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!Print