Is This The Site Of Molycorp’s New Heavy Rare Earth Prospect?

by Gareth Hatch on October 4, 2011 · 24 comments

in News Analysis, Rare Earths

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The rare-earths community has been all a-buzz these past 24 hours with news from Molycorp, Inc. (NYSE:MCP) that they are looking to develop a heavy rare-earth element (HREE) prospect in the USA.

Things kicked off yesterday evening with the publication of an article by Keith Bradsher on the New York Times web site, titled "Molycorp Set to Announce a Rare Earth Rediscovery". In the article, Mark Smith, CEO of Molycorp, is quoted as saying that "the company might be able to begin producing heavy rare earths in a little over a year from now", and that the prospect is near to the existing Mountain Pass facility in California.

The article went on to say that

"The company still needs to do extensive test drilling to determine the quality and quantity of the rare earth ore. [...] Geologists first noted the outcropping in 1950 while mapping the area around what is now the Mountain Pass mine. But back then, Unocal, the oil company that acquired the mine, was mainly interested in light rare earths used in either oil refining or color televisions. So the company began mining a nearby lanthanum-rich deposit instead. Information on the heavy-ore outcropping eventually became buried in Unocal’s vast archive of maps and mineral analyses from rare earth deposits around the world, said John L. Burba, Molycorp’s executive vice president and chief technology officer."

TMR has been doing some homework on the new HREE prospect, and may have found its possible location - but more on that in a moment...

This week the European Institute at the Cosmos Club in Washington, DC is hosting the Trilateral EU-Japan-U.S. Conference on Critical Materials for a Clean Energy Future, an event jointly organized by the European Commission, the Japanese Ministry of Economy, Trade and Industry and the U.S. Department of Energy. In a presentation titled "Environmental Technology Innovation: Key to Sustainable Rare Earth Development", Molycorp's Dr. Burba outlined Molycorp's approach to the so-called HREE issue, including the company's efforts to "identify and develop new HREE resources".

Confirming the comments in the New York Times article, Dr. Burba's presentation indicated that after reviewing historical exploration data, the company apparently identified four new HREE prospects that:

  • All have >4% total rare earth oxide (TREO) material grades, and "very significant HREE content"';
  • All have mineralizations that can be processed by the company, presumably at Mountain Pass , once the new facility is in place;
  • Have not previously been discussed publicly, and are not currently associated with "publicly traded rare earth mining companies".

Dr. Burba went on to state that one of the four deposits is located in the USA, "within easy access" of Mountain Pass, and that the company owned "all necessary mining claims" for it. Apparently containing "high ore grade and high HREE content", Dr. Burba indicated that the material could be "readily processed" at the company's facility. Apparent preliminary results indicate that the total rare earths present contain 0.8% europium, 1.6% terbium, 0.5% dysprosium and 2% yttrium.

It's something of an understatement to say that these communications from Molycorp contain some pretty bold claims. To be able to process the materials at the new HREE prospect in little over a year, as claimed by Mr. Smith, likely assumes that there are no modifications to either the budget, schedule or construction plans for the company's new processing facility. Does this mean that Molycorp knew all along that it would potentially be including materials from this prospect, in its overall processing capabilities? We've heard mention of potential monazite deposits at and around the Mountain Pass facility - what is the specific mineralogy of this prospect?

Successfully exploiting this deposit obviously assumes that there is even an actual resource present - there is certainly no indication of just what data Molycorp has based these announcements on. The New York Times article mentioned earlier states that "the company still needs to do extensive test drilling to determine the quality and quantity of the rare earth ore". We won't even get into the business of securing permits...

The most frequently asked questions though, that I've received from folks on this story today, revolve around its timing. It's no secret that Molycorp recently has its investment rating cut from overweight to neutral by JP Morgan, and that the company's share price is at a fraction of its 52-week high. On the other hand, the entire rare-earth sector has been similarly hit by declining share prices, and it's sometimes hard to tell what is cause and what is effect.

So, where might this HREE prospect actually be? Earlier today, I took a look at some of the public records pertaining to mining claims in San Bernardino County in California, home to the Mountain Pass project. There were several claims listed as being owned by Molycorp or its predecessor companies; all of them appeared to be at or adjacent to the existing Mountain Pass location... all except for one. This latter claim appears to be located about eight miles east of Mountain Pass and from the Google Maps satellite photo, it appears to have been the site of previous activity, although there are no buildings or pits present. Take a look at the two figures below for more details.

In the meantime, I've put in a note to Molycorp asking if I can pose some questions to get clarification on this story, and if I am able to get some answers I will follow up with a posting here at the TMR Web site.

UPDATE 1 (Oct 5, 2011 12:30 AM CDT)MarketWatch is reporting that Dr. Burba said on Tuesday that "the company took 26 surface samples at a stretch of land that is located within four miles of the company's Mountain Pass operation", which if accurate, would mean that the mining claims mentioned above would not be the location of the new prospect. Interestingly they also quote him as saying that they are looking at three, not four deposits...  Dr. Burba is further quoted as saying that although Molycorp has mining rights for the prospect, they would still need "regulatory approval from a number of government agencies before it could begin production".

UDPATE 2 (Oct 5, 2011 1:00 AM CDT): The Form 8-K filing that Molycorp made to the SEC, prior to mentioning the deposit at the conference on Tuesday, can be found here. It includes the statement that "Molycorp must do extensive test drilling to determine the quantity and quality of the deposit. Accordingly, there can be no assurance as to the quantity or quality of such rare earth deposit or that such deposit will become proven or probable reserves."

UDPATE 3 (Oct 7, 2011 11:30 PM CDT): Molycorp has now added a copy of the slide presentation to its Form 8-K filing on the EDGAR Web site. Also, "Valley Boy" recently posted the following at SeekingAlpha.com: "[The above] article is mistaking Molycorp's old wastewater holding pond for the new mining claim. The holding pond is located at the southwestern edge of Ivanpah Dry Lake just north off of Nipton Road several miles east of Interstate 15. That is why the land shows up in the county records as belonging to Molycorp.

The holding pond and the drainage pipe coming down from the mine to the pond has been discontinued. That was part of the environmental responsibilities the company had to take in order to obtain the necessary permits from the government agencies. That must have probably happened during the reconstruction of Interstate 15 in Wheaton Canyon in 2008 to 2010. The pipeline went down the middle of the canyon from the mine to the holding pond partway in the freeway median strip. The canyon is the median strip itself with both freeway directions cutting the northern and southern slopes of the canyon for a couple of miles." - Thanks for the clarification, Valley Boy!

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{ 24 comments… read them below or add one }

1 Jack Lifton October 5, 2011 at 12:09 am

Let me get this straight: in a solvent exchange (SX) plant not yet built, not yet proven in, or run up to capacity after the proving-in bugs are worked out, Molycorp is going to run process leach solution (PLS) from an ore concentrate that it has not yet determined can be produced, with an extraction efficiency that it has not yet determined to be economical – this additional HREE-containing PLS will be run simultaneously or on top of the PLS derived from the Mountain Pass bastnaesite concentrate – which has not yet been run in the new plant. All this in a year.

The assumption must be that since the old SX plant is creaking along at whatever level – it has been said to be between 1,800 and 5,000 tons of “oxides” per year – then a new one must be able to do its job at an even larger throughput volume and for whatever ore PLS comes along – if it’s running the same process.

This is complete and utter engineering and chemical nonsense.

Other than that – it’s a great story.

2 david baran October 5, 2011 at 12:17 am

seems to me the share price decline is in line with everything else that is going on. Lynas has equally been sold off. how could a site of this magnitude remained a secret for so long? is there any way to check if they actually own all the mineral rights? i assume unocal would have filed some documents on this somewhere.

3 bz1516 October 5, 2011 at 12:21 am

This monazite deposit is well known and is a matter of public record. It has always been stated to be at/near/adjacent to the Mountain Pass site.

Because its only 5% HREE which is typical for monazite it would have to be substituted for the 20,000 tons of phase 2, or was already part of it, as their total processing capacity does not appear to be large enough to accept additional product in large enough quantity to produce meaningful amounts of HREEs.

So either this is not new or if new it raises the question of additional capex and construction, and delay.

4 Gordon Clarke October 5, 2011 at 1:22 am

Why was Mark Smith’s presentation “behind closed doors”. As I have been saying for two years now “all I ask for is a level playing field” in what has turned out to be a true debacle! Mark Smith and JPMorgan cronies appear to have made a lot of money with out a hint of final product.

5 hackenzac October 5, 2011 at 1:45 am

Bullwinkle: Hey Rocky! Watch me pull a rabbit out of a hat.
Rocket J Squirrel: But that trick never works.
Bullwinkle: This time for sure! Nothing up my sleeve! Presto!
Lion in the hat: ROAR!!

http://www.youtube.com/watch?v=kRW7pITY5Cg

6 Nagaoil October 5, 2011 at 1:54 am

Haha Yeah….Nonsense….
A normal construction for a building will need one year to complete without including the time for getting relevant engineering deisgn/goverment approval.

One Year???????

7 Toly October 5, 2011 at 2:47 am

This is from a Seeking Alpha article last April… The article was about a Project Phoenix tour and it included a discussion on the tailing pit left over from previous activity…

What I don’t understand, is how this recent discovery provides such a substantial increase in the future production of HREE’s. I mean, the HREE orebody is already on site so is more better?

“… Molycorp currently also has mining claims on what they estimate is the second richest rare earth deposit in North America and it’s a three minute walk or van drive from the open pit at Mountain Pass. It is the tailings pit that contains 10-20 million tons of tailings created by the 50+ year operational history of Mountain Pass. The estimated TREO of the tailings pit is 4-5% with four to five times the HREE/TREO percentage found in the main Mountain Pass ore body.”

“The tailings pit is covered by an engineered cap of approximately 2-3 feet in thickness. The cap is designed to absorb precipitation and let it evaporate without moisture seeping into the tailings. We were right next to the tailings pit during our tour, and let us just say it was kind of surreal realizing that the richest rare earth deposit in North America was the source of the second richest and that the new Molycorp facilities are literally a two minute walk from it.”

http://seekingalpha.com/article/265291-molycorp-s-project-phoenix-rising-along-with-its-npv

8 Yves S. October 5, 2011 at 7:58 am

Elissa Resources will take advantage of this unexpected news.

9 Jim Bond October 5, 2011 at 9:54 am

Toly
Thanks for posting the excellent excerpt and link to the Seeking Alpha article I missed it. Very good article.

10 Hal Shearer October 5, 2011 at 10:38 am

I agree with Toly, we attended the shareowner’s conference a few months ago, it was mentioned that the tailings pile was high in HREEs due to the fact that in the early days of the mine the focus was on LREEs. In addition, Mark Smith mentioned it was not on their books due to the tax implications. So, it’s conceivable that this is the deposit they are referring to; already mined, has CA approval to be “re-mined”; dig it back up and take out the HREEs, plus the LREEs that were not obtained in the first mining process.

11 Jason Burack October 5, 2011 at 11:59 am

Molycorp got a lot more than people think when they acquired SIlmet. Analysts covering the sector, if they have the time, should really make the trek to Silmet’s facilities. I don’t think there would be half as much negativity about Molycorp’s future prospects on the processing and vertical integration aspect of their business model if people understood how shrewd the Silmet acquisition was. Silmet’s facilities have a lot of expansion capabilities including being able to process at the same purities of LCM if they want. They also have superb technical people. I’ve spoken with Silmet CEO David O’Brock. He says they can make the highest purity alloys just like LCM does it’s just that they were not economic until recently. Also, when Kevin Kerr visited the facilities, and he’s visited numerous times, he said Silmet has a partially built HREE processing facility on site that the Soviets had started building but had not fully finished. Kevin did not say how far along the facility was, so it might be way behind Stans’ facility. Just some things to ponder…

12 Simon J. October 5, 2011 at 6:41 pm

I think the market is starting to wake up the MCP is not what it seems…or promises!

I predict there will be more articles of this nature over the coming months exposing the ‘short falling’s of Molycorp.

In the meantime Lynas (LYC.AX) will be in production by the end of this year and will become a global power house within the REE industry outside of China.

The company is well run, resourced, has firm contracts in place and it is currently a steal at A$1.005.

Depending on who you believe, the SP could be anywhere between A$10 to A$18 within the next two to two and a half years.

13 orvie zimmerman October 5, 2011 at 8:05 pm

There`s a company that is going into production here in Colorado, mining for gold, They will be be obtaining a concentrate that will contain a very high percent of the heavy rare earth metals. As I have stated before,the US Geological Survey as well as President Herbert Hoover state that the size of this minerlized area is 30 miles wide by 40 miles long. (1200 square miles). I think that this deposit will rank with best because it contains enough gold to mine at a profit.

14 Y. Watanabe October 5, 2011 at 8:36 pm

The analytical data looks strange. 0.8% europium, 1.6% terbium, 0.5% dysprosium and 2% yttrium. Tb is generally less than Dy, and Dy is generally 1/6-1/10 of Y. Need more information how much HREE is enriched in the prospect.

15 GMATRADES October 5, 2011 at 11:34 pm

Why would Molycorp be looking at three other HREE deposits if this new HREE ” find” is so good?

My guess is that Molycorp is about to aquire a major HREE deposit shortly. MCP is pulling the rug out from under the HREE story by coming out with a so called substantial HREE deposit news, then take out a HREE deposit on the cheap? Why has Molycorp been so blatantly underestimating the need for HREE’s and fluffing off the supply/demand issues as not relevant? And of course they will be producing magnets for wind turbines without HREE’s soon as well. lol

Just watch them announce a HREE acquisition soon.

16 Toly October 6, 2011 at 1:11 am

I have to disagree Jason, IMO, the vertical integration moniker is costing some of these juniors (and Moly) siginificant resources…

Case in point, GWM. Much has been spent of LCM and it is substantially cash flow negative according to the latest 10q. While the direction of the deficit seemed to be improving, I suspect it was a result of increasing REE prices that quarter. It will be interesting to see if falling REE prices will affect the profitability of LCM, Neo, Silmet and the rest of the “performance metals” companies. A lot will depend on just when the feedstock was purchased and how much was paid. Of course high COGS (cost of goods sold) on the income statement will (negatively) affect the profitability…

Additionally, Moly plans to source concentrate to Silmet which may result in logistic and environmental issues. Regardless, the distraction of administering nascent technologies in an emerging space such as REE’s is costing these fledgling juniors valuable resources… JMHO…

17 Kris October 6, 2011 at 2:27 am

Toly,

For years I’ve had to read that LCM would go bankrupt if REE prices went up. And now you’re just twisting that logic. Quite funny.

And you think juniors without vertical integration will not suffer when lower (L)REE prices hit the market?

We will see in two years….

18 prescient11 October 6, 2011 at 10:18 am

Kris, technically LCM is already bk, given that it constantly loses money and GWG only provides capital by diluting shareholders every year.

But I am sort of holding my opinion on GWG, they have a resource now that appears to serve as a plausible mine (in contrast to the many “projects” they had before a/k/a Hoidas Lake), so let’s see how they do. Perhaps this is their moment to shine.

With regard to MCP’s claims, while I do not share Jack’s views on the pure impossibility of MCP’s plans to scale up to a 40k tonne processing facility, I am somewhat struck by the cavalier way that they are going to process this ore as if it is no big deal.

At a minimum, I think it would require significant CapEx expenditures and maybe even a separate facility to handle the ore? That is strange.

19 Vladimir Seredin October 6, 2011 at 1:00 pm

Y. Watanabe is absolutaly right. These ratios of REE are unbelivable. I am sure that is mistake.

20 Tom F October 6, 2011 at 1:08 pm

I’m surprised at all the hoopla, since it’s not been unexpected from an OLD (March 2010?) Molycorp press release:

“Molycorp Minerals to Commence Rare Earth Exploration Program”

http://phx.corporate-ir.net/phoenix.zhtml?c=236277&p=irol-newsArticle&ID=1453112&highlight=

21 MaxkilMachina October 6, 2011 at 3:51 pm

Chess play for the political adults.
Moves:
1. Rare Earth bills in Congress have low chance of getting approve.
2. Critical Minerals is a security risk to country.
3. DoD releases list of Critical Minerals report recently.
4. Chance of Critical Minerals bill with Rare Earth getting approved increases.
5. Politicians discuss with Molycorp that a Critical Minerals bills is in the immediate works.
5. Molycorp release new HREE concentration that contain Critical Minerals.
6. Senators trying to get Critical Minerals bill amendended into Currency Exchange Rate Oversight Reform bill.
7. If pass, then Molycorp benefits just because they timely announced new HREE Critical Minerals findings.
8. Or paranoia.

22 Maximus October 7, 2011 at 2:02 pm

Hi Gareth ,

Is there any link to the Trilateral EU-Japan-U.S. Conference about Critical Materials for a Clean Energy Future which was recently in DC Washington or if someone else knows a link, to see what was all about ??

23 fran October 7, 2011 at 5:29 pm

i suppose HITACHI and SUMO are saddened that they walked away from such potential rewards.

or they were too wise to believe MCP management a second time.
i trust their judgement vs SMITHSPEAK.

24 4now October 8, 2011 at 10:12 am

the most interesting part of the NY times article is :” The new plant, to be opened in stages between late next year and the end of 2014, is intended to process either light or heavy rare earths. ” So they are delayed because previously they said Mid 2012. No wonder according to Mr. LIftons doubt to start such a dream project.

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