint venture in this respect, maybe with Lynas. Please note though, that Alkanes CEO mentioned in this interview http://www.raremetalblog.com/2011/08/tracy-weslosky-interviews-alkane-resources-ian-chalmers-in-sydney-australia.html#more that they have the technology to go it alone, it just would add another 2 years to REE production.*

*My personal worst case szenario (in the extremely unlikely case they wouldn’t get a reasonable contract with one of the REE producers): they’ll go ahead with the DZP, sell the zirconium and niobium and store the REE concentrate for two years (just like the Chinese) till they can seperate the stuff themselves – later but higher cashflow …

12 Positroll August 20, 2011 at 4:58 pm

Ok, I exagerated, unlike MCP, Lynas does have some HREE (esp Duncan deposit), but only in relatively small amounts … which is why they are interested in getting to cooperate with Alk …

13 Paul San Antonio August 20, 2011 at 9:11 pm

Positroll,
I’d say you missed a lot.
Your comment is mostly wrong but your attitude is not worth the time. Research the numbers and drop the arrogance and you can learn a lot.

14 Paul San Antonio August 20, 2011 at 10:15 pm

Gareth Hatch,
I respect the fact that TMR does not include Lynas’ Crown deposit in it’s index. I’m sure the Lynas Board likes things that way. But in support of Lynas shareholders I have put together a list of slides from old Lynas presentations on Crown.
http://seekingalpha.com/instablog/812815-chihawk/208469-lyans-crown-defined
The slides give enough detail and the resource is JORC defined. I wish you would consider listing Crown in your index. I think the data is of at least the quality of Kutessay II and the listing would keep Lynas management honest IMO. I’m sure you know this spring Lynas management tried to sell the resource to a shell company (Forge). The sale failed when shareholders realized the value of Crown. But I think the more public Crown’s value becomes the less the risk of these type of future actions. I would appreciate your thoughts.
Thanks,
Paul (chihawk)

15 maxkil August 22, 2011 at 11:12 am
16 prescient11 August 25, 2011 at 12:38 pm

Gareth, you need more press on this work. My only real criticism is that the focus is again on in situ value rather than annual production value of REEs.

I think that from a practical, “which one is going to make a mine” perspective, you have to look at the annual output of a feasible mining operation.

Again, if the clays of China truly only have 10-15 years left in them, can there be any doubt that both AVL and QRM must be brought onstream immediately?

17 Gareth Hatch August 25, 2011 at 3:50 pm

@Paul San Antonio: if the Lynas Crown Deposit resource estimate was broken out by individual REEs, it would probably be a candidate for inclusion in the Index.

@maxkil: my understanding is that the DOD report has been issued, but that it has not been released to the public.

@prescient11: from the STRATEGIC point of view, the presence and distribution of specific elements in a given deposit is the “first port of call” for looking at deposits. Individual junior exploration and mining companies and their investors will obviously be interested in the money to be made in such projects, and that’s fine; however, evaluating deposits for potential financial gain is a different exercise than doing such evaluations for strategic purposes.

I’ll be writing more on this topic shortly.

18 Paul San Antonio August 25, 2011 at 7:05 pm

Gareth Hatch,
One of the slides in the prior link does breakdown the individual REE’s. For your convienence I have isolated the slide here:
http://seekingalpha.com/instablog/812815-chihawk/210670-crown-breakdown-for-gareth-hatch

The full portfolio of slides can be found at:
http://seekingalpha.com/instablog/812815-chihawk/208469-lyans-crown-defined

19 prescient11 August 25, 2011 at 9:18 pm

Gareth,

I saw your writeup on RMB, but must say that I think the amount of detail and work you put into this should be giving you a lot of press here and attention to your own site!!!

Please show up that clown Hykawy for what he is.

In any event, I understand your point with regard to “strategic” value, but I would counter with the thought/argument that, while in situ value is for sure an important consideration regarding CREO value, it doesn’t much matter though unless you’re considering through put mining scenarios.

In other words, whether addressing it purely strategically or from a financial/investor point of view, exactly what kind of mining plan could rush LYC’s Dy to production faster. You still have to crush the same tonnage of rock, don’t you?

Unless perhaps some of these deposits have certain REE bearing ore concentrated that they could just focus on I suppose. But barring that, according to Jack, if you had to double or triple your tpa to take advantage of the full insitu value due to the low percentages, that would be incredible complicated and unlikely.

Bottom line I think, is whether you think from a strategic or financial point of view, the answer is the same, what annual production of what REEs could you get from a realistic mining plan.

I think that’s why such a high % of heavies on a decent resource is important for the future.

Btw, looking forward to your Strange Lake writeup. Did you have some drinks with Mickey Fulp up there?

20 Recover August 26, 2011 at 11:25 am

What about the Turkish deposit? Why nobody looks into it?

http://amrminerals.co.uk/assets/files/AMR%20August%202011%20Presentation.pdf

Please explain

21 Recover August 26, 2011 at 11:30 am

Also, has teh source of 100 kt HREE Chinese stockpile been found?

22 prescient11 August 30, 2011 at 11:05 am

I think my point/argument in the previous post is fairly valid.

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