Rare Earths Are Still Hot: Musings From Hong Kong

by Jack Lifton on February 26, 2010 · 24 comments

in Rare Earths

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Rare earths are a “hot topic” in Southeast Asia. I’ve just arrived back from Hong Kong and Tokyo. In both cities I had private meetings with the clients of CLSA, a large Hong Kong based brokerage, which advises institutional investors.  I also spoke at the CLSA “U” Forum in Tokyo where that company brings together sector experts to give analytical talks. Mine is “Rare Metals in the Age of Technology”.

I made a similar visit to New York City in December and next month I will be in Europe talking to a number of very large institutional investors.  Let me give you a synopsis of what I am being asked and of my responses.

First of all I specialize in the market fundamentals and future use trends of the “technology metals.” These are the rare metals for which I have now published an operational definition, which has already been posted elsewhere at The Jack Lifton Report. I speak on the current production, the potential production, and the natural limits on production and production rates of a suite of metals that I tie together as the “technology metals.”

Yet invariably, in the last year in particular, I will be asked only about the rare earth metals. That is why I conclude that the rare earth metals are a hot topic among institutional investors.

Having studied the rare earth production sector for some time, I conclude and I tell institutional investors that the crisis in the supply of rare earths, now and into the near future, is one of finance and timing. Current rare earth pricing at the mine face is too low to make rare earth mining a profitable investment. This means that if a large investor in the development of a mine wants a return on his investment in less than several years, perhaps as many as 10 or as little as 3-5, then he should consider not investing in rare earth mining. There are some projected balance sheets that are much better than others, so that even with current prices they would be able to return a profit on a large investment within a reasonable short time. This in fact is the normal time frame for mining finance to bring in new production from existing or in-process operations.

For example, because Canada’s Great Western Minerals Group has a degree of vertical integration, which no other Western company similarly situated has at the moment, and because it has a relatively low cost for re-opening a former working thorium/rare earths mine in South Africa, then I think that an investment in GWMG could bring a good return within 3 years if all of the known issues are resolved favorably.

Last week I was informed that Mark Smith, CEO of Molycorp spoke recently of his cost of producing at Mountain Pass and that he stated that Molycorp could produce its Mountain Pass concentrate for a figure of what would be about one-half of today’s selling price. If this guidance is accurate, and I have no reason to doubt it, then Mountain Pass would be a good investment indeed, with a good prospect of short term return on investment and, based on past production, a good chance of large revenues.

In the long term Avalon Rare Metals will likely be the global major supplier of heavy rare earths from its Nechalacho mining facility at Thor Lake, when its development reaches the production stage. This does not mean that Avalon will supplant GWMG or Molycorp; it means that for North America to be self sufficient and to become a world supplier of “all” of the rare earths, it will need the Canadians and Mountain Pass to all succeed in both the short and long terms. If America itself is to become self-sufficient and to have the capability to export all of the rare earths, then it will need to add a source of heavy rare earths within the USA. I think that US Rare Earths, a private venture at the moment, has the right deposit for that (note: I am a paid business development consultant to US Rare Earths).

There are rare earth deposits at various stages of development outside of North America, in Australia in particular. Lynas of Australia is funded and on the way to mining and refining its rare earth ores outside of China within 2-3 years. In the world market it will compete fiercely with Molycorp but not with GWMG or eventually Avalon. The deposits of the Canadians are rich in heavy rare earths and although GWMG will most likely be the first to produce heavy rare earths outside of China, the eventual world supplier will be the massive deposits of Avalon. I predict however that China will remain the principal and by far largest user, and by 2015, the largest buyer (yes, I said buyer) of rare earth metals.

There are, notwithstanding recent ill-informed commentaries, significant minable deposits of heavy rare earth rich ores in Southern Africa. Some of these have been producers in the past, although not of heavy rare earths for which there was no market prior to the year 2000. One that I investigated while I was there recently, was producing thorium at one time; another was being developed when Chinese low pricing closed out the non-Chinese producers in the late twentieth century.

There are other large and small deposits claimed around the world, but the overwhelming majority of these are far, far, from production. None of them could be profitable at current rare earth pricing coupled with enormous development costs, but some of them are the world’s reserves for the future.

If rare earth pricing improves shortly, then the rare earth supply crisis will end within 3-5 years. Even if pricing does not improve there may yet be government subsidies in the USA for strategic purposes that will end the crisis within the USA. If neither of these contingencies occurs then no mining development in the rare earths will occur outside of North America and Australia, except for the potentially already profitable companies I have named above.

I have in recent months received thinly-veiled threats of legal action from certain rare earth juniors who claim that by not mentioning them, or by quoting from their written record, that I am in some way disparaging them.  This is illogical and it shows significant ignorance of marketing dynamics. I welcome constructive criticism of any and all of my remarks; if I can be shown where I am wrong, I will publicly say so, and will adopt your reasoning and conclusions. This is what reasonable people do.

The rare earth supply crisis is entirely man-made, and it can be, must be, and can only be resolved by the actions of men and their bankers and leaders.

Next week I’m in San Francisco. I’ll report from there.

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1 Tek February 27, 2010 at 10:31 am

Thanks Jack for another professionally objective analysis of the REE sector, especially the time line projections.
I, like so many others, had initially been expecting an immediate explosion of development, which is obviously not going to happen in the short term. But, that does give investors an opportunity to assess this space, and make prudent investments, which in the end, is exactly what is needed to establish a solid financial base for the industry. And as you have noted before, there may well be some very pleasant unexpected surprises as this development process unfolds over the next 2 to 7 years. This should be a fun ride.

2 JAY BIRGE February 27, 2010 at 10:58 am

“The rare earth supply crisis is entirely man-made, and it can be, must be, and can only be resolved by the actions of men and their bankers and leaders.”

Wow, Jack, what a conclusion. A real hype-buster! Can our Wall Street folks, politicians, lobbiests and those that pay them, stand your truth???? It may cost some folk some real bucks.

3 John Petersen February 27, 2010 at 11:00 am

The problem with all the time you spend consulting for the rich and famous is it cuts back on the time you can spend educating those of us who are neither. I do want to thank you, however, for the time you devote to the effort and look forward to seeing you soon.

4 Bill Meisner February 27, 2010 at 11:57 am

Hello Jack,
I have done a lot of DD on many of the so-called REE companies. For one, you state a person could “probably” make a good investment in Molycorp. That would be true if a person could invest, but right now it is owned privately. Plus they don’t have the Heavy Rare Earths, from what I could find on them. What some may also like to know with Molycorp is: Goldman Sachs has their hands all over this one.
You also mention US Rare Earths and yes as a paid consultant you “Probably” need to throw their name in there, but they are a long way off from production.

What you never mention and it’s beyond me why, because I have studied most of these companies, Why you never mention the company, that may well have the largest HREE’s in North America. Plus their meturallogy, which is very expensive, has been competed and paid for by the US Gov. This company is also on US Soil, in a VERY friendly mining area, ===> without human inhabitants to worry about. Plus a deep sea port. I could go on, and I know you know who I’m talking about. So just to set the record straight, tell us why you won’t mention this company. I will be monitoring for a reply, ===> so that I may respond to your response.
For those who may not know the company, they are called UCORE URANIUM. They are located at Bokan Mountain, Alaska. If you don’t believe what I have stated about this company, have a look on their Web site and do your own DD. You will come to the same conclusion as me. Why won’t Jack mention this company ===> John Kaiser does.
One last thing Ucore is presently working on a 43-101. When that is completed you all will see, ===> you need to do your own DD.
I’m not a professional consultant/investor. I’m just a person who has done a lot of research in most of these REE companies. I would also like to say, “I’m in no way recommending or discrediting any company. I’am just adding to a well written commentary that isn’t complete by any means.

Thank you for your time,
Bill M.

5 Volkhart Rudert February 27, 2010 at 12:07 pm

Another impressing analysis ofthe RE-market; as a Germany based consultant I use to have strong contacts within the german industry sector and the government organisations as well: RE is now definitely on top of the agenda amongst leading german organisations. The last few weeks I was several times asked by big companies about Lynas Corp. and Arafura Resources as well, therefore I wonder why You never mention Arafura Resources/NT/Australia which is expected to start production 2012/2013. Arafura’s reserves will last for 20 years at 20.000t/a at least, having the advantage of producing technical grade phosphoric acid as a byproduct(150000t/a) which leads to a good net profit. What is Your sight about Arafura Resources?

6 Nancy Shaw February 27, 2010 at 1:04 pm

My observation is the same as Bill Meisner, “Why is Ucore Uranium, the biggest HREE in North America, being ignored by the analysts and marketplace? It just doesn’t make any sense.

7 Jack Lifton February 27, 2010 at 2:45 pm

Let me clear something up: I only comment in detail, on junior mining ventures of which I have what I consider to be sufficient credible information.

My consulting business consists of advising institutional investors and junior mining companies on the probabilty of the commercial success of a mining venture. To do that, I maintain a knowledge of the market fundamentals and future use trends of the rare metals in general. When asked to do a “due diligence” or to participate in one, I request that I visit the mine site, see all of the data, and interview the principal managers and technical staff.

I have spoken, I believe, so far to one “uranium” venture that morphed into a rare earth venture in the flood of such entity transformations in the last year. I was invited to visit their deposits in northern Quebec, but that visit conflicted with a trip to Beijing, so I had to decline. I have not heard from them since that time. Also, I have never spoken to anyone associated with the Bokan Ridge project, so, as with the northern Quebec project I could not publicly comment upon it.

I have known for many years that rare earths are often found along with uranium. It is, I hope, common knowledge that deposits of rare earths, which are almost always mixtures of ore types, almost always are associated with thorium more so than with uranium. Monazite is well known for its thorium-content issue. Thorium as I have written elsewhere, was the last of the technology metals; prior to the atomic age that began in 1945, in the New Mexico desert, thorium was used only to enhance the visible emissions of gas lights and to make tungsten more amenable to being formed into welding rods (a very small use in 1945). Its use in the first American civilian nuclear power reactor at Shippingport, Pa. in the 1950s led to a search for thorium back then that among other things was an important factor in the discovery and development of the Mountain Pass bastnaesite deposit that is today the principal asset of Molycorp. In South Africa in the 50s, Anglo-American began mining thorium at Steenkampskraal from high grade thorium associated with very high grade HREE distributions. When both the American and British governments gave in to their militaries, and dropped the development of thorium reactors in favor of uranium ones the thorium projects shut down and were forgotten.

As far as I know, the only licensed privately-owned depository for thorium in the world is at Steenkampskraal, by the way. I understand from my own conversations at INDABA that the current owner of that mine, Great Western Minerals Group of Canada , is considering offering that function – legal thorium-bearing material storage – to other rare earth miners (or at least South African ones) who are concerned that if they process thorium-bearing monazite or any other thorium-bearing ore, that they could wind up with a thorium storage problem that makes their projects uneconomical. China does not now any longer consider thorium a waste product; it has ordered its rare earth miners and refiners to sequester their thorium and to hold it in reserve for the state. It will be processed to fuel for uranium-enhanced thorium reactors. There was the first ever public civilian conference on that topic last September in China, in the Bayanobo rare earth mining region for obvious reasons; India has a strong commitment to thorium-based reactor technology and is very far along with its reactor technology, as is Russia, Canada, and last but not least, the USA.

I am going on about thorium to get across the point that until now, the thorium content of rare earth ores was considered a problem, not an advantage, JUST AS WAS THE URANIUM CONTENT OF RARE EARTH ORES!

If you want to know why the actual uranium miners, some of whom in Canada have significant above ground residues rich in HREE, are not rushing into the REEs production business, it is because of the regulatory climate for the mining of uranium- or thorium-containing ores and the politics of even trying to do so and the ECONOMICS!

I do not believe that any metallurgy to separate, refine, and produce HREEs in metallic form from uranium mining residues or uranium-bearing ores is “settled” science. The chemical/metallurgical issues are different in each deposit, and only China has ever produced dysprosium and terbium commercially. The Chinese deposits, the “famous” ionic clays, are unusually low in thorium so that there is a minimal issue of radioactivity rather than the maximal issue arising from using uranium ores and residues as a resource for HREEs.

You should ask yourself, why world class uranium miners such as Canada’s Cameco and France’s Areva, do not produce HREEs. Then you would begin to understand how complicated the production of HREEs from uraniferous deposits. IT IS ECONOMICS AND REGULATORY ISSUES!

If and when a rare earth venture based on the extraction and separation of REEs from uraniferous or thoriumiferous asks for my advice, and I can both do all of the steps in my due diligence agenda and the company will allow me to report on that publicly, I will report on it for you here. Until then the only one I have ever looked at in detail is US Rare Earths, formerly Thorium Energy, and I consult for them as a paid consultant, so I do not wish to speak of their deposits publicly until they go to an IPO, whenever that may be. I hope fairly soon.

I have just now returned from Hong Kong and I’ll post a report on the SE Asian rare earth interest level (sky-high) next week.

Thank all of you, sincerely, for reading TJLR.

8 Richard Leeds February 27, 2010 at 3:57 pm

I, like Bill Meisner, am doing my own due diligence on the Rare Earth hype. I was fortunate to come across Jack Lifton’s site and appreciate his efforts. Jack, since Great Western Metals has hired you to expose their company to investors, my concern is that they want to expand their investor pool, increase demand for their shares, resulting in higher prices, so the eventual secondary offering will raise more funds.

Jack, Bill, Nancy and other posters on this board. I appreciate your comments.

The problem I see with rare earth ventures is the following:

China supplies 95% of the world demand. Demand is currently about $1B a year. So if other mines come on line during the next three to four years which will happen with Lynas and others, what are we looking at?

Suppose another $1B of production comes to the market. Will it depress prices or will demand double from the current level. Also, if three new mines are producing by 2014-2015 they are going to be competing against the Chinese for sales. The last time that happened China drove all others out of production by its superior labor rate advantage in the mining industry. In North America and Australia most mining labor makes $40,000-100,000 per year. In China, what do they make, I’m guessing $2500 per year. So can anyone compete against the Chinese and have a valuable mining business that can make investors any money? I am doubtful.

Look at Lynas. The did a billion share stock issuance at 29 cents. They have 1.66 billion shares. The stock has been bid up to 44 cents in just the last few months on newsletter hype. How can this company have any good financial results for shareholders when per share results on revenue and income in future years will have to reflect 2 billion shares of stock? In addition, phase one of their mine is going to cost $400 million dollars. I assume phase two will be another $400 million and another stock issuance.

Lynas will be good for the executive management team and insiders that receive option shares, I just do not see how they can make a good investment for shareholders unless the newsletters over the next two or three years hype the shares up. From a financial standpoint I just do not see it.

The world is currently using around $1B+ of rare earth, demand and production are in equilibrium and the prices are around $12-16 per KG. Does the planet need a 100% increase in production from the mines that are going to be selling rare earth by 2014 from Australia, Africa and Canada? I assume if demand increases by 100% over the next decade and that is probably a big “if”, all these new mines will be going after the sales. Remember, China has the cash to buy mineral leases and reserves anywhere in the world. The ore gets shipped to China and the processing plants in China will have the lowest cost labor and will drive down price and sales for other producers with more expensive labor.

Am I wrong, I think rare earth mines are a big crap shoot with not enough substance.

I thought Lynas might be a good investment, after looking at it it just seems that investors will not make out.

Great Western Minerals went from 2 cents to 25 cents over 1000% return. The big money has been made by the insiders and early investors. How do they make money with almost 200 million shares. Two hundred million in sales less production costs (and a big if, they get the South Africa property into production) would amount to about 20% of the existing world demand. If they have a 50% gross profit after mining expenses that is only 50 cents a share less financing costs on paying off the debt to operate the mine. If they can get debt financing. If not, they issue more shares and the per share sales and net are incredibly diluted.

Every rare earth company is going to go after the next billion in sales that the Chinese are not currently controlling. Remember, most of the manufacturing and other uses are taking place in Chinese factories (China, Hong Kong, Taiwan, etc.).

What am I missing, Jack? Others?

9 loquacite February 27, 2010 at 4:25 pm

The owner of Steenkampskraal is a private South African company called Rareco — NOT Great Western Minerals Group (GWG).

GWG has been shabbily misrepresenting that they own this REE development project, with little tiny footnotes in their presentations saying that they don’t actually “own” it, but that they in fact only have an option to purchase REE mined product. That has nothing to do with ownership. They do not even have an option to purchase the project, or an agreement with Rareco of any kind. So, Mr. Lifton, when you and everyone else says that GWG owns Steenkampskraal, it is a big fat lie, and investors are being duped in a Bre-X style scam.

Judging by GWG’s stock price, however, investors are not being suckered. It’s all too obvious that this destitute company has no technical or financial capability of putting this prime REE jewel into production. And the investment banks will not give them a red cent for this, because they know it too.

Your commentary about thorium storage is also false. GWG has absolutely nothing to do with that. That is all due to Rareco’s efforts.

Have the decency to represent the facts, sir. Not rubbish lies and corporate propaganda.

10 Jack Lifton February 27, 2010 at 4:35 pm

Richard,

I do not work for Great Western; nor have I ever worked for them; nor will I. I have taken some expenses from them twice to address their AGMs in 2008 and 2009 in Saskatoon. I am a paid consultant to US Rare Earths for business development advice; I am not a participant in the company’s administration, nor do I nor have I ever owned shares of the company.

Loquacite,

I don’t like to respond to people like you, but I will tell you that I had dinner with the chairman of RARECO and the Chairman of GWMG together in Cape Town two weeks ago, and they, GWMG, indeed have an arrangement that gives GWMG the ownership rights for mining at Steenkampskraal. If you wish to dispute the semantics of South African law as to mining and mineral rights please find a SA solicitor to shout at.

11 Tek February 27, 2010 at 4:43 pm

Well, dick, your assertion that “Great Western Metals has hired you (Jack) to expose their company to investors” is a surprising bit of news. I didn’t see that in any of GWMGF’s Press Releases.
But, suppose Great Western, or a consortium of chain related companies, is simply building a vertically integrated business where they control the entire process from raw materials ,to product manufacuring and sales? That seems like a reasonable business strategy, especially in the face of rising demand. Any company/JV who has that type of business model through solid planning and steady growth, is returning to the basic principles of building a strong business orgainization. I think those are some basic priciples that have been discarded.
Just because you suggest that a doubling or tripling of the current share price is too paltry to consider successful, doesn’t make it so. If you think this whole space is simply a hype then you would be foolish to invest one more minute in discussing it, and simply seek a more lucrative option elsewhere.
I, for one, think this sector has good promise, and some of the businesses in it will be successfull and profitable. So I invest.

GWMGF, URRAF, QSURF

12 dave February 27, 2010 at 10:22 pm

Jack,
you said that you only comment on mining ventures on which you have sufficient credible information. This is fair. What is not fair, though, is to declare which company is winning the rare earth race, as you did a couple of months ago, when, in fact, you do not have enough information on all companies involved. You never mentioned that your analysis is done on the handful of companies whose properties you actually visited.
You also mentioned the problems associated with production of HREEs from uraniferous deposits, as a reply to Bill Meisner who was intrigued by your complete silence as regards Ucore Uranium. However, if you knew better, Ucore is not planning to extract HREE from the area that was once a uranium mine, but from neighboring areas that are enriched in REE and lack uranium almost completely. The fact that Dr. Anthony Mariano loves the Bokan property speaks volumes. And you know this very well.
You also mention that Quest Uranium (you actually carefully avoided both Ucore and Quest names in your reply) has not given you a second chance to visit them. Again, if you want to be a fair analyst of the sector, and perceived as such, you should be the one who actively seeks to visit and explore different companies, not just wait for invitations. Quest has no incentive to invite you since they were already recommended by other credible analysts and their share price went from 5 cents to over 3 bucks.
Again, to investors like me, your cerdibility is lost by the simple fact that you only mention the same companies over and over again. Nothing is said on the other ones. I wonder what will you be saying if times proves you wrong…and it will.

All the best

13 Jack Lifton February 27, 2010 at 11:21 pm

The production of rare metals from a mine requires that the mine be accessible logistically, have access to power and process water, and have its chemical engineering issues (“metallurgy”) resolved before mining commences. Of course, it must also be able to produce its end product (almost always an ore concentrate, not even a metal in crude form, and never, at the mine, a pure metal for end use) ECONOMICALLY-i.e., the mine product must cost less to produce than it can be sold for at the mine face! It’s as simple and as complicated as that.

Based on a metric designed from the above incontrovertible facts, a colleague and I analyze mining ventures for their probability of commercial production of the mine product economically and within a reasonable time.

Notwithstanding what is said by those with an agenda to make money pumping and dumping stocks, I conclude that in the heavy rare earth space the highest probability of first production will be by Great Western Minerals Group at Steenkampskraal in South Africa; this, I think, will be followed by production of HREEs at Avalon Rare Metals mine at Thor Lake, Northwest Territories, Canada.

Both of these ventures have been in development for more than five years and both have similar impediments to production, namely unresolved total metallurgy issues and the lack of refining capability in-house. These are soluble by continuing work on technology and continued access to finance, and I judge for myself, after studying the companies, whether or not they will succeed.

I do not ask to visit new junior startups, and I don’t rate them unless they or someone else asks me to do so. Apparently some of my readers have confused what I do with stock picking and stock promotion.

I try to determine which companies could actually produce metal ore concentrates, at a cost less than the market price on the day of their first production, and then try to determine if it looks highly probable that they can do so and then finally whether or not they are structured to make it happen – in my opinion.

My clients are not pump and dump promoters of share prices, but end users of the metallic forms produced downstream of the mining companies. I also have institutional investor clients, with a long-term strategic outlook for investing in mines.

Dr. Mariano said last March in 2008 at the SME meeting in Denver, that Avalon’s Thor Lake project would never produce anything. He had his reasons for saying that, and I have my reasons for disagreeing. I do not attack his veracity or integrity and he does not make disparaging remarks about me.

I haven’t visited any uranium-related rare earth deposits, because I could not agree on a date with the owners of one, who asked me. I really have no other comments on them at this time.

The reason I don’t ask to visit such sites is that I am looking at the timeframe of 2010-2015. I stand by my prediction of first production of HREEs commercially outside of China; it will be GWMG or Avalon. I will further say that I believe that when Avalon goes into production of more than 5,000 tons per year at Thor Lake then the HREE crisis of supply will be over in the global market, although I do believe that the USA will move to make itself independent and self-suffcient in total REEs for reasons of national security.

There have been some 100 new REE ventures brought to market in the last two years. With the opening and reopening of Lynas, Molycorp, GWMG, Avalon, perhaps Arafura, and, politically driven in the USA, US Rare Earths and when and if there comes into existence the complete supply chain in the West to separate, purify, make pure metals, make alloys, and make magnets, batteries, lasers, and catalysts using the REEs in the USA and elsewhere, perhaps Canada and/or Australia – then the REE crisis will be over and those left standing then will be the winners; the others will be unnecessary.

My clients include end users who critically need materials. My advice is focused on improving their security of supply, a term I learned from John Kaiser.

If any of you want to follow my public work and use it as some of the data with which you form your opinions on what stocks to buy that is your right. If you want to tell me that a discovery of an ore body with some high grade grab samples in a remote part of the world has something to do with delivering metal forms and alloys to a Global 1000 producer of high technology devices or machines by 2015, then you are pissing up a rope. Watch out that you don’t get splashback and please consider going elsewhere for advice.

14 Gareth Hatch February 28, 2010 at 12:04 am

To Bill Meisner: in reference to Ucore Uranium, you said that “Plus their meturallogy, which is very expensive, has been competed and paid for by the US Gov.”. Are you referring to the Green and Harbuck (1996) Bureau of Mines report [available via http://media3.marketwire.com/docs/GreenHarbuckUSBM1996.pdf ] titled “Rare Earth Recovery From Bokan Mountain, Alaska”?

Green and Harbuck indicated that yttrium and to a certain extent, cerium and lanthanum could be recovered effectively via the culmination of the processes that they tried. However, they went on to say [on page 8 of the report] that “[A]s emphasized throughout this paper, the main thrust if [sic] the research was yttrium recovery; however, as is evident in tables 7 and 8, the raffinate from the yttrium circuit could be passed through a 20 pct DEHPA, 0.24M OPAP circuit to selecrively [sic] recover cerium. The recovery of other select metals from the leach liquor would require further research”.

Note the last sentence. There is no indication in this report that the metallurgy for the other REEs [light or heavy] has been settled or completed – quite the contrary. While I understand that a news release from Ucore Uranium from Sep 2009 included a comment that “[y]ttrium can be considered a proxy for the entire “Yttrium Group of Lanthanoids”, otherwise called the heavy rare earth elements (HREE’s)”, that comment was not made by Green and Harbuck, nor is it supported by the content of that report. It’s also not supported by the handful of geologists and extractive metallurgists to whom I’ve mentioned the comment in the past….

15 Gareth Hatch February 28, 2010 at 1:02 am

Nancy Shaw: to my knowledge, there is as yet no objective evidence in the public domain, to suggest that one or other of Ucore Uranium’s deposits is for sure “the biggest HREE [deposit] in North America.” This is despite the chatter on the bullboards and elsewhere, to the contrary, based on admittedly very interesting core sample data.

Once a 43-101 compliant report is released, we’ll all have a better idea of where these deposits stand in the grand scheme of things.

16 geoff alford February 28, 2010 at 3:07 am

Dear Jack,

You say “Having studied the rare earth production sector for some time, I conclude and I tell institutional investors that the crisis in the supply of rare earths, now and into the near future, is one of finance and timing. Current rare earth pricing at the mine face is too low to make rare earth mining a profitable investment. This means that if a large investor in the development of a mine wants a return on his investment in less than several years, perhaps as many as 10 or as little as 3-5, then he should consider not investing in rare earth mining”

As before, I suggest that this type of comment can be confusing. Are you talking about “mining” (digging up and selling the materials containing REEs) or “processing” (concentrating, refining and separating individual REEs)?

Please reply for my clarification.

I also suggest a small box in which you define “mining” and “processing” which can be inserted in all of your papers. Repetition is necessary in order to reinforce the distinction.

It may also be useful to include in your box the following – “Mining of ferrous and non-ferrous metals typically involves digging up an ore deposit and some simple extraction of the metal in the form of a compound such as an oxide.

Mining of REEs really describes digging up an ore deposit, typically containing several REEs. Processing of REEs is more complicated than extraction of common metals and needs to be distinguished as a different and more complex process.

17 alex dolensky February 28, 2010 at 12:11 pm

Dear Jack : I like your replies to the negative posters who I believe follow your site hoping for comments on stocks they are invested in but as you describe due to infrastructure will not make it to market in time. Also thorium will be the nuclear fuel of the future and I follow LTBR which has a promising future. Also could you please comment on hud.v and MSQ.V in particular because of their molybdenum and rhenium deposits. Alex

18 Jack Lifton February 28, 2010 at 12:42 pm

Geoff,

Thank you for your insightful comments. In fact I hope to add a definitions section to TJLR next month for the exact reasons you state.

For the moment let me say that I mean by “mining” only the discovery, digging, and concentrating of an ore to a level at which it can be refined. As you have perceived the confusion comes from those who calculate or mislead others into calculating the net present values of the highest purity fabricated or utilized metal as the metrics by which to calculate the value of the percentage of the metal in the undeveloped ore body. In Canada this is called “The American Disease” by the banking sector.

Again, as you have perceptively noted, the rare earths are a particularly obdurate group when it comes to their ore “metallurgies.” Separating them and refining them is a challenge not lightly undertaken by working chemical engineers, much less chairbound commentators. Each ore concentrate is unique and may even so vary significantly during the life operations of a given mine. At the same time, chemical engineering advances and can fall back, as when a reagent becomes unavailable or a process is fatally regulated.

When I say that the value of the total production of rare earths in 2008 was $1.2 to $1.4 billion “at the mine face” I mean the value of the output at the mine, which is a concentrated ore. This figure, which is a function of the low value placed on REE ore concentrates today, makes the financing of free standing mining of the rare earths uneconomical, if a return on your investment is mandated in less than 5-7 years. The drivers for such development must be such that they include a belief in future higher prices, a perceived threat to national security, or incorporation of the mine into a more complex supply or value chain at the end of which the processed “metals” are evaluated.

Thanks for your comments.

19 JOHN RICHARD IVENS February 28, 2010 at 4:05 pm

THANKS JACK, YOU TELL IT THE WAY IT IS.
IT CAN BE READ IN YOUR FACE !!

20 alex dolensky February 28, 2010 at 6:20 pm

dear jack
I have read all your articles and they bring to light the future of green energy presently in control of China. To me at present the push for green energy and the components to complete their develompent as you have mentioned benefit China, as it is cheapest to manufacture the components there and export to companies associated in that sector, they get the jobs,they control the supply of materials , they are a monopoly. Green energy will suffer outside of them with this control, leaving all others to oil for energy until supply is available . Is this not more serious than mine development cost and can they not obtain more control with their enormous funds to aquire outside supplies. The time frame of 3-5 years is practical if we move now, otherwise, green energy is biofuel ,a flop ,because of supply and costs.
Please respond and comment on how i reason your articles. Alex

21 Bill Meisner March 1, 2010 at 4:37 pm

From Gareth Hatch:
Note the last sentence. There is no indication in this report that the metallurgy for the other REEs [light or heavy] has been settled or completed – quite the contrary.

Also Jack, can you expound on Thor Lake’s meturology? Since you think they are going to be one of the first out of the gate or how about Great Westerns in Canada?

Anyhow, this should be interesting:
HALIFAX, NOVA SCOTIA, Mar 1, 2010 (Marketwire via COMTEX News Network) —
Ucore Uranium Inc. (TSX VENTURE:UCU) is pleased to provide an update on detailed mineralogical studies on surface and drill core samples from its Bokan Mountain rare earth element (REE) project.
Preliminary results of the mineralogical studies will be presented at the Society for Mining, Metallurgy and Exploration (SME) Annual Meeting in Phoenix, Arizona this week by Ucore’s Harmen Keyser and Dr. Mariano. The SME has recognized the increasing demand for, and a potential shortage of, rare earths to supply the US industrial and military complex with a special dedicated session.

We are encouraged by the coarse grain size and liberation of iimoriite, a key REE mineral that has high concentrations of the more valuable heavy rare earths and has relatively simple refining properties.

We will see this week, who is giving coverage to all REE explorations ===> in their so-called fair and balanced reports.

I will be responding again after that report.
Bill M.

22 Gareth Hatch March 1, 2010 at 9:27 pm

Mr. Meisner: for the record, today’s news release from Ucore was posted to RareMetalBlog this morning, several hours before your last comment here at Jack’s blog:

http://treo.typepad.com/raremetalblog/2010/03/news-ucore-provides-an-update-on-ree-mineralogy-at-bokan.html

As for “coverage to all REE explorations” – with over 110 non-state owned companies claiming the presence of rare earths at over 165 different properties around the world, achieving such coverage will take some time, though it is for sure a worthwhile goal.

23 Bill Meisner March 1, 2010 at 10:10 pm

Mr. Hatch

As for “coverage to all REE explorations” – with over 110 non-state owned companies claiming the presence of rare earths at over 165 different properties around the world, achieving such coverage will take some time, though it is for sure a worthwhile goal.

I totally agree with that above statement, BUT with that said, Ucores Heavy REE’s were proven many years ago. Many of what your stating haven’t even drilled, ===> just submitted GRAB SAMPLES. Ucore’s REE’s were known before many who are being touted as “The First out of the Gate.”
There seems to be about a dozen properties with substantial proven amounts. The word there is proven. Mosts metturology has not been completed. When all are not mentioned or added to the horse race, creditability is deminished for the announcer.
Makes you wonder on the timing of the NR.
Thank you for your time,
Bill M.

24 Geoff Alford March 3, 2010 at 9:15 pm

Dear Jack,

See a REE profile comparison of Arafura, Lynas, China and Mountain Pass

http://www.arafuraresources.com.au/nol_reo_dist.html

I would appreciate your comments, as I am sure others also would

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