Rare Earth Bull

by Jack Lifton on March 8, 2012 · 48 comments

in China, News Analysis, Permanent Magnets, Rare Earths

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Rare-earth deposits are not rare; they are just rarely put into production. Why is that? It is because of pricing economics driven by supply and demand. The demand for the rare earths as raw materials is today in southeast Asia, so it should not be surprising to see how the producing supply base has migrated to that part of the world. Yet pundits and politically charged writers keep hinting at a vast intentional Chinese conspiracy to 'control' the rare earths. It is more than likely actually a consequence of the operations of the market forces of (what we now ironically call) free-market capitalism. as practiced today by governments following the model originated by John Maynard Keynes.

The American financial regulators are as guilty of allowing foreseeable but unintended consequences of their actions, as the Chinese regulators are responsible for maximizing the benefits of American oversight for China's economy. There is actually no intractable problem so long as both economies practice free trade, but when Chinese self-interest is seen as a threat to American self-interest, it is the 'other' rather than the 'system' that is brought into ill-repute.

Rare-earth-based production (the supply) and production levels are determined by the economics of overall demand. So long as the lowest cost for rare-earth products is obtained by buying such types of goods manufactured in China, the total supply chain and the focus of the rare-earth industry will remain in China.

Today, in early March 2012, I am going to give one prescription for the re-birth, health and continued growth of a non-Chinese rare-earth industry, and I'm also going to make one prediction about the growth of the global rare-earth industry over the next ten years.

First, before I assume the mantle of the business-survival specialist or of a resource-markets Nostradamus, I need to point out that the growth of demand for a rare-earth element (REE) is in the case of almost all of the REEs, within a unique market for each of them individually. The demand for cerium (Ce), for example, has almost nothing whatsoever to do with the demand for lanthanum (La), or any other REE. They are not interchangeable, nor substitutable for each other, except in very few cases such as that of neodymium (Nd) and praseodymium (Pr), which in some limited applications in rare-earth permanent magnets (REPMs), are substitutable/interchangeable.

Notably the demand for Nd for use in REPMs is the principal driver of the demand for dysprosium (Dy), whereas the inverse is not true. This complex subject, the demand for individual and certain combinations of the REEs, is glossed over by pundits as if it doesn't matter. This is a fatal flaw in creating investment strategies for developing REE supply, because what is overlooked is that the supply of the rare earths must be examined on an element-by-element basis. and not looked upon simply as a 'basket' containing all of the REEs.

This error of assuming that all or most of the REEs are interchangeable for marketing purposes, gives rise to the glib assumption that the same strategies will work for selling REEs to a variety of end users, whose only common interest is that their products all contain REEs.

An even more flawed assumption is the idea that the individual REEs are of equal importance to our technological economy in any of their uses, and so one simply calculates a basket price and this metric then defines an opportunity to produce a combined value. Nothing could be farther from the truth.

China appears to have unused (excess) capacity in the production of the lower-atomic-numbered rare earths (LANREs) in the amount of more than 50%! This means that China could ramp up production to twice today’s output of LANREs and, based on even old (from 1997) basically anecdotal data from the US Geological Survey, keep this level of production up indefinitely.

On March 5, 2012, there was official news from China (reported in the China Daily, the English-language version of the People’s Daily, the house organ of the Chinese Communist Party) for example, that Jiangxi Copper, which has been given responsibility to consolidate rare-earth production in Sichuan province, says that it will increase production there to 50,000 tpa and will target the export markets! Rare-earth prognosticators please pay attention! Jiangxi Copper is a world-class commodity-metals-producing giant. It is also state-owned and has more working capital and borrowing firepower than all of the non-Chinese rare-earth ventures on Earth combined.

The domestic growth of the Chinese demand for the REEs is today without doubt the principal driver for any attempts to increase the supply of REEs. China's domestic demand for all of the REEs today is probably at 70-80% of the world’s total supply (also, of course, today produced in China domestically).

China is openly moving to change its economy from an export-led to a domestic-consumption-led model. As China does this, the domestic demand for REE-containing consumer products (the vast majority) will increase in China, apparently without decreasing outside of China. Unless there is increased production of those among the REEs that are the critical REEs, there will be shortages and price hikes - but NOT in China, which will simply consume more REEs domestically while reducing exports, as it has already begun to do precisely to prepare for the change of direction in its economy.

Reacting to that change and to world opinion, China has restructured its REE industry and this has resulted, for example, in Jiangxi Copper telling the world that it will ramp up production in the area under its control, so that both the Chinese domestic market and the export market can be served.

Jiangxi is a new competitor in the global REE market, and it is a large profitable company run by excellent managers. It has no competition outside of China in the REE space that can match it in resources of intellectual property, manpower resources, capital, and knowledge of world markets.

Yet in China, Jiangxi faces Baosteel and Chinalco in the newly consolidated REE production space as its competitors. Keep in mind that it will be an uphill battle to beat China at its own game inside China. So what is left for the non-Chinese REE supply wannabes is to produce something that the Chinese domestic REE market needs, and which is not produced in China in sufficient quantity, so that it will be in demand whether or not a total supply chain is ever constructed outside of China.

It seems that the higher-atomic-numbered rare earths (HANREs), the so-called 'heavy rare earths' fit this description and their number may even be joined by the LANRE Nd.

There are two cultures on Bay Street (the center of junior-mining finance in Toronto, and most likely the financial world). Among the denizens of one of those two cultures, it is the share price of a company that measures its success; in the other culture, the question asked is: 'how much money will it take to bring this venture into (profitable) production?'. The probability of achieving profitable production is this second group’s measurement of success.

It is late in the rare-earth 'boom' and so lately the line between the two cultures has begun to blur in the rare-earth 'space.'

Junior mining is basically the mineral-data mining of the Earth. The data are discovered and recorded by field geologists and then it is filtered through layers of physical and chemical analysis, until for a given volume of the Earth's crust, a picture can be drawn in three dimensions, of the distribution of specific minerals within the chosen volume. If there are known mechanical and chemical procedures for recovering any valuable metals or minerals in the defined volume, and the result of those procedures is a product, or products that can be sold for more than the cost of production in volumes above the break-even cost of the venture then, if those factors have additionally a high probability of continuing in time, we have a mineable ore body that is economic.

The day of reckoning is upon the rare-earth juniors. Those of them who have no knowledge of supply-and-demand-based pricing, or the geographic distribution of demand, or who have no knowledge of finance will be gone first. Even among those that survive this first cut, if they believe that the goal of a business is anything other than producing consistently a competitive profit from selling products produced at the lowest cost with the lowest possible break-even threshold, then they will be gone next.

The survivors will be those ventures which can sell their product at a profit, at a place in the supply chain which their management and marketing skills can maintain.

The Vatican in Rome regularly issues statements of Catholic doctrine, which are intended to be the 'correct' interpretations of questions of faith for believers. These statements are written in church Latin and the translation of the category aspect of the title of all such statements is a papal 'bull.' This is the short form of the Latin word bulla, used to describe the clay stamp traditionally applied to such edicts, and from which in English, we get the word 'bulletin.'

I consider this article to be a 'bulletin' to investors in the rare-earth space.

I am not. nor do I pretend to be infallible, but I recognize that much of what passes for interpretation in the mainstream media of the announcements that regularly flow from junior miners, or, in some cases from companies actually running mining operations, is just plain 'bull.'

If a junior miner is to survive. it must either sell its ore body or develop a profitable mining operation. There has been little interest by the major mining companies in purchasing the properties of the current rare-earth juniors. Therefore to survive, the juniors will have to try to put their ore bodies into production as mines. This means that the clock is ticking. There will be no more than a dozen rare-earth ventures outside of China in actual development by the end of 2014. The global REE demand outside of China needs very little additional supply of the LANREs if it does not ramp up its metal-, alloy-, and component-manufacturing supply chain. Certainly there is way too much potential and/or planned production of the LANREs chasing too small a market.

It is just the opposite for the HANREs. China is short of these very critical materials, so that even if no supply chain at all is constructed or enhanced outside of China for using such raw materials, there will be a demand for them.

The problem with the HANREs market is that it is not understood as a free-standing market by non-Chinese investors. Additionally it has turned out that the highest grades of HANREs as a proportion of total REEs, are in hard-rock ores and tin and uranium residues, the 'metallurgy' (cracking) of which has not been successfully (i.e. economically) achieved to date. I believe, however, that the metallurgies of the hard-rock ores have been addressed with sufficient success outside of China, by companies attempting this endeavor, to allow me to recommend to my institutional-investment clients that they fund the development of the best-managed and best-sited ones.

The skills to extract the HANREs into a pregnant leach solution, and to separate the individual HANREs from that solution are in very short supply. No one, as of yet, outside of China has addressed the commercial separation of the HANREs. Innovation Metals, a company co-founded by my TMR colleague Gareth (and to which I am an advisor), is attempting to do something about this, with its goal of creating the world's first independent rare-earth separation facilities, to toll-treat rare-earth concentrates. Do not be fooled by those who say that all you have to do is 'buy' a property and 'feed’ the ore into an existing LANRE separation system. This is flim-flam.

I predict that at least one, perhaps two American companies, and one European company will be producing HANREs competitively with the Chinese within 3-5 years. from hard-rock mining. I further predict that it is these operations which will catalyze the re-birth of a non-Chinese total supply chain for the production of Dy-modified REPMs. There are a number of promising Canadian, Southern African, and Australian HANRE-themed junior miners, who I believe will become suppliers to the total supply chains located in the USA, Europe, Japan, or even China. Their ability to do so will be based on competitive pricing.

I am not mentioning Great Western Minerals Group’s South African/UK integrated operations, because they are now in a group of one, at least with regard to the commercial production and utilization in the downstream total supply chain of the heavy rare earth Dy. As far as I know their, output of Dy is fully taken up by their customers, and is only a market factor in the reduction of non-Chinese demand for Dy it will cause (less than 3% of the current market).

The first step in the production of a REE is the mining of an ore containing a mineral that has REEs in its molecular or physical composition. In simple English, a rare-earth mineral is one in which the REEs are either chemically bound into, or in a few cases, just physically attached (adsorbed) onto a substrate mineral. The ore at Molycorp’s Mountain Pass mine is an example of the first and the famous adsorption clays in China's southern provinces are an example of the second.

A common pundit error at this point is to declare that the ores with the highest concentrations of the rare earths are the most valuable. The most valuable rare-earth ores are those from which the rare earths can be extracted efficiently at the lowest cost per unit. In fact, the most pressing problem today in the rare-earth supply space is the fact that all of the HANREs now produced commercially, are from the very low overall grade 'ionic adsorption clays in China. This is because of:

  1. The fact that by ignoring (and not capitalizing) safety or environmental 'costs', the Chinese mining industry has been able to continue due to the high demand for their 'unique' products, and
  2. The lucky situation that the ionic clays are essentially thorium and uranium free, allowing their processing by crude heap leaching in the open.

For hard rock, HANRE-enriched deposits have been found outside of China, the concentration of desired minerals is accomplished by preparing the ore (typically this involves crushing and/or grinding followed by gravity separation). Milling is the first step, with the second typically done by floatation, in which the higher specific gravity minerals are separated from the lighter 'rock'. by a combination of surface-chemistry techniques and the differences in their densities.

When we have the ore concentrated, we come to a point in the process where mining terminology diverges from both common English and from the strict definitions of terms as they are used in modern materials science. When miners use the term 'metallurgy', they usually mean ONLY the extraction from an ore concentrate of the CHEMICAL forms of the elements desired.

In such cases, developing the metallurgy means chemically leaching the ore or ore concentrate. Leaching is a wet chemical process most often involving acids or bases), which places into solution the chemical elements present in the ore, so that they can be further chemically processed to separate them from each other.

Typically even the separated elemental chemicals must be further purified - especially in the frequent case where separation is not analytical (i.e., is not complete). The purified chemicals are then reduced by chemical/physical processes to create pure metals.

An example of straightforward mining metallurgy is the processing of common sulfide ores of copper (Cu). Their metallurgy starts with roasting ( i.e. forced-air, high-temperature oxidation). The Cu oxide so obtained is dissolved in sulfuric acid, obtained in part by capturing the sulphur dioxide from the roasting, catalytically oxidizing it further to sulphur trioxide and dissolving this in water.

The Cu sulphate solution is electrolyzed so that the pure Cu collects on the cathode and the nuisance metals, such as molybdenum, gold, silver, palladium, tellurium, selenium, and arsenic collect in the "mud" formed under the anode. Some of the nuisance metals contained in the Cu ore are also collected in part from the exhaust gases of the roaster, which include volatile oxide species of many of the elements also present in the mud.

The mining metallurgy of Cu ores is complex, and time- and energy- (and thus capital-) intensive, but it pales in comparison with the complexity of the separation of the individual rare earths after they have been extracted from their ores into a pregnant leach solution.

The separation of the mixed rare earths produced by the leaching of their ore concentrates into individual REEs is a labor intensive, time-consuming operation, accomplished commercially today only via the process known as solvent extraction (SX), which is expensive to facilitize, difficult to supply with some Chinese-produced chemical reagents, slow, and in need of a large body of skilled chemical engineers for its operations and quality control. Outside of China, and previously in Japan and possibly Kyrgyzstan, no-one has yet constructed a SX operation with the capability to separate the HANREs.

I have been told that a HANRE-separation-capable facility is, in fact, being constructed in the Western Cape province of South Africa, by Great Western Minerals Group, but I do not know the timetable for that project. I do know that the punditry has now figured out that the HANREs are the most desirable of the REEs, but, once again, the highest grade. largest total ore tonnages are being mindlessly touted as 'the best investments.'

Of course, the best investments are the well-managed ventures that own ore bodies for which known extraction techniques work, and from which a pregnant-leach solution can be made, which will be capable of being fed into a separation plant, that will produce separated, purified rare-earth chemicals. All of this will have to be done at the lowest costs possible and the lowest breakeven possible.

HANREs so produced, mainly Dy and terbium (Tb), will be saleable into a market in deficit for the rest of this decade and beyond.

A total supply chain to produce Dy-modified Nd-based magnets will be built in Europe. I believe that such a project is also underway in the USA. The successful mining ventures in the HANRE space will most likely sell their products in a magnet 'bundle'. In order to get Dy, the customer will also need to buy Nd in a ratio of the two that insures the total sale of both.

There are already too many contenders in the LANRE space outside of China. The survivors will be the low cost, lowest breakeven, producers.

Anyone who is going to invest in a junior rare-earth-mining venture must look at its balance sheet, for its break-even point at reasonable prices. One must also ask exactly what market share the company needs, to break even at those prices. Next one must ask for a list of the products to be produced, which are to be sold at that point into the supply chain, and match that list with the companies expertise, or access to expertise, necessary to technically accomplish each step in the supply chain in which it will be directly involved.

Size matters in a high-school locker room. Only skills and break evens matter in the world of mining...

Disclosure: at the time of writing Jack Lifton is long on Great Western Minerals Group (TSX.V:GWG).

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{ 48 comments… read them below or add one }

1 Mike March 8, 2012 at 2:09 pm

Great reading, thanks Jack.

2 ellwodo March 8, 2012 at 2:27 pm

Jack,

You see at most two American and one European (plus one African) companies producing heavy REEs within the next 5 years. This presumably means you see zero Canadian companies doing so. I do not understand why you apparently conclude that Matamec won't do so. It seems to be well on its way to surmounting the technical hurdles that you do an excellent job of explaining.

3 Jake March 8, 2012 at 2:34 pm

"I believe that such a project is also underway in the USA. "

Jack, I understand you not mentioning GW in SA as their product is (mostly) spoken for but where does that leave GWTI? Is there room in the US for their expertise? What about UCOR and GW forming a JV and having them build a SX plant? I think GWTI is an unsung gem and far, far underutilized.

Thanks as always!
Jake

4 Swan March 8, 2012 at 2:36 pm

Dear Jack,
I am student and my thesis deals about factors determining Neodymium's price soaring in 2011. Could you give me some tips to find data on the chinese (or worldwide) 2009-2011 production of Neodymium?
By the way, thank you for your articles that really helped me out so far.
Best regards,
Swan

5 robit March 8, 2012 at 2:46 pm

Thanks for the excellent treatise. I gather from the density of the information that you labored over it for a good while.

We had a bit of a discussion on the RMB concerning "China is openly moving to change its economy from an export-led to a domestic-consumption-led model". If China will be ramping up their purchasing of world resources to feed the internal consumption, will they want the RMB to float up OR will they want it to stay flat so they can use their US Treasuries for the purchases? By ramping up I mean increasing the buying of world resources at an even faster rate than is already under way.

For pondering the US side of the polyhedron, this 2010 USGS study is a gem:

http://pubs.usgs.gov/sir/2010/5220/pdf/SIR2010-5220.pdf

PS: my heart was given quite a dose of sadness when ECD declared bankruptcy on Valentines Day

6 Tekton March 8, 2012 at 2:54 pm

Then the simplest model would be a gravel pit: quarry, crush, sort, test( makes buyers' specs), grade, and stockpile for "X" dollars per ton. Then, sell it and load it on to the buyer's transport for "Multiple X" dollars. No downstream.
Am I silly to think this sounds like Ucore's original plan?

7 Jack Lifton March 8, 2012 at 2:56 pm

Ellwodo,

I do not exclude Matamec. I am looking at the possibility of a re-constructed total supply chain being built in a country or an economically linked region based on the existence of mine(s) with the full spectrum of critical rare earths. In my opinion Quebec or Ontario with their massive modern technology infrastructure would be well advised to spearhead (euphemism for "give funding guarantees for") a "total Canadian rare earth supply chain." Until then Matamec will produce only feed stock for an Asian supply chain. I would say "American" or "European" also, but i suspect Toyota has other ideas.

Jack

8 Jack Lifton March 8, 2012 at 2:58 pm

Jake,

I do not wish give such advice publicly, but I hope the CEOs of those two companies read your comment. Luckily they are both subscribers to TMR.

Jack

9 Poncho462 March 8, 2012 at 3:09 pm

Ellwodo....

Due to corporate structure, it is possible that Canadian companies control or own at least one of the US companies(GWTI?), the European company(Tasman?) and the S.A. company(GWGQD?). Great Western owns 100% of GWTI, and 75% of GWGQD. Tasman probably has some similar corporate arrangement to do business in Sweden.

No pressure Jack, but do you have any clarifying comment on this? Even if it's just negative on my speculations?

10 Jack Lifton March 8, 2012 at 3:28 pm

Poncho462

I am not "pressured," because I don't understand the point you are trying to make. GWTI is a wholly owned subsidiary of GW, but even if it is also a part of LCM, sited in the UK, but also owned by GW, it, GWTI, would only be one part of a total rare earth supply chain. Tasman is a Canadian company which owns Scandavian sited deposits. Each of these companies is, of course, operating legally in the countries where their operations are sited. I am speaking of supply chains totally located, including the mine, in politically distinct regions. Tasman will be shipping its products to various member nations of the EU. Tasman's rare earths will wind up first in components and then in finished goods made entirely within Europe. Sweden is part of Europe though it does not have a monetary union with the EU. Sweden was the first or second European continental nation to supply iron and steel to all of the European nations as a surplus export. I am certainly not saying that GWTI would not be part of a total American rare earth supply chain. by the way GWTI is an American company; it happens to be owned by Canadians.

Jack

11 Aat Oskam March 8, 2012 at 3:29 pm

Jack, fine analysis, as ever.
Your opinion please about the Chinese activities in Africa (e.g. Globe Metals & Mining, some 53 % owned by the Chinese). Wille they satisfied their HREE needs there?
Hope to hear from you!

12 Jack Lifton March 8, 2012 at 3:50 pm

Aat,

ECE, the "Chinese" resource exploration (junior) mining company seems to be a Hong Kong based enterprise,owned, or at least operated by a mainland-born Chinese national, Ms Lu. I will take your word that ECE has 53% of Globe. Just being of Chinese nationality does not give ECE any magical ability to engage Chinese refiners to process rare earth ore concentrates in or from Africa. I have never visited nor have I been asked to visit any of Globe's sites, but from what i read on their web site they are early on in the rare earths space and this is at a time when it is getting very difficult for companies at Globe's stage of development to raise capital in the west. By contrast with Toronto, Vancouver, London, or Perth Hong Kong is a good choice for Globe. Apparently they had to give up quite a bit to get ECE on board.

Jack

13 Jake March 8, 2012 at 3:59 pm

Jack,
Thank you very much for taking the time to answer questions in the comments section. Very gracious of you.
You say that the analysts and pundits don't get it (I am paraphrasing). And you don't want to include GW because most of their HREEs are spoken for. My question is this then: what are they analysts missing when looking at GW? How can they not see the value added by completing the vertical chain? What are they not seeing ... or conversely, what have I missed ? ( I am long GW obviously)
Perhaps I do not understand the world of punditry and analysts so that is where you come in.... care to help me out? :)
Thanks
Jake

14 Poncho462 March 8, 2012 at 4:36 pm

Jack- Thanks for you reply.

I was just attempting to reply to Ellwodo's original question about Zero Canadian companies, as it seemed he did not connect GW or Tasman as Canadian companies with the subsidiaries and operations in the other nations. Sorry if I confused more than helped.

Ponch

15 geoff alford March 8, 2012 at 5:08 pm

Jack,
Your usual, everyday outstanding performance!
Australian candidates possible include Alkane Resources (ALK) and Northern Minerals (NTU)
Chinese interests already have just over 19% interest in NTU, which answers one of your questions. Note 20% or more would raise the attention of the Australian Takeovers Panel and Foreign Investment Review Board.
GBM Resources (GBZ) may be a new candidate with its recent announcement of a maiden 103 million tonne Rare Earth Oxide Resource at 760ppm. Dominant elements include Neodymium, Yttrium, Dysprosium, etc. The company has Singaporean interests among its top share holders, who also hold a Non-executive Director position.
All companies have economic projects in other metals such as zirconium, gold, copper, etc., with which they could subsidise their HANRES operations.
Australia is not called “the lucky country” without reason.
Interested readers can check these out at http://www.hotcopper.com.au Registration is free and I have given the relevant ASX codes.

16 Aat Oskam March 8, 2012 at 5:14 pm

http://www.globemetalsandmining.com.au/uploads/files/investor_presentation_and_brochures/Globe%20Update%20-%20ADU%20-%20Final.pdf

Jack,

thanks for you answer. If you can spare the time, the brochure mentionnes the relationship with ECE. I will ask Globe to invite you.

Regards, Aat

17 Mark March 8, 2012 at 6:00 pm

Jack,

Treatise on Rare Earth realities - excellent
Papal Bull - priceless.

18 Pieter J Mazereeuw March 8, 2012 at 6:24 pm

Great article Jack. Thank you.
I think Canadian mines will not cheap producers due to the rock.
Europe will need Sweden. Not sure of the USA but I would agree with the need for a few strategically located separation plants. I like Australian companies in general as they are mining friendly and several but one in particular, a very junior JV of Pancontinental and Crossland who claim some potential for very pretty cheap mining costs and (hopefully soon) an initial resource estimate. The best product at the cheapest price will always be in demand.

19 G H March 8, 2012 at 6:30 pm

Jack,

Does any of your article need revision, now that Molycorp is buying NEO?

Thanks,
G H

20 Jake March 8, 2012 at 7:09 pm

GH...
beat me to it. Does that change Jack's thinking? All I can say is MCP is desperate to copy GW's strategy of Mine to Magnet. Which makes sense since MCP tried to buy GW once upon a time. I think GW should be more valuable in the morning.... we shall see.

21 Jack Lifton March 8, 2012 at 7:12 pm

G H,

No, not at all. What has happened now is that Molycorp and Neo will have to sort through what happens when you use a meat ax rather than a scalpel to fix a hernia. Molycorp always seems to me to overdo things. First heavy rare earths weren't important, and to prove the point it bought into a wind turbine maker that said its magnets wouldn't need dysprosium. Then Molycorp decided that dysprosium was indeed important, so it discovered some overlooked claims that it had all along that supposedly have HANREs. Remember when Project Phoenix didn't need any outside help and now Neo comes in just when the market is getting nervous about Molycorp's in-house refining skills? Keep in mind that Neo is not in the mining business, and that Neo's operations are predominantly in the Peoples' Republic of China. Don't I remember that Molycorp's reason for demanding US taxpayer guarantees was so that the US military could become independent of Chinese control of the sourcing of its vital rare earths?

Its a very positive move for Molycorp that it could now elect Constantine Karayannopoulos as its CEO; he's the best CEO in the rare-earth space and has consistently delivered profits and measured growth for his shareholders.

What happened to the Chileans? Is this what that money was for? Will the value of their stock now go up enough to recover the investment? What a deal?

I note that at our workshop last October I had a chat with Mr. Karayannopoulos in which I asked him why he didn't advise Molycorp on how to build and operate a large-scale separation plant. His answer was "nobody asked me." I don't blame Mr. Karayannopoulos for being disingenuous. I respect him for it. There are rules about insider trading for Canadian companies and other ethical people. However I sure hope it comes out that Neo was at that time in talks with Molycorp, because I'd hate to think that Molycorp just thought of this idea.

Now, more than ever, the REE market needs a few more total supply chains as I mentioned. There will be at least one more in the USA, one in Europe, and down the road one in Australia.

Please ask your broker by the way which kind of magnets Neo specializes in? Neo materials should have bought Molycorp in my opinion, by the way.

Jack Lifton

22 Jake March 8, 2012 at 7:19 pm

Jack-
given what you said, then this strengthens Gw's hand as they own the mine and LCM. Perhaps this is the catalyst the analysts and pundits need to recognize what GW has to offer. (see above question)

- Jake

23 Jack Lifton March 8, 2012 at 7:44 pm

Jake,

I cannot overemphasize that GW is "The Right Size" venture for its primary targeted market, which is the fabricators of rare earth permanent magnets of the dysprosium modified neodymium-iron-boron type. I believe it will be as it says it's going to be a profitable 150-250 million dollar/yr revenue venture with a gross margin of 30%. It will grow from there, if it wants to, by increasing magnet alloy production fed by new discoveries or acquisitions of the correct critical metals it needs. GM is also "The Right Stuff.'

Picking off more than you can chew is an adolescent game and it always ends with someone kicking the s**t out of the one who aims too high.

Bet on the cautious guy who stops for water on his way up the mountain rather than the guy who thinks he can make it in a single leap.

Philosophy over. i'm more sold than ever on the GW model. I'm glad Mark Smith got the model right anyway.

Jack

24 G H March 8, 2012 at 7:59 pm

Thanks, Jack. Personally I never saw Molycorp's pursuit of loan guarantees as anything more than normal U.S. capitalism; if someone else got 'em, Molycorp would rightly be judged stupid for not having tried.

I'm not sure I understand your reference to the Chileans? Maybe you're thinking of Neo's Brazilian tin mine development deal with Mitsubishi?

I agree with Jake that the acquisition raises an interesting new value chain question. My spin on it is, besides GW, will any other significant NeFeB magnet producers be left outside China? You've mentioned twice now another USA based value chain. Who?

Thanks!

25 jake March 8, 2012 at 8:11 pm

http://www.miningweekly.com/article/molycorp-says-chiles-molymet-buys-13-of-company-for-390m-2012-02-01

GH... that is what the Chilean reference with regards to MCP is all about.

26 Gennady March 8, 2012 at 10:12 pm

Geochemical search fields. A new species of the samples. Search results.
Russia:.
-2076 sq km 165 samples.(20 elements) ::Au -833, Ag -322, Sn-217, Cu -185, Bi-153, Mo-122 . Au -14 t.
-2279 sq km 108 samples.(20 elements): Au-1110, Sn> 250, Pb -208, Mo-115, W -55, Bi -25. Au-60 t.
-700 sq.km.27 samples.(30 elements): Pd -200, Au -190, Ni -193, Cr -82, Hg -58, As -39, Bi -47, Sn -30. Sn-30000t
Canada:
-220 000 sq. km. . 26 samples. Delta. (30 elements. Russia):Cu -24, Mo-10, Ni -20, Pb -20 (1%), Bi -15, Sn -10, Ag -8-40, Ga -7, Zn -6, Cr -6, Co -4, V -4, B -3, Zr -3-4, As -3-8, Mn -3, Ti -3, Ge -2, (W, Sc, Li, Nb, P , Sr, Y) -1--1.5. Au>4g|t no. Gibraltar, Highland Valley, Afton, Similco, Brenda, Okeover Property, Bralorne..
- Yukon: 31000 old samples (51 elements): Pb-8090, Au-6260, As-3800 (19000), Mn-5000, Sb-1700, Hg-1190(2780), Cu-1125, Cd-1100, Ni-1030 (240), V-1782, Br-1740, B-1000, U-877(1603), Ag-870, Mo-815 (2480), Ce-725, F-690, Lu-625, Zn-600 (2400), La-563, Ba-550 (5850), Co-550, Se-500, Sm-465, Ti-444, Br-435, W-428 (800), Eu-372, Sc-336, Cs-305, Hf-300,Cr-300,Rb-299, Tl-284, Sn-286 (3680), S-282,Mg-256, Bi-233, LOI-200, Na-152, Sr-140,Fe-83, Th-69(209), Ga-64, Ta-44,K-40, Tb-40, Yb-36, P-30, Te-27. Klondaik
Best regards. Gennady Kaplenkov. Geologist. Vancouver. Gennady.kaplenkov@gmail.com
Ps: Search TR (http://www.theaureport.com/pub/na/12115) –no problem. Consultation, search (contracts).

27 Veritas Bob March 8, 2012 at 10:40 pm

Jack, as you may recall from a comment I made a few months or so back to an article of yours on RMB, Molycorp never did get the DOE loan, and eventually withdrew from consideration.

28 blackjack March 9, 2012 at 12:26 am

Always great work from you and creates good debate and research.

My figures show that:
Kvanefjeld has 14% hree
Mountain pass 1%
Thor Lake 17%
Mt Weld 3%
Nolands Bore 4%
Don Pao ?
Dubbo Zirconia (ALK) 60%
Bear Lodge ?
Holdas Lake 7%

Extract from Australian Rare Earths website
Also the method of extraction depends on the yield:
A combination of acid baking and caustic cracking has also been investigated and shown to
offer high recoveries and preferred reagent consumption levels and operating costs. As
reported in the previous Technical Report, extractions under favourable conditions are typified
by the results of AB-19 in which overall zirconium recovery was 99%, overall light rare earth
(lanthanum, cerium and neodymium) extraction was 98%, and extraction of the heavy rare
earths and yttrium was 99%. Niobium extraction was 83%
Although it is clear that a very effective process for solubilizing the valuable elements in the
Thor Lake concentrate had been identified, testwork is continuing at SGS Mineral Services.

However with ALK (Dubbo) having 60% Hree and the Chinese investing in it up to the allowable amount (i think 19%) and with pilot plant underway it would seem that ALK has all the ticks and the green light.

If they use the above technique for extracting the Hree and Y @99% then all things should get better plus ALK has a number of producing gold mines.

So I am adding this to the replies as ALK as far as I know has the largest HREE deposits in the World. If I am wrong or these figures out dated then I would love to see them

29 toly March 9, 2012 at 1:04 am

Hi Jack, thanks for a great article, I don't always agree with your views (like putting John Keynes before Adam Smith, the founder of free market capitalism) but I think you knocked it out the park with your comment:

"Now, more than ever, the REE market needs a few more total supply chains..."

Honeywell announced they were developing new compact electric motors to drive jet airliner landing gear with electricity. RE magnets will be indispensable in making these compact lightweight motors. According to their engineers jet (and prop) engines are inefficient in using jet fuel for taxi purposes... This is just one example of new (and significant) demand for a product that is not available as yet...

A marketplace with an abundance of RE's is essential to develop this nascent technology into an industry with sufficient supply for increasing demand...

30 nicolas pietrangelo March 9, 2012 at 3:54 am

Jack thanks for sharing your wisdom on this foream. The parts of ENER appear to be worth lots more than THE WHOLE. But so much of this co's and Stan's vision was not understood. With Bosch getting Cobasys and now BASF attaining OVONIC battery and of course GWM owning 100% of GWT(formerly Ovonic materials) the NIMH battery and LANTHANUM are far from being upstaged by various LITHIUM technologies(20 plus chemistries). The sweetspot for vehicles will be HYBRIDS not plug in hybrids nor pure electrics. As you so well know the IDEAL battery for HYBRIDS is NIMH and with the GERMAN connection and the JAPANESE connection NIMH will roar back to the spotlight/proven/totally recyclable nickle-cobalt/totally safe/high performance/long lasting etc etc etc. The Japanese (Toyota PRIUS-Honda-Ford-BMW) and now the Germans(VW-Audi-etc) far far far exclipse the STUPID efforts of GM visa vie THE CHEVY VOLT-LITHIUM powered. Boy what a comparison of GENIUS vs STUPIDITY. On the solar scene I would watch the takeover of UNITED SOLAR OVONIC by either DOW or best bet BASF. BASF has been in the belly of the beast with acquiring OVONIC battery and 2 other battery footprints(SION and MERCK electrolyte division). Long live the GENIUS of OVSHINSKY and the 50 yr developements of ENER. All the other stuff like FIRST SOLAR/CHEVY VOLT/LITHIUM EFFORTS/EVERGREEN SOLAR/etc.etc is PURE BULL----!!! Looks like INTEL/MICRON will grab the Phase change memory. Your thoughts having lived the ENER saga. Batterydoc

31 blackjack March 9, 2012 at 4:11 am

BASF and Siemens both have agreements in place with Lynas

so BASF for the batteries and Siemens for the magnets

32 Vakiss March 9, 2012 at 9:06 am

If u r serious about HREEs players then u shld check out recent presentations of Northern Minerals Ltd (NTU : ASX).
Aims to produce 60% concentrate HREEs from Xenotime at low capex and unvbelievable returns based current pricing. Paydirt values of drill hits product are highest in the world. IMO NTU is likely to be one of handful of REEs projects to succeed from the global range of hopefuls. maiden resource due this year. No sovereign risk..

33 Daniel Nantz March 9, 2012 at 9:41 am

The whole problem with the world today is that fools and fanatics are so certain of themselves and wiser people so full of doubts.

Bertrand Russell

34 Ted March 9, 2012 at 12:57 pm

Great article Jack,
Montero Mining, a Canadain company operating in Tanzania, has recently produced its first saleable samples (which include Nd as part of a mixed REE hydroxide, cabonate and oxalate) http://bit.ly/yqfC9E and they have made their downstream processing a priority. They will have an initial small quarry mine in '12, possibly 1st Q '13 and they have an increasing 43-101 targeting 5,000t/yr http://bit.ly/z1NP1e . I'm just a shareholder, but was wondering if Montero was on your radar.

35 Jack Lifton March 9, 2012 at 1:24 pm

Ted,

I like the Montero story. I think that its management has the right idea about 'right sizing.' I have not yet been invited to visit the mine site, and I wasn't at PDAC last week where I could have met the CEO, but people whose opinion I respect have given me glowing accounts of both the mine site and the management.

Jack

36 fran March 9, 2012 at 1:45 pm

three questions--

will supply chain application volumes of consequence exist outside asia, requiring HREE from non-asian manufatured sources?

will HREE'S cost content impact on total product cost justify non-asian suppliers?

is the answer to these of consequence to mine candidates?

37 Poncho462 March 9, 2012 at 2:29 pm

Jack...

It occurred to me that as you mentioned earlier, Molycorp might have jumped too quickly on NEO. I have posted the following on several boards and would appreciate your opinion on these questions.

Here is something no one has mentioned...

Neo buys it's separated materials from Chinese sources. Is China likely to allow MCP to import U.S. sourced LREE materials(that's what Mtn pass will produce) and displace Chinese internal sales?

Contrary wise, will the U.S. be happy to see what they have been talking about in Congress as Strategic Materials exported to China?

If allowed to complete, it looks to me that MCP could be left holding a fairly large bag, having spent a ton of money and ending up with a processing plant in China, buying Chinese separated materials, and selling primarily to the Chinese market, with no Vertical Integration benefits.

38 ellwodo March 9, 2012 at 2:39 pm

Jack,

Thank you for your response. I didn't realize that you were using "producing" heavy REEs to mean the whole supply chain through the production of ready to use oxides. I agree that would not include Matamec at present.

39 Gareth Hatch March 9, 2012 at 3:05 pm

@blackjack: Alkane Resources does NOT have 60% HREEs at its Dubbo Zirconia Project. Not sure from where this error first originated but it has been floating around for a while.

My numbers for oxides of Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu-Y as a % of TREO for the projects you mentioned:

Bear Lodge (Bull Hill Zone): 3.5 %
Dong Pao: 1.6 %
Dubbo Zirconia Project: 23.3 %
Hoidas Lake: 3.7 %
Kvanefjeld: 11.8 %
Mount Weld (Central Lanthanide): 2.9 %
Mount Weld (Duncan): 10.3 %
Mountain Pass: 0.6 %
Nolans Bore: 3.3 %
Thor Lake (Nechalacho) 15.4 %

40 chihawk- Paul San Antonio March 9, 2012 at 9:59 pm

Jack Lifton (above): "I have been told that a HANRE-separation-capable facility is, in fact, being constructed in the Western Cape province of South Africa, by Great Western Minerals Group, but I do not know the timetable for that project."

My understanding is GQD is designing the plant now, but there is no funding or construction at this point. Are you referring to future plans or did I miss important funding provided to GWMG?

41 blackjack March 10, 2012 at 1:21 am

G - even 23.3% HR EE is higher than most
the numbers come from several sources = and include the ALK 60% figure includes yttrium and scandium - the Y is quiet high and considered in the HREE table

Source is http://www.australian-shares.com/forums/discussion/6215/20.html
and
http://www.australianrareearths.com/images/alk.gif

hope this helps

42 blackjack March 10, 2012 at 3:59 am

In a follow up to its earlier report the U.S. Department of Energy, Dec. 2011 – Critical Materials Strategy, examined the role that rare earth metals and other key materials play in clean energy technologies such as wind turbines, electric vehicles, solar cells and energy-efficient lighting.

The five rare earth metals – dysprosium, neodymium, terbium, europium and yttrium are considered to be the most critical of the elements considered in the report.

So ALKANE has a lot of Yttrium and this is also on the high demand list

So in demand and on the critical list = business 101

43 Gareth Hatch March 10, 2012 at 10:12 am

@blackjack: sure - 23.3 % is a decent distribution. You'll find that almost without exception, Y content dominates the fraction of HREEs in deposits with significant HREE:TREE ratios. I think it's one of the reasons why some folks don't like to call Y a rare earth (despite the International Union of Pure and Applied Chemistry, the official "keepers" of the periodic table of elements, clearly defining the rare earths to include Y).

I recognize the image whose link you posted above - but I can't quite remember where it first appeared. I do remember sending its author a note at the time on the error for Alkane's DZP, and not hearing back :-/

44 steph2638 March 16, 2012 at 8:33 am

Jack,
In yr article you write ''Outside of China, and previously in Japan and possibly Kyrgyzstan, no-one has yet constructed a SX operation with the capability to separate the HANREs.''
So what about Rhodia in La Rochelle, France?

45 Jack Lifton March 16, 2012 at 9:47 am

Stephane,

Thank you for bringing this up. Rhodia's solvent-exchange plant in LaRochelle, France, has been there for a very long time, as the history of rare earths goes. I have personally been refused the opportunity to visit it as I have been refused a visitor's pass to Mt Weld. Strangely I admire Rhodia's technology and never say anything bad about it. Quite the contrary. I am writing a book on critical metals and my research leads me to believe that Rhodia was the global pioneer in large scale processing of the rare earths, and since Rhodia has never been out of the business-it moved S/X operations to China to have easier access to feed-stock- I conclude that it is the world's premier processor of rare earths.

In any case, LaRochelle is today back up and running. Rhodia has a j/v with Belgium's Umicore to recycle lighting scrap, among other rare earth containing scrap, to make phosphors for the lighting industry. Rhodia may also be looking at providing "jobbing" services to those who can bring it ore concentrates or process leach solutions to separate. This is not as easy as it seems, because you have to have mastered the skills of following separate batches through a very complex process management regime and also you need to get ores and or solutions that may contain measurable radioactivity onto and across the roads in La Belle France, not a task for the faint hearted. Of course if you have radiation-free feed-stock....

Thanks for the very good question,

Jack

46 Positroll March 20, 2012 at 12:56 pm

Do you think Rhodia would be a good fit for Alkane for a take.off agreement wrt Alk's (radiation-free) REE solutions ?
So far discussion on blogs/boards that I read has rather turned around Japan/South Korea on the one hand, and Lynas on the other. But since Alk already has MoUs with European companies for its zirconium/niobium products ...
Would they be in a position to help financing the DZP?

47 ROCKHOUND March 21, 2012 at 11:58 pm

Hi, Jack would you elaborate on the chinese Solvents mentioned in above article? It seems there would be another potential chokepoint coming up
for out of china refining extraction/purification.
any other producers?
new Technology? my small but painful investment in Rare Earth Industries
did little to alleviate my curiosity into new technology, also, any comments on Orbite Garant Rare earth pregnant alumina refinment liquors.
Thanks, great Blog.

48 George Farmer October 5, 2012 at 12:45 am

Mr. Lifton,
I wrote to you about a week ago, requesting what your thoughts were on Stans Energy. You replied that you really were not tracking them since information was so difficult to obtain., and their operations were shut down by government decree. Now that they are back in operation, and forging forward, in a quasi stable mode, I wonder if you have any recent news for us small investors? Or, where we might go to find out more. Is there a decent mining newsletter, which I might subscribe to? I also have positions in U-Core, and Alkane and American Vanadium.
Thank you again.for any response.
George Farmer

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