Seemingly, rare earth companies are dead... crazy.

HLM Completes 7-Hole, 1,500 Metre Phase II Diamond Drill Program On The Pak Rare Metals Project In Ontario

Sudbury, Ontario –March 26, 2014 - Houston Lake Mining Inc. (TSX.V: HLM), is a mining exploration company which is actively exploring for rare metals lithium, tantalum, rubidium and cesium by currently advancing its 100% owned and optioned PAK Rare Metals Project in northwestern Ontario, Canada. HLM is pleased to announce the addition of 500 metres to the originally planned 1,000m announced on the February 18, 2014 press release. The phase II diamond drill program is a follow-up to the Canadian National Instrument (N.I.) 43-101 maiden mineral resource estimate that was filed by the Company in December 2013, see news release dated December 4th, 2013. The drill program focused on the recommendations from the report and is designed to expand and infill the current resource on the project by testing along strike and to infill on selected sections of the deposit with a particular focus on the higher grade Upper Intermediate Zone (UIZ) of the deposit.

The drill program consisted of 1,500 m in seven holes targeting the Pakeagama Lake pegmatite. The objectives of the program are (1) to upgrade some of the resource to an indicated level, specifically some of the 1.17 million tonnes grading 3.44% Li2O in the technical/ceramic grade spodumene lithium zone (UIZ) with low inherent iron, and (2) to expand the resource which currently has a 265m strike length with an estimated width varying from 45 to 125m with a sub-vertical orientation. Samples are currently being processed and will be sent to the laboratory shortly. The assay results of all drillholes will be released once analyses have been reviewed and are subject to QA-QC review.

About the PAK Rare Metals Project
The PAK Rare Metals Project lies close to the boundary between two geological sub-provinces in northwestern Ontario. The deposit is a LCT (lithium, cesium, tantalum) classified pegmatite. These rare types of deposits have been the principal source of hard rock lithium, tantalum, rubidium and cesium ores mined in the world.

HLM is actively developing its 100% owned and optioned project which contains the Pakeagama Lake pegmatite. The deposit has a current new NI-43.101 compliant Inferred Resource of 6.89million tonnes of 1.86% Li2O Eq. The pegmatite uniquely hosts 1.17million tonnes grading 3.44% Li2O in a technical/ceramic grade spodumene lithium zone (UIZ) with low inherent iron content. The Pakeagama Lake pegmatite has a 265m strike length with an estimated width varying from 45 to 125m with a sub-vertical orientation of the pegmatite. The resource remains open to depth and along strike to the northwest and southeast.

About Houston Lake Mining Inc.
HLM’s goal is to become a fully integrated lithium and tantalum producer by targeting the growth as a result of the shift towards electric/hybrid vehicles and high quality consumer electronics through the development of the PAK Rare Metals Project in Ontario, Canada. Combined, HLM’s Board of Directors and Management have over 255 years of exploration and mining experience in order to facilitate the Company’s goal of becoming a raw material supplier of the elements required for the pursuit of sustainable energy, and other applications in high-tech electronics and metal alloys.

HLM has a total of 80,215,695 common shares issued and outstanding. For additional information, please visit www.houstonlakemining.com.

Company Contact Information

Trevor R. Walker, President
2736 Belisle Drive
Val Caron, ON.
P3N 1B3 CANADA

T. +001 705.897.7622
F. +001 705.897.7618

Ready For Rare Earth Rebound In 2014?

http://seekingalpha.com/article/1918721-ready-for-rare-earth-rebound-in-2014?source=email_portfolio&ifp=0

Dec. 27, 2013 3:47 PM ET | 7 comments | About: REMX, Includes: FXY, LYSCF, MCP, UUP

Disclosure: I am long MCP. (More...)

For weeks, I told you about the increasing tensions between China and Japan and the potential impact on the rare earth sector ETF (REMX). It was announced yesterday that Japan's Prime Minister Abe went to visit the Yasukuni War Shrine which was criticized by the Chinese and the Americans. The debate is over territories in the South China Sea which is rich with natural resources.

(click to enlarge)

We are seeing both China and Japan moving toward nationalism as Japan deals with rising inflation and major debt challenges. The U.S. is very disappointed with Abe's move as they do not want to rattle China which holds a large amount of U.S. dollars (UUP) and bonds (TLT) and controls the supplies of 18 critical industrial metals.

The underlying concern is that the rise of China has affected the Japanese as their domestic industries have suffered due to higher labor and electricity costs. China is a major importer of Japanese cars. Both countries are boosting spending on their military.

The U.S. may be tapering to allow the Japanese to devalue the Yen to boost their economy and avoid conflict with China. The Chinese want a stronger Yen (FXY) so that China's exports are cheaper. Japanese central banks are increasing quantitative easing while Bernanke announced a $10 billion taper.

We may be on the verge of a repeat of a rare earth crisis which started in the summer of 2010. That is when China cut off rare earth exports when Japan detained a Chinese fishing boat in disputed territory. This sparked a mania in the rare earth mining sector in the West as end users realized the need for a secure supply for these critical elements needed for high tech industries such as telecommunications (IYZ), defense (PPA) and the automobile sector. They realized without rare earths computers, smartphones, cruise missiles, stealth aircrafts and automobiles could not be built. There are pounds of rare earths in your automobile in places where you would least expect it.

Every year around the holiday time a new craze emerges to capture our imaginations. Remember Beanie Babies, My Little Pony and Cabbage Patch Kids? Will the rare earth ETF be the must have for this holiday season to prepare for a shortfall in 2014 as the global economy expands?

Do not be surprised to see the beaten down rare earth miners propel once again to the front pages of the mainstream media. End users will no longer rely on China and the highest quality assets are already gaining attention from the Europeans, Americans, Canadians, Japanese and Koreans.

Share prices in some of the smaller junior names could double and triple similar to 2010. Many of the questionable rare earth companies which are far from production have already been weeded out by the recent market declines. Molycorp and Lynas (OTCPK:LYSCF) are the only rare earth producers outside of China. In the junior heavy rare earth space stick to the companies with infrastructure in mining friendly jurisdictions. Mining rare earths is extremely difficult and requires environmental and regulatory support.

It should be noted that the Rare Earth ETF has no Western rare earth producer in the top 10 of its holdings. The name of the ETF should be changed to the industrial metals ETF.

A rare earth producer which I believe should rebound off of these lows is Molycorp (MCP). Molycorp is the only rare earth producer on the NYSE and in the Western Hemisphere. It should be considered as Molibdenos Y Metales (MOLYMET) invested $90 million at $6 per share. These guys are not dopes. Investors can purchase Molycorp below that price now and below book value.

Molycorp just announced recently that the final unit of its multi-stage Cracking Plant at Mountain Pass is operational. This could help boost production and decrease unit costs. Once the system is optimized at Mountain Pass I wouldn't be surprised if Molymet makes a bid for Molycorp especially if the price is near their previous purchase at $6. Molycorp is way undervalued as its revenue per share is $3.68.

(click to enlarge)

Molycorp recently declined due to the dilutive financing announced in October, but may be on the verge of closing that gap and finally turning higher. Major volume has come in today on no news which is very bullish. This may mean the smart money is anticipating a rebound in this deeply discounted situation.

How to Read and Interpret an Announcement by a Junior Rare Earth Mining Company 101\

http://investorintel.com/rare-earth-intel/63083/

Posted on November 20, 2013 by Jack Lifton

Junior rare earth mining companies, which I define as those companies that own a mineral deposit which is not producing ore concentrates, regularly produce “announcements” in the form of press releases. These announcements are of two distinct types:

Reports on the junior’s timely adherence to regulatory reporting according to the laws of the country in which it is legally domiciled and/or of the country in which its mineral deposit is located, and
Reports on the hiring and/or firing of “key” personnel; the current market price of its “products;” and the future demand for those same products.

In fact the only important announcements ever issued by a junior are those of type 1 above. Let me explain this to you.

Once exploration has identified a potential ore[GH1] body containing elements of a type desired BY THE MARKETPLACE then a “junior” mining company may be formed to “develop” the potential ore body into a mine, a future producer of ore concentrates. A massive scandal in Canada 20 years ago in which a Calgary based company, Bre-X, falsified the results of a gold “discovery” in Indonesia and cost investors 6 billion dollars resulted in a total revision of Canadian regulations for the purpose of safeguarding investors. The shorthand for this set of Canadian public disclosure regulations is NI 43-101, which is the most easily remembered way to locate the appropriate section of Canada’s legal rules and regulations.

Jack-LiftonNI 43-101 rules require that Canadian-listed companies which are developing mineral deposits must go through and publish the results of a series of steps in order, the measureable details of which must be independently verified by disinterested third parties. NI 43-101 compliance means that the minerals and their contained elements are present as described.

When a Bay Street boutique investment house sells you shares in a NI 43-101 compliant junior it is telling you, the buyer of those shares, that it has done due diligence and is satisfied that the company is reporting its technical information in a fashion that is NI 43-101 compliant. If the company is in an earlier stage the seller of the shares is saying that it has confidence that the company is in the process of developing becoming NI 43-101 compliant.

The goal of NI 43-101 compliance is to minimize the risk of fraud to small investors. The regulations cannot prevent market changes that wipe out the value of the underlying commodity.

It is now traditional for regulated junior miners in Canada (and in those, mostly developed and mostly Commonwealth, countries which have adopted the Canadian regulatory scheme) to proceed in a series of steps from an initial resource estimate to “bankability,” which is simply the level of confidence in the ability of the junior to produce and market its final chosen product that allows a publicly regulated financial institution to make an investment without being liable to its shareholders for a breach of fiduciary law.

There are many steps to bankability/feasibility. A general listing would include:

Determining the precise geology of the deposit – leading to a mineral resource estimate at one or more levels of confidence, which are in terms of increasing confidence, inferred, indicated, and, finally, measured – and simultaneously determining the size (extent) and the (overall) grade of the deposit(s).
Preliminary economic assessment – A basic economic analysis to +/- 35% – mineralogy work, initial metallurgical work, piloting, recovery rate determination etc. This is known as the PEA, and it is a very important step in the verification and determination of a mine’s probability of success in becoming a producing, profitable enterprise. It is followed by the
Pre-feasibility study – +/- 25% accuracy of costs – typically doing added work in upgrading resources to indicated / measured; more advanced piloting / demo / process optimization / permitting issues identified etc., and finally by the
Feasibility study – +/- 10-15% accuracy of costs – full mine design, completed flow sheet, full facilities design, full idea of all other issues – full economic analysis that leads to conversion of mineral resources to mineral reserves – that part of the mineral resources that are deemed to be economically viable.

Note please those of you who read carefully that much of the general estimation by all of the rare earth juniors, in particular, of the market value of their chosen output products is based on descriptions and prices of forms of the rare earth metals that not only would the juniors not produce but also that they could not produce; rare earth metals, alloys, and chemical compounds sold to end user fabricators of components and devices are customer specified. This makes, in my opinion, in particular, the so-called “basket prices” of little or no value. Not only do general basket “prices” take into account the mostly useless “values” assigned to elements such as cerium they also ignore the substantial costs involved in producing even small quantities of the most useful rare earth elements such as terbium and dysprosium. The commonly used paradigm of “average” cost per kilogram to “produce” rare earths is also a fantasy.

There are some total domestic supply chain providers of rare earth products. But today these are only in China. In that country there are several large enterprises which mine, refine, separate, purify, fabricate, and build end-user components (mainly magnets). Molycorp is today the only non-Chinese entity, which might be classified as a total supply chain “in process.” The company seems to have in-house light rare earth mining, refining, and limited separation/purification (in the USA). It probably has purification operations in China to separate the neodymium it needs from didymium produced in the USA, and it does have bonded magnet alloy operations in China, and I believe other southeast Asian locations. I do not know if those Chinese or other Asian operations get their neodymium metal from Molycorp’s American metal making operations. In any case Molycorp is not specific total supply chain capable in any one country or even in any region of the world.

The point of the above two paragraphs is that in order to cost a rare earth production venture at any level it is necessary to have a great deal of information that is not available on the open market. Chinese data are always hidden by non-standard accounting even when such data is “public.” Japanese companies in the metals and magnet manufacturing business are not at all forthcoming either. The rest of the rare earth supply chain industrial companies outside of China are also not at all forthcoming on costs or processes. Thus all of the Feasibility studies done are dependent on estimates and guesses by engineering companies.

Let me close this section by saying that the senior scientist of the only large capacity total spectrum rare earth separation and purification by solvent extraction operation outside of China told me last spring in Toronto that he could not imagine from where the juniors presenting at that conference got their estimates of the cost of building and operating a rare earth separation plant. The estimates he heard, he said, were “wildly wrong and far too high.”

It is my conclusion therefore that most rare earth junior Feasibility studies result in costs that are too high if such studies include separation and purification of the individual rare earths.

I believe that we in the non-Chinese world of rare earths have now entered a phase where Chinese and Japanese and perhaps Korean companies are looking at the exploration and development that we in North America, Australia, and South Africa have done and are that they, the Chinese, Japanese, and Koreans, are trying to determine, which, if any of the exploration and/or development projects would be good to buy or to invest in to produce raw material concentrates to process in their already existing and paid-for facilities in China and Japan.

I therefore suggest to small investors as well as to institutional investors that they look carefully at the positions of the junior rare earth projects that have issued PEAs and find those that have the lowest costs of producing mixed concentrates. You, investors, will then be looking at the same juniors that the Chinese, Japanese, and Koreans are looking at. Next you should consider which, if any, of these juniors are in countries or regions that already have supply chain component industries in place and have national or regional plans to maintain independent high tech manufacturing capabilities and capacities. The competition is now between Asian countries with existing or planned downstream capacity and non-Asian countries with the will to capitalize the security of their high tech manufacturing bases.

Now, in conclusion, as to the announcements by junior mining companies that concern anything other than meeting the requirements of Canadian Regulations NI 43-101, and, after having done so, then meeting the steps to bankability/feasibility, I would pretty much ignore them.

Announcements of Phds and chartered accounts or financial masters of ledger-domain, who have previously been involved with companies that successfully made money for their shareholders are meaningless unless those individuals have previously brought junior mining companies into production and those producing mines have made money through profits on their production.

It does not matter what might be or what laboratory scale wizardry can be accomplished with the elements to be produced.

Nor does it matter than non-traditional technology might be able to produce the desired elements more cheaply than currently standard processing technologies.

The sole objective of a junior rare earth mining project is to produce marketable forms of rare earths competitively.

All announcements not measuring the company’s performance to that objective are illusions, cast them into the flames, and save your money.

[GH1]Jack – a mineral deposit is only an ore body once it is generating a profit

This entry was posted in Market Commentary Intel, Rare Earth & Critical Minerals Intel by Jack Lifton. Bookmark the permalink.
About Jack Lifton
Jack Lifton is a Founding Principal of Technology Metals Research, LLC. He is also a consultant, author, and lecturer on the market fundamentals of the technology metals, the term that he coined to describe those strategic rare metals whose electronic properties make our technological society possible. These include the rare earths, lithium and most of the rare metals.
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House Passes Critical Minerals Act

http://rareearthinvestingnews.com/16395-house-passes-critical-minerals-act.html?pmc=E-1&MyID=lakotaeagle@gmail.com&utm_source=Resource+Investing+News&utm_campaign=b6ffdd89d3-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_f83d87db0f-b6ffdd89d3-248737485

Monday September 23, 2013, 4:30am PDT

By Andrew Topf - Exclusive to Rare Earth Investing News
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The US House of Representatives has passed a piece of legislation that would speed up mining and exploration permit approvals, but the law is by no means assured passage by the Democrat-controlled Senate.

Known as the National Strategic and Critical Minerals Production Act, the bill was passed 246 to 178, with just 15 Democrats in favor. In the last Congress, 22 Democrats supported a similar bill.

The act would give federal agencies a maximum 30 months to decide on whether to approve or reject permits for exploration and mining, and it limits the ability of opponents to use courts to stop mining.

Republican supporters of the bill say the legislation is needed to speed up mining approvals, to ensure that the US has adequate sources of strategic minerals such as rare earths. Locally sourced strategic minerals would break US dependence on other countries, such as China, on importing the materials, used for defense and other applications.

“Burdensome red tape, duplicative reviews, frivolous lawsuits and onerous regulations can hold up new mining projects here in the U.S. for more than 10 years,” The Hill reported House Natural Resources Committee Chairman Doc Hastings (R-Wash.), as saying. “These unnecessary delays cost American jobs as we become more and more dependent on foreign countries for these raw ingredients.

“As China continues to tighten global supplies of rare earth elements, we should respond with an American mineral mining renaissance that will bring mining and manufacturing jobs back to America.”

Opponents voted against the bill because they said it would erode environmental protections and because it includes a broad definition of “strategic minerals,” The House reported.

“The bill’s classification of critical minerals is so broad that even sand and gravel and other such things can fall under its definition,” said Rep. Rush Holt (D-N.J.). Attempts by House Democrats to narrow the definition of strategic minerals were unsuccessful.

Not surprisingly, the bill was applauded by the US mining industry.

“Without compromising our rigorous environmental standards, this bi-partisan legislation carefully addresses the inefficiencies of our underperforming system by incorporating best practices for improving coordination among state and federal agencies, clarifying responsibilities, avoiding duplication, setting timeframes and bringing more accountability to the process,” National Mining Association CEO Hal Quinn said in a statement.

However, while the bill has the blessings of House Republicans and industry, it is unlikely to gain the support of a majority of lawmakers in the Democrat-controlled Senate. A similar version of the legislation died in the the Senate Committee on Energy and Natural Resources in 2012, Mineweb reported.

Texas Rare Earth Resources (OTCMKTS:TRER), which is developing the Round Top project near El Paso, said the 15 Democrat votes are “a solid sign of a growing consensus on the importance of strategic and critical metals.” The rare earths company also decried the predicted demise of the bill in the Senate.

“I am sorry to see some of the news reports stating that now the Amodei bill ‘goes to die in the Senate,’” said Chairman Anthony Marchese. “For rare earths and other strategic metals — including beryllium, lithium and uranium — that’s a dangerous view to take. Now that the House has recognized the need to develop domestic resources, it is critical to have serious discussion in the Senate on this bill — and on strategic metals policy more broadly.”

The US Department of Defense in its biannual Strategic and Critical Materials 2013 Report on Stockpile Requirements, recommends stockpiling $120.43 million worth of heavy rare earth elements (HREEs), Rare Earth Investing News reported.

China, which produces about 95 percent of all rare earths elements, is using government funds to stockpile REEs and in 2012 announced its intention to build a strategic reserve for future shortfalls.

Anthony Mariano: Calling Next-Generation REE Investors

http://www.theaureport.com/pub/na/15541?utm_source=delivra&utm_medium=email&utm_campaign=TMR+FINAL+streetwise-reports+08%2F27%2F2013+12%3A49%3A01

Anthony Mariano Tony Mariano Jr. If you thought you had rare earth element mining all figured out, think again. Dr. Anthony Mariano and his son, Anthony Jr., work as geological consultants to many rare earth companies, and say even they have more to learn. But if you're looking for a sector that will nurture your inner nerd, rare earth elements may be the play for you. In this interview with The Metals Report, geek out with the Marianos as they talk rare earths and igneous, metamorphic and sedimentary rocks.

Companies Mentioned: Matamec Explorations Inc. : Molycorp Inc. : Rare Element Resources Ltd. : Ucore Rare Metals Inc.
Related Companies

: DNI Metals Inc.
: Energy Fuels Inc.
: Midland Exploration Inc.

The Metals Report: Without heavy rare earth elements (REEs), can the worlds' chemists and engineers develop metal alloys sufficient to meet the demands of today's high-tech devices? If not, why not?

Anthony Mariano: My son and I are neither chemists nor engineers—our expertise lies in the area of geology and mineralogy of REE deposits, which are much more complicated than that of other commodities, such as base metals or precious metals.

However, we do believe REEs have unique properties that may be difficult to obtain from other elements.

TMR: How has the REE space changed for investors?

AM: The buzz of the high-demand years was a result of political or economical implications surrounding REEs, which were largely controlled by China. Investors then became interested in REEs. Now the drop in REE prices has changed the game. At this point, investors are not getting as involved, so companies that were attempting to explore potential deposits can't. You need a budget for that. But a lot of our technology requires the use of REEs. The demand is going to be there. There's been a period of quiescence because people have been acquiring REEs from stockpiles, but when those stockpiles are diminished, REE demand is going to pick up again.

TMR: Tony Jr., anything to add at this point?

Tony Mariano Jr.: I am certainly not a market analyst, but we have seen ups and downs in the REE market, as with any commodity. I suspect investors may have also realized that the development of REE deposits often happens at a slower pace than other commodities. The beneficiation of REEs can be very complex. REEs occur in many varied mineral hosts. Complex rock textures, complex mineralogy and mineral chemistry, and varied lanthanide distribution in the REE minerals all contribute to complexities in physical concentration and chemical processing. Many companies are developing innovative techniques to concentrate and process REEs. This takes time and can slow progress toward taking these commodities to the marketplace. Investors may be developing a better awareness of these complexities.

TMR: Apart from money, what's the single biggest hurdle to the development of HREE deposits outside of China?

AM: First and foremost, miners have to understand the type of igneous, metamorphic or sedimentary rock they're dealing with in order to determine if the geology and mineralogy are amenable to economic processing. Some deposits may not even occur within rocks, but soils, sands or river placers. The mineralogy will decide whether you have something with potential. On top of that, miners have to pay attention to permitting, environmental restrictions, the cost of energy and the cost of reagents.

TMR: How would you rank the various mineral sources for REEs, like bastnaesite?

AM: Bastnaesite has historically been a source of light lanthanides or light rare earth elements (LREEs), and it will probably continue to be the best source for LREEs. HREEs and yittrium can be obtained from other REE deposits in North America, such as Kipawa, Quebec; Pajarito, New Mexico; Mineville, New York; and Bokan Mountain, Alaska. Some will be very costly. These are not bastnäsite deposits but contain various HREE minerals. No development has been conducted on Pajarito or Mineville, whereas Matamec Explorations Inc. (MAT:TSX.V; MRHEF:OTCQX) has conducted a considerable amount of exploration work at Kipawa, as has Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) at Bokan Mountain.

TMR: And monazite?

AM: Monazite could be an even more important source than bastnaesite for LREEs. It could also be a low source for HREEs and yittrium if it's mined on a large level. It occurs in many places in the world, but there is a problem associated with it—the presence of thorium. From the '50s to the early '80s, there was a lot of environmental leniency, and you could transport monazite in ships even though it was radioactive. That's no longer the case. Much of it was brought to La Rochelle in France, and they ended up with a large accumulation of radioactive thorium. They finally decided they could no longer pursue this direction and switched from monazite to bastnaesite. Monazite is an LREE phosphate. It runs around 70% rare earth oxide (REO), whereas bastnaesite runs at around 75% REO.

TMR: What about fergusonite?

AM: A beautiful and relatively rare mineral. If you have a garden or a plant on your fire escape and get your fingernails dirty and analyze what's under them, you may run into fergusonite. You may find fergusonite in many places using the current advanced technology. Although fergusonite occurrences are being investigated in a few areas in the world, we've never established a deposit that could provide a sustained source to the marketplace. Fergusonite is an oxide mineral rich in yittrium, HREEs and niobium.

TMJ: Another mineral source worth mentioning is xenotime. Xenotime is an yttrium, HREE phosphate, rich in HREEs. The techniques for chemical processing to extract the yttrium and HREEs have already been established. The problem is finding a deposit with enough xenotime to be economic. There are a few potential xenotime deposits being evaluated now outside of North America.

In addition, eudialyte is a silicate mineral and has not traditionally been a resource for providing HREEs to the marketplace. In the past, there were problems in the chemical processing to extract the REEs, but several companies claim to have resolved these issues. In North America, eudialyte is known to exist at the Kipawa, Quebec deposit, at Pajarito Mountain, New Mexico, at the Red Wine deposit in Labrador and at Dora Bay, Alaska.

There are many other potential REE mineral sources, but for the HREEs, the minerals we have mentioned are those that are being most actively pursued.

TMR: If you were an investor looking at companies with various types of mineral sources, what would be your top names?

AM: The best source for a sustained quantity of HREEs is Matamec Exploration Inc.'s HREE mineral-bearing deposit in Kipawa, Quebec. And the best bastnaesite deposit in the world outside of China is Molycorp Inc.'s (MCP:NYSE) Mountain Pass facility, which is a tremendous source of LREEs, although problems may exist there around permitting, environmental restrictions and energy and reagents costs.

TMR: Matamec is about to come out with a feasibility study. Would your mineralogy studies on the Kipawa deposit be included in that study?

AM: I imagine much of it may be based on that. I can speak for the REE industry when I say that we are anxiously awaiting the results of this study, which will be released September 4. This deposit is the best source for the heavy lanthanides and is one for which we're able to obtain the quickest results.

TMR: Can Matamec make money just making a concentrate and not creating oxides?

AM: That's something it has to figure out. I'm not an insider on Matamec, though I did commence the first REE exploration in Kipawa, Quebec, in 1985.

TMR: Tony Jr., can you comment further on Kipawa project economics?

TMJ: I am not knowledgeable on the Kipawa project economics but I agree with my father that geologically, the Kipawa deposit is very impressive. The textural properties of the Kipawa rocks and the abundance of several HREE minerals make Kipawa uniquely attractive.

TMR: If there were a crisis tomorrow?if, for example, China completely eliminated REE exports, what projects could reach production quickly?

AM: North America would need a domestic source. Although deposits outside of North America could be suppliers, that could be a problem in that a ship carrying critical source concentrate across the ocean may not make it to North American shores. But if we're in critical need, economics are no longer as important. If you need it, you pay for it. We've got sources in the United States, and we've got sources in Canada. To draw a historical parallel, during the beginning of World War II, the U.S. desperately needed quartz, which was used in military submarines. North America was getting all of its quartz crystals from Brazil. Brazil had always transported quartz crystals to the U.S. by ship, until U-boats began to bombard the ships. So the U.S. government supported Bell Labs in developing an immediate technique to synthesize high-purity, optical-quality quartz. That became the basis of all the quartz that's used nowadays.

TMR: Tony Jr., to expand on this scenario, which companies other than Matamec are currently furthest along in developing North American REE projects?

TMJ: The companies furthest along in developing North American REE projects are clearly led by Molycorp. Molycorp holds an existing REE mine in Mountain Pass, CA and, as I understand it, is currently working on process developments and permitting to move toward production. Also, Rare Element Resources Ltd. (RES:TSX; REE:NYSE.MKT) is well on its way toward developing its Bear Lodge, Wyoming deposit. But, these projects are chiefly dominated by the LREEs. For HREE's, other than Matamec, Ucore is probably the furthest along in developing its Bokan Mountain, Alaska deposit.

TMR: What do you make of Ucore Rare Metals Inc.'s Bokan Mountain project?

AM: It's made up of very interesting minerals. Many are fine grain and complex, made up of several different minerals that cannot be concentrated independently; a multi-mineral concentrate must be treated chemically in order to process the multi-mineral concentrate. The chemical treatment and the costs involved at the final stages of chemical processing are important factors.

TMR: Does Ucore's relationship with the Department of Defense give it a leg up?

AM: It should, because the project is in the U.S. There are some very interesting heavy lanthanide minerals at that site. They're fine grain, inextricably associated with quartz and other gang material that has to be removed. Crushing costs will be expensive, and it will be difficult to come up with an independent mineral concentrate. Ucore could probably do a good job by chemically processing a multimineral concentrate. And Bokan Mountain's logistics are excellent. The deposit is less than a kilometer uphill from the shores. You could fill up a ship with concentrate with ease.

TMR: Some analysts estimate that, at current rates of consumption, China's supply of HREEs could evaporate within 15 years. Does that seem realistic to you?

AM: It's hard to tell. China has a tremendous source in the Bayan Obo mining district. It also has a good source of LREEs in Mianning, Sichuan. I did a detailed field and laboratory study there in 1994, so I'm very familiar with this bastnaesite deposit. I can tell you a lot about the nature of the South China clays in the laboratory but not about how long they're going to last. Are they going to be allowed to mine South China clays and put up with the problems that exist? Will any other continent be allowed to process South China clay-type deposits without affecting the environment and while keeping the prices down?

TMR: Is permitting strictly an environmental issue?

AM: No, not strictly. For example, there are some very interesting monazite deposits in the United States, but they're situated in places where people have nice homes, so exploration and development are out of the question. What if you found a beautiful deposit right in New York City? Forget about it. But it's true that some very interesting deposits in the United States and Canada are in conservation areas and national parks. In those cases, permitting hurdles exist for environmental and other restriction reasons.

TMR: What can you tell investors based on your experience in this space?

AM: Investors need to get information from people who are familiar with the nature of REE mineralization that has fed the marketplace. Early in the game, I was told that if I wanted to evaluate a deposit on a world level, I needed to get lots of experience in deposits that actually feed the marketplace. I did that, and it made a huge difference in my ability to make evaluations. Academics may have written excellent papers outlining a particular deposit's geology, but the challenges miners face in approaching exploration or, later down the road, processing—are critical factors academic work doesn't necessarily address.

TMR: Do you see it as part of your job to explain REE mineralization for non-experts?

AM: We try to do that to the extent that we can. It's still very complicated even among experts. It's sometimes difficult to simplify economic geology even for academics who specialize in mineralogy, petrology and geochemistry. It's not enough to run out to Mountain Pass and come back and say, "We went to Mountain Pass. We understand everything." Good luck. I've been working extensively at Mountain Pass since 1965, and I still have a lot to learn.

Anthony N. (Tony) Mariano, PhD, is a geological consultant on rare earths and other rare metals. For decades, he has been the go-to expert on the geology and mineralogy on rare earths, niobium-tantalum and other rare metals. Companies around the world depend on his professional opinions on the potential economic viability of deposits based on mineralogical examination, lab work and field visits.

Tony Mariano Jr. is a geological consultant on rare earths and other rare metals. He also spent several years as an environmental geologist/consultant. He currently works exclusively in conjunction with his father, Anthony N. (Tony) Mariano, consulting on rare earth mineral exploration and evaluation worldwide.

Want to read more Metals Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Metals Report homepage.

DISCLOSURE:
1) Brian Sylvester conducted this interview for The Metals Report and provides services to The Metals Report as an employee or as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Metals Report: Matamec Explorations Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Anthony Mariano: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is am paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Tony Mariano Jr.: I or my family own shares of the following companies mentioned in this interview: Matamec Explorations Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
5) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
6) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
7) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

The Results Are (Almost) In for Rare Earth Competitors: Alex Knox

TICKERS: AVL; AVARF, CCE; D7H; CMRZF, LYC, MAT; MRHEF, MCP, NRE, ORT; EORBF, QRM, SMY, TSM; TAS; TASXF; T61, UCU; UURAF

Source: Brian Sylvester of The Metals Report (7/16/13)

http://www.theaureport.com/pub/na/15442?utm_source=delivra&utm_medium=email&utm_campaign=Gold+final+streetwise-reports+08%2F16%2F2013+14%3A25%3A58

Alex Knox Western rare earth companies are in a conditioning period, optimizing on every front to get the leanest capital costs possible. In the next six months, Geologist Alex Knox expects a big shakeout across the rare earth space as companies release amended PEAs and feasibility studies. "That," says Knox in this interview with The Metals Report, "is when smart investors will be able to look at the numbers and pick out the winners." Knox helps us jump the gun by identifying companies with lean, mean stats.

Companies Mentioned: Avalon Rare Metals Inc. : Commerce Resources Corp. : Lynas Corp. : Matamec Explorations Inc. : Molycorp Inc. : Namibia Rare Earths Inc. : Orbite Aluminae Inc. : Quest Rare Minerals Ltd. : Search Minerals Inc. : Tasman Metals Ltd. : Ucore Rare Metals Inc.
Related Companies

: DNI Metals Inc.
: Energy Fuels Inc.
: Midland Exploration Inc.
: Northern Graphite Corporation

The Metals Report: Alex, what is your overview of the rare earth element (REE) space?

Alex Knox: The highlight is that two large deposits of light rare earth elements (LREEs) are coming into production: Molycorp Inc.'s (MCP:NYSE) Mountain Pass and Lynas Corp.'s (LYC:ASX) Mt. Weld deposit. The considerable increase in LREE production has eliminated the need for any market niche for these types of deposits, at least for the short-term.

I see a dramatic need for development of heavy rare earth element (HREE) deposits in the western world, now that China's crackdown on illegal mining has presumably cut into its production of HREEs. A number of companies have reached prefeasibility or preliminary economic assessment (PEA), and one already has a feasibility study. Overall, I believe this space offers the most potential growth and the most potential to add new deposits.

TMR: Can investors make money in REEs?

AK: Certainly. On the HREE side, the deposits coming on stream will be profitable. At the present prices of the companies that own these deposits, there is substantial upside. I think the market will pick two or three of these companies and make them the winners in the HREE space.

TMR: Rare earth expert Jack Lifton has written that, "non-Chinese sources of heavy rare earths must now be brought into production under all circumstances. Non-Chinese manufacturing centers and regions need to attain self-sufficiency as soon as possible." What's your view?

AK: I totally agree. The Chinese will protect their low-cost resources, the South China ionic clays. End users operating outside of China will need to secure supplies elsewhere. There is a good market opportunity for companies that can get these deposits to market in a profitable state.

TMR: Yet in 2012, half of China's export quota on REEs wasn't used. The 2013 quota is 5 tons higher than 2012. Doesn't that suggest there is less demand?

AK: Again, there is a distinction between LREEs and HREEs. Given China's crackdown on illegal mining and illegal export of HREEs, those exports are volumetrically small compared to the LREEs. There is not a lot of tonnage, but there is high value. The tonnage mainly comes from the LREEs.

The fact that the overall quota has risen doesn't mean that the output of HREEs will increase. I believe the supply of HREEs from China may actually decrease, while the overall quota for all REEs increases.

TMR: Can illegal Chinese exports meet the world's supply needs for HREEs?

AK: The South China clays are a finite resource. They lack vertical extent. Some are only 10 meters thick and are often fairly low grade. To extract significant quantities requires immense surface disturbance because you have to strip off a lot of land to take out the top 10 or so meters. This surface destruction is unsustainable. The Chinese recognize that and are trying to eliminate illegal mining to save these resources for themselves.

TMR: Lifton noted that, even if non-Chinese HREE costs become level or lower than prices in China, the cost of building new separation and alloy-making facilities would be in the billions. He argues that the problem can be solved by "central, regionally deployed tolling facilities for separation." How likely is that?

AK: These facilities are expensive to build. Also, the expertise to design and run them is very thin on the ground. The facilities largely depend on Chinese technology or Chinese expertise. For a western company to build its own rare earth separation plant seems to me inefficient.

One would hope that companies could agree to reduce their individual capital costs by creating a central, large-volume, efficient and well-managed separation plant as Lifton suggests. However, these companies are competitors. One wonders whether they could collaborate to bring this vision into reality.

TMR: Could a company with deep pockets and expertise take that on?

AK: It's a bit of a chicken-and-egg situation. A company would have to have secure sources of supply for a proposed processing plant before it had the economic justification to build it.

TMR: If there were steady supplies of REEs, especially HREEs, would manufacturers start changing the way they build high-tech devices, such as cars and lighting systems?

AK: This is another chicken-and-egg situation. Lack of reliable supplies of, say, dysprosium, terbium or lutetium inhibits research into their uses. As deposits come on stream and the supply becomes stable and predictable, people will do more research and find uses for these elements.

There are certain HREEs—holmium and lutetium, to name a couple—for which there are almost no known uses because the supply is virtually zero. If supplies could be found, people would research how to use them and they would gain in value.

TMR: Could governments get involved in building regional facilities or backing loans for their construction?

AK: The U.S. government might do it, because it takes a more strategic view of things. Some of these HREEs have military applications, and a secure source might be desirable. This might be an advantage to a company like Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) whose HREE deposit is in the U.S. There are a number of HREE deposits in Québec, so the Québec government might fund something or offer tax advantages to the Québec producers to secure a supply.

TMR: The Tech Metals Research Advanced Rare-Earth Projects Index identifies 56 advanced-stage REE projects and almost that many companies. How many of these companies do you reckon will develop their projects into mines in the next 6 to 10 years?

AK: The REE space is microscopic compared to other metals markets. Market capacity can be satisfied by a handful of REE deposits coming into production. On the LREE side, many would argue that demand has already been more than met by the Mt. Weld and Mountain Pass deposits. There may be room for one or two more if they're very cost effective. On the HREE side, four or five deposits might saturate the market. Out of that list of 56, I suspect no more than 10 would find the market share to get into production. Anybody who enters the market after that will have to compete on price and knock out existing producers.

TMR: What's the name of the game now in this space? Part of the game has to be financing, but what else?

AK: Metallurgy. In many cases, the metallurgy is based on assumptions that may no longer be valid. Some of these companies have been working on the metallurgy of their deposits since 2009.

Looking at the HREE space, only Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX) has done a feasibility study. That's on its Nechalacho deposit up in the Northwest Territories.

Another half dozen or so companies have released a PEA or are close to it and are working toward a feasibility study. Of note would be Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.MKT; TASXF:OTCPK; T61:FSE) and Ucore. Matamec Explorations Inc. (MAT:TSX.V; MRHEF:OTCQX) plans to release a feasability study this month. Search Minerals Inc. (SMY:TSX.V) has a PEA out on its Fox River deposit in Labrador.

Since 2009, some companies have changed their processes to take advantage of advances in filtration technology. For example, Ucore has apparently completed successful trials on using X-ray technology to concentrate its ore and reject 50% of the material with virtually no loss of rare earths.

It's important to use the metallurgy to extract as much of the REES as you can and coproduce the byproducts that will add value to the bottom line. The more money you've got coming out of your process the better. For example, Quest Rare Minerals Ltd. (QRM:TSX; QRM:NYSE.MKT) recently announced a preliminary understanding with a ceramics company to buy Quest's zirconium offtake at the Strange Lake deposit.

TMR: Does that materially add to the economics for Strange Lake?

AK: I think it does. We don't yet know what price Quest is getting. The supply of high-purity zirconium that can be used in ceramics is limited. Most zirconium is produced as zircon concentrate and is made into paint. This is another example of uses being found for elements as the supply increase and becomes reliable.

TMR: Will other companies follow Quest's lead regarding byproducts?

AK: I would hope so. Granite-based HREE deposits can be quite treasure troves of other minerals: niobium, tantalum, uranium, even thorium. There are lots of little cash registers in these deposits. If they can be extracted and marketed profitably, they could add substantially to the revenue from the same amount of ore. That is nothing but great for the bottom line.

The idea of thorium reactors is getting a lot of play in the nuclear industry. To date, byproduct thorium has been a detriment. If it could be sold for use in a thorium reactor, it would be a real benefit.

TMR: If you were an investor with $100 million ($100M) to invest in the REE space, how would you deploy it among those equities and what company characteristics would you look for?

AK: I would certainly go toward the HREEs or look for an LREE producer with significant byproduct credits to ensure another revenue source.

Looking at the five principal deposits, Avalon and Quest are high-grade, but rather remote. Tasman is bigger than Ucore and Matamec. Ucore is right on tide water. Matamec has an ideal location and the metallurgy is good, but to fund the feasibility study, the company gave away half of the deposit in an offtake agreement.

There are substantial opportunities in the sector once you we see who has the upper hand in terms of metallurgy and who can keep costs down and revenues up. The prices of the HREE producers are so depressed now that the companies—maybe as many as three of them—that get into production will be profitable investments in the long run.

TMR: You plan to do some work in Québec this summer. Tell us about that.

AK: Commerce Resources Corp. (CCE:TSX.V; D7H:FSE; CMRZF:OTCQX) has a large carbonatite-hosted deposit in the Labrador Trough in northern Québec. The company is doing a low-cost drilling program this summer to upgrade its resources.

This carbonatite deposit contains substantial, separate showings of high-grade niobium and tantalum. The property could produce both elements from the same carbonatite, thus getting byproduct credits in through the back door. Even though this is an LREE deposit, it has zones enriched in the mediums and heavies. The potential production of niobium, tantalum and even other minerals makes this an attractive carbonatite deposit. My role this summer will be to help Commerce Resources explore and to work on the niobium and tantalum zones.

TMR: Orbite Aluminae Inc. (ORT:TSX; EORBF:OTXQX) is another Québec-based company you have worked with, yes?

AK: I helped Orbite with the REE part of its PEA last year. As I became familiar with the Orbite process, I realized it would have great potential for the metallurgical extraction of non-carbonatite-type, REE-bearing ores.

Most of the ore minerals in REE deposits are silicate minerals. Presently, producers bake the silicates with sulfuric acid to fix the silica, which affects the recoveries. The sulfuric acid bake also can consume large amounts of reagent.

Orbite developed a process to break down the silicate minerals and filter off the silica more effectively, making it possible to extract many or all of the byproducts, not just the REEs. Plus, the acid can be recycled.

Orbite is using its process to extract alumina, scandium and gallium from its deposit. If Orbite has actually solved the silicate mineral problem, its process could be used to extract REES in a very purified form that would be imminently suitable for separation technology. It would dramatically reduce the operating costs for all granite-based HREE deposits.

TMR: The Orbite process is used primarily to recover alumina from bauxite. Does that make Orbite a technology play or an aluminum play?

AK: In the short term, Orbite intends to make money from extracting aluminum from any aluminum-bearing rock, not just bauxite. That includes shale, red mud or fly ash, anything that doesn't have high carbonate content.

The potential for crossover into extracting REEs and other elements is a satellite to the main aluminum play. Orbite's ore contains 500 parts per million rare earth oxides, which the company has proved on a bench scale can be concentrated and extracted even at low levels as a byproduct of aluminum extraction. The technology seems to be applicable outside of the aluminum space and could, in the future, provide another source of revenue for Orbite.

TMR: Of the top-tier, advanced-stage rare earth projects, which deposits would be most amenable to Orbite's processing technology?

AK: Tasman and Matamec's deposits both have eudialyte, which is extremely acid soluble. It dissolves in vinegar at room temperature. These would be the ideal. The process also would be useful to Quest and Ucore. In fact, all of the granite-type, non-carbonate REE deposits could potentially benefit.

TMR: Are other companies developing similar recovery technologies?

AK: Yes, but not many details have been made public. Matamec intends to finish its feasibility study this month; it should give us a good look at what that company has accomplished. Tasman, with a similar metallurgy, has obtained decent recoveries from its processes.

Quest must be able to extract zirconium from its deposit or the ceramics company wouldn't be involved there. Ucore has an ore-sorting technology that appears to be applicable and successful in reducing the throughput to the mill with little or no loss of rare earth potential.

TMR: Let's look at Tasman. The company recently got a mining lease for its Norra Kärr project. Is that meaningful for investors?

AK: To me it is. It means that the Swedish government believes the company can operate safely and control emissions, in a relatively populated area. That is a major hurdle to get over.

TMR: What are the most dramatic changes investors should expect in this space over the next 6 to 10 years?

AK: It is a given that you will start to see major western REE producers. If a consistent supply of rare earths causes a rise in demand, there will be space in the market for additional producers. That may spur exploration.

Exploration for rare earth deposits has been in the doldrums for the last couple of years. Many of the deposits we've been talking about are 30–40% HREEs. That leaves a substantial quantity of LREEs that will have to be gotten rid of. Neodymium is easy to sell because there's a demand. But the deposits will also produce substantial quantities of lanthanum and cerium, which are not in short supply at all.

A couple of recently announced deposits contain ore that more than 90% HREEs. If these get to production, they will be producing exactly what the marketplace wants and none of the stuff that's in oversupply.

For example, Namibia Rare Earths Inc. (NRE:TSX, NMREF:OTCQX) has a small NI-43-101-compliant resource in Namibia: Measured and Indicated and Inferred of about 2 million tons of a nice, HREE-rich deposit. The company is well financed, with something like $20M in the bank.

TMR: What did you make of Namibia's recent metallurgical tests?

AK: Namibia's mineral is called xenotime, a fairly heavy mineral that has the potential to be concentrated by gravity methods. Namibia also has some carbonate in its ore that can be removed by acid dissolution.

TMR: Could the fact that it's in Namibia be its biggest advantage?

AK: I would suspect the company won't have as many environmental hoops to jump through and that labor could be less expensive. Compared to the long lead times and permitting processes in North America, that can't hurt.

TMR: What do you know about Pro-Or Inc.'s (POI:TSX.V) chlorinator recovery technology?

AK: Right now, Pro-Or is targeting the platinum group elements. There is nothing to suggest the company is looking at the rare earth side, but certainly any new recovery technique is worth looking into.

TMR: Do you have a parting thought or two for our readers?

AK: There is very little news in the REE sector now because everybody's doing their metallurgical testing, their optimization. It's not a very exciting time in the rare earth space because there's not much exploration. Companies are hunkered down to boost the value of their products and lower their capital costs.

In the next six months, I expect to see a real shakeout as companies release amended PEAs, prefeasibility studies and feasibility studies across the REE space. That is when smart investors will be able to look at the numbers and pick out the winners. At these depressed prices, there will be substantial profit potential when the winners and losers emerge. This is a good time to keep your eyes open and sharpen your pencil to crunch some numbers.

TMR: Alex, thank you for your time and your insights.

Geologist Alex Knox has been involved in the mineral exploration industry since 1970. He served in the mineral exploration division at Unocal Canada Ltd., the exploration arm of Molycorp, where he was involved in the discovery of the Kipawa deposit in western Quebec. Knox has explored for uranium, gold, rare earths, niobium, diamonds, slate and limestone in Canada, the U.S., Mongolia, Bolivia, Peru and Argentina. Highlights include Matamec's Kipawa deposit, Commerce Resources' Eldor and Blue River properties and Quantum Rare Metal's Elk Creek deposit. Knox is on the REE Advisory Board of three publicly traded Canadian junior mineral exploration companies.

Want to read more Metals Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Metals Report homepage.

DISCLOSURE:
1) Brian Sylvester conducted this interview for The Metals Report and provides services to The Metals Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Metals Report: Commerce Resources Corp., Pro-Or Inc., Namibia Rare Earths Inc., Tasman Metals Inc. and Orbite Aluminae Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Alex Knox: I or my family own shares of the following companies mentioned in this interview: Matamec, Namibia, Commerce, Search and Orbite. I personally am or my family is paid by the following companies mentioned in this interview: In the last year I consulted for Orbite and Commerce. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

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Video - Jack Lifton says 'worst is over', rare earth recovery imminent

Rare Earths in the United States

Monday July 29, 2013, 4:25am PDT
By Staff Writer - Exclusive to Rare Earth Investing News3

http://rareearthinvestingnews.com/13580-rare-earths-in-the-united-states.html

The rare earth elements are a group of 17 chemicals on the periodic table composed of the lanthanides, yttrium and scandium. They are typically discovered together but are considered rare because they are not often found in large, commercially viable concentrations.

Rare earth elements are used for manufacturing high-tech products like MRI scanners and cell phones. China has thus far been the largest supplier of rare earth elements, but analysts from the US Geological Survey (USGS) recently determined the United States is sitting on a sizable untapped reserve5 of them in the west part of the country. New extraction techniques will allow companies to access this rare earth in old mine tailings, ABC reported.

Currently, mining company Molycorp operates the only site in the United States that produces rare earth elements, according to ABC. Its Phoenix Project is located in California. Otherwise, the USGS recognizes Idaho, Montana, Alaska and Colorado as some of the locations of economically viable rare earth deposits.Get the latest Rare Earth Investing News articles delivered to your email inbox. Learn more6
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Ucore Rare Metals (TSXV:UCU7)

Based in Canada, the company is in the development phase and focuses on rare metal resources with near-term production potential. Ucore owns multiple properties across North America, but its primary asset is its 100-percent-owned Bokan-Dotson Ridge Project in Alaska.

According to the company website, this property is rich in heavy rare earth elements, such as dysprosium, terbium and yttrium. It is the only rare earth element deposit in the world that has immediate deep-water access, and it also has the highest grade of NI 43-101-compliant heavy rare earth element resources in the world.

US Rare Earths (OTCBB:UREE8)

The mineral exploration, mining and claims acquisition company is based in Plano, Texas, and was formerly known as Colorado Rare Earths. It has rare-earth mining properties in Colorado, Idaho and Montana, which together span more than 16,000 acres.

One of its assets, the Diamond Creek Project in Idaho, was recently evaluated for its estimated resources. Researchers found a number of individual rare earth elements present in notable quantities, including cerium, neodymium, lanthanum and yttrium.

Rare Element Resources (TSXV:RES9)

Rare Elements Resources is a mineral resource company based in Lakewood, Colorado. Its main asset is the 100-percent-owned Bear Lodge Project located in Wyoming. According to the company website, this property has one of the largest disseminated rare earth element deposits in North America. Bear Lodge hosts both high-grade, light rare earth and heavy rare earth.

A 2012 study of the project determined its measured and indicated resources have increased by 65 percent since the previous year to reach 14.7 million tons at an average grade of 3.22 percent total rare earth oxides. Additionally, the inferred resource estimate rose to 31.4 million tons at 2.68 percent total rare earth oxides.

Molycorp (NYSE:MCP10)

With headquarters in Greenwood Village, Colorado, Molycorp claims to be one of the leading manufacturers of custom engineered rare earth and rare metal products in the world. The company produces materials from 13 different rare earths, plus yttrium, at a purity level of nearly 100 percent.

Currently, Molycorp is operating the Project Phoenix at its Mountain Pass site in California, which is a rare earth resource and production facility. The project, an expansion and modernization of the Mountain Pass mine, is intended to transform the asset into a technologically advanced rare earth production facility.

The Results Are (Almost) In for Rare Earth Competitors: Alex Knox

http://rareearthinvestingnews.com/13085-the-results-are-almost-in-for-rare-earth-competitors-alex-knox.html

By thegoldreport - Exclusive to Rare Earth Investing News
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Source: Brian Sylvester of The Metals Report (7/16/13)

Western rare earth companies are in a conditioning period, optimizing on every front to get the leanest capital costs possible. In the next six months, Geologist Alex Knox expects a big shakeout across the rare earth space as companies release amended PEAs and feasibility studies. “That,” says Knox in this interview with The Metals Report, “is when smart investors will be able to look at the numbers and pick out the winners.” Knox helps us jump the gun by identifying companies with lean, mean stats.

The Metals Report: Alex, what is your overview of the rare earth element (REE) space?

Alex Knox: The highlight is that two large deposits of light rare earth elements (LREEs) are coming into production: Molycorp Inc.’s (MCP:NYSE) Mountain Pass and Lynas Corp.’s (LYC:ASX) Mt. Weld deposit. The considerable increase in LREE production has eliminated the need for any market niche for these types of deposits, at least for the short-term.

I see a dramatic need for development of heavy rare earth element (HREE) deposits in the western world, now that China’s crackdown on illegal mining has presumably cut into its production of HREEs. A number of companies have reached prefeasibility or preliminary economic assessment (PEA), and one already has a feasibility study. Overall, I believe this space offers the most potential growth and the most potential to add new deposits.

TMR: Can investors make money in REEs?

AK: Certainly. On the HREE side, the deposits coming on stream will be profitable. At the present prices of the companies that own these deposits, there is substantial upside. I think the market will pick two or three of these companies and make them the winners in the HREE space.

TMR: Rare earth expert Jack Lifton has written that, “non-Chinese sources of heavy rare earths must now be brought into production under all circumstances. Non-Chinese manufacturing centers and regions need to attain self-sufficiency as soon as possible.” What’s your view?

AK: I totally agree. The Chinese will protect their low-cost resources, the South China ionic clays. End users operating outside of China will need to secure supplies elsewhere. There is a good market opportunity for companies that can get these deposits to market in a profitable state.

TMR: Yet in 2012, half of China’s export quota on REEs wasn’t used. The 2013 quota is 5 tons higher than 2012. Doesn’t that suggest there is less demand?

AK: Again, there is a distinction between LREEs and HREEs. Given China’s crackdown on illegal mining and illegal export of HREEs, those exports are volumetrically small compared to the LREEs. There is not a lot of tonnage, but there is high value. The tonnage mainly comes from the LREEs.

The fact that the overall quota has risen doesn’t mean that the output of HREEs will increase. I believe the supply of HREEs from China may actually decrease, while the overall quota for all REEs increases.

TMR: Can illegal Chinese exports meet the world’s supply needs for HREEs?

AK: The South China clays are a finite resource. They lack vertical extent. Some are only 10 meters thick and are often fairly low grade. To extract significant quantities requires immense surface disturbance because you have to strip off a lot of land to take out the top 10 or so meters. This surface destruction is unsustainable. The Chinese recognize that and are trying to eliminate illegal mining to save these resources for themselves.

TMR: Lifton noted that, even if non-Chinese HREE costs become level or lower than prices in China, the cost of building new separation and alloy-making facilities would be in the billions. He argues that the problem can be solved by “central, regionally deployed tolling facilities for separation.” How likely is that?

AK: These facilities are expensive to build. Also, the expertise to design and run them is very thin on the ground. The facilities largely depend on Chinese technology or Chinese expertise. For a western company to build its own rare earth separation plant seems to me inefficient.

One would hope that companies could agree to reduce their individual capital costs by creating a central, large-volume, efficient and well-managed separation plant as Lifton suggests. However, these companies are competitors. One wonders whether they could collaborate to bring this vision into reality.

TMR: Could a company with deep pockets and expertise take that on?

AK: It’s a bit of a chicken-and-egg situation. A company would have to have secure sources of supply for a proposed processing plant before it had the economic justification to build it.

TMR: If there were steady supplies of REEs, especially HREEs, would manufacturers start changing the way they build high-tech devices, such as cars and lighting systems?

AK: This is another chicken-and-egg situation. Lack of reliable supplies of, say, dysprosium, terbium or lutetium inhibits research into their uses. As deposits come on stream and the supply becomes stable and predictable, people will do more research and find uses for these elements.

There are certain HREEs—holmium and lutetium, to name a couple—for which there are almost no known uses because the supply is virtually zero. If supplies could be found, people would research how to use them and they would gain in value.

TMR: Could governments get involved in building regional facilities or backing loans for their construction?

AK: The U.S. government might do it, because it takes a more strategic view of things. Some of these HREEs have military applications, and a secure source might be desirable. This might be an advantage to a company like Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) whose HREE deposit is in the U.S. There are a number of HREE deposits in Québec, so the Québec government might fund something or offer tax advantages to the Québec producers to secure a supply.

TMR: The Tech Metals Research Advanced Rare-Earth Projects Index identifies 56 advanced-stage REE projects and almost that many companies. How many of these companies do you reckon will develop their projects into mines in the next 6 to 10 years?

AK: The REE space is microscopic compared to other metals markets. Market capacity can be satisfied by a handful of REE deposits coming into production. On the LREE side, many would argue that demand has already been more than met by the Mt. Weld and Mountain Pass deposits. There may be room for one or two more if they’re very cost effective. On the HREE side, four or five deposits might saturate the market. Out of that list of 56, I suspect no more than 10 would find the market share to get into production. Anybody who enters the market after that will have to compete on price and knock out existing producers.

TMR: What’s the name of the game now in this space? Part of the game has to be financing, but what else?

AK: Metallurgy. In many cases, the metallurgy is based on assumptions that may no longer be valid. Some of these companies have been working on the metallurgy of their deposits since 2009.

Looking at the HREE space, only Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX) has done a feasibility study. That’s on its Nechalacho deposit up in the Northwest Territories.

Another half dozen or so companies have released a PEA or are close to it and are working toward a feasibility study. Of note would be Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.MKT; TASXF:OTCPK; T61:FSE) and Ucore. Matamec Explorations Inc. (MAT:TSX.V; MRHEF:OTCQX) plans to release a feasability study this month. Search Minerals Inc. (SMY:TSX.V) has a PEA out on its Fox River deposit in Labrador.

Since 2009, some companies have changed their processes to take advantage of advances in filtration technology. For example, Ucore has apparently completed successful trials on using X-ray technology to concentrate its ore and reject 50% of the material with virtually no loss of rare earths.

It’s important to use the metallurgy to extract as much of the REES as you can and coproduce the byproducts that will add value to the bottom line. The more money you’ve got coming out of your process the better. For example, Quest Rare Minerals Ltd. (QRM:TSX; QRM:NYSE.MKT) recently announced a preliminary understanding with a ceramics company to buy Quest’s zirconium offtake at the Strange Lake deposit.

TMR: Does that materially add to the economics for Strange Lake?

AK: I think it does. We don’t yet know what price Quest is getting. The supply of high-purity zirconium that can be used in ceramics is limited. Most zirconium is produced as zircon concentrate and is made into paint. This is another example of uses being found for elements as the supply increase and becomes reliable.

TMR: Will other companies follow Quest’s lead regarding byproducts?

AK: I would hope so. Granite-based HREE deposits can be quite treasure troves of other minerals: niobium, tantalum, uranium, even thorium. There are lots of little cash registers in these deposits. If they can be extracted and marketed profitably, they could add substantially to the revenue from the same amount of ore. That is nothing but great for the bottom line.

The idea of thorium reactors is getting a lot of play in the nuclear industry. To date, byproduct thorium has been a detriment. If it could be sold for use in a thorium reactor, it would be a real benefit.

TMR: If you were an investor with $100 million ($100M) to invest in the REE space, how would you deploy it among those equities and what company characteristics would you look for?

AK: I would certainly go toward the HREEs or look for an LREE producer with significant byproduct credits to ensure another revenue source.

Looking at the five principal deposits, Avalon and Quest are high-grade, but rather remote. Tasman is bigger than Ucore and Matamec. Ucore is right on tide water. Matamec has an ideal location and the metallurgy is good, but to fund the feasibility study, the company gave away half of the deposit in an offtake agreement.

There are substantial opportunities in the sector once you we see who has the upper hand in terms of metallurgy and who can keep costs down and revenues up. The prices of the HREE producers are so depressed now that the companies—maybe as many as three of them—that get into production will be profitable investments in the long run.

TMR: You plan to do some work in Québec this summer. Tell us about that.

AK: Commerce Resources Corp. (CCE:TSX.V; D7H:FSE; CMRZF:OTCQX) has a large carbonatite-hosted deposit in the Labrador Trough in northern Québec. The company is doing a low-cost drilling program this summer to upgrade its resources.

This carbonatite deposit contains substantial, separate showings of high-grade niobium and tantalum. The property could produce both elements from the same carbonatite, thus getting byproduct credits in through the back door. Even though this is an LREE deposit, it has zones enriched in the mediums and heavies. The potential production of niobium, tantalum and even other minerals makes this an attractive carbonatite deposit. My role this summer will be to help Commerce Resources explore and to work on the niobium and tantalum zones.

TMR: Orbite Aluminae Inc. (ORT:TSX; EORBF:OTXQX) is another Québec-based company you have worked with, yes?

AK: I helped Orbite with the REE part of its PEA last year. As I became familiar with the Orbite process, I realized it would have great potential for the metallurgical extraction of non-carbonatite-type, REE-bearing ores.

Most of the ore minerals in REE deposits are silicate minerals. Presently, producers bake the silicates with sulfuric acid to fix the silica, which affects the recoveries. The sulfuric acid bake also can consume large amounts of reagent.

Orbite developed a process to break down the silicate minerals and filter off the silica more effectively, making it possible to extract many or all of the byproducts, not just the REEs. Plus, the acid can be recycled.

Orbite is using its process to extract alumina, scandium and gallium from its deposit. If Orbite has actually solved the silicate mineral problem, its process could be used to extract REES in a very purified form that would be imminently suitable for separation technology. It would dramatically reduce the operating costs for all granite-based HREE deposits.

TMR: The Orbite process is used primarily to recover alumina from bauxite. Does that make Orbite a technology play or an aluminum play?

AK: In the short term, Orbite intends to make money from extracting aluminum from any aluminum-bearing rock, not just bauxite. That includes shale, red mud or fly ash, anything that doesn’t have high carbonate content.

The potential for crossover into extracting REEs and other elements is a satellite to the main aluminum play. Orbite’s ore contains 500 parts per million rare earth oxides, which the company has proved on a bench scale can be concentrated and extracted even at low levels as a byproduct of aluminum extraction. The technology seems to be applicable outside of the aluminum space and could, in the future, provide another source of revenue for Orbite.

TMR: Of the top-tier, advanced-stage rare earth projects, which deposits would be most amenable to Orbite’s processing technology?

AK: Tasman and Matamec’s deposits both have eudialyte, which is extremely acid soluble. It dissolves in vinegar at room temperature. These would be the ideal. The process also would be useful to Quest and Ucore. In fact, all of the granite-type, non-carbonate REE deposits could potentially benefit.

TMR: Are other companies developing similar recovery technologies?

AK: Yes, but not many details have been made public. Matamec intends to finish its feasibility study this month; it should give us a good look at what that company has accomplished. Tasman, with a similar metallurgy, has obtained decent recoveries from its processes.

Quest must be able to extract zirconium from its deposit or the ceramics company wouldn’t be involved there. Ucore has an ore-sorting technology that appears to be applicable and successful in reducing the throughput to the mill with little or no loss of rare earth potential.

TMR: Let’s look at Tasman. The company recently got a mining lease for its Norra Kärr project. Is that meaningful for investors?

AK: To me it is. It means that the Swedish government believes the company can operate safely and control emissions, in a relatively populated area. That is a major hurdle to get over.

TMR: What are the most dramatic changes investors should expect in this space over the next 6 to 10 years?

AK: It is a given that you will start to see major western REE producers. If a consistent supply of rare earths causes a rise in demand, there will be space in the market for additional producers. That may spur exploration.

Exploration for rare earth deposits has been in the doldrums for the last couple of years. Many of the deposits we’ve been talking about are 30–40% HREEs. That leaves a substantial quantity of LREEs that will have to be gotten rid of. Neodymium is easy to sell because there’s a demand. But the deposits will also produce substantial quantities of lanthanum and cerium, which are not in short supply at all.

A couple of recently announced deposits contain ore that more than 90% HREEs. If these get to production, they will be producing exactly what the marketplace wants and none of the stuff that’s in oversupply.

For example, Namibia Rare Earths Inc. (NRE:TSX, NMREF:OTCQX) has a small NI-43-101-compliant resource in Namibia: Measured and Indicated and Inferred of about 2 million tons of a nice, HREE-rich deposit. The company is well financed, with something like $20M in the bank.

TMR: What did you make of Namibia’s recent metallurgical tests?

AK: Namibia’s mineral is called xenotime, a fairly heavy mineral that has the potential to be concentrated by gravity methods. Namibia also has some carbonate in its ore that can be removed by acid dissolution.

TMR: Could the fact that it’s in Namibia be its biggest advantage?

AK: I would suspect the company won’t have as many environmental hoops to jump through and that labor could be less expensive. Compared to the long lead times and permitting processes in North America, that can’t hurt.

TMR: What do you know about Pro-Or Inc.’s (POI:TSX.V) chlorinator recovery technology?

AK: Right now, Pro-Or is targeting the platinum group elements. There is nothing to suggest the company is looking at the rare earth side, but certainly any new recovery technique is worth looking into.

TMR: Do you have a parting thought or two for our readers?

AK: There is very little news in the REE sector now because everybody’s doing their metallurgical testing, their optimization. It’s not a very exciting time in the rare earth space because there’s not much exploration. Companies are hunkered down to boost the value of their products and lower their capital costs.

In the next six months, I expect to see a real shakeout as companies release amended PEAs, prefeasibility studies and feasibility studies across the REE space. That is when smart investors will be able to look at the numbers and pick out the winners. At these depressed prices, there will be substantial profit potential when the winners and losers emerge. This is a good time to keep your eyes open and sharpen your pencil to crunch some numbers.

TMR: Alex, thank you for your time and your insights.

Geologist Alex Knox has been involved in the mineral exploration industry since 1970. He served in the mineral exploration division at Unocal Canada Ltd., the exploration arm of Molycorp, where he was involved in the discovery of the Kipawa deposit in western Quebec. Knox has explored for uranium, gold, rare earths, niobium, diamonds, slate and limestone in Canada, the U.S., Mongolia, Bolivia, Peru and Argentina. Highlights include Matamec’s Kipawa deposit, Commerce Resources’ Eldor and Blue River properties and Quantum Rare Metal’s Elk Creek deposit. Knox is on the REE Advisory Board of three publicly traded Canadian junior mineral exploration companies.

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DISCLOSURE:

1) Brian Sylvester conducted this interview for The Metals Report and provides services to The Metals Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Metals Report: Commerce Resources Corp., Pro-Or Inc., Namibia Rare Earths Inc., Tasman Metals Inc. and Orbite Aluminae Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Alex Knox: I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Have Rare Earth Prices Bottomed Out?

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Thursday May 30, 2013, 4:30am PDT

By Andrew Topf - Exclusive to Rare Earth Investing News
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prices-downRare earth producers may have nothing but blue sky to look forward to after several months of gloomy weather, metaphorically speaking, regarding stagnant rare earth oxide prices.

A report this week by Morgan Stanley states that demand for REOs has troughed, suggesting prices could start to come back up following another 12 percent cross the board price decline in May. The caveat, however, is that more supply from Molycorp (NYSE:MCP) and Lynas (ASX:LYC) in the second half of this year could put more downward pressure on prices, according to a Morgan Stanley analyst quoted by StreetInsider.com.

The firm’s assessment is encouraging news at least in the short term for REE producers which have seen a continued weak pricing environment. Metal-Miner’s monthly Rare Earths MMI fell three points in May to 39 points, a 7.1 percent decrease from 42 in April. Rare earths were the worst performing of any of MetalMiner’s MMI indices.

Metal-Miner managing editor Lisa Reisman wrote in Seeking Alpha that the index was pulled down by falling prices of terbium, europium and dysprosium oxides. Dysprosium, used in lasers, magnets and electronics, was worst hit with a 17.3 percent price decline. However, she also noted that the prices of 8 other metals were up, including yttrium, yttria, terbium metal, samarium oxide, praseodymium oxide, neodymium oxide, neodymium and lanthanum oxide.

There are indeed encouraging signs that the two-year rout in rare earths prices could soon be coming to an end. Metal-Pages reported on Wednesday that industry sources are starting to see interest from high-net-worth investors who think that prices are close to bottoming out.

“There’s definitely a speculative interest in rare earths,” wrote Metal-Pages, quoting a European trader. “We’ve had a number of enquiries recently from investors.”

“Some of them have been talking of investments of up to $0.5-1.0 million,” said the trader, noting that 6 months ago there was no investor interest. Metal-Pages also said that some traders are restocking cerium, lanthanum and erbium oxides in hopes that prices have bottomed.

Rare Earth Investing News reported earlier this week that the demand picture for rare earths is brightening, as witnessed by an uptick in buying from key REE consumer Japan. The auto and electronics powerhouse accounts for two-thirds of China’s rare earth exports, which have been steadily rising this year. Japan is seeing higher economic growth since the government embarked on a massive stimulus spending program, and that is giving Japanese rare earth consumers the confidence to place more orders especially considering the current low prices of REOs.

Market round-up

The price of erbium oxide fell over the past week due to weak demand from consumers in the glass and enamal markets, Metal-Pages reported. Dysprosium oxide prices also softened as suppliers, concerned that prices could fall further, sold material rather than holding onto stocks. The price of praseodymium, used in colored glass, have firmed over the past couple of weeks on the back of reduced output in China. Weekly prices of terbium, neodymium, cerium carbonate, and lanthanum all held steady, according to Metal-Pages.

Company news

In a revised scoping study released on Wednesday, Peak Resources (ASX:PEK) said it has reduced its operating and capital costs at the Ngualla rare earth project in Tanzania. The mine’s capex is now pegged at $373 million, a 7 percent reduction from earlier estimates. Operating costs have been reduced by 8 percent to $10.18 per kg REO equivalent.

“This update to the Scoping Study and preliminary economic assessment quantifies the excellent results achieved from the improved resource model and beneficiation test work released in April this year,” said executive chairman Alastair Hunter. The revised study also shows a higher mine grade of 5.35 percent REO for the first 25 years of mining, a much lower strip ratio of 0.89 compared to 3.34, and a doubling of the minelife from 25 to 50 years.

China has approved what would be the country’s largest heavy rare earths separation project, Shanghai Metals Markets reported. China Nonferrous Metal Industry’s Foreign Engineering and Construction (NFC) said on Tuesday that it plans to invest about 612 million yuan (US$99.8 million) for the plant, located in Guangdong province. The facility would produce an annual 6,531 mt of rare earth oxides — mostly lanthanum, yttrium and neodymium.

The government of Malawi has tapped a private Australian company to explore for gas and rare earth metals in two of the country’s districts, reported StarAfrica.com. Malawi is hoping the finds will double its GDP by 2015.

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.

US Mine Approval Times a Growing Concern for Investors

Monday April 22, 2013, 4:30am PDT
By Adam Currie - Exclusive to Rare Earth Investing News

http://rareearthinvestingnews.com/9438-united-states-rare-earth-mine-approval-investors-ucore-molycorp-permitting.html

As US-based rare earth mining companies continue to battle a market monopoly out east, they are also facing big challenges on their very own doorstep.

While most developed countries are constantly seeking to improve the length of time it takes to get a mine to production, the US continues to struggle in this regard. Obtaining the permits and approvals needed to build a mine in the US takes an average of seven years — that is one of the longest waiting times in the world. In a ruthless market environment where timing is everything, more and more rare earth mining companies (as well as a number of other commodity-focused firms) are struggling as a result of seemingly endless delays relating to permitting.

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An unwanted ranking

This point was underlined recently when Behre Dolbear Group, an international mining and mineral advisory group, released its latest report, 2013 Ranking of Countries for Mining Investment: “Where Not to Invest.” It states that of the top 25 mining countries in the world, the US and Papua New Guinea are tied for having the longest permitting process. Putting that into context, Australia, another large mining center, takes an average of one to two years to process permitting approval.

Of increasing concern to producers, as well as investors, is that little is being done to rectify the issue. In an interview with Rare Earth Investing News last month, Daniel McGroarty, president of US Rare Earths (OTCBB:UREE), a US-based rare earth development company, underlined his concerns by noting that other industrialized democracies run permitting processes that are far less lengthy and Byanztine. Commenting on the latest findings, he told the American Resources Policy Network, “[j]ust 4 years ago, in 2009, the same study found that the U.S. permitting process took an average of 5 to 7 years. Today, it’s 7 to 10 years – a 40 percent increase in delays. Thanks to onerous federal rules on U.S. mine permitting, we are mired in last place with Papua New Guinea for the second year in a row. Meanwhile, other mining nations are leveraging their mineral resources to fuel manufacturing, drive economic growth, and create jobs without sacrificing environmental protections.”

The consequences are dire

This mindset has not only been reserved for investors and mining executives. At the 2012 Alaska Strategic and Critical Minerals Summit last November, Senator Lisa Murkowski (R-Alaska), advised attendees that it was time to make a “yes” or “no” decision on permit applications, adding, “t has persisted as an unfortunate reality for nearly every project in the country and the consequences are really dire.”

“Rare earths garner many of the headlines, but we need to look at the bigger picture,” said Murkowski. “We are 100-percent-dependent on foreign sources of 18 other minerals and more than 50-percent-dependent on foreign sources for some 25 others.”

What makes this scenario even more puzzling from an investor standpoint is that these increased delays are coming at a time when many in Washington have expressed concerns about the potential risks of the United States’ overreliance on other countries to supply rare earth elements (REEs).

That was highlighted in the Department of Energy’s (DOE) December 2011 Critical Materials Strategy document, which notes that supply challenges for five rare earth metals (dysprosium, terbium, europium, neodymium and yttrium) are likely to affect clean energy technology deployment in the coming years. That proved to be such a real concern that the DOE announced earlier this year that it will allocate up to $120 million for the creation of a rare earths research facility aimed at decreasing the country’s dependence on REEs from China.

A benefit to all

While investors continue to be frustrated by drawn-out wait times, a new study suggests that streamlining these processes would benefit REE producers and investors, as well as taxpayers. A study commissioned by the National Center for Policy Analysis (NCPA) suggests that states with rare earth resources could improve revenue by $724 million, add approximately 3,600 well-paid jobs and increase gross state domestic product by almost $40 billion.

“With economic and military demand likely to grow in the next few years, the United States must reform its mine permit process and safety regulations to take advantage of the vast underground store of raw materials that could drive growth, add jobs and bring revenue to state budgets,” Tom Tanton, author of the report, told the NCPA.

“Non-governmental organizations and environmental groups create additional challenges, which delay project approval,” states the report. “Currently, mines in Arizona, California and Wyoming are facing multiyear delays in the development of rare earth resources.”

It adds that the US should be trying to model Australia and Canada’s successful regulations and should aim to dramatically reduce domestic permitting times.

“The federal government should consider a trade mission to both countries to discover how they permit mines in one-fourth the time it takes in the United States, while meeting similar worker safety and environmental protection goals,” it notes. Among the potential benefits of rare earth mining in the US, the report named the creation of 1,000 potential jobs and state revenue of $160 million in Alaska; 1,150 jobs and state revenue of $250 million in Nebraska; 430 jobs and $116 million in state revenue in Illinois; and 600 jobs and state revenue of $90 million in Wyoming.

“A key issue for the country’s future economic growth”

The issue of delays came to a head recently when the National Mining Association (NMA) came before a congressional subcommittee to question whether US mining really needs HR 761, the National Strategic and Critical Minerals Production Act of 2013. Hal Quinn, CEO of the NMA, told the House Subcommittee on Energy and Minerals Resources that the measure “addresses a key issue for the country’s future economic growth and manufacturing revival: the painfully slow permitting process for the miners that supply metals and minerals essential for our basic industries, our national defense and the consumer product we use,” according to a report by Mineweb.

“Overall, when view through the lens of resource potential, the U.S. is underperforming, a fact that will have increasing consequences as global demand for minerals becomes more competitive due to the demands of development economies, where millions are being propelled into a rising global middle class,” he noted.

“In fact, the length, complexity and uncertainty of the permitting process are the primary reasons investors give for not investing in U.S. minerals mining,” he added. Quinn also noted that in 1993, the US attracted 20 percent of global exploration investment dollars, adding, “[t]oday, our share has eroded to just 8 percent.”

This issue has become particularly potent as REE prices continue to slide. While there are a number of great opportunities presenting themselves within the US REE landscape, such as Ucore Rare Metals’s (TSXV:UCU) Bokan Mountain heavy rare earth element project in Alaska, investors will be viewing these projects with a degree of skepticism when weighing them up against competitive projects based in countries with more efficient regulation processing regimes.

An example of how delays are effecting the sector is the fact that Molycorp’s (NYSE:MCP) Mountain Pass mine in California was closed from 2002 to 2012, despite having completed the required Environmental Impact Statement in 2004. Similarly, Rare Element Resources (TSX:RES,AMEX:REE), has an exploration permit to expand its test drill programs at its Bear Lodge Project in Wyoming, but is still facing at least three more years before final federal permits are issued.

The hope is that US-focused rare earth mining firms, and indeed the mining sector as whole, will generate momentum for reform. For that to occur, the process will need a significant shift in public policy aimed at advancing resource development.

That does not necessarily mean the sector will need to increase risks in areas such as environmental reviews. An example of a country on the right track is Sweden, where extractive industries account for roughly 20 percent of its annual exports. The country is simultaneously ranked in the top 10 of Yale University’s Environmental Performance Index for 2012.

The mining sector, and indeed the open market, will not wait around forever. Mines delayed in the US will simply be built elsewhere. The US mining sector needs a more efficient resource development strategy and it needs it now.



Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.

Rare Earths Rouse Pentagon Fears

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Washington right now is supposed to be all about slashing budgets and tightening belts — but the Department of Defense has recently asked Congress for over a billion dollars. To buy rocks.


Specifically, to buy rare earth and other minerals that are crucial to the U.S. defense industry, and whose supply is currently at the mercy of China and its opaque political system. Japan, for example, was starved of rare earth elements during a maritime dispute with China in 2010. The United States wants to hedge that risk, given the damaging consequences an abrupt clampdown could entail.

The DoD has in previous years noted China’s near-monopoly on global rare earth metal production, but the present report, delivered to the House Armed Services Committee in late March, describes the risks in stark terms, and sketches out a range of scenarios.

One scenario has China embargoing exports of some key rare earth elements, and notes that currently the U.S. would be hamstrung.

Stockpiling some of the crucial elements is one of the proposed remedies for China’s control. It’s an idea that has hardly been heard since the later years of the Cold War, given the growth of globalized and largely unfettered trade that has characterized the last several decades.

Daniel McGroarty, principal of American Resources, a policy group, and president of U.S. Rare Earths, a mining company, referred to a reflection made by Adam Smith, the ideological father of free markets, over two hundred years ago: that when it comes to strategic items like sailcloth and gunpowder, “it might not always be prudent to depend upon our neighbors for the supply.”

Rare earth metals are to the the modern world what gunpowder and sailcloth were to 18th century Britain, McGroarty says, which explains the DoD’s concern.

“I think we lost sight of the geopolitical or strategic element that might cause countries to intervene in industry for reasons of advantage that are not just economic,” McGroarty said in a telephone interview. “I think we just didn’t see that. And now when we do see it, the situation has changed drastically.”

Two decades ago, McGroarty said, the rare earth market was split between the United States and China. “Now it’s become extraordinarily lopsided,” with China producing over 90 percent of supplies of rare earths.

The Department presents its report on Strategic and Critical Materials Report on Stockpile Requirements every other year. In the past it has noted China’s predominance in the rare earth metal space, but had not previously evinced the concerns seen now.

In a strategic risk assessment given in Appendix 12, the possibility of China cutting off rare earth exports was assigned a mean probability of only 4 percent, though with dire consequences. “Gross domestic product losses would be high, and the consequences would extend over a significant timeframe,” the report said.

It continued: “Economic consequences of war with China are high based on the mutual dependence between the two countries. Militarily the conflict would be violent, but quick; and we would get the better of it, at least in the next ten years. Politically, there would be some loss of credibility on both sides, due to the failure to prevent the war. Trade disruptions would also have major Chinese domestic political consequences.”

A scenario where China cuts off exports of some key minerals for a year “in an effort to coerce or punish the United states… as well as to drive up commodity prices,” was also considered. There would be a $1.2 billion shortfall for the 72 minerals considered.

Complicating the assessment is the sometimes haphazard and fragmented nature of how rare earths are obtained from China: in the south of the country, tens of thousands of metric tonnes of rare earths are thought to be wrung from the ground, and refined and exported, by a chaotic chain of fly-by-night mining operators — none of those figures go into the official books. Estimates for that illicit activity range from 10,000 to 40,000 metric tonnes per year.

At the height of its production, Molycorp, a U.S.-based miner of rare earth elements that was hit hard by China’s rock-bottom prices, says it planned to produce 20,000 metric tonnes of product in 2012. This means the underground Chinese supply component could be as much as double the entire U.S. supply, which goes some way to illustrating the opaque and potentially volatile nature of Chinese supply.

“Think about how nervous that would make a Pentagon planner,” McGroarty says.

U.S. Rare Earths' properties in Idaho and Montana, including Lemhi Pass, have been recognized in the U.S. Department of Energy's Critical Materials Strategy publications to have significant showings of Heavy Rare Earth Elements, in particular for the five Rare Earths identified by DOE as being at "Critical Risk": Dysprosium, Europium, Neodymium, Terbium and Yttrium.

The Pacific Dream: An Underwater Rare Earth Behemoth

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The Pacific Dream: An Underwater Rare Earth Behemoth

All eyes shifted east this week when Japanese researchers announced the discovery of a large-scale deposit of rare earths in the seabed surrounding Minami-Tori-shima Island in the Pacific Ocean.

Scientists from the Japan Agency for Marine-Earth Science and Technology and the University of Tokyo confirmed the discovery of a “huge new deposit” on the Pacific seabed. They claim that the deposit can be mined at very low cost and will be able to produce materials that are 20 to 30 times more concentrated than those currently being mined in China.

Some analysts believe that if the Asian manufacturing giant is able to implement a cost-effective way of extracting this resource, which is said to be located approximately 5,700 meters below sea level, it will have access to approximately 6.8 million metric tons (MT) of rare earths, equivalent to 230 years of local demand, according to The Australian.

What sets this discovery apart?

Mud sample concentration is what makes this discovery notable. Yasuhiro Kato, a Tokyo University professor and the researcher who led the underwater discovery, admitted that he assumed the finding was a mistake when he first saw the “astronomically high level of rare earth minerals” present, The Guardian reported. The newly discovered metals are in higher than usual concentrations and will be cheap to mine; researchers intend to explore for another two years before scaling up efforts aimed at the extraction of the elements from the seabed, according to a report by The Telegraph.

“When researchers brought back the data to me, I thought they must have made a mistake, the levels were so high. The fact is this discovery could help supply Japan with 60 percent of its annual needs merely with the contents of a single vessel,” said Kato.

While countries such as the US and Australia have been actively ramping up production of rare earth elements (REEs), they have yet to discover viable quantities of heavy rare earth elements (HREEs), such as dysprosium, terbium, europium and ytterbium. The importance of securing such REE supplies was highlighted only last week, when the Department of Defense released its biannual Strategic and Critical Materials 2013 Report on Stockpile Requirements, which calls for the government to stockpile $120.43 million worth of HREEs. On the same note, the US Department of Energy (DOE) announced earlier this year that it would allocate up to $120 million for the creation of a rare earths research facility aimed at decreasing the country’s dependence on REEs from China.

Exploration gaining momentum

This is not the first instance of Japan expanding its search for viable REE resources into more remote locations. The country has been openly aggressive in its stance towards diversifying supply, and this search gained momentum when it, along with the US and European Union, formed an alliance that moved in on the World Trade Organization to challenge China’s restrictive REE export policies.

The country’s goal of breaking its reliance on China was highlighted when Kato told The Telegraph that China’s restrictive export policies are meant to force manufacturing companies to build inside of the country, allowing the communist state to steal their technologies.

This is also not the first time Japanese researchers have claimed to have discovered an unusual REE deposit. Earlier this year, Japanese mining company Nippon Light Metal Holdings Company (TSE:5703) stated that Jamaica may host a large amount of REEs in its red mud, or bauxite residue.

“A dramatic and highly significant new development”

While this latest discovery is undoubtedly a coup for Japan in its efforts to diversify its rare earth supply, some investors are questioning whether a large-scale mining operation in such a remote location is in fact feasible.

“The discovery of REEs in 2011 in the deep ocean sediments of the Pacific was a significant event and indicated a potential long-term source of REEs. However, the new discovery of REE- and yttrium-rich nodules close to the ocean bottom, and within the exclusive economic zone (EEZ) of Japan, is a dramatic and highly significant new development,” said Peter Kowalczyk, CEO of Ocean Floor Geophysics, in a conversation with Rare Earth Investing News. Ocean Floor Geophysics is a Canada-based private company that provides geophysical services for the exploration of submarine massive sulphides.

“The ore tenor of these nodules is presumably higher than that of the previously discovered REE-rich sediments. The fact that this resource exists as nodules close to the ocean bottom means it is likely to be simple to mine. It will not require burrowing or the removal of significant amounts of overlying sediments,” he said.

No territorial implications

He added that another advantage to the find is that any political issues related to the holding of tenements under the authority of the International Seabed Authority will be eliminated as the resource lies within Japan’s established EEZ and not within the disputed area of the Japanese EEZ in the South China Sea.

Investors are also questioning the logistical viability of an underwater project of this scale; however, Kowalczyk noted that the oil industry is already working at depths up to 3,000 meters, with the move to 6,000 meters already well underway in the equipment industries.

“Japan has already committed to developing the technology to mine copper, gold and zinc in from sea floor deposits and to begin sea floor mining within this decade. Mining REEs and yttrium from a deep sea nodule resource is a natural extension to the present Japanese technology track. The discovery of REEs and yttrium in nodules will add impetus to their present work to begin sea floor mining,” he added.

“The analogue is manganese nodule mining, which is attracting considerable interest today — in the 1970s, manganese nodules were lifted 5,000 meters using air-lift risers. This may not be the most efficient method, but it is simple and it works. The overall costs are unknown, but the cost of robotic equipment is declining rapidly.”

When questioned as to whether such a high-profile discovery might lead to more interest in underwater exploration companies, such as Nautilus Minerals (TSX:NUS), Kowalczyk, responded, “yes, although there are very few of them and in the present mining investment climate they are having a tough go.”

Environmentally sound

Over half of the metal in this underwater deposit is on the heavier end of the spectrum, “twice the level of China’s key mines and without the radioactive by-product thorium that makes the metals so hard to mine,” according to researchers cited by The Telegraph.

Commenting on the environmental implications of mining REEs from the seabed, Kowalczyk noted that there will likely not be any major implications and that if issues arise, they will most likely be associated with the amount of material that needs to be moved to access the ore-bearing horizons, which are subhorizontal and exist over large areas.

Describing the kind of extraction process that would be used to retrieve REEs from the seabed, Kowalczyk stated it will undoubtedly be robotic.

“It is very unlikely it will be an open-cut type of extraction sequence as this would impact considerable amounts of material. Possible candidates are in situ leaching, robotic mining machines that are analogues of tunnel boring machines and perhaps subhorizontal drilling similar to that used in the extractions of tight gas from shale formations on land.”

He continued, “it may be that a process similar to that used for roll-front uranium deposits on land may be adaptable to this environment also. If the new high-grade nodule type deposits are confirmed to be extensive and not buried deeply, this will simplify the mining process.”

Investing In Rare Earth Elements Part 1: An Introduction To Rare Earth Elements

http://seekingalpha.com/article/1288861-investing-in-rare-earth-elements-part-1-an-introduction-to-rare-earth-elements?source=email_portfolio&ifp=0

This is Part 1 of a two part article series on investing on Rare Earth Elements (REEs, hereon). In this part I introduce the reader to REEs. Specifically I explain why investors should consider taking positions in REE-related investments. I then provide some basic background information pertaining to REEs. Finally I provide specific details about some of the more important REEs that investors will need to be familiar with before researching individual REE-related investments. In Part 2, I will discuss specific investment opportunities based upon the conclusions I arrive at in this article.

1: Why Investors Should Consider REEs

REEs are essential resources in many products that modern society cannot live without. Global government defense departments consider REEs to be strategic resources that are essential to national security. REEs are also essential for the production of clean energy technologies. Furthermore, REEs are needed to build electronic devices, medical devices, and products used in modern scientific experimentation.

What distinguishes REEs from other metals that satisfy the above claims (such as copper, silver, zinc, PGMs...etc.) is that the vast majority of all REE production comes from China. Specifically most REE production currently comes from the ion-adsorption clay ores in southern China. Estimates vary as to the extent of this monopoly, and it differs from REE to REE, but in general China controls at least 90% of global REE production at the present time, and in the case of some of the rarer REEs this figure exceeds 99%. Furthermore, while there are many REE projects in the Western world currently under development, China controls over half of the world's REE in-ground resources.

These two realities, coupled with the fact that REE demand is generally inelastic, make for incredibly favorable supply-demand fundamentals that will greatly benefit well-informed REE investors.

2: REE Basics

A: REEs

The term "Rare Earth Element" is a blanket statement that refers to the lanthanides -- a group of 15 metals with particular atomic properties -- plus scandium and yttrium: elements that share chemical properties with the lanthanides and that are often found in the same ore deposits.



What follows is a list of the 17 REEs in order of atomic weight:

1-Scandium (Atomic weight: 21)

2-Yttrium (39)

3-Lanthanum (57)

4-Cerium (58)

5-Praseodymium (59)

6-Neodymium (60)

7-Promethium (61)

8-Samarium (62)

9-Europium (63)

10-Gadolinium (64)

11-Terbium (65)

12-Dysprosium (66)

13-Holmium (67)

14-Erbium (68)

15-Thulium (69)

16-Ytterbium (70)

17-Lutetium (71)

B: Rare Earth Minerals

REEs are not found in the ground as independent elements. Rather, they are found in minerals which must be separated chemically in order to obtain them. The minerals containing REEs are called Rare Earth Minerals (REMs, hereon), a list of which can be found here. No REM consistently contains the same set of REEs, although some REMs always contain one or two of the same REEs. For example, the REM monazite always contains cerium. It almost always contains lanthanum, and it may contain small amounts of dysprosium, terbium, as well as other REEs.

As a result, geologists who are projecting resource quantities and densities for these companies will generally be subjected to a greater level of unpredictability, and investing in REE mining companies is inherently more speculative than investing in mining companies that focus on other metals, although there are exceptions to this, which I will discuss in Part 2.

C: REE Applications

Different REEs have different applications, some of which I will discuss in greater detail below. Industries that use REEs include electronics production, defense, clean energy, medical devices and scientific equipment (equipment used in scientific experiments). Primary applications include magnets, batteries, lasers, X-rays, computer chips, lighting technology and more.

3: Which REEs Will Make the Best Investments?

Given that there are 17 REEs, the notion of investing in REEs is far too vague to be actionable. Successful REE investors must select specific elements from this list that have the best supply-demand fundamentals and then find investments that focus on these elements. REE mining companies will provide investors with exposure to many REEs, and so we need to find companies that will get most of their revenues from the best of them.

In what follows I will give a brief summary of the REEs that are most important to investors. I must note that up to date price data for REEs is generally not available to the public except to paid subscribers of certain reports such as metalprices.com. Consequently, the prices I give are roughly 1 month out of date, as it would be unfair to metalprices.com for me to provide Seeking Alpha readers with this privileged information.

Cerium

As I discussed earlier REEs are not found alone; rather they are found in REMs. The most commonly found REMs, particularly bastnaesite and monazite, are composed predominantly of cerium. As a result cerium is the most abundant of the REEs and it has the least favorable supply-demand fundamentals. Furthermore most REE mining companies will produce more cerium than any other REE. Companies that mine mineral ore that is rich in cerium but not in the other REEs will tend to be losers. That is not to say that cerium mining will not be profitable or that cerium is not useful. The price of cerium on February, 17 2013 was roughly $32,000 per metric ton. Some of the industrial uses of cerium include: catalytic converters, glass manufacturing, light flints, and permanent magnets.

Dysprosium

Dysprosium is frequently cited by the U.S. Defense Department as a strategic metal that is essential the national security. It is also used in many clean energy technology products. Dysprosium has several industrial applications including permanent magnets, neodymium-iron-boron magnets used in hybrid cars, neutron-absorbing control rods in nuclear reactors, and data storage (which requires magnetic compounds).

China currently controls virtually all of the world's dysprosium production. There are currently some mines in early development that will produce some dysprosium outside of China but none of them will be in production until 2014 at the very earliest, and many of the larger producers will not be producing dysprosium until 2016 or later.

As of February, 17 2013, the price of dysprosium was $1,374 per kilogram, and currently dysprosium production is at roughly 100 tons per year.

Given that dysprosium supply is so low it may have the best supply-demand fundamentals of any REE. REE expert Jack Lifton implies that this is the case in an interview he gives published by The Critical Metals Report -- The Only Five Rare Earth Elements that Matter. As a result, dysprosium miners will probably be among the best performing REE mining companies.

Terbium

Terbium is one of the rarest REEs and consequently it is among the most valuable. Some applications of terbium include calcium fluoride, sonar devices, sensors, and solid state charge carriers. As of February 17, 2013 terbium cost $1,730 per kilogram.

Terbium, like dysprosium, is considered by the U.S. DoD to be a critical metal for America's national security. While currently terbium production is greater than dysprosium production at a couple hundred tons (cf. Lifton), future production will be limited. For example, Lifton states that Ucore Rare Metals' (UURAF.PK) Bokan Mountain project anticipates 120 tons of annual dysprosium production, but only 20 tons of terbium production. As a result it is unlikely that any REE mining company will emerge as primarily a terbium miner; nevertheless investors should look for terbium resources when researching individual companies.

Yttrium

Yttrium is not a lanthanide but it is still classified as an REE because of its chemical properties and the fact that it is found in REMs. Yttrium is used in cathode ray tubes, superconductors, and as a material strength enhancer for metals such as aluminum and magnesium. Yttrium is not incredibly rare as it is found in the Earth's crust at a rate of 32 parts per million and cost just $32,500 per metric ton as of February, 17 2013, yet demand is rising.

The U.S. Department of Defense considers yttrium to be a strategic metal of the highest significance considering its estimates of future demand (given yttrium's use as an enhancer for aluminum this makes sense). According to a June, 6 2012 American Resources Policy Network report, yttrium, along with 13 other metals (none of which are REEs), was ranked as being the most significant to America's national security (see p. 11). Furthermore, while over 20% of in-ground yttrium resources are in the United States, it is currently completely dependent on imports to meet its yttrium needs as most of these reserves are held at mines that are still in development such as Bokan Mountain in Alaska (Ucore Rare Metals) and Bear Lodge in Montana [Rare Element Resources (REE)].

Other REEs

For the most part, investors in REE mining companies or in Dacha Strategic Metals (DCHAF.PK) (a holding company for certain REEs) will not be able to get exposure to other REEs except in small amounts, the gains from which will be dampened by cerium exposure. As a result I have decided not to provide detailed descriptions of the other REEs. However investors should look into europium and neodymium which along with dysprosium, terbium, and yttrium are mentioned by Lifton as being among the five REEs that "matter." Investors should also look at lanthanum which is mentioned by the American Resource Policy Network report cited above as a metal that is critical to America's national security (cf. p. 11).

4: Conclusion

To summarize:

1: REEs are essential in the production of many modern-day products, including some that are important for our national defense.

2: Almost all current REE production occurs in China.

3: The term "Rare Earth Elements" refers to 17 different metals which have similar chemical properties, but which have distinct characteristics and industrial applications.

4: REEs are found in minerals. Some of the rarer REEs do not necessarily comprise any of these minerals, and consequently mining companies have difficulty in predicting their future production of some of the REEs that make the most attractive investments.

5: Cerium is the most common REE and consequently it has poor supply-demand fundamentals and makes for a poor investment relative to other REEs.

6: Dysprosium and terbium are extremely rare and make for excellent investments relative to other REEs.

7: Yttrium is not so rare, but it has particular usages that make it an attractive investment.

In Part 2 I will discuss strategies for choosing specific REE investments. I will also discuss some individual companies that investors should consider purchasing if they agree with the information in this article and if they are willing to take on some risk in order to potentially achieve substantial gains.

The Rare Earth Space, ‘A Culling of the Herd, and the Survivors’ (Part 1: North America)

http://www.proedgewire.com/rare-earth-intel/the-rare-earth-space-a-culling-of-the-herd-and-the-survivors-part-1-north-america/

US to Build $120m Rare Earth Research Institute

http://proedgewire.com/rare-earth-intel/us-to-build-120m-rare-earth-research-institute-2/

“US to build $120m rare earth research institute” was the headline that BBC News used to report the latest development in the rare earth elements sector (REEs.) The new Critical Materials Institute (CMI) is going to be based in Ames Iowa, alongside the existing Ames Laboratory in Ames, Iowa. The Ames Lab is the USA’s premier research centre for rare earth materials’ science and technology.

“The new research center, which will be named the Critical Materials Institute (CMI), will bring together leading researchers from academia, four Department of Energy national laboratories, as well as the private sector.

Rare earth metals and other critical materials are essential to manufacturing wind turbines, electric vehicles, advanced batteries and a host of other products that are essential to America’s energy and national security,” said the press release.

At first sight, $120 million doesn’t seem that impressive, this is expensive America after all, and in 2013, a dollar doesn’t buy as much as it used to, even in Ames Iowa. Even worse, it’s supposed to be a 5 year program so it’s really just $24 million a year. But the fact that its being put up at all, as America readies itself for a round of budget cuts and tax increases, underlines the importance of REEs and other critical materials to the modern economy.

To return to the press release again:

“CMI, headquartered at The Ames Laboratory, will be directed by Alex King, also the director of the Ames Lab. The Hub will bring together some of the most advanced critical material research programs in the U.S. today. Other national labs partnering with Ames include Idaho National Laboratory, Lawrence Livermore National Laboratory, and Oak Ridge National Laboratory. University and research partners include Brown University, the Colorado School of Mines, Purdue University, Rutgers University, University of California-Davis, Iowa State University, and Florida Industrial and Phosphate Research Institute. Industry partners that have joined to help advance CMI developed technologies include General Electric; OLI Systems, Inc.; SpinTek Filtration, Inc.; Advanced Recovery; Cytec, Inc.; Molycorp, Inc.; and Simbol Materials.”

In that sense, this 21st century, micro-mini, “Manhattan Project,” just might be able to punch well above its weight. Never underestimate good old Yankee ingenuity once America gets behind a project. Again from the press release:

“The new Hub will focus on technologies that will enable us to make better use of the materials we have access to as well as eliminate the need for materials that are subject to supply disruptions.”

For my part I wish them well and hope that they succeed. I’d rather have a critical materials supply chain based on the highly reliable USA, rather than the corrupt and increasingly erratic China. With luck they’ll come up with more efficient, less dangerous methods of refining and recycling rare earth elements, out witting existing patents too with luck. Not that they need any input from me, but I’ll put my two cents worth in anyway. Since radioactive waste is often a by-product of REE refining, from “Graphene To The Rescue In Gas Production,” an early phone call to Rice University might be a timely place to start.

“The results of new research into microscopic graphene oxide, by researchers at Rice University, Houston, and researchers at Lomonosov Moscow State University in Russia, published this week in the Royal Society of Chemistry, journal Physical Chemistry Chemical Physics, came out under the summary: “Graphene oxide far surpasses other materials commonly used to remove radioactive toxins from water.”

The Ames Laboratory to Lead New Research Effort to Address Shortages of Critical Materials Link.
This entry was posted in Rare Earth & Critical Minerals Intel by Graeme Irvine. Bookmark the permalink.
Copyright © 2012 ProEdge Media Corp. All rights reserved. More & Disclaimer »

I'm not a REE shareholder...

But, I do read what you post here because much of it is equally as relevant to other REE stocks as it is to REE stock specifically.

You do an excellent job of posting relevant material... making this one of the very few boards on IHub that I find is worth reading for the quality of the content.

So, thanks for making the effort.

I appreciate it.

7 High-Performing Rare Earth Stocks of 20121
Monday December 24, 2012, 4:30am PST

By Andrew Topf - Exclusive to Rare Earth Investing News3

http://rareearthinvestingnews.com/8739-high-performing-rare-earth-stocks-2012-medallion-orbite-aluminae-junior.html

2012 was in some ways a watershed year for rare earth elements (REEs) and the companies that mine and explore for them. The sector experienced a significant fall off in rare earth oxide (REO) prices, which enjoyed huge gains in 2011. Companies that hunt for these critical metals have suffered as a consequence, with most experiencing significant valuation declines.

The most obvious example is Molycorp (NYSE:MCP), the US REE producer that in February restarted its rare earths processing facility in California. In the past year, Molycorp has shed 60 percent of its market cap and on Friday was trading at $9.55, not far above its 52-week low of $5.75. The company’s sickly stock price was at least partially responsible for the departure8 earlier this month of Molycorp’s CEO, Mark Smith.

What is behind the dramatic fall in rare earths prices, which in 2011 had a record year, surging some 537 percent from 2010? The simple answer? Chronic overproduction in China — from which 95 percent of the world’s rare earths are sourced.Get the latest Rare Earth Investing

Despite the Chinese government’s attempts to crack down on companies that flout export quotas and ignore environmental standards — the rare earth business in China is notoriously polluting — rare earth miners in Sichuan and Mongolia, specifically, continued to overproduce, and that has led to an across-the-board fall in prices.

For example, the price of cerium oxide, which is used in glass and catalytic converters, was running at around $55 per kilogram in April, but has been cut in half and now fetches between $25 and $28/kg, according10 to Metal-Pages. It’s a similar story for praseodymium, which is used in jet engines and studio lighting, europium, which is found in television sets and lasers, lanthanum, which is used to make nickel11-metal hydride batteries and most of the other oxides derived from the 17 rare earth elements.

Not surprisingly, the value of most rare earth companies has fallen in lock step with the drop in REE prices. There have, however, been exceptions. The list below identifies seven year-to-date gainers sourced from 41 rare earth companies that trade on the Toronto, London or Australian stock exchanges. If there is a stock that we missed, let us know at: editor@resourceinvestingnews.com12.

1. Critical Elements (TSXV:CRE); current price: $0.22; year-to-date gain: 60.71 percent; 52-week high: $0.28; 52-week low: $0.09.

Critical Elements is a Canadian exploration company that concentrates on rare earths and rare metals, particularly tantalum14. Its flagship property is the Rose tantalum-lithium15 project, currently at the advanced exploration stage with a bankable feasibility study in the works. Critical Elements has a rare earths property in the Rocky Mountains of British Columbia and a rare earths and tantalum-niobium16 project in Quebec. A recent company press release17 notes that once in production, the Rose mine will be “the first new significant producer of tantalum in over 20 years.”

2. Ucore Rare Metals (TSXV:UCU); current price: $0.52; year-to-date gain: 50.72 percent; 52-week high: $0.64; 52-week low: $0.22.

Ucore Rare Metals explores for rare earth deposits in North America, and is primarily focused on the Bokan-Dotson Ridge REE property in Alaska. The company maintains that the Bokan deposit is the largest heavy rare earth project in the United States and is targeting production within the next three years. In November, Ucore released19 a preliminary economic assessment for Bokan; it shows a net present value of $577 million and an internal rate of return of 43 percent.

3. Tsodilo Resources (TSXV:TSD); current price: $1.16; year-to-date gain: 28.89 percent; 52-week high: $0.72; 52-week low: $0.16.

Tsodilo Resources is prospecting for diamonds21, base metals, precious metals and rare earths in Botswana. The prospecting licenses are held under three subsidiaries, including Gcwihaba Resources, which is exploring for base and precious metals, platinum22 group metals and rare earths. Tsodilo announced23 the adoption of a shareholder rights plan in October, presumably clearing the way for a takeover to occur.

4. Medallion Resources24 (TSXV:MDL,OTCQX:MLLOF); current price: $0.18; year-to-date gain: 24.14 percent; 52-week high: $0.28; 52-week low: $0.16.

Vancouver-based Medallion Resources is different from other rare earth juniors in that it is seeking to extract rare earths from monazite found in mineral sands. The company recently acquired the Red Wine heavy rare earth element prospect northeast of Churchill Falls, Labrador. In November, Medallion announced26 the completion of technical plans for a rare earth processing facility in the Middle East.

5. TNR Gold (TSXV:TNR); current price: $0.07; year-to-date gain: 16.67 percent; 52-week high: $0.19; 52-week low: $0.04.

TNR Gold is developing the Shotgun gold28 property in Alaska, the TNR iron29 ore and REE projects in Soules Bay, Canada and an advanced-stage copper30 porphyry project in Argentina — which the company claims is the sixth-largest undeveloped copper deposit in the world. TNR recently settled31 a lawsuit with McEwen Mining (NYSE:MUX32), which was disputing ownership of the Los Azules copper project.

6. Orbite Aluminae33 (TSX:ORT,OTCQX:EORBF); current price: $2.53; year-to-date gain: 6.75 percent; 52-week high: $3.99; 52-week low: $1.50.

Orbite’s technologies enable the extraction of smelter-grade alumina, high-purity alumina (HPA) and other elements, including rare earths and rare metals from sources such as aluminous clay and bauxite. In December, Orbite announced34 the commissioning of an HPA plant in Quebec, Canada. HPA is used to manufacture the industrial sapphires used in LED lights and screens.

7. Rare Element Resources (TSX:RES); current price: $3.45; year-to-date gain: 1.82 percent; 52-week high: $8.02; 52-week low: $3.03.

Rare Element Resources owns the Bear Lake property in Wyoming, which the company claims is one of the largest disseminated REE deposits in North America. A prefeasibility study released March 1 for the potential open-pit mine shows36 a net present value of $1.7 billion with an internal rate of return of 44.9 percent. An updated NI 43-101 report released in May outlines37 7.5 million tons (measured and indicated) of REOs grading 3.79 percent, up from the earlier estimate of 6.8 million tons averaging 3.75 percent REO.

Patience the key to playing today’s rare earths market – Chris Berry

http://www.mineweb.com/mineweb/content/en/mineweb-podcasts?oid=166060&sn=2010+Detail

10 Yukon Mining Stocks to Watch

http://www.miningstockreport.com/219/10-yukon-mining-stocks/

... "The Yukon has a long and storied history of mining, dating back to the Klondike Gold Rush in the late 1800's. While things may have changed, the Yukon continues to be considered a world class mining region. Here are 10 mining companies currently working in the Yukon region that should be on your radar screen.

By Christopher Haugen

Here, in no particular order are ten mining stocks that we feel warrant closer attention.

ATAC Resources Ltd. – ATC.V

Kaminak Gold Corporation – KAM.V

Yukon-Nevada Gold Corp. – YNG.TO

Western Copper & Gold Corp. – WRN.TO

Ethos Gold Corp. – ECC.V

Eagle Plains Resources Ltd. – EPL.V

Strategic Metals Ltd. – SMD.V

Golden Predator Corp. – GPD.V

Victoria Gold Corp. – VIT.V

Precipitate Gold Corp. – PRG.V" ...

Graphite Declared a Critical Raw Material in US & Europe

http://proedgewire.com/graphite-graphene-intel/graphite-week-in-review-the-confirmation-of-graphite-as-a-critical-material/

Graphite, the ‘humble’ material most commonly associated with an HB pencil, has been officially confirmed by no less than the US State Department, British Geological Survey and the European Commission to be a “critical raw material”. While some analysts have interpreted this as the validation of their ‘bubble’ cries, the conditions that pushed graphite prices higher are still valid. The average mobile phone or laptop Li-ion battery already contains 20 times more graphite than it does lithium. This is hardly news for those who have followed the rapid progress made in the development of new, lighter and more powerful, Lithium-Ion, and its Lithium-Phosphate-Iron variants, which are helping to drive technological advancements from electric automobiles, consumer electronics, computers and renewable energy-including the less meltdown prone pebble-bed nuclear reactors-to mention just some of the applications. Graphite is essential in improving batteries charging times and storage capacities; the greater the improvement in these parameters, the greater the popularity of electric vehicles. Experimental graphite based cell-phone batteries, which could be coming to a hi-tech convention near you next year, could offer full charging times of less than five minutes, while having a greater charge retention capacity.

The past months, and indeed, the past week, have seen a resurging investor interest in graphite, whose prices reached unprecedented heights last spring. Graphite prices have dropped from up to USD$ 3,000/ton to USD$ 2,000/ton or less. These are still remarkable prices in the historical price context for graphite, which has typically been closer to USD$ 700 than not. One of the factors driving the value of graphite has been the fact that most of this crucial mineral is produced in China, some 70% of it. The shadow of Chinese resource nationalism then prompted a surge in new graphite projects. Graphite stocks have halved, or worse, as a consequence of continued economic uncertainty, but this should not be considered as evidence of graphite’s actual value. In China, which has the fastest growing automobile market, electric cars are more popular than they are in the West, which suggests battery demand will surge – and that’s just one application. The prospect of superfast batteries should boost graphite demand by several factors before the end of the decade. Concerns of a graphite bubble are unfounded, given the time needed to bring the new mining prospects to production. Even then, the mines that will truly make it are those able to extract high purity or flake graphite, such as the ‘Sri Lankan’ or the jumbo flake types. Petroleum derived graphite will address common applications from golf equipment to alloy additives or for the manufacturing of carbon fibre; nevertheless, naturally occurring flake graphite what the new technologies demand. Those mines need time to proceed from exploration to production and the fastest to reach production will be able to best capture the wave.

Focus Graphite (OTCQX: FCSMF) and Standard Graphite (TSXV: SGH) have uncovered very high grade resources and the former is relying on these to stimulate the emerging graphene industry. Flake sizes and purity are some of the key factors to secure the highest prices – over USD$ 2,000 a ton now. The higher the percentage of large flake and high purity mineralization (higher carbon content), the better the price a resource can command. Focus Graphite and Standard Graphite have prolific high grade resources, while such plays as Zenyatta (TSXV:ZEN) can offer graphite that is very similar in chemistry and appearance to the famed Sri-Lankan graphite variety.

The week starting November 23 was favorable to graphite share prices as reflected by the valuations of our sponsors, which recorded an overall stock price increase of 5.93%, reflecting the general higher confidence in North American markets before and after the American Thanksgiving holiday. Zenyatta, saw, and by far, the most significant market move, rising by 25.93% from CAD$ 0.54 to CAD$ 0.68. The rise was explained by the Company’s announcement that it now owns 100% of the Albany graphite deposit, acquiring the last 20% interest in the property that was still controlled by Cliffs Natural Resources Exploration.

Standard controls 12 graphite properties in proven graphite rich geological areas in (read more) Quebec and Ontario and the Company has launched an aggressive strategy in 2012, which has already yielded significant results. This week, Standard Graphite saw the biggest drop in percentage terms, at -11.76%, from CAD$ 0.17 to 0.15 even as it published more favorable results from its Mousseau East property, noting that these coincided with the outline of the known mineralization. Standard Graphite is becoming one of the major North American pure-play graphite exploration companies, controlling 100% interest in 13 graphite properties in both Quebec and Ontario. Canadian Platinum Corp. (TSX. V: CPC) also saw a significant share move, 16.67%, likely promoted by its announcement of that it completed its previously announced private placement to advance the exploration of the Company’s Brabant Lake graphite property. Galaxy Graphite Corp. (TSX.V: GXY) also saw a favorable percentage move, 12.5% as it announced encouraging sample results from its Brownell gold project in mid-November.

Rare Earths Vital to the Defense Sector

http://proedgewire.com/rare-earth-intel/rare-earths-so-vital-to-the-defense-sector-as-to-provoke-a-ceasefire/

Rare earths are relatively abundant in the earth’s crust but they are made ‘rare’ because of the complex post extraction processing, separation and purification of these minerals. The real value of these elements is in the downstream end of the business as finished and semi-finished products, sold as oxides, carbonates, fluorides, borides, or pure and alloy metal forms. These semi-finished materials are then used to manufacture a variety of ‘high-tech’ products. The rare earths also earn their ‘rare’ designation because with very few exceptions they are irreplaceable, which explains why technologically advanced societies have become so dependent on rare earths in the past decade. Despite the recent bearish speculation, the fact remains that the rare earth market has grown to an estimated 5 to 10 billion dollars; it was worth 500 million dollars in 2003. Our dependence and the variety of their applications (rare earths are responsible for the miniaturization trend that allows for such items as smart phones, lighter batteries and more powerful electric motors possible) have turned rare earths into strategic materials; nowhere is this more evident than in the defense sector.

Rare earths are present on supersonic military aircraft, missiles, satellites, radar, sonar, telecommunications systems. Specifically rare earths are used in such individual components as transducers, sensors, phosphors and electronic controls, among others, that allow the hardware to perform strategic tasks. Rare earths are also used in structural items such as gas turbines blades and protective coatings (coatings against corrosion, erosion, heat shields), in optical systems. Yttrium is particularly important in applications in the metallurgical sector (protective coatings and thermal barriers), for the manufacture of phosphors and for applications in the field of defense. The brewing dispute between China and the West (including Japan) has only served to stress the importance of rare earths in military technology.

The US Government has called for the creation of a rare-earth stockpile along the lines of the strategic petroleum reserves to ensure a stable source for these materials. Rare earth values have not responded with the kind of urgency expressed at the level of the Pentagon, as they have been suffering under the weight of a jittery market and under most analysts’ generally perfunctory understanding of just how crucial rare earths are to modern weapon systems. A general list was presented above, but viewed from a wider strategic horizon; rare earths have acquired a veritable geopolitical importance.

This is because rare earths are essential in putting the ‘precision’ in precision guided munitions including precision guided missiles such as those used to intercept incoming enemy projectiles and rockets. Such platforms as Raytheon’s Patriot missile notoriously used with relative success during the first Gulf War in 1991 and the even more effective Israeli made ‘Iron Dome’ defense system rely on such rare earth elements as Dysprosium, Neodymium, Praseodymium, Samarium and Terbium, which allow for their electronic and dynamic guidance. Fins on the rockets move thanks to actuators controlled by samarium-cobalt magnets. Combinations of heat sensors, computers and rare earth magnet equipped motors work together to control the flight path of Tomahawk or Stinger missiles. The range and precision targeting is then performed by the Europium, Neodymium and Terbium which power lasers. Meanwhile, Gadolinium, Samarium, and Yttrium are used in radars and sonar governing air traffic and surveillance. The Patriot air defense missile uses these materials to moderate the electronic signal flow. Dysprosium, Erbium, Europium, Praseodymium and Yttrium can be used to vastly improve satellite communications; enabling fiber optic devices transfer huge amounts of data. Modern warfare relies on visual systems and rare earths are used in all kinds of high definition video panels, including instruments such as avionics, and ‘visual enhancement’ equipment.

Whereas, solid fuel was the strategic asset of rocket based weapons (such as the German V1 and V2 rockets) from World War II to the 1970’s; today, rockets are no longer sufficient. Surely, rockets and boosters are needed to generate the power needed to break out of the atmosphere, but space travel to other planets is fueled by rare earth magnets, the very same at the heart of ion engines. Magnets based on samarium cobalt (SmCo), first tested in October 1998 in NASA’s Deep Space 1, and are used in ion engines propelling planetary probes through distances in outer space. Moreover, while ballistic missiles had some form of limited radio guidance, it was impossible to guide them directly to the desired target. So-called ‘smart-bombs’ are made ‘smart’ by the rare earth elements used in their guidance systems.

It is the very precision of modern rocket weapon platforms that is generating a new kind of geopolitical power. Israel’s Iron Dome missile defense system is a recent and fresh example. The system has been so effective at destroying incoming Fajr and Qassam rockets from Gaza in the recent confrontation between Israel and Hamas that it has directly contributed to an official ceasefire. Iron Dome blocked most of Hamas’s rockets aimed at Israeli targets, minimizing casualties and denying Hamas any victories to present before its constituents, obliterating any political or military advantages that Hamas might have gained otherwise. In 2006, when Iron Dome was not available, Hezbollah was able to score some victories and build support during a one month long war with Israel. Hezbollah was able to translate the military points into political strength, emerging as the dominant political force in the country.

Hamas and other groups in Gaza have presumably tried to achieve the same results; however the Iron Dome has blocked their strategy, forcing their hand into a ceasefire and making it less necessary – from Israel’s perspective – to launch a full scale ground invasion in Gaza during a very delicate period in the Arab World, undergoing profound political changes and not necessarily democratic ones. Iron Dome has also emboldened Israel vis-à-vis a possible confrontation with Iran, showing that Israel could be capable of defending itself against multiple rocket attacks from Hamas and Hezbollah, should they intervene in conjunction with an – highly improbable – Iranian attack. The Iron Dome system relies on complex guidance and detection systems managed by computers, featuring a variety of rare earths. The Iron Dome rocket defense system, more successful than the Patriot system (designed more than twenty years earlier with less effective systems and slower computers) has reduced the ability of non state players, rogue elements and random terrorists to carry out effective attacks against populated areas, buttressing the role of more diplomatic and political strategies in conflict resolution.

Beware Rogue Pricing In REMs Market

Some firms operating in the alternative assets market are being accused of ‘rogue pricing’ in Rare Earth Metals (REMs), selling kilo bags of REMs at hugely inflated prices as an ‘investment’ to hundreds of retail buyers.

One such firm, operating out of rented offices in Canary Wharf, is handing out commissions of 60% and more on any monies their sales desks persuade out of investors. The firm – London Metal Group – can afford to be generous to its staff, as it is currently offering a kilo of samarium at over £190, when the FOB wholesale price out of China is less than £25 a kilo. LMG today is also offering cerium at over £102 a kilo, when the latest China wholesale price puts it at less than £14 a kilo. LMG’s prices are displayed clearly on its website.

Salesmen for the firm are telling investors (if any of them notice) that the price differential is due to add-on costs of transport, storage and wholesale market pricing, but most brokers in fact are able to obtain REMs at sizeable discounts to the prices quoted by Metal Pages, so the true differential between LMG’s prices to investors and the price paid for metals is likely to be very much bigger. As the brokers also fail to explain how they can give away 60% of investors’ money in commissions, then investors need to steer clear – at least 70% of your money could be going straight into a broker’s pocket, so that any ‘investment’ potential for the future is already wiped out.

Apart from the enormous price gap between the latest market prices quoted on Metal Pages and the LMG offers, gossip amongst traders in the REMs market also raises concerns about verification and security of the metals being sold to retail investors by LMG. The usual slick sales operation is telling ‘punters’ that their kilos of everything from cerium to samarium are safely tucked away in secure vaults in places such as Switzerland, but one of LMG’s ‘suppliers’ is a Seychelles-based company on which little material information exists, so that the quality and security of the metals is far from guaranteed.

Furthermore, gossip in the City suggests that the people behind these companies have been involved in previous scam trades and already face charges from the SFO – with some of them expected back in court in January as part of the ongoing ‘Operation Steamroller’ case. Meanwhile, traders are openly saying in the coffee bars around Canary Wharf that those who were scamming in the dud shares and carbon credits markets are now active in REMs.

Any scandal in the metals market – where the FSA does not have jurisdiction, and which can only be dealt with initially by the police or DTI – will come at a bad time for those firms trying to operate legitimately in the REMs market, and who are currently trying to get REM investments accepted for SIPP holdings. A scandal in rare earth metals will knock back those attempts, and hurt more ethical broking firms.

As we point out in our overview of REMs, “Beyond equity or fund based investments, involvement in the REM market is difficult for the private investor, and any ‘alternative’ offerings in this area need to be treated with real caution, if not scepticism. It is a difficult and complex area of precious metals because of the scientific and end-user complexity, the relatively opaque pricing, and changing variables of supply and demand”.

That’s not to say there aren’t solid offers out there for retail investors – just that LMG probably isn’t one of them.

Luisa Moreno: Is It Time to Call a Bottom in Rare Earth Metals Markets?

http://www.theaureport.com/pub/na/14473?utm_source=delivra&utm_medium=email&utm_campaign=streetwise-reports%2010/02/2012%2012:47:03

TICKERS: AVL; AVARF, CCE; D7H; CMRZF, FRO, GWG; GWMGF, LYC, MAT; MRHEF, MCP, MON, NRE, ORT; EORBF, QRM, RES; REE, TSM; TAS; TASXF; T61, UCU; UURAF

Source: Brian Sylvester of The Critical Metals Report (10/2/12)
The worst is over, postulates Luisa Moreno. But is modest appreciation in rare earth stocks a symptom of across-the-board improvement in equities, or have fundamentals in the space changed for the better? To tackle these questions, the Euro Pacific Canada analyst gets elbow-deep in metallurgical data. In this exclusive interview with The Critical Metals Report, Moreno lends her razor-sharp analysis to determine the frontrunners as metals prices stabilize.

Companies Mentioned : Avalon Rare Metals Inc. : Commerce Resources Corp. : Frontier Rare Earths Ltd. : Great Western Minerals Group Ltd. : Lynas Corp. : Matamec Explorations Inc. : Molycorp Inc. : Montero Mining and Exploration Ltd. : Namibia Rare Earths Inc. : Orbite Aluminae Inc. : Quest Rare Minerals Ltd. : Rare Element Resources Ltd. : Tasman Metals Ltd. : Ucore Rare Metals Inc.
Related Companies
• : DNI Metals Inc.
• : Energy Fuels Inc.
• : Gold Canyon Resources Inc.
• : IBC Advanced Alloys Corp.
• : Medallion Resources Ltd.
• : Stans Energy Corp.

The Critical Metals Report: Luisa, the share prices of a number of leading companies in the rare earth elements (REEs) space have started to trend upward again. Where is the sector headed in 2013?
Luisa Moreno: Brian, it is likely that we have seen a bottom for these stocks. I'm not sure that it necessarily has to do with developments in the REE space, however. It is much broader than that. Overall, there is somewhat better performance in the equities market, including the commodities and REEs. However, I believe that REE prices will continue to go down, which is a positive event because some end users had to find less efficient alternatives when prices were very high.
Recent news out of China indicated that the price of didymium, which is praseodymium and neodymium together, is trending lower. The light rare earth elements (LREEs) are especially likely to fall flatter as Lynas Corp. (LYC:ASX) and Molycorp Inc. (MCP:NYSE) come into production. And as LREEs continue to fall, prices for heavy rare earth elements (HREEs) will likely stabilize. That will be an important development for junior companies in this space. They will have a much clearer idea of the economics of the projects.

TCMR: What's Euro Pacific's investment thesis when it comes to these companies?
LM: Euro Pacific has a great deal of focus on strategic metals. We believe that they are and will continue to be important. Because REE prices were so high last year, some end users were forced to find less efficient alternatives, but there are many avid applications where the price of the elements is not as important and substitutes are very hard to find. The end users are not going anywhere, and neither is the REE story. Going forward, it will be important to have sustainable supplies of these elements.

TCMR: You recently produced a report titled "Who's the Heaviest?," where you try to clear up some of the misconceptions about Molycorp and its ability to process heavy rare earths (HREEs) at Mountain Pass. Can you share your bullet points with our readers?
LM: There is not a significant amount of HREEs at Mountain Pass. It does have HREEs, because rare earths occur all together, so when you find LREEs, you'll find the HREEs as well, and vice versa. The proportions in which they occur can vary from location to location, however.
Molycorp has a high-grade deposit. Proven reserves' grade is 8.5% TREO, which is significantly high compared to others. Most of that is LREEs, however. It has a very small grade and percentage of HREEs, and that's why some people in the REEs space were very surprised when they heard Molycorp was planning to separate it.
It is able to separate samarium, europium, gadolinium (SEG) and all the HREEs from its top-four elements, which are lanthanum, cerium, praseodymium and neodymium. It ends up with a HREE concentrate, which is also known as the SEG stream. This SEG stream usually comes from light deposits because it has a very small percentage of the heavies, and it is not economic for them to focus on that small percentage of elements.
Molycorp is planning to produce 19,500 tons (t)/year, but it's only going to produce a SEG stream that is 254 t. Most of that is samarium. It's about 1.3% of everything that it's producing.

TCMR: How will falling LREE prices affect Molycorp?
LM: Molycorp has a mine-to-magnet strategy, meaning it wants to vertically integrate and potentially use everything it produces to transform it into metal, alloys and, ultimately magnets and other engineering products. If it is successful in allocating internally all or most of its mine production, it probably is not going to be affected that much. But I believe it is not yet there. To the extent that it does not fully consume all of its production, it will be hit by the fall in prices.

TCMR: Let's get into the deposits a little bit. Critical metals expert Jack Lifton recently told The Critical Metals Report that many investors do not understand that 50% of the concentration at the average REE deposit is not worth anything. The composition of the ore matters more than the grade. Would you agree?
LM: Yes I agree. Molycorp, for instance, has all the light and heavy elements, but the heavy elements, including samarium, are only 1.3% of the yield. Jack was probably trying to explain that it is important to not just look at the grade. A company may have a very high grade, but if more than 50% of what it's selling will end up being priced at, say, $10/kilogram (kg), how material is it if only a tiny portion of the output is worth $1,000/kg or higher? Project economics are highly affected by the composition of the ore.
In my report, I introduced a table (below) that shows the potential production per ton of total rare earths produced for a number of companies. Because the rare earths are all recovered at the same time, it is not the grade but ultimately the average proportion of each element that determines how much of each element is produced per ton of output.

TCMR: If half the material at an average REE deposit is not worth much, does that make it difficult to calculate a project's net present value (NPV)?
LM: It's definitely more complex than modeling a simple gold project, as various products have to be taken into account. Analysts usually break down a deposit based on a company's rare earths distribution. We want to know how much of each element the company could extract, and we calculate the total potential production per element. Most of us actually tend to assume that some of the elements that occur in very small percentages are not separated. We give zero value to those, which are usually erbium, thulium, holmium, ytterbium and lutetium. When we do an NPV, we're basically forecasting the production and prices for several elements, assuming that several elements are recovered and each will have its own price and its own volume. Determining the NPV is a complex process, and the fact that half the ore or more may have low value, is indeed taken into account in our calculations. Also important are the recovery rates, production costs and capex, which are also included in our forecasts.

TCMR: Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) recently announced that it is able to take uranium and thorium out of its processed ore at its mine in Alaska. Is that meaningful to investors?
LM: It is very meaningful. Most projects, if not all, will have concentrations of uranium and thorium that they will have to deal with. They need to find a safe way of extracting the uranium and thorium, storing it and disposing of it. It's good that Ucore is talking about it and educating investors about the amount of uranium and thorium it has in its deposit and how it can be extracted. And the company is taking it into account as it develops its preliminary economic assessment (PEA) report and analysis. Hopefully, we will better understand what the costs are for the handling and storage of these elements as Ucore completes its economic study. Depending on how you look at which are the heaviest or which are the most valuable, they all rank differently, but Ucore's Bokan is well positioned. It has the second-highest grade for dysprosium and a favorable HREE distribution, according to my analysis.

TCMR: Ucore has also announced that it has had success separating these elements with a type of processing technology called solid-phase extraction. Some scale tests have been done so far. Tell us about that.
LM: Ucore is working with a group from Stanford University, which has technology that was mainly used in biotechnology applications. Its nanomembranes are able to filter some elements and let others go. It gets rid of some of the impurities, like iron, uranium and thorium, in two or three steps. In the following step, they change the chemistry of the membrane and it's able to recover the REEs. It seems that it actually can go through several interactions and recover individual elements and refine them. We don't know the economics at this stage, but it's unique. It's very exciting for Ucore. We think it is the only REE group trying this, and it has observed very interesting results. As Ucore puts together the PEA, we will definitely learn more about it.

TCMR: Could other companies that are having some difficulty with their metallurgy be able to mimic what Ucore is doing?
LM: Hopefully, yes. If Ucore is successful, others should be able to do it as well. It could be a positive development in the REE space across the board.

TCMR: Of the short number of HREE-weighted deposits that you chose, you say Namibia Rare Earths Inc. (NRE:TSX) is the heaviest, followed by Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.MKT; TASXF:OTCPK; T61:FSE) and Quest Rare Minerals Ltd. (QRM:TSX; QRM:NYSE.MKT), Ucore, Matamec Explorations Inc. (MAT:TSX.V; MRHEF:OTCQX) and Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX). Can you expand on your system of evaluation?
LM: It is actually fairly simple. We define heavy deposits as those that have a higher percentage of HREEs relative to the total elements. It is important to understand that REEs occur together and are recovered and first concentrated all together. It is not possible to produce a mineral concentrate rich in only one rare earth element. Furthermore, rare earths are first recovered as a mixed rare earth chloride, or oxide concentrate, and only after are they individually extracted. Thus, companies that could produce a mixed rare earth concentrate rich in HREEs would be able to produce more heavy rare earths per ton of output. And those are the ones we consider the "heaviest."
The ranking considers europium all the way to lutetium and yttrium but does not take into account recovery rates, which are actually a very important factor in project economics.
If you look at one of the tables included in the report, Great Western Minerals Group Ltd. (GWG:TSX.V; GWMGF:OTCQX) has a total grade of 18.74%. But the cerium grade alone is 8.5%, lanthanum is 3.96% and it has only about 8% HREO/TREO. Thus, although Great Western has a very high-grade deposit, it won't be able to produce more heavies per ton than, for instance, Tasman or Quest, which have total grades of less than 1%.



One company that actually gives a good description of all the grades is Lynas, which has a total grade of 7.96%—with 3.62% of cerium alone. Its dysprosium grade is 0.038%. That is very similar to Quest, which has 0.034%. Quest's total grade is only 0.93%.
An important point is that if you look at the heavy grades, they are actually very comparable across companies. At the bottom, Molycorp's grade for the heavies is the smallest, at 0.03%. Although the total grade is very high, the total grade for the heavies is 0.03%, compared with Tasman Metals, which is much higher at 0.29%. As I pointed out, Tasman's rare earth distribution is considerably more favorable toward the most critical and heavy elements.

TCMR: Rare Element Resources Ltd. (RES:TSX; REE:NYSE.MKT) has a large secondary REE deposit near its flagship Bear Lodge property in Wyoming, which has the highest concentration of europium and the largest overall reserve of dysprosium in the continental U.S. What is Rare Element Resources' plan for that deposit?
LM: The company is committed to explore and potentially develop this deposit so it can bring more value to its REE assets. My understanding from my conversations with management is that it will continue working on the various deposits in due time. The Bull Hill deposit on the Bear Lodge property is its main focus. However, it is drilling the other deposits at Bear Lodge to determine their value.

TCMR: What's the approximate timeline for production?
LM: Based on the work Rare Element has been doing at Bull Hill, it is targeting 2015. It is one of the most developed projects. I visited its pilot plant. It completed a prefeasibility study and is progressing toward a definitive feasibility study. It is planning to complete that by the summer of 2013. Once it completes the bankable feasibility study, Rare Element should be able to be in good shape to start attracting end users and determine its path to production.

TCMR: Any issues with metallurgy there?
LM: The deposit is not identical to Molycorp, but it has good grades and is rich in bastnasite as well. Rare Element has been able to produce a concentrate in its pilot plant, and this concentrate material should be sellable in China. Unfortunately, most of the separation facilities are still in Asia. Those outside China might not have the capacity to absorb additional feedstock concentrate. It could be difficult to allocate a concentrate material out of Wyoming, but the company may have plans to eventually separate individual elements. Having said that, it could potentially sell its SEG stream to Molycorp as well, which is far richer in the critical rare earths elements.

TCMR: Wyoming is not a great distance from Mountain Pass.
LM: It's definitely closer than China, that's for sure. It would make total sense for Molycorp and Rare Element Resources to work together. Rare Element Resources has far better rare earths distribution for the production of, for instance, europium and dysprosium than Molycorp has, so that could be potentially a good idea for them to come together and build an extended separation facility. That will be really interesting to see.

TCMR: Let's talk about Orbite Aluminae Inc. (ORT:TSX; EORBF:OTXQX). It is building a solvent extraction and ion-exchange combination plant as part of a system to produce high-purity alumina to be used in electronics. The plant and process should be finished by the end of the year. Orbite says it's willing to let other companies process their ore there. What do you make of that move?
LM: Orbite has said that it has filed a patent for that process and could help other REE companies that might be facing issues with chemical cracking. It might be very successful in processing it, making a concentrate and then separating it using solvent extraction. My question concerns the economics. It is true that some elements carry higher prices than alumina, such as dysprosium, which is now selling for about $1,200/kg, which is $1.2 million (M)/t compared to alumina, which sells for $320/t. What I am not sure of is if it will be economic to use the Orbite rare earth process for chemical cracking of REE ore as a stand-alone REE plant. Given that most PEAs indicate capital costs of $200–900M, the Orbite process could well be a good alternative. I don't know yet, but it will be interesting to analyze.
But to answer your questions—yes, I think Orbite could introduce at the front end of its process higher-grade ore to boost its rare earths output. Transporting the ore, or mineral concentrate, has to be economically viable, though.

TCMR: When will Orbite begin processing its own REEs?
LM: It should be able to at least produce a byproduct concentrate once its high-purity alumina plant comes on-line in Q1/13.
Higher rare earth production is expected however, when the larger-scale, smelter-grade alumina (SGA) plant is built. In the meanwhile, we should be able to visit a fully integrated working plant with Orbite's disruptive technology in less than four months. These will significantly derisk the full-scale SGA plant construction. At Cap-Chat, where Orbite is building its HPA plant, the intermediate, lower-grade material will be produced in a smaller-scale SGA plant with the major acid regeneration systems. This SGA co-plant is similar to the larger-scale SGA plant that is expected to be commissioned in 2014.
Orbite doesn't have a solvent extraction plant right now. There's a pilot plant in Europe that can refine individual rare earths, I think. Orbite could potentially send REE concentrate there and produce small amounts of refined REOs. Orbite will likely build the first separation facility in North America with the capability of refining HREEs, when the first larger SGA plant is built.

TCMR: What kind of advantage does Orbite have in being the only high-purity alumina producer in North America?
LM: There would certainly be a geographic advantage as most high-purity alumina comes from China and Japan. Apparently, Orbite does have a potential cost advantage, so it should be able to come into the market with competitive prices. It seems to be able to control a number of important characteristics, such as granule sizes and distribution as well as purity, which indicates that it should be able to create physical consistency in its products. It seems that the lack of product consistency has been an issue for some of the end users of high-purity alumina in North America who currently get these products from China.

TCMR: Do you expect to see a round of consolidation in the rare earth industry before everything picks up entirely across the board?
LM: I think we may see some consolidation. There are a number of consolidation candidates in Quebec. Commerce Resources Corp. (CCE:TSX.V; D7H:FSE; CMRZF:OTCQX) has a very large deposit and favorable distribution with a good percentage of the most critical elements. Quest Rare Elements and Matamec, which now has a deal with Toyota Tsusho Corp. (TYHOF:OTC; 8015:JP), also look promising. With Orbite building a solvent extraction plant, Innovation Metals Corp. (private) also wants to build a separation plant there. Maybe we will see some consolidation or collaboration of some sort between these Quebec companies.
In South Africa, there is Great Western as well as Frontier Rare Earths Ltd. (FRO:TSX). Perhaps there will be a collaboration there of some sort. Frontier has a very large deposit, which could potentially complement Great Western's assets. I'm not sure about the relationship between the companies, but geographically they're not far from each other. Also in Africa, there's Montero Mining and Exploration Ltd. (MON:TSX.V) and Namibia Rare Earths. There could be an interesting synergy there for some of these companies with African assets.

TCMR: Thank you for sharing your expertise with our readers.
LM: It's been a pleasure.
Luisa Moreno is a mining and metals analyst. She covers industry metals with a major focus on technology and energy metal companies. She has been a guest speaker on television and at international conferences. Luisa has published reports on rare earths and other critical metals and has been quoted in newspapers and industry blogs. She holds a bachelor's and master's in physics engineering as well as a PhD in materials and mechanics from Imperial College, London.
Want to read more exclusive Critical Metals Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators and learn more about critical metals companies, visit our Critical Metals Report page.

DISCLOSURE:
1) Brian Sylvester of The Critical Metals Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in this article are sponsors of The Critical Metals Report: Commerce Resources Corp., Frontier Rare Earths Ltd., Namibia Rare Earths Inc., Rare Element Resources, Tasman Metals Ltd., Ucore Rare Metals Inc., Quest Rare Minerals Ltd. and Orbite Aluminae Inc. Interviews are edited for clarity.
3) Luisa Moreno: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview.

The Astounding Rise of Western Rare Earth Extraction: Jack Lifton


http://www.businessinsider.com/the-astounding-rise-of-western-rare-earth-extraction-jack-lifton-2012-9

The Critical Metals Report: Jack, you have a chart listing 52 advanced rare earths projects. But in your last interview, you said that only five of the new HREE producers could be in production in the next three or four years, processing often being a significant hurdle. What makes HREE processing so difficult?

Jack Lifton: The major difficulty is separation costs for the individual elements. Because HREEs constitute such a small proportion of the rare earth element (REE) distribution in almost any deposit, companies are challenged with the task of separating all of the rare earths from each other to get any one of them in a useful form that can be sold to end users. In any REE deposit, half of it is typically made up of the REE cerium, which carries the least value of the so-called light rare earths (LREEs) because it trends to oversupply, but companies have to remove it anyway, which is an expensive process. On the other hand, dysprosium, a valuable, in-demand element, rarely makes up even 5% of a deposit. What happens in the La-La Land of the markets is that many investors do not understand that 50% of the concentration at your average rare earth deposit is not worth anything. They fail to realize that the composition of the ore matters more than the grade.

A hard rock rare earth ore with significant heavy rare earth content, which is now only found in Sweden, Norway, Finland, Canada and Brazil, first has to be concentrated mechanically, often by density to filter out the denser minerals. Some processes use gravity so the good stuff sinks to the bottom of a container. Flotation processes use chemical tricks so that the lighter materials float to the surface, where they can be skimmed, leaving the heavier stuff. These are well-known processes, but even if you are only interested in the heavy rare earth content, for example, you still must remove as much as 99% of the mass of the deposit to get to the less than 1% you wish to process chemically.

Let's say, in an ideal world, the mechanical concentration processes work. Now, you have the problem of extracting rare earth elements as ions out of those minerals that you've already separated. This is a chemical process. The mining industry has used simple chemistry for this for a long time, and it involves very widely available materials like sulfuric and hydrochloric acid. But what do you do if your mineral does not react to those commonly available solvents? You can always find an acid, a base or a combination of materials that will extract your material, but it's not necessarily economical. It can't be something exotic that's made in a laboratory or something that isn't available in the center of Mozambique, or wherever your mine is. You have to be practical.

Now, let's say you have completed step two and extracted a material. Let's say you even found a way to do it cheaply; maybe you can even recycle the acid. At this point, you have to look at how much you can extract through your chosen method. If you can only extract 10%, it's probably not worth it because even naturally concentrated ores are rather low grade. You have to work out a system to get the maximum yield. A good yield would be 70?90% of all the metallic ions in the ore body. Now you have to leave the laboratory and employ a full-scale leaching process. This will produce, finally, an ionic form of the metallic ions that you want. This mixture of every ion in the ore is called the process leach solution, or the PLS.

But it's still not over. Keep in mind that you have to separate not only all the rare earths from each other, but anything else that came along for the ride. With rare earths, that almost always includes iron, uranium or thorium. The problem is that uranium and thorium are bad actors. Thorium is genuinely the most radioactive element found in nature. Uranium is not as radioactive in nature as thorium is, but it too must be properly disposed of in a safe way. It can't just be removed and tossed aside.

TCMR: How do processors handle thorium and uranium safely?

JL: Traditionally, an operation like Mountain Pass would extract the thorium early on in the process from the PLS. It would extract thorium and LREEs so that they come out together, and then separate the LREEs from the thorium and/or uranium. When the thorium is finally isolated, then it is distributed in the process residue. This involves lowering the concentration as much as possible by dilution and producing a cement out of the thorium-laced mixture. This cement can be buried or put into pits. But when an ore has a lot of this material in it, even if there is a legal way to dispose of it, handling it is dangerous. Furthermore, miners need permits to handle radioactive materials and they need to prove that their process of extracting it, separating it and mobilizing it all meet the standards. This is a huge expense. But you can't even get to processing rare earth PLS before you handle the thorium/uranium problem.

In Malaysia, Lynas Corp. (LYC:ASX) separates the thorium early in the separation preprocessing and distributes it in the overall residue. At that point, the company processes that residue into a form where the thorium is not water soluble. Then it will legally dispose of it in assigned pits or underground. The company has been under vigorous scrutiny from the Malaysian government for some time now and finally has its temporary operating permits.

Twelve years ago, Mitsubishi left Malaysia with a $100 million ($100M) mess the government had to clean it up. So when Lynas came along, Malaysian leadership knew more than any other government in the world about this problem. It put the company through an extremely rigorous vetting and the Lynas plant has passed that test?it's got its temporary operating permit. I visited that plant as a guest at the behest of the Malaysian government in May and went through it completely with Lynas management and all questions were answered. In our group was a representative from Germany's Karlsruhe Institute of Technology, and he is the man in charge of decommissioning Germany's nuclear plants. He was there to look at radiation safety. And he remarked to me, "I would move my wife and young children to live in that plant because the background radiation is lower than where I live in Germany."

TCMR: Wow. So why did Lynas choose Malaysia?

JL: That's a very good question. It's quite a ways from Australia where the ore is mined. It comes down to processing costs. Just the amount of fresh water you need in this plant is enormous. I believe Lynas uses 50 cubic meters a minute. When you're running a plant 24 hours a day, it's quite a bit. The water wasn't available in Perth, Australia, the company's first choice. Then there are energy costs to consider. The cost of electric power in Malaysia is less than half of what it is in Australia. Lynas also tried to do something in China about three years ago, but it didn't work out. So the company settled on Malaysia.

TCMR: Will the Malaysian plant process ore from only Lynas or from other companies as well?

JL: No, only Lynas and only LREEs. And Lynas does not plan to produce anything but lanthanum, cerium, praseodymium and neodymium carbonates?plus customer-specified blends of those materials.

TCMR: Let's go back to dysprosium, the in-demand, heavy rare earth element (HREE) you call "the problem metal." Who is going to be able to process dysprosium?

JL: I think that the European producer will be Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.A; TASXF:OTCPK; T61:FSE) because it will be able to get its material processed by a specialized strategic ally. I really can't say any more than that because of non-disclosure agreements. Let's say I'm extremely optimistic about Tasman being a major producer of dysprosium by 2016 or '17. And I mean hundreds of tons (100t) a year, perhaps 350t per year.

I am also very optimistic about Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) in Alaska being able to produce more than 100t of dysprosium a year in the same time period, maybe sooner. Note that Ucore recently announced that it is already able to take the uranium and thorium out of its material at the mine. This is an extremely significant announcement. I am also looking at Rare Element Resources Ltd. (RES:TSX; REE:NYSE.A). It has a large second rare earth deposit near its in-development Bear Lodge property in Wyoming, which has the highest concentration of europium and the largest overall reserve of dysprosium in the Lower 48. I expect RER to be a producer of significant quantities of dysprosium by the middle of the second half of this decade.

Orbite Aluminae Inc. (ORT:TSX; EORBF:OTXQX) in Quebec is constructing a solvent-extraction, ion-exchange (SX/IEX) combination plant in the Gaspé Peninsula of Quebec as an ancillary part of a system to produce high-purity alumina for the electronics industry. The SX/IEX plant and the process were engineered by a German company, and should be finished by Dec. 31 of this year. The company will then have the system capacity to produce up to 1,000 tons of high-purity alumina per year, and it can use the ancillary SX/IEX plant to process the byproducts produced during the processing of its ore to make 99.99% alumina. These byproducts include the full range of rare earths. Orbite will be able to separate all of them from each other and purify them. To prove that, the pilot plant took byproduct containing residues from Orbite's alumina refining operations and produced 200 grams each of 99.99% dysprosium oxide, terbium oxide, erbium oxide, yttrium and cerium. It was amazing, because these are just byproducts of the process Orbite developed for its high-purity alumina. Orbite's ore body contains around 500 parts to 1,000 parts per million of rare earths and associated critical materials like yttrium, gallium, scandium and various rare metals. Orbite should be able to produce tens of tons of dysprosium, terbium and the like. It's all laid out in Orbite's website, which I urge people to read carefully.

I went to Orbite's company headquarters in Quebec about a month ago and the management said to me, "Our SX/IEX plant will be finished in December, but we're not ready to run it at full capacity from our principal ore body for maybe a year or more." They said, "Can you suggest to us anybody who may have a process leach solution that we could run for them to separate rare earths for them at this purity, 99.99%?" And they explained that even at the beginning, this plant will be able to handle quite a bit of capacity. Management plans to ramp up the main plant from one ton a day (1t/d) of high-purity alumina to 3t/d in a year and a half. But they have capacity to do 3t/d as soon as the plant opens. With the open SX/IEX capacity, the company thinks it could use its facilities to process rare earths for outsiders. And quite frankly, although I'm not at liberty to name names here, quite a few people I've talked to have contacted them. Many companies have the ore, but not the capital it takes to build a large processing plant. When this plant is finished, it will be able to process and purify a total spectrum of rare earths.

TCMR: What other full-spectrum processing options are out there for miners?

JL: When it comes to solvent extraction technology, Americans pay too much attention to America. They're too busy looking in the mirror. You've got to look out the window. There's been a solvent extraction plant for rare earths as byproducts built for Alkane Resources Ltd. (ALK:ASX) in Australia. In India, the government announced that it's building a 10,000t-capacity plant to process Indian monazite from mineral sands ore, the same type of rare earth ore that's found in harder formations in Australia. India's also going to build a separation plant and produce individual rare earths from that. But it's not saying that this is for the world market. Chinese costs are going up by the day. Chinese people are fed up with the visibly polluted air and rivers of all sorts of odd colors. The government is being careful not to allow anymore of this happen. Therefore, the cost of environmental remediation and management is going very high in China. As you know, Chinese industry has slowed down because it's restructuring. And in the middle of the restructuring, China's been hit by the world recession, which means demand is decreasing. However, India is like China 10 years ago, which means it is home to thousands of engineering graduates with no jobs. When you want to staff a specialized company, for example, to process rare earths, you can find skilled people in India and they're not horribly expensive. Labor is cheaper overall there than in China today. I think India is going to get into the rare earth processing business and the fluid-cracking catalyst business. I think the Indians are planning to use their rare earths in India to build a domestic competitive industry. There are private as well as state-owned rare earth process technology companies in India.

One more thing?the Chinese government does not look favorably upon the export of Chinese technology, such as rare earth separation technology. The Western companies like Great Western Minerals Group Ltd. (GWG:TSX.V; GWMGF:OTCQX) that have been working with Chinese separation companies have a long-established relationship. They knew the steps you have to take to get a Chinese export license for technology and they worked very hard on that. I suspect that anybody else that wants to get the latest Chinese technology is not going to be very successful.

TCMR: When will Great Western be up and running?

JL: Great Western should be up and running by the end of next year. Its process will produce up to 34t a year of dysprosium. But this supply is already dedicated to existing customer orders for magnet material. The company won't be putting any of that on the market. And Lynas, by the way, has no such intention either with its light rare earths and mixtures of them. I was told that they have been presold on long-term contracts.

TCMR: What is the path to building enough high-quality separation projects to process the ore coming out of the mines on your list to the purity that it would be valuable?

JL: Well, the problem is that experiments in processing technology are very expensive. Governments can afford things like that, but private capital can't do it. There's so much work involved in building these huge solvent extraction plants, which are really just giant-sized laboratories. Typically, you'll have 15?30 stages for the LREE separation plant. And if you want to process all of the 14 rare earths plus yttrium and scandium, you would need up to 88 stages. If processing 30 stages requires an $800M investment?well, do the math. Regardless of the volume of each individual REE element you're producing, you have to have just as much process control for each stage. And with HREEs, available volumes are so low that you're going to have to accumulate material until you have enough to run the plant economically.

In addition to these technical and financial questions, there are political questions. The U.S. EPA just issued a study on rare earth processing and recycling. It shows seven or eight technologies for separating rare earths. Great. But here's the problem? the two large LREE plants we know of (Molycorp Inc.'s (MCP:NYSE) and Lynas' facilities) were each huge investments, close to a billion dollars. Orbite's plant is $32M, but, of course, it doesn't have the same capacity as Lynas' and Molycorp's plants. I think many rare earth projects are way too big. I'm an advocate of what I call "right-sizing." I think Orbite has right-sized its alumina and rare earth byproduct projects perfectly. And the company used investor money; it didn't go deep in debt to build those plants. As an investor or stakeholder, I would want to know when I'm going to get my money back.

The problem I have with spending a billion dollars is I don't think you can get it back. I really wish Lynas all the luck in the world. And I know Lynas has in fact some serious HREE formations at Mount Weld at its Duncan deposit. That's not the one it's mining. That's not the one it's refining in Malaysia. In the next year, I think you're going to see the announcement of some big breakthroughs in some other processing technologies. I sincerely believe that solid-phase extraction, which is mentioned by the EPA's report, is going to make an impact on rare earths processing globally, especially where a commitment to a large-scale solvent extraction plant has not yet been made.

TCMR: Where is this new technology coming from?

JL: America. The solid-phase extraction technology that Ucore is using to separate out the radioactive nuisance elements at the mine is coming from the United States. Typically, if you have a discussion about solid-phase extraction with informed people, they will tell you it's beautiful in the laboratory but it doesn't scale up. Well, I don't doubt that was true when they tried it more than a dozen years ago. But things change. Chemical process engineering is a living, organic process. And the fact is that until 2007, the only people in the world working on improving solvent extraction separation technology were the Chinese and the Indians, as well as the Western companies based in China, like France's Rhodia Group (RHA:NYSE) and Neo Materials technology (now Molycorp Canada). When interest ramped up in separating rare earths and purifying them in the last few years, quite a few serious laboratories looked into it. Rhodia has since reactivated its shut-down solvent extraction plant in LaRochelle, France. Germany has a private pilot solvent extraction plant I will visit next month?it's the one that developed and verified the SX/IEX process now being installed by Orbite in Quebec. The Italian state agency ENEA is working on solvent extraction. In Japan, I know for a fact there are companies that have solvent-extraction plants and they are keeping up with the newest technology. Orbite's plant in Quebec is state-of-the art solvent extraction and represents significant improvements in solvent-extraction capability. There's a private company in the United States, Intellimet, that has really made some major improvements in solid-phase extraction. I expect solid-phase extraction of HREEs will be underway at full scale in the United States no later than 16 months from now. I am not at liberty to say where, but I think you can figure it out just from what I've said today.

TCMR: That is a wonderful prediction to end our processing conversation. Thank you so much for taking the time to chat with us.

JL: It's my pleasure.

Jack Lifton is an independent consultant and commentator focusing on market fundamentals and future end-use trends of the rare metals. He specializes in sourcing nonferrous strategic metals and due diligence studies of businesses in that space. He has more than 50 years of experience in the global OEM automotive, heavy equipment, electrical and electronic, mining, smelting and refining industries.

Want to read more exclusive Critical Metals Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators and learn more about critical metals companies, visit our Critical Metals Report page.

DISCLOSURE:
1) JT Long of The Critical Metals Report conducted this interview. She personally and/or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in this article are sponsors of The Critical Metals Report: Ucore Rare Metals Inc., Rare Element Resources Ltd. and Tasman Metals Ltd. Interviews are edited for clarity.
3) Jack Lifton: I personally and/or my family own shares of the following companies mentioned in this interview: Great Western Minerals Group. I am a business development, technology, and marketing consultant paid by the following companies mentioned in this interview: Ucore Rare Metals Inc., Tasman Metals Ltd. and Orbite Aluminae Inc. I was not paid by Streetwise Reports for participating in this story.

( Companies Mentioned: ALK:ASX, GWG:TSX.V; GWMGF:OTCQX, LYC:ASX, ORT:TSX; EORBF:OTXQX, RES:TSX; REE:NYSE.A, RHA:NYSE, TSM:TSX.V; TAS:NYSE.A; TASXF:OTCPK; T61:FSE, UCU:TSX.V; UURAF:OTCQX, )

Read more: http://feedproxy.google.com/~r/TheGoldReport-StreetwiseExclusiveFullArticles/~3/f_AnuvMgqRI/14372#ixzz27EeyES39

Three Steps to Rare Earth Mining Success: Alex Knox

http://www.theaureport.com/pub/na/13958?utm_source=delivra&utm_medium=email&utm_campaign=streetwise-reports%2007/24/2012%2012:34:01

Quest Positioned to be Global Heavy Rare Earth Leader

http://www.raremetalblog.com/2012/07/quest-positioned-to-be-long-term-heavy-rare-earth-player.html

Rare Earth Elements in Medicine

http://www.raremetalblog.com/2012/06/rare-earth-elements-in-medicine.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+typepad%2FIBmE+%28RareMetalBlog+%29

Looks like LBSR found REE's at Hay Mountain....

http://ih.advfn.com/p.php?pid=nmona&article=52420737&symbol=LBSR

Rare Earth Juniors Have a Five-Year Window

John Kaiser - 4/24/12)

John Kaiser John Kaiser, editor of Kaiser Research Online, sees 2015–2020 as a critical time for rare earth projects. Any later, he argues, and companies who have not reached production will be out of the game. In this exclusive Critical Metals Report interview, he profiles promising juniors in the space with the "full spectrum" of rare earth deposits and details how end-users like Toyota are leapfrogging the market to secure the elements they need most.

Companies Mentioned: Avalon Rare Metals Inc. - EMC Metals Corp. - Flinders Resources Ltd. - Lynas Corp. - Matamec Explorations Inc. - Molycorp Inc. - Neo Material Technologies - North American Tungsten Corporation Ltd. - Northern Graphite Corporation - Quest Rare Minerals Ltd. - Sojitz Tungsten Resources Inc. - Tasman Metals Ltd. - Woulfe Mining

The Critical Metals Report: John, a recent Brookings Institution report suggested that greater collaboration between U.S. and Chinese companies would alleviate tensions over tightening rare earth markets. Is the proposed merger between the Chinese company Neo Material Technologies (NEM:TSX) and Molycorp Inc. (MCP:NYSE) what the doctor ordered?

John Kaiser: The merger between NEO Material and Molycorp combines NEO's knowledge about producing and fabricating downstream products from rare earths (REEs) and other specialized metals with Molycorp's emergence as a major U.S.-based REE supplier, especially light rare earths (LREEs). Within two years, Molycorp's Mountain Pass project will deliver a substantial portion of global supply. The output from Mountain Pass and Lynas Corp.'s (LYC:ASX) Mt. Weld project will boost global output to 170,000 tons, knocking China off its perch as the 95% dominant supplier to a less overwhelming position of 65%. That will alleviate some of the anxiety underlying what the Brookings Institution calls "mutual strategic distrust" between China and the U.S.

The Brookings paper emphasizes the need for the government to become more accommodating about Chinese ownership of American assets, especially if it involves capital investment. Right now we have a one-way street where western capital invests itself in China, ships back cheap goods to Europe and the United States, and waits for access to the Chinese consumer to open up. Not only would Chinese investment in America put their strategic goals more in harmony, but it might prod American companies to invest some of the trillion dollars they are hoarding because of the uncertainty over how the seemingly opposed destinies of China and America will play out.

TCMR: Toyota has a pending REE deal with Matamec Explorations Inc. (MAT:TSX.V; MRHEF:OTCQX) in Canada. German manufacturers are talking to Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.A; TASXF:OTCPK; T61:FSE) in Sweden. Will deals like this end China's monopoly on REEs, lower their price and encourage more manufacturers to use these elements?

JK: Historically, REE prices have been very low due to China's abundant resources and its ability to produce them very cheaply. China is aware that it could become the world's biggest polluter when its economy eclipses that of the U.S. China is very concerned about making sure it has the raw materials on hand to assure its clean-energy future. The supply restrictions China introduced a couple of years ago were part of a campaign to clean up and consolidate its high-pollution industries. Those restrictions resulted in spectacularly high REE prices for export and substantially higher prices within China. Since July 2011, the drop in demand and China's inability to control smuggling resulted in a pullback in REE prices. To some degree, I think China wants its monopoly to end. China's ambitions go far beyond squeezing a few profits out of a market it controls.

All of this was a wakeup call. Companies all over the world realized that their new technologies can no longer rely on cheap REEs from China. Toyota's deal with Matamec, which is essentially a 100% offtake agreement, is critical to Toyota's plans to continue manufacturing hybrid and electric cars over the coming decades.

What distinguishes projects such as Tasman's Norra Karr, Matamec's Kipawa, Avalon's Nechalacho and Quest Rare Minerals Ltd.'s (QRM:TSX; QRM:NYSE.A) Strange Lake is that these deposits offer the full spectrum of rare earths from lights to heavies. China's natural rare earth abundance is skewed toward LREEs of the sort Molycorp and Lynas are bringing onstream. China's bounty of HREEs are restricted to a group of rapidly depleting low grade clay deposits in southern China. While it is questionable that the world needs any more major light rare earth mines beyond Mountain Pass and Mt. Weld in the near term, bringing on stream heavy rare earth supply is in the interest of everybody, including China.

TCMR: What are China's goals? Is the endgame to have companies move to China?

JK: China's primary goals are to make sure the country does not run out of these critical materials. A secondary goal is to clean up the pollution. As China becomes more of a middle-class society, quality of life becomes a pressing issue. If the Chinese public rallies against pollution, it could become a destabilizing nightmare for the government.

Introducing supply quotas created a situation where end-users outside of China had to consider moving their production capacity there to get materials at a reasonable price. Technology companies have moved to China, creating a serious bone of contention related to the theft of intellectual property.

For the next two to four years, China will be in a position to force the transfer of technology production into China, where it can be co-opted by domestic companies and companies owned in part by the state. These companies would in turn compete with western companies. This is a convenient byproduct of China's long-term strategy.

TCMR: If manufacturers will be able to source materials outside China, will they move out or stay in Asia, where the market is growing?

JK: Companies know that it is wise to have a foothold in Asia, the world's biggest long-term growth market. Companies already there are likely to stay. In the case of NEO Material, I would be very surprised if Molycorp ends up shipping REEs to China to be processed at its facilities, as [Molycorp CEO] Mark Smith suggested in the post-merger conference call. Molycorp's output will first flow to facilities Neo has outside of China, such as those in Thaliand and Germany. Neo currently holds export quotas that are still in the "provisional" category awaiting environmental clearance even though NEO claims to have been exemplary in complying with new regulations. I believe the true value of the NEO/Molycorp merger lies in the possibility that NEO will be able to transfer its know-how outside of China, possibly back into the United States itself. It is interesting that of the 472,000 manufacturing jobs created since 2010 in the United States, 120,600 have come in the sub-sector called "fabricated metal products." I do believe that once the merger has closed, Molycorp will look at acquiring a major deposit outside of China that will give it control over a full spectrum of rare earths. Because NEO is also involved with the fabrication of zirconium metal products, I would expect Molycorp to be interested in Avalon, Quest or Tasman, whose heavy rare earth deposits will also include a zirconium credit.

Allowing Chinese capital to invest in the U.S. would also address the trillions of U.S. dollar reserve assets China holds. We could see a migration of capital into the U.S., tapping into American automation technology and rebuilding the domestic manufacturing base. This evolving trend could put the American economy back on an uptrend.

TCMR: Will the price of oil influence where manufacturing facilities are located?

JK: The cost of moving goods across the Pacific and Atlantic oceans is likely to stay high. However, we may see different pricing for oil in the immediate vicinity of North America. We already see a significant difference between Brent oil and West Texas Intermediate oil. One must also keep in mind the fixed cost of multiple port handling and cargo transfer charges, which become more important as the production cost of Chinese goods destined for export markets rises.

In competitive terms, making your goods in the U.S. in a highly automated manner and shipping it to distribution centers cuts both the cost and the risk of shipping them across the ocean. Chinese companies are already looking at importing automation technology to deal with their rising labor costs, which strikes me as a recipe for domestic trouble. It would make more sense to make this sort of investment in America where three decades of manufacturing job losses have choked off labor opposition to automation.

TCMR: You mentioned Matamec and Tasman. Are those two companies ahead of the pack when it comes to development? What hurdles do they still face?

JK: Molycorp and Lynas Corp. are the two companies in the lead with high-grade LREE projects. Molycorp is marching along very nicely. Lynas is hung up in Malaysia due to political opposition to how the company wants to deal with the radioactive thorium waste from processing REE concentrates. If these two companies come fully onstream, they will glut the market with LREEs, primarily lanthanum and cerium, as well as a fair amount of neodymium, the key REE used in magnets. This will bring free-on-board prices down and may even lower the current domestic spot price in China.

Next come companies with a mix of REEs, which I call full-spectrum deposits. In this group, Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX) is the most advanced. It hopes to have a feasibility report on its Nechalacho project done by the end of 2012 with permits in place by the middle of 2013 to initiate construction.

The other companies with large projects are Quest Rare Minerals, Tasman and Matamec, which have all done preliminary economic assessments (PEAs). Quest has been working on a prefeasibility study for more than a year and expects to have it done in H2 of 2012; Tasman and Matamec are just starting prefeasibility work. However, if Matamec's deal with Toyota goes to the next step, Toyota will define feasibility, which need not be as rigorous as an independent "bankable" feasibility study. If Toyota is satisfied the metallurgy works and the costs are in line with what it would want to pay for rare earth oxides in the market, it could make a production decision for Kipawa much sooner than would be the case for an independent company.

TCMR: Matamec's PEA targets production for Q216. Do you think that is plausible?

JK: I think it is plausible, assuming Toyota is satisfied with the flow sheet. Toyota wants to mine the Kipawa deposit very aggressively. Matamec is confident that over time, it will find additional mineralization and will be able to stretch production beyond the current 11-year forecast.

Remember, Toyota wants a 100% offtake deal. That would make all the REES from Kipawa available to one major manufacturer. The rest of the world will have to look to to Avalon, Quest and Tasman.

TCMR: It looks like Avalon is scheduled to go into production in late 2015. What about Tasman and Quest?

JK: At best, I would expect them to break ground in mid-2016, followed by commercial production in 2017, assuming everything goes smoothly. Although Tasman is a year behind Quest, the location of Norra Karr in southern Sweden close to infrastructure will shorten the development timeline.

TCMR: You mentioned that a lot of REE companies may not survive the next five years. How many will be left when the dust settles?

JK: In 1992 in the junior mining sector, nobody was paying attention to diamonds. Then Lac de Gras was discovered. Within four years, there were 200 diamond exploration companies. Twenty years later, there are six junior companies still in the game. The REE junior space will be similar, but in a shorter timeframe.

The period from 2015 to 2020 is critical for REE production coming onstream, which means if a company's project is not at an advanced stage right now and does not have a full spectrum of REEs—heavy and light—that company is not in the game anymore. It is too late for grassroots exploration for REEs. I regard half a dozen companies as serious contenders. End users must make decisions during the next 12-18 months about which projects they will back financially in order to secure their needs in 2015-2020. This does not mean exploration juniors should give up trying to make new rare earth discoveries. But they must accept that their discoveries will not be considered for production earlier than 2020. Meanwhile, they will have to endure market uncertainty about future rare earth demand. Some observers believe that the current shortages are causing permanent demand destruction that will result in a supply glut in 2015-2020 that renders the current crop of advanced projects future economic failures. Others believe the demand destruction is temporary. Demand will rebound and achieve new heights once it becomes clear that non-Chinese supply is coming on stream.

I belong in the second camp. Toyota's new Prius C line is a hybrid priced below $20,000 whose sales pitch is not its "green status" but rather its fuel efficiency of 46-53 mpg. It is the hottest selling small car in decades. During the next decade, the streets will be ruled by conventional hybrids that use rare earth-based permanent magnets and the nickel-metal-hydride batteries that use the rare earth lanthanum.

So even if many of the rare earth projects do not make it into the 2015-2020 production round, the current REE boom is creating a future inventory for the world to draw on if these various clean technologies do take off and continue to require significant amounts of REEs.

TCMR: Graphite seems to be the newest "it" mineral. What are the most positive projects out there?

JK: China is the dominant producer, with about 65% of the graphite supply. But its best deposits are heading toward depletion. Because of the boom in the price of large-flake graphite prices, a lot of deposits, in Canada for example, are being revisited. Of these projects, you need a large enough flake with minimal impurities. Northern Graphite Corporation (NGC:TSX; NGPHF:OTCQX) has resurrected the Bissett Creek deposit in Ontario. Flinders Resources Ltd. (FDR:TSX.V) has resurrected a project in Sweden. Northern Graphite and Flinders are the most advanced public projects, though a number of advanced and operating private graphite projects are being readied to go public by IPO or reverse takeover.

The rest are grassroots projects or ones where graphite was intersected by past drilling campaigns seeking base metal discoveries. They were never delineated because they were failures. Early-stage graphite projects have better potential for attracting market attention than early-stage rare earth projects because they are simpler to develop and the big market demand is still down the road.

Unlike the REE sector, where each project requires a custom chemical plant, we will probably see a boom in mergers and acquisitions in the graphite space. Graphite projects do not command billion-dollar valuations; their small size and the comparatively low unit cost of graphite limit individual projects to net present value-based valuations below $200 million (M). The long-term supply will have to come from multiple operations, not a handful of world-class mines. Once companies drill their targets and demonstrate deposits of 20–30 million tons of 5–10% of the right sort of graphite, bigger companies will buy them up.

TCMR: When would Northern Graphite reach production?

JK: Northern Graphite hopes to publish a feasibility study in Q212. The permitting process is not complicated, so it could be in production by the end of 2013.

Flinders was in production at one point; this is really a case of refurbishing the mill and putting it back into production.

TCMR: What are the prospects for non-Chinese companies developing tungsten?

JK: A number of smaller operations are attracting attention. Sojitz Tungsten Resources Inc. (2768:JSX) bought out Primary Metals' Panasqueira deposit in Portugal in 2007 and now uses it as a supply for tool-making.

Woulfe Mining (WOF:TSX.V) acquired Sangdong, the historic Korean tungsten deposit. Woulfe just did a deal with International Metalworking, which is controlled by Warren Buffett's empire. International Metalworking invested directly in the mine and will develop a processing plant to upgrade the concentrates to ammonium paratungstate (APT), which is the primary form of tungsten used by manufacturers.

This is another example of end-users not waiting for the market to solve their problem. Instead, they are tracking down the juniors and putting up the capital directly.

North American Tungsten Corporation Ltd. (NTC:TSX) has the Cantung Project in Canada. Its production is on and off and really needs the current tungsten price to be profitable.

I am also watching EMC Metals Corp. (EMC:TSX). Its Springer deposit in Nevada is a mill that needs $30M more to come fully onstream. Ironically, Springer was created in the late 70s by General Electric when China jerked the tungsten price higher. Once the Chinese realized GE could produce its own tungsten, they let the price come down and GE mothballed the mine. Now, EMC would like to bring it back into production as an American tungsten source.

TCMR: Is that viable?

JK: It is if the tungsten price stays above $300/MTU. If the price sinks below $300/MTU, the mine would start to lose money.

For the past year, the price has been parked in the range of $400–450/million tons per unit (MTU) for ammonium paratungstate (APT) tungsten. Over the previous 15–20 years, the high had been $300/MTU, which is looking more like a base price these days. That is the level above which non-Chinese projects are economic to mine.

Incidentally, in 2011 total world tungsten production was valued at $3.7 billion (B), compared to $1B for graphite and roughly the same amount for lithium production.

TCMR: Is developing alternative sources to Chinese critical metal resources a better solution to the supply problem than the World Trade Organization's (WTO) lawsuits? Or should both go forward on parallel tracks?

JK: When dealing with raw materials, it is always wise to have production coming from a variety of geographically distinct locations. Anytime you depend on a single-source supplier, you are setting yourself up for a malicious or accidental supply disruption. The latter could be a catastrophe that shuts down a key mine or a civil insurrection that makes the country incapable of producing anything.

If the WTO were massively successful—in other words, if China were to turn the taps back on—it would still be counterproductive, because China retains the ability to shut down its mines at any point. The WTO's action is more a pressure tactic and is largely irrelevant to reducing supply dependency.

TCMR: If the U.S. economy continues to improve, how will that affect U.S./Chinese relations?

JK: It would help, because part of the tension is due to the trade imbalance. China knows it cannot rely on an export-based economy forever. It needs to develop a domestic economy.

After the crash, China bit the bullet and invested more than $600B in infrastructure development. It was counting on the U.S. to have emerged from the recession by now. Ongoing weakness in the U.S. economy increases the opposition to the import of low-priced Chinese goods.

None of this would be important if the American economy—in particular manufacturing—were growing again. Just as we need to rebalance global sources of raw materials, we need to rebalance manufacturing. Chinese capital investment in U.S. manufacturing capacity expansion would go a long way toward reducing the tension between the two countries.

TCMR: John thanks for talking with us.

John Kaiser, a mining analyst with 25-plus years of experience, produces Kaiser Research Online. After graduating from the University of British Columbia in 1982, he joined Continental Carlisle Douglas as a research assistant. Six years later, he moved to Pacific International Securities as research director, and also became a registered investment adviser. He moved to the U.S. with his family in 1994.

Want to read more exclusive Critical Metals Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators and learn more about critical metals companies, visit our Critical Metals Report page.

DISCLOSURE:
1) JT Long of The Critical Metals Report conducted this interview. She personally and/or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Critical Metals Report: Matamec Explorations Inc., Tasman Metals Ltd., Quest Rare Minerals Ltd. and Northern Graphite Corporation.
3) John Kaiser: I personally and/or my family own shares of the following companies mentioned in this interview: Matamec Explorations Inc., Quest Rare Minerals Ltd., Tasman Metals Ltd., Flinders Resources Ltd., EMC Metals Corp. I personally and/or my family am paid by the following companies mentioned in this interview: None.

Graphite Investment Boom Heats Up

April 24, 2012 @ 3:45 am In Feature Articles,Graphite Articles
By Karan Kumar — Exclusive to Graphite Investing News [1]

Graphite Investment Boom Heats UpGraphite seems to be the new rare earth [2], and investor interest in the mineral, once seen as synonymous with No. 2 pencils, is heating up. Graphite is in short supply, especially large-flake graphite, a must for lithium [3]-ion batteries, fuel cells, and nuclear power. China controls about 80 percent of the world's graphite supply and its intention to curb exports is causing worry. Historic underinvestment in new graphite projects globally has prompted many juniors to step in and fill the gap. Investor interest in a cycle like this will not last for a long time, but for now, the bubble is growing bigger.

“I believe the Graphite cycle is now where Rare Earths were in 2009,” Ben Axler, managing partner and co-founder of Spruce Point Capital Management [4], a New York-based hedge fund, was quoted as saying on Seeking Alpha [5].

Axler, who is long on large-flake graphite company Northern Graphite Corp. [6] (TSXV:NGC [7]), said, “it's entirely possible...NGC's shares can easily double from here to over $6/share.” Northern Graphite shares were trading [8] at $2.41 on Friday morning.

Northern Graphite, which owns 100 percent of the Bisset Creek deposit, said earlier [9] this month that it has made test quantities of spherical graphite from graphite. The spherical graphite has been evaluated in lithium/graphite battery test cells, and the “performance of these cells demonstrated that it meets or exceeds current commercial performance requirements,” the company said.

Siddharth Rajeev, head of research at Vancouver-based Fundamental Research Corp. [10] (FRC), told Graphite Investing News in an interview, “we are most bullish on high-grade, large-flake graphite projects.” He added that applications such as batteries and fuel cells will “require high-grade, large-flake graphite - and a significant portion of the demand is currently filled by synthetic graphite. We believe high-grade, large-flake natural graphite has the potential to take a significant market share from the synthetic graphite market.”

But Rajeev warned that “the recent boom and growing investor interest in the graphite sector have resulted in lot of new graphite companies and/or has prompted existing companies to switch their focus to graphite. Switching focus is not uncommon in the junior resource space. We saw the same trend a few years ago when the rare earth and lithium boom started. Several of those rare earth or lithium companies do not exist anymore. We will see the same in graphite as well. Investors should keep this in mind and look for strong fundamentals and management teams before making an investment decision.”

Nathan Pearson and Rachel Harrison reported for VantageWire [11] that investors looking to invest in shares of graphite juniors need to “focus on projects with near-surface, high-grade, large-flake deposits that are in politically and economically safe areas with sound infrastructure.”

Besides Northern Graphite, other firms making headlines in the graphite space are Focus Metals Inc. [12] (TSXV:FMS [13]), Energizer Resources Inc. [14] (TSX:EGZ [15]), Flinders Resources Ltd. [16] (TSXV:FDR [17]), and Standard Graphite [18] (TSXV:SGH [19]) to name a few.

Focus Metals holds 100 percent ownership of its Lac Knife, Quebec, property [20], which has 16 percent carbon grade medium- and large-flake crystalline graphite, with production expected to begin in 2014. Its shares have risen more than 38 percent so far this year.

Energizer Resources last month [21] confirmed jumbo-flake graphite with more than 90 percent purity at its Green Giant project in Madagascar. Shares of the company have nearly doubled so far this year.

Flinders Resources raised $15 million to advance the Kringel graphite mine in Sweden toward production this month [22]. The Kringel mine [23], with a capacity 13,000 tonnes per year of flake graphite, operated from 1996 to 2001, when production was halted due to falling graphite prices. The company's shares are down more than 23 percent so far this year, but have risen more than 20 percent in the past month.

Standard Graphite controls a 100 percent stake in twelve highly prospective graphite properties within known graphite districts in both Quebec and Ontario. Its shares have risen more than 80 percent so far in 2012.



Securities Disclosure: I, Karan Kumar, hold no direct investment interest in any company mentioned in this article.

Article printed from Graphite Investing News: http://graphiteinvestingnews.com

URL to article: http://graphiteinvestingnews.com/323-323/

URLs in this post:

[1] Graphite Investing News: http://graphiteinvestingnews.com/

[2] rare earth: http://rareearthinvestingnews.com/

[3] lithium: http://lithiuminvestingnews.com/

[4] Spruce Point Capital Management: http://www.sprucepointcap.com/

[5] Seeking Alpha: http://seekingalpha.com/article/489981-the-graphite-investment-boom-is-just-starting

[6] Northern Graphite Corp.: http://www.northerngraphite.com/

[7] NGC: http://www.google.com/finance?q=CVE%3ANGC&hl=en

[8] trading: http://www.google.com/finance?q=PINK%3ANGPHF&hl=en

[9] said earlier: http://www.northerngraphite.com/wp-content/uploads/2010/01/April-2012-SG-final.pdf

[10] Fundamental Research Corp.: http://www.researchfrc.com/index.htm

[11] VantageWire: http://www.vantagewire.ca/articles/continued-expansion-graphite-space-more-canadian-juniors-rapid-expansion-49389

[12] Focus Metals Inc.: http://www.focusmetals.ca/english/

[13] FMS: http://www.google.com/finance?q=CVE%3AFMS

[14] Energizer Resources Inc.: http://graphiteinvestingnews.com/53-graphite-vanadium-madagascar-energizer-resources/

[15] EGZ: http://www.google.com/finance?q=TSE%3AEGZ&hl=en

[16] Flinders Resources Ltd.: http://www.flindersresources.com/s/Home.asp

[17] FDR: http://www.google.com/finance?q=CVE%3AFDR&hl=en

[18] Standard Graphite: http://graphiteinvestingnews.com/292-graphite-mining-canada-quebec-ontario-standard-graphite-corp/

[19] SGH: http://www.google.com/finance?q=CVE%3ASGH

[20] property: http://www.focusmetals.ca/english/global-operations/lac-knife

[21] last month: http://www.energizerresources.com/news/press-releases/519-energizer-resources-confirms-jumbo-flake-graphite-with-90-purity-dra-mineral-projects-makes-initial-equity-investment-in-energizer.html

[22] this month: http://www.flindersresources.com/s/NewsReleases.asp?ReportID=519254&_Type=News-Releases&_Title=Flinders-Announces-Closing-Of-Private-Placement-For-Gross-Proceeds-Of-15-Mi...

[23] Kringel mine: http://www.flindersresources.com/s/Kringel_Graphite.asp

More Indications The Graphite Market Is Booming

http://seekingalpha.com/article/520751-more-indications-the-graphite-market-is-booming?source=email_investing_ideas&ifp=0

Conclusion

I continue to believe that the graphite market is still in an early stage of adjusting to a new price equilibrium that can push prices much higher in 2012. Further evidence is mounting that China is taking decisive measures to reduce their output of graphite this year. The impact on world markets is material, and is set to reduce output by up to 10%. Assuming announced time lines for new mine production are achieved, it will take at least 2 years for new supplies to fill a portion of the deficit gap.

With the recent acquisition of European producer Graphit Kropfmuehl, there are already signs that strategic acquirers are moving to exert greater control over these scarce resources. Canadian producers are expected to play a leading role in driving incremental supply in the next few years. The companies that will benefit the most are the ones with the best source of large flake, high purity graphite that can advance their projects in the quickest fashion.

All indications continue to point to Northern Graphite being the best positioned given its advanced time table and high quality graphite.

Graphite and Rare Earth Metals for the 21st Century

http://www.theaureport.com/pub/na/12484

Insider Insight into the Rare Earth Market

http://rareearthinvestingnews.com/6692/insider-insight-into-the-rare-earth-market-tasman-metals-rare-element-resources-orion-metals-world-trade-organization-chinese-export-quota/print

LYSCF - Political Involvement Complicates Lynas REE Plant Progress

http://rareearthinvestingnews.com/6567/political-involvement-complicates-lynas-ree-plant-progress/

RareMetalBlog

http://www.raremetalblog.com/

Bokan mine could meet rare earth needs

By Jonathan Grass, Alaska Journal of Commerce

Mar 22, 2012 - 01:27 PM AKST

http://www.alaskajournal.com/Alaska-Journal-of-Commerce/AJOC-March25-2012/Bokan-mine-could-meet-rare-earth-needs/

Whether it’s a commuter turning on a cell phone or the military engineering new defense systems, they depend on rare earth minerals. Until now, the United States has been relying on foreign suppliers to get them, but that may change eventually with a new mining venture in Southeast Alaska.

Bokan Mountain rests on Prince of Wales Island. Miners have gone to the site for uranium in the past. In fact, seven companies have come and gone at Bokan over the years. Now the company Ucore Rare Metals Inc. — which has offices in Halifax, Nova Scotia, and Vancouver — has set its sites on a new prize within the mountain.

After learning that Bokan is rich in rare earths that are a necessity in developing technologies Ucore President and CEO Jim McKenzie decided to take a chance and purchase the site. The company ultimately paid $995,000 for the entire prospect with McKenzie buying a 6 percent share.

There are 17 rare earths in the world, broken down into heavy or light categories depending on their atomic weights. Bokan is especially valuable for its supply in heavy rare earths and could likely be the best source for these elements in the country. The heavy ones are harder to come by and therefore command higher prices.


Steve Borell recently retired after 22 years as the executive director of the Alaska Miners Association and has studied Bokan Mountain for years. He said rare earths have been known to exist there for a long time but there wasn’t enough interest in rare earths to explore them. He said people are just now beginning to understand their importance for higher technology applications.

The purchase and movement on the Bokan prospect comes at a time when China is limiting its supply of rare earths to the world. China currently controls more than 95 percent of the world’s supply of all rare earths. However, those suppliers have been cutting back on export quotas over the years.

“It puts our industry in a very vulnerable position,” said Ken Collison, Ucore’s chief operating officer.

China’s stronghold wouldn’t matter so much if America didn’t depend so greatly on these materials. But we do, from everything from computer memory to magnets to missiles, from vehicles to television screens, rare earths are a major component for high-tech devices.

Preparation

Ucore is moving full ahead with its intentions. The company has completed a drill program analysis and has just named Randy MacGillivray as senior mine permitting manager. This analysis confirmed the intensity of development prospects there. Still, these are preliminary findings.

The company is currently undergoing a preliminary economic assessment, which is expected to be completed in April, to help determine the property’s economic practicality for a mine.

“They believe they have an economic deposit. They have not proven that yet,” Borell said. “We hope very much that it is.”

Collison is pretty sure it is. He said Bokan has proven to be a large enough resource to justify a mine.

“If it’s really economic, which I expect this one will be, then you do a feasibility study,” he said.


This study generally takes nine to 12 months and is expensive, necessitating this preliminary study to find out if the project will be good before the costs are incurred. Collison said this is the study that will come into play for financing and permitting, although this step could still be a few years away.


“We’re still a ways away from knowing whether it’s going to be a mine or not but it’s exciting to see them moving in that direction,” Borell said.

He said having such an ore body usually implies that it would be economic to mine and can be processed at a profit.

In the meantime, the studies will look at environmental data such as water quality and fish studies. This data will be required later for the permitting process. Collison said the mine is probably about three years from opening if all goes well but this will be dependant on a number of issues, especially with lengthy permitting procedures. The current pre-cost studies will also point out different items that need to be worked on, such as mining methods.

Collison said the mine will have a 10- to 15-year lifespan, but that could be increased.

“One thing I like to tell people is miners like to mine. And so the trick is to get the mine going and they’ll find ways to keep it going,” he said.

Collison said the underground would probably employ around 200 people but the exact number is still unknown. Current plans also include processing the materials onsite.

Borell said having the processing facility plus the follow-on manufacturing facilities could present a big challenge. He said it could prove to be unlikely to process the materials on-site, but the minerals could be concentrated there.

Ucore will host job camps to hire locally. Representatives will be visiting communities this summer to explain more about the project and get a feel for the available workforce. Collison said the local employee pools look good.

He gave an example of how logging professionals from the area will likely make good miners since they know how to run the mine’s rubber-tired, diesel-powered equipment without breaking it .

“I’m pretty positive that we’re going to be able to hire a very good percentage of our employees from the local area,” he said.

National security

Collison said Bokan means more than just a local economic boost, but that it’s important to the nation to lighten dependence on China. Borell said more domestic manufacturing with domestic rare earths could prove to be an even bigger financial boost than the mining.

The country’s other big rare earth source is Mountain Pass in California, which is owned by Molycorp. This site has been mined off and on over the years, and the company is expected to re-open the mine this year.

Collison said Mountain Pass was mostly light rare earths anyway and so isn’t considered a competitor for Bokan.

“Bokan is the main know deposit in the United States that has a high percentage of heavier rare earth,” he said. “And a high percentage is somewhere between 40 and 60 percent.”

This would make the output worth more than Mountain Pass on a per-ton basis since heavy rare earths are more expensive.

Borell agreed that Bokan’s heavy rare earths give it an advantage over Mountain Pass.

One material Borell made particular mention of was dysprosium. Among its uses is in the world’s strongest permanent magnets. Such magnets have a number of uses, such as in hybrid or electric engines. Dysprosium even has applications for cameras or aircraft like Predator drones. This is one the least common rare earths but Bokan has a high concentration.

Legislative support

Rare earths have always been used but remained under the radar until recently. This is partly why Bokan’s minerals haven’t been aggressively sought before. China’s cutback in 2010 pushed the issue into the light.

President Barack Obama has been pushing China to loosen those restrictions, announcing that his administration would file a complaint with the World Trade Organization.

Sen. Lisa Murkowski reacted to this. In a release, she denounced the continuation of looking to China for rare earths instead of at home.

“The president wants to sue the Chinese for something that we could – and should – be producing for ourselves. Instead of settling for Chinese imports, the president should be taking steps to jumpstart development of our own supplies of rare earth elements and other critical minerals. All he has to do is look north to Alaska, which has already identified roughly 70 rare earth elements sites,” she stated.


Murkowski also introduced the Critical Minerals Policy Act last year to reduce dependence on foreign suppliers.

Sen. Mark Begich met with Ucore officials last summer and sees Bokan Mountain as a good prospect for metals and economic development. In a statement last August, he advocated expeditious review of exploration permits, “so that the mine can be put into production with no undue delay.”

This article appears in the AJOC March25 2012 issue of Alaska Journal of Commerce

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/AJOC-March25-2012/Bokan-mine-could-meet-rare-earth-needs/#ixzz1q2eFyTSU

DC ‘Leak’: Catalyst for Chinese Rare Earth Supply vs. US National Security Debate

Thursday, March 15, 2012

http://www.raremetalblog.com/2012/03/the-obama-administrations-case-against-chinas-export-policies-on-rare-earth-minerals-is-not-only-about-business-concerns-.html

The Obama administration’s case against China's export policies on rare earth minerals is not only about business concerns -- it is about national security. I just returned home from the TREM Critical Metals Summit about Washington’s policy on rare earths and it was “leaked” that a DC report was forthcoming that would negate the need for creating self dependence on rare earth supply and would instead cite global interdependence and the benefits of Chinese economics in supplying cost effective REEs.

Timed appropriately this week with President Obama’s news conference that the United States, joined by Japan and the European Union, has filed complaints with the World Trade Organization over China's rare earth export quotas said this is an effort to give "American workers and American businesses a fair shot in the global economy". He also brought up rare earths in clean energy applications – but there was no reference to what we all know and as eloquently summed up by a member in the audience: “...every frickin’ defense platform uses rare earths.”

I recall the 70’s (and yes, I do) and how upset we were about our dependence on the Middle East for oil. Today, China’s dominance of the rare earth industry with over 90% of the supply and 95% of the processing capabilities poses far reaching implications for the U.S.’ defense sector. Jeff Green of JA Green & Co. commented from a panel in response to the rumor: “Earlier promises to vertically integrate a supply-chain all in the US had tremendous political appeal garnered by wrapping yourself in the flag...” – we believe that James Hedrick had it right when he said: “Rare earths are the economic and technologic foundation of a safe and secure Nation. To possess them imparts independence, immunity to coercion, and the tools to invoke scientific advancement.”

What’s the answer? One conclusion at the TREM event was that no conclusion would occur until after the Presidential election. So we challenge the Presidential candidates to add this relevant issue to their platform for debate.

So let’s drill down further...

A report released in February 2011 called Rare Earth Metals and U.S. National Security, by the American Security Project notes:

Though the Pentagon claims that the U.S. only uses 5% of the world’s supply of rare earth metals for defense purposes, the U.S. is fully dependent on China for the production of some of its most powerful weapons.
The U.S. does not track rare earth metals in its weapons systems or platforms. Therefore a shortage of rare earths will affect the strength and readiness of the U.S. military until currently used defense systems are no longer in operation.

In April 2010 the Government Accountability Office released a report titled Rare Earth Materials in the Defense Supply Chain commissioned by Congress to assess sources and projected availability of rare earth materials; to identify which defense systems depend on rare earth materials; and to assess national security risks identified by the U.S. Department of Defense (DOD) due to dependencies on rare earth materials and review the actions that can be taken.

Here’s what the report concluded:

Use of rare earth materials is widespread in defense systems. These include precision-guided munitions; lasers, communication systems, radar systems; avionics, night vision equipment; and satellites.
Rare earths are responsible for the functionality of critical components in defense systems and would be difficult to replace without losing performance. For example, fin actuators used in precision-guided munitions are specifically designed based on the capabilities of neodymium-iron-boron rare earth magnets. Rare earths are also used in commercial-off-the-shelf products in defense systems such as computer hard drives
These defense systems will likely continue to depend on rare earth materials, based on their life cycles and lack of effective alternative substitute materials.
While the U.S. has previously performed all stages of the rare earth material supply chain most rare earth materials processing occurs in China. Rebuilding a U.S. rare earth supply chain could take up to 15 years and is contingent on several factors: securing capital investments in processing infrastructure, developing new technologies, acquiring patents held by international companies.

REE Defense Systems Applications:

REEs play a crucial role in several national defense systems including those used by the U.S. Air Force, Army, Navy and Marine Corps. REEs are critical to the functionality of such systems and can affect calibration, aim, efficiency and speed. REEs are used in a range of military and defence equipment including F-series fighter jets; helicopters; tanks & other armoured vehicles; ships; missiles; radar systems; countermeasure systems; and satellite systems.

REEs in the form of sintered neodymium-iron-boron (NdFeB) are used in tail fin actuator motors of joint direct attack munition (JDAM) bomb conversion kits; miniature air-launched decoys (MALD); joint air-to-ground missiles (JAGM); and javelin missiles. They are also used in permanent magnet motors of close-in-weapon-systems like the Phalanx CIWS anti-ship missile defense system; and navy propulsion motors and drives for the Zumwalt Destroyer.

Here are some more applications of REEs in the defense sector as cited in the REE Handbook – the ultimate guide to Rare Earth Elements:

Gadolinium-scandium-gallium garnet (GSGG) crystal lasers are used in high-energy laser weapons.
Lanthanum is a key input in the production of fuel for planes, trains, and automobiles.
Lanthanum oxide is used in the making of infrared-absorbing glass used in night vision goggles.
Neodymium yttrium aluminum garnet (Nd:YAG) are the most widely used lasers in commercial and military applications. It is used for cutting, welding, scribing, boring, ranging, and targeting.
Luminous promethium range-marks are used in the targeting sights of shoulder-fired missiles.
Samarium-cobalt permanent magnets are used in servo-motors to adjust the fins on missiles.
The primary use of europium is in phosphors for pilot display screens to yield reddish-orange colours.
Yttrium gadolinium garnet or yttrium gallium garnets (YGG) are used in the electronic components of communications and radar systems.
Dysprosium in Terfenol-D is used in sonar sensors and positioning actuators.
Holmium: yttrium aluminum garnet (Ho:YAG) solid state lasers are used in military and space-based laser distance and ranging (LADAR) systems to create three-dimensional images and to detect objects at great distances.
Fighter jet engines use yttria-stabilized zirconia as a thermal barrier to withstand extremely high temperatures.

On a final note, with China having a third of the world’s REE reserves, and only about 3% of the deposits compared to the US where according to the US Geological Survey there are about 13 million metric tons of rare earth deposits in the US...instead of buying from China – if we supply our share for the supply of rare earth materials it would create jobs for Americans...for the endless technological applications, not to mention -- we could supply our own materials needed for our national security.

Molycorp buys Neo Material for C$1.3 billion

http://www.reuters.com/article/2012/03/09/us-molycorp-idUSBRE82800T20120309?feedType=RSS&feedName=innovationNews&rpc=43

TORONTO | Thu Mar 8, 2012 7:14pm EST

(Reuters) - Rare earth miner Molycorp (MCP.N) is set to buy Neo Material Technologies (NEM.TO) in a C$1.3 billion ($1.31 billion) cash and share deal that will give Molycorp access to Neo's rare earth processing capabilities and patents.

The friendly deal will see Colorado-based Molycorp pay C$8.05 in cash plus 0.122 of a share for each share of Toronto-based Neo Material. That would amount to a total consideration of C$11.30 per share, based on Molycorp's 20-day average.

Molycorp chief executive Mark Smith told Reuters that the deal will bring together the Molycorp's massive production capacity at the Mountain Pass mine in California and Neo's advanced rare earth processing capabilities.

"(We are)putting those two together and forming the best full supply chain capability known in the industry," he said.

Rare earth oxides, used in products as diverse as Apple's iPhone and Toyota's Prius, require extensive processing in order to take them from rocks in the ground to a material that a technology company can use.

China currently produces about 95 percent of the global supply of the group of 17 metals. The country has repeatedly clamped down on rare earth exports, which last year sent prices of the individual oxides, metals and alloys soaring.

Neo, which owns facilities in China, Thailand, Germany and North America, produces rare earth oxides, alloys and magnetic powders. The company also processes various minor metals like gallium, rhenium and indium.

Molycorp said it will leverage Neo's years of processing experience to better serve its existing customers. The purchase will also give Molycorp access to new customers that require high purity, product-specific rare earth oxides and alloys.

The deal, Molycorp's third in the last year, will give the American company a foothold in China, which is the top consumer of rare earths.

Colorado-based Molycorp is expanding and modernizing its Mountain Pass mine and processing facility, and expects the project to achieve commercial production by the end of the third quarter, right around the time the deal is expected to close.

"By the time we get through the integration process, putting the two companies together, that should - timing wise - fit in right about the time that Phase 1 is ramping up," said Smith.

Phase 1 of the expansion will bump production up to 19.050 tonnes a year. Some of that capacity will be fed into Neo's facilities.

Molycorp's offer was 42 percent higher than Neo's closing price of C$7.97 on Thursday on the Toronto Stock Exchange. The offer was above Neo's peak of C$10.67 in April of last year when skyrocketing rare earth prices sent the equities soaring.

($1=$0.99 Canadian)

(Reporting by Julie Gordon; editing by Rob Wilson and Gunna Dickson)

Rare Earth Bull

Posted By Jack Lifton On March 8, 2012 @ 1:33 pm In China,News Analysis,Permanent Magnets,Rare Earths | 2 Comments

http://www.techmetalsresearch.com/2012/03/rare-earth-bull/

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 [1], 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:

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
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…

Rare Earth Metals Is a Stock-Pickers Market: Jason Burack and Mo Dawoud

TICKERS: ARU, GWG; GWMGF, LYC, MCP, QRM, RES; REE, HRE, UCU; UURAF

Source: The Critical Metals Report Editors (2/28/12)

http://www.theaureport.com/pub/na/12678

Jason Burack Mo Dawoud In the wake of a 2011 roller coaster ride in the rare earth market, the sector still holds promise for astute investors, argue Wall St. for Main St. co-founders Jason Burack and Mo Dawoud. In this exclusive Critical Metals Report interview, the pair name the six major REE projects that could rocket back up out of 200-odd juniors competing in this space.

Companies Mentioned: Arafura Resources Ltd. - Great Western Minerals Group Ltd. - Lynas Corp. - Molycorp Inc. - Quest Rare Minerals Ltd. - Rare Element Resources Ltd. - Stans Energy Corp. - Ucore Rare Metals Inc.

The Critical Metals Report: As co-founders of Wall St. for Main St., the two of you have been watching the rare earth elements space for years. How do you define the term?

Jason Burack: The rare earth elements (REEs)—mostly lanthanides and actinides—are elements with unique chemical and electrical properties. These elements are contained in host rocks with a unique mix of the 17 uncommon elements that can be found on the bottom of the periodic table. These elements are actually abundant around the earth's crust, but are spread out rather than concentrated the way gold, copper and lead are concentrated in vein deposits. For that reason, the majority of REEs are uneconomical for extraction, thus making them rare.

Mo Dawoud: What is new is an increased level of demand. In the last decade, REEs have been used to improve new electronics and green energy technology, including flat-screen televisions, mobile phones, hybrid vehicles, defense missiles, petroleum refineries, wind turbines and much more. If it wasn't for neodymium, dysprosium and terbium, we would still be walking around with Gordon Gekko's cell phone because these materials are key ingredients in neodymium-iron-boron magnets. Small quantities of these materials allow manufacturers to make phones, tablets and mp3 players smaller, thinner and lighter, while maintaining computer power, memory and functionality.

TCMR: If manufacturers can't access these materials at reasonable prices, won't they just engineer them out of the products?

MD: Automakers are exploring ways to make hybrid cars without rare earth metals, but it would be difficult for them to create REE-free motors because they provide more power and efficiency than traditional ferric magnet alternatives.

JB: We believe uses for these metals will continue to rise. One expert in natural resource investing estimates that China has over 1,000 engineers and scientists dedicated to creating new products using rare earth metals!

Over the last decade, as global consumers have continued to buy REE-dependent products, demand has risen from 80,000 tons (t) to over 130,000t. Demand could go as high as 300,000t by 2015 by some aggressive estimates.

Much of the demand increase is coming from China as the country moves toward creating green energy and advancements in military and defense technology. In 2010, China's demand was 72,000t; by 2015, China's forecast demand is over 117,000t.

rare earth metals

TCMR: How will growing demand and shrinking supply posed by China's shrinking export quota impact rare earth prices and, ultimately, equity opportunities?

JB: China owns 30% of the REE deposits and controls 97% of the world's REE production. The rare earth monopoly allows Chinese suppliers to manipulate prices. As the former leader of China, Deng Xiaoping once said, "The Middle East has oil and China has rare earths." China's leadership plans to make the most of that fact.

MD: Japanese and U.S. governments and manufacturers are, therefore, at the mercy of the Chinese government for REE supply. The U.S. government has claimed that a supply shortage would threaten national security because defense manufacturers use rare earths to make lasers, guided missiles systems and predator drones. Japanese automakers are now locking up supplies in Vietnam, Brazil and India.

Some manufacturers moved to China to gain access to supply, which was part of the country's strategic plan to bring more jobs and capital to the Chinese economy. Outside China, we think it will be difficult to close the supply gap, particularly for the heavy rare earth elements (HREEs). Unfortunately, there are not many mines outside of China that have a big deposit of the heavies going into production within the next three years. This will create a major supply shortage for metals like dysprosium and terbium going into 2015.

The supply forecast for light rare earth elements (LREEs) is more optimistic, mainly because a few mines are coming into production in the next few years. Molycorp Inc.'s (MCP:NYSE) Mountain Pass Mine is projected to be in full production in the second half of 2012 and Great Western Minerals Group Ltd.'s (GWG:TSX.V; GWMGF:OTCQX) Steenkampskraal Mine could be operational in 2013.

TCMR: I know prices increased dramatically in 2009 and 2010, but most have come back down since then. Was it a bubble?

JB: We believe the price dip was long overdue because the market moved way ahead after China cut exports. A violent correction was normal after such a long-time price increase. We do not believe this will mark the new low due to the high global demand and the potential supply shortage. The rare earths market still holds a lot of promise in the future for astute investors, but capital needs to be carefully allocated into the sector. This is a stock picker's market now. More than 200 juniors list themselves as REE plays today. However, based on current conservative 2015 demand projections, we think the market can only support at most five or six companies.

What this means is many of the junior companies furthest away from production will go bust or sell out through a joint venture (JV) for pennies on the dollar. We think a massive consolidation of the sector is very good for its long-term health.

MD: Many of the rare earths companies, including some in the second tier, have management teams that don't properly understand the context of the current macroeconomic situation. Some of these companies in our second tier have high quality deposits, but are still years away from production with many companies in the second tier not scheduled to go into production until 2015 at the earliest. Despite this reality, a number of companies are not adequately managing cash flow burn rates to weather the storm and they will need additional equity financing in 12 months or less at a depressed stock price.

JB: For example, Arafura Resources Ltd. (ARU:ASX) management totally misunderstood the macroeconomic environment and did a massive equity financing/dilution after the stock price had already had an immense correction. This is one of the main reasons it didn't make either tier or our watch list, although the company could be saved by a surprise takeover or funding from the Chinese. Prudent company financing should have been done before early 2011 when rare earths prices were soaring.

TCMR: What companies positioned themselves well during this window?

JB: Molycorp used debt, equity and preferred shares to fund through production at higher stock price valuations. The company announced on Feb. 23 that it earned $0.26/share for Q411. Gross profit margins dropped less than 7% total, which means management is doing a very good job operationally considering how much REE prices fell and how some input costs have increased during the Phase 1 production ramp up of Project Phoenix at Mountain Pass. The company is in very good shape to weather out the storm of lower prices. It is now generating good cash flows from small production and doesn't need to go back to the market for any more debt/equity financing unless it wants to make an acquisition of accretive, undervalued assets, as it did earlier in the year by buying the rare earths processing company Silmet. The company recently announced a JV deal with Daido Steel and Mitsubishi Corp. (MSBHF:OTN) to make value added, higher profit margin rare earth magnets in Japan starting in 2013. Once more market penetration occurs, Molycorp is projecting massive sales growth for 2012 and should be able to achieve pricing power on all of their Xsorbx water treatment products and start getting a premium for the product. It's a sound long-term strategy. Innovating with the rare earths to create higher profit margin products to sell is the best way to weather the storm of a worsening macroeconomic environment.

Questions remain concerning permitting, execution on the mine-to-magnet vertical integration strategy, processing capacity and exposure to the HREEs. But the company is the best positioned of the group in our opinion. If Molycorp succeeds, the sector will start to get more people willing to finance other projects. The company could even reinvest profits into other juniors.

MD: Over at Great Western's Steenkampskraal Mine, the all-important total rare earth oxide (TREO) grades are well above 10% TREO, some of the highest grades of any deposit in the world, which could translate into the most robust profit margins. Rock mined at Steenkampskraal is monazite, so in-demand HREE concentrations are high. The mine could be in production in less than 18 months. The company already has a license to store the thorium byproduct at the mine, and since the mine was operated decades ago before it was shut down, infrastructure is already present. The company owns two quality processing facility assets worth more than the current market cap. Management has already said demand is increasing so rapidly that another doubling of production capacity is possible after the first expansion is implemented in the next three years.

Great Western Minerals owns a few other promising REE deposits. It will be buying tailings from other South African miners. It has a deal negotiated with Aichi Steel, a subsidiary of Toyota Group, for Aichi to buy a large quantity of rare earth alloys and another long-term supply contract with German permanent magnet maker, Vacuumschmelze.

The downside is that the Steenkampskraal Mine is located in South Africa, which is politically unstable. However, Great Western's processing plants will comprise most of the profit and those facilities are located in the U.S. and U.K.

Also, although it is generating significant revenues, Great Western Minerals is still not profitable because it pays high input costs for processing materials. The company imports rare earth metals from China at great expense. Management has not done a good job of understanding the macroeconomic situation or of managing the cash levels at the company and because of this, management botched a financing in the last few months that it could have easily done at a much higher stock price earlier in the year and have diluted less. The company is not fully funded yet and is not completely self-sustaining. Cheaper materials from Steenkampskraal will generate higher profits. The company's other processing facility, Great Western Technologies in Michigan, is currently sitting idle because of a dearth of HREE materials.

Great Western Minerals is a long-term play. Financial statements are getting stronger with increasing gross profit margins due to the Less Common Metals processing plant. Great Western's stock price also benefited tremendously when the rare earth metals price rose from 2010 to July 2011. Since then, the stock price had a violent correction, mainly from declining rare earth prices and dilution. Investors will have to have a two- to three-year timeframe when investing with Great Western Minerals. The most important thing to watch is management execution. Can they can recover from the dilution? Will they bring the Steenkampskraal Mine to full production on time with no major setbacks? Will they reduce processing costs? And can they continue to expand profit margins? If management can execute, we would not be surprised if this stock goes up tenfold.

TCMR: What REE-related companies could benefit from demand for REEs' unique physical properties?

JB: Neo Material Technologies (NEM:TSX) is generating significant profits and free cash flow. The company makes higher, valued-added profit margin products in the form of permanent magnets. Not many firms are capable of making neodymium iron-boron magnets outside of China, Japan and Germany. The company has been using profits to acquire smaller magnet-making firms.

The company recently announced a share buyback program to counteract what it believes is severe undervaluing. Neo Material still buys some of its rare earth alloy materials from China to make magnets and is vulnerable to higher export tariffs/taxes on Chinese rare earth products or disruptions in supply. To better protect itself, the company needs to further diversify its supply.

Similar to Great Western Minerals, Neo Materials is also a long-term play for rare earth investors. However, if you invested in this stock over a year ago, then it should be paying off now. Financial statements continue to get stronger every quarter with 10 consecutive increases in quarterly revenue due to the increasing rare earth prices. The quarterly earnings per share (EPS) increased almost sixfold and operating income is at $109 million (M), compared to $19M last year. Long-term debt is at $197M, but the company is sitting on $319M in cash, so it can pay off debt in full at any time and still have enough cash to reinvest.

It will be interesting to see how management increases revenue with declining rare earth prices. Will buyers lock up supply at a discount or will demand taper off due to the bad macroeconomic environment? Since Neo Materials has no exposure to the beginning part of the vertical integration strategy, the company might want to use its cash to do private placement or a royalty deal with rare earth mining companies in exchange for rare earth oxides (REOs) and alloys at a discount. We will have to watch this one.

TCMR: Why isn't Lynas Corp. (LYC:ASX) included in the top tier?

MD: At one point, Lynas was ahead of Molycorp in terms of its production timeline. That time has passed. Lynas has a very good and very economic deposit at Mt. Weld with great grades and a nice mix of rare earths, but the company has some very serious issues it needs to address with more than words if it is going to be moved back into our top tier.

For starters, Lynas has received very credible allegations of cutting corners at its proposed Malaysian REO processing facility. The plant was put in Malaysia because of a large tax break and the plant was supposed to be online already. What most people do not understand about the rare earths sector is that the concentrate produced from mining is worth up to 80% less than the market will pay for processed REOs, which are easier to move up the value chain and into more advanced products.

Lynas is currently mining its Mt. Weld Deposit, but it can't make the concentrate from there into REO at the Malaysian processing facility. The environmental permit for Lynas to process there has been delayed by the Malaysian government for more than eight months. Additionally, production costs have risen twice already to well above original project economics. We do not like the trend we are seeing out of management.

Also, Australia now shows significant geopolitical risk. Last year, politicians attempted a mining super-profits tax. This year, Australian politicians successfully passed carbon cap-and-trade legislation tax that will hurt mining production costs. We are avoiding investing in the country entirely.

TCMR: What can we expect from the rest of the field in 2012?

JB: Because we are using a more conservative demand estimate for 2015, we believe there will be a forced shakeout/consolidation period in the rare earths market, similar to what is still happening in the uranium market. Volatility caused by the worsening macroeconomic situation, fluctuations in REE prices and the abundance of rare earth juniors too far away from production with little to no hope of getting the financing means more shakeout to come.

MD: That said, there are still many positive, bullish reasons why investors should still be willing to allocate capital to the rare earths space. The entire market is more than capable of growing at a 7% or more annual growth rate in terms of industrial demand for many years because of the growing acceptance of products that only rare earths currently make possible and the future products that will most likely come from continued innovation in rare earths.

However, investors really need to be discriminatory with their capital. Concentrate on the top tier in the sector. Then sprinkle some of the second-tier companies that aren't generating cash flow yet but have quality deposits or processing facilities. Those companies are Quest Rare Minerals Ltd. (QRM:TSX.V; QRM:NYSE.A), Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX), Tasman Metals Ltd. (TSX.V: TSM; OTCPK: TASXF), Stans Energy Corp. (HRE:TSX.V), Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX), Lynas, and Rare Element Resources Ltd. (RES:TSX; REE:NYSE.A).

Below the second-tier companies is a watch list of dark horse companies that could leapfrog or surprise and jump ahead of the second tier that we listed because these companies are selling at extremely low valuations and are potentially takeover targets or JV partners for companies like Molycorp and Great Western Minerals.

In our opinion, Molycorp and Great Western Minerals Group are going to end up consolidating the rare earth sector in the next three to five years—unless Lynas gets its act together and joins the ranks of one of the companies doing the consolidating. Neo Material Technologies has not hinted that they are interested in a fully vertical integrated strategy, but they have been acquiring firms higher up in the value chain in processing rare earth magnets. In 2013 going forward, we expect dividends in the common shares from Molycorp, Neo Material Technologies, and maybe even Great Western Minerals.

Jason Burack is an investor, entrepreneur, financial historian, Austrian School economist, and contrarian. Burack co-founded the startup financial education company Wall St for Main St, LLC, to try to help the people of Main Street by teaching them the knowledge, skills, research methods, and investing expertise of Wall Street. You can also find Burack's work at his blog website at www.jasonburack.com.

Mo Dawoud graduated from James Madison University with a Bachelor of Arts in finance. He is the co-founder of Wall St for Main St, a financial education company focusing on providing information on the economy and the market to contemporary Main Street investors. Dawoud believes in the Austrian school of economics and a free-market economy. He is an expert in technical analysis and fundamental analysis. His interviews and articles can be found on Forbes, Money Show, Financial sense and The Daily Gold. His technical analysis work has been featured in Kerr's Commodity Trading Newsletter. For more information on Mo Dawoud, go to http://www.momoneyblog.com.

Want to read more exclusive Critical Metals Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators and learn more about critical metals companies, visit our Critical Metals Report page.

Disclosures
1) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
2) The following companies mentioned in the interview are sponsors of The Critical Metals Report: Quest Rare Minerals Ltd., Stans Energy Corp., Ucore Rare Metals Inc. and Rare Element Resources Ltd.
3) Jason Burack: I personally and/or my family own shares of the following companies mentioned in this interview: Molycorp and Great Western Minerals.
4) Mo Dawoud: I personally and/or my family own shares of the following companies mentioned in this interview: Great Western Minerals.

Molycorp to Launch Sequential Start-up of New, State-of-the-Art Rare Earth Manufacturing Facility This Week


Earlier Than Expected Start Up Strengthens Company's Positioning for an On Time Ramp To Phase 1 Production Later This Year

GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--Feb. 21, 2012-- Molycorp, Inc. (NYSE: MCP) today announced that the sequential start-up of the new Project Phoenix rare earth manufacturing facility at its flagship Mountain Pass, California operation will begin this week and includes the following operations and plants:

Active mining at a full mine production rate of approximately 2,800 short tons of fresh rare earth ore has been underway for several weeks.
Mechanical completion of the new Crushing Facility has been achieved and fresh ore will be introduced.
Mechanical completion of the initial Cracking Facility has been achieved, steam testing has been completed, and feedstock from stockpiled material will be fed into the system.
Liquid natural gas (LNG) has been trucked to the site and offloaded into the onsite storage terminal. The LNG system associated with the Combined Heat and Power (CHP) plant will be pressurized and the first test firing of the turbines in the CHP plant will occur. LNG is being used for start-up operations until pipeline natural gas becomes available upon completion of current construction of a feeder line to the facility, expected to be completed in April of this year.

Other operations in the Project Phoenix facility that will be brought online over the coming months include the following: milling and mineral extraction; expanded cracking; impurities removal; rare earth oxide separations; product finishing; and paste tailings processing and storage.

“The launch of Project Phoenix’s sequential start-up is occurring well ahead of our April 1 deadline, and represents the accomplishment of a critical milestone in our project,” said Mark A. Smith, Molycorp President and Chief Executive Officer. “When this new manufacturing facility is complete and running at full capacity, it will be the most technologically advanced, energy efficient, and environmentally superior rare earth facility in the world.”

Molycorp also confirmed that it remains on track to achieve its full Phase 1 annual production rate of 19,050 mt of rare earth oxide equivalent by the end of the third quarter of 2012. The Company’s achievement of Phase 1 production will come three months ahead of the original Dec. 31, 2012 deadline that was set when the project was launched in 2010.

“I continue to be inspired and humbled by the dedication and hard work of our Molycorp family, and the more than 1,100 construction workers now building this new facility,” Smith said. “I could not be more proud of the Company’s ability to achieve these critical milestones on an accelerated basis.”

The Company said that further updates regarding Project Phoenix will be provided in Molycorp's Q4 / year-end earnings announcement and conference call on Thursday, Feb. 23, 2012.

About Molycorp, Inc.

With offices in the U.S., Europe, and Japan, Molycorp, Inc. is the only U.S-based company that is fully integrated across the rare earth mine-to-magnets supply chain. In addition to its current production of rare earth oxides at its flagship rare earth mine and processing facility at Mountain Pass, California, the Company produces rare earth metals, rare earth alloys (such as neodymium-iron-boron and samarium-cobalt alloys) and rare metals such as niobium and tantalum. The rare earths and rare metals Molycorp produces are critical inputs in existing and emerging applications including: clean energy technologies, such as hybrid and electric vehicles and wind power turbines; multiple high-tech uses, including fiber optics, lasers and hard disk drives; numerous defense applications, such as guidance and control systems and global positioning systems; advanced water treatment technology for use in industrial, military and outdoor recreation applications; and other technologies. For more information please visit http://www.molycorp.com.

Safe Harbor Statement Regarding Forward-Looking Statements

This release contains forward-looking statements that represent Molycorp’s beliefs, projections, and predictions about future events or future performance. Forward-looking statements can be identified by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other similar expressions or phrases. These forward-looking statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause Molycorp’s actual results, performance or achievements or industry results to differ materially from any future results, performance or achievement described in or implied by such statements.

Factors that may cause actual results to differ materially from expected results described in forward-looking statements include, but are not limited to: Molycorp’s ability to secure additional capital to implement its business plans; Molycorp’s ability to complete its initial modernization and expansion efforts, including the accelerated start-up of the Mountain Pass facility, which management refers to as Project Phoenix Phase 1, and the second phase capacity expansion plan, which management refer to as Project Phoenix Phase 2, and reach full planned production rates for REOs and other planned downstream products; the final costs of the Project Phoenix Phase 1, including with accelerated start-up of the Mountain Pass facility, and Project Phoenix Phase 2, which may differ from estimated costs; uncertainties associated with Molycorp’s reserve estimates and non-reserve deposit information; uncertainties regarding the results of exploratory drilling programs; uncertainties regarding global supply and demand for rare earths materials; Molycorp’s ability to successfully integrate recently acquired businesses; our ability to enter into additional definitive agreements with our customers and our ability to maintain customer relationships; completion of the formation of the proposed sintered NdFeB rare earth magnet joint venture, which remains subject to the satisfaction of customary closing conditions; the proposed sintered NdFeB rare earth magnet joint venture’s ability to successfully manufacture magnets within its expected timeframe; Molycorp’s ability to maintain appropriate relations with unions and employees; Molycorp’s ability to successfully implement its “mine-to-magnets” strategy; environmental laws, regulations and permits affecting Molycorp’s business, directly and indirectly, including, among others, those relating to mine reclamation and restoration, climate change, emissions to the air and water and human exposure to hazardous substances used, released or disposed of by Molycorp; and uncertainties associated with unanticipated geological conditions related to mining.

For more information regarding these and other risks and uncertainties that Molycorp may face, see the section entitled “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011. Any forward-looking statement contained in this press release or the Annual Report on Form 10-K or the Quarterly Report on Form 10-Q reflects Molycorp’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to Molycorp’s operations, operating results, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. Molycorp assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except as otherwise required by applicable law.

Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50174954&lang=en

Source: Molycorp

Molycorp, Inc.
Jim Sims, +1 303-843-8062
Vice President, Corporate Communications
Jim.Sims@Molycorp.com
or
Brian Blackman, +1 303-843-8067
Senior Manager, Investor Relations
Brian.Blackman@Molycorp.com

Rare Earth Market Defies Bleak Forecasts

February 20, 2012 @ 4:00 am In Feature Articles,Rare Earth Articles

By Adam Currie — Exclusive to Rare Earth Investing News [1]
Rare Earth Market Defies Bleak Forecasts [2]

With weak demand still casting a shadow over the market coming into 2012, analysts were surprised when rare earth stocks displayed positive pricing [3] trends in January and early February.

As favorable economic data once again raised hopes that the demand for rare earth metals would strengthen, the Market Vectors Rare Earth/Strategic Metals ETF - which seeks to yield performance and replicate the price of securities of publicly traded companies related to rare earth, strategic metals, and minerals - surged a staggering 18.6 percent in January.

Looking east

On the legislative front, a World Trade Organization [4] (WTO) appeals panel confirmed that China's export restrictions on raw materials, including bauxite and magnesium [5], had violated global trade rules. While rare earth metals were not part of this ruling, Reuters analysts argued [6] that the ruling could result in forced changes to some of China's rare earth policies.

In February, China's premier, Wen Jiabao, told local media that the country does not discriminate [7] against foreign companies in terms of rare earth supplies, underlining that policies and quotas for both domestic and foreign companies are equal.

"Although we now know that we must develop rare earth metals sustainably, we can still afford to meet 90 percent of global demand with less than 50 percent of the world's reserves," said the premier.

China's rare earth export quota for 2012 has been largely unchanged from that of 2011. The country's rare earth exports totaled 14,750 tonnes during the first eleven months of 2011, meeting just 49 percent of the annual quota.

In an interview with The Critical Metals Report, Byron King, energy and natural resource expert at Agora Financial [8], said that he felt that the world cannot afford [9] for the non-Chinese rare earth sector to fail.

"The rare earth space is at the point of separating out the stock promoters from the company builders and serious managers," he said. "Rare earth miners are distinct from gold [10] miners, who don't really care what ultimately happens to the gold they produce."

"The companies that are going to make the serious gains and profits will make the right kind of deals with the midstream and downstream processors, refiners and end-users," he concluded.

A sleeping giant

Markets reacted to the news that the world's largest refinery for rare earth metals could soon obtain permission to operate [11] - a step that analysts feel would help break China's near monopoly on the sector. At capacity the refinery will be able to meet a fifth of the world's demand.

The announcement has not been all smooth sailing, and resulted in demonstrations relating to radiation concerns, regulatory hurdles, and the withdrawal of a major equipment supplier due to worries about the safety of the refinery being built by Australian company Lynas Corp. [12] (ASX:LYC [13]).

According to a report [14] by The New York Times, Lynas has been trying for several years to find a site for the permanent disposal of roughly 20,000 tons a year of low-level radioactive waste that will be produced.

In February, speakers at the Technology Metals Summit 2012 in Toronto stressed that the two main challenges faced by the rare earth market are the absence of a supply chain [15] for rare earth elements (REEs) outside China, and the considerable economic challenges to any company starting a mine given that absence.

With the prospect of near-term and significant reduction of rare earth from China, the race is on for juniors to discover and delineate economically feasible deposits to feed a technology sector that has become highly dependent upon REEs.

Constantine Karayannopoulos, CEO, President, and Director of Neo Material Technologies [16] (TSX:NEM [17]), commented: “There's no question that consumers around the world are making the right noises about supporting production outside of China. Ultimately, they'll have to put their money on the table if they want to see this happen.”

“Talk is cheap. Some of these projects have a price tag of around $1 billion. There are very few people that have the longer-term confidence in prices and demand.”

In a recent note to investors, Yiannis Mostrous, strategist at Global ETF Profits [18], claimed that demand growth for rare earth will be driven by the increased adoption of new green technologies, such as hybrid cars, and by spending on military applications. As a result, demand will fluctuate [19] based on the outlook for these industries, meaning that although the overall demand trend for REE is rising, the growth will not travel in a straight line.

Opportunities in the marketplace

China Shen Zhou Mining & Resources [20] (AMEX:SHZ [21]) signed [22] an equity transfer and investment increase agreement with the shareholders of Wuchuan Dongsheng Mining Company, whereby China Shen Zhou will acquire 60 percent ownership of Wuchuan Mining's equity. China Shen Zhou is engaged in the exploration, development, mining, and processing of fluorite and nonferrous metals such as zinc [23], lead [24], and copper [25] in China.

Solo International [26] (OTCBB:SLIO [27]), a development stage exploration and mining company focused on REE, announced that it had expanded [28] its Quebec REE project with the addition of approximately 60 hectares directly adjacent to its Philadelphia Prospect.

Michel Plante, President and CEO, commented, "I am very happy to have completed the acquisition for this additional property adjacent to our Philadelphia REE Prospect," adding, "This acquisition completes another step in our acquisition and exploration plan to develop asset diversity."


Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.

Article printed from Rare Earth Investing News: http://rareearthinvestingnews.com

URL to article: http://rareearthinvestingnews.com/6151/rare-earth-market-defies-bleak-forecasts/

- Rare Earth Investing News - http://rareearthinvestingnews.com -

Clock Ticking for Rare Earth Juniors as Lynas Wins Plant Approval

February 7, 2012 @ 4:15 am In Feature Articles,Rare Earth Articles
By Robert Sullivan - Exclusive to Rare Earth Investing News [1]

[2]

The approval of Lynas Corp [3].'s (ASX:LYC [4]) advanced materials plant (LAMP) in Gebang, Malaysia last week could start the clock ticking for many rare earth junior miners, as the facility, and others slated to come online in the next few years, is expected to increase non-Chinese output 10-fold by 2016 and a create a surplus of supply in rare earth markets.

The two year temporary license [5] awarded on February 2 by Malaysia's Atomic Energy Licensing Board (AELB) allows Lynas to begin processing rare earths imported from its Mount Weld property in Austalia. If Lynas complies with the terms of the license during this period, a permanent license may then be considered by the AELB.

Initial capacity at the $200 million plant will be 11,000 tonnes [6] of rare earth oxide (REO) per annum when operations begin midway through the year, and this will eventually be ramped up to 22,000 tonnes per annum of REO.

But with 11,000 tonnes per annum of REO already one-third of current demand, first-movers [7] such as Lynas could end up supplying the bulk of the rare earths market outside of China and squeezing out juniors who need strong rare earth prices to raise capital and to keep their projects commercially viable.

Improving supply could force many juniors out of the sector

With some experts forecasting [8] production of REO outside of China to reach 60,000 tonnes per annum by 2016 and demand of just 55,000 tonnes per annum, rare earths markets could see a surplus of supply within 5 years that could restrain rare earth prices and trim the playing field down from the hundreds of companies that are currently operating in the industry.

In an interview with Mining Weekly on February 1, Jack Lifton [9] of Technology Metals Research suggested that “clammed-up capital markets coupled with lower prices” would put close to 90 percent of publicly-listed rare earth juniors [10] out of business over the next two years.

Riding soaring rare earths prices over the past two years following cuts to China's output and export quotas, the number of junior miners in the rare earths sector ballooned.

A fallback in rare earths prices over the last half of 2011, however, was painful for many juniors who had been baking sky-high prices into their business models.

As the market continues to search for an equilibrium, Lifton believes that there will be at most 30 to 40 companies left by 2014.

“There are too many companies in the supply side and not enough on the demand side, so a lot of the supply side will be eliminated by the market effect that they will get no money,” remarked Lifton.

Great Western and Alkane nearing production

Among those that should be able to avoid being squeezed out of the market by entering into production within the next few years are Great Western Minerals Group Ltd [11]. (TSXV:GWG [12]) and Alkane Resources Ltd. [13] (ASX:ALK [14]).

According to Dudley Kingsnorth [8], Executive Director of Industrial Minerals Company of Australia, Great Western's Steenkampsraal project [15] in South Africa and Alkane's Dubbo project [16] in Australia, which is composed of more than a 25 percent mix of heavy rare earth elements (HREE), are two of a handful of projects that are more than likely to be fully operational by 2016.

Both companies have previously indicated they could begin initial production as early as 2012 [16]/2013 [17], and although Kingsnorth's projections are more conservative than those provided by the two companies, he believes Great Western and Alkane should be joining the ranks of active producers within the next four years.



Securities Disclosure: I, Robert Sullivan, hold no direct investment interest in any company mentioned in this article.

Article printed from Rare Earth Investing News: http://rareearthinvestingnews.com

URL to article: http://rareearthinvestingnews.com/6038/clock-ticking-for-rare-earth-juniors-as-lynas-wins-plant-approval/

URLs in this post:

[1] Rare Earth Investing News: http://rareearthinvestingnews.com../../../../../

[2] Image: http://rareearthinvestingnews.com/files/2012/02/lynasplant.jpg

[3] Lynas Corp: http://www.lynascorp.com/

[4] LYC: http://www.google.com/finance?q=ASX%3ALYC

[5] license: http://www.theaustralian.com.au/business/lynas-rare-earths-plant-approved-for-malaysia/story-e6frg8zx-1226261275584

[6] 11,000 tonnes: http://www.adelaidenow.com.au/business/lynas-wins-chinese-rare-earth-deal/story-e6frede3-1226263155654

[7] first-movers: http://rareearthinvestingnews.com../../../../../5965/north-american-junior-ree-miners-production-avalon-quest-rare-element/

[8] forecasting: http://www.raremetalblog.com/2012/02/kingsnorth-latest-2016-2020-ree-forecasts.html

[9] Jack Lifton: http://www.miningweekly.com/article/further-falls-for-rare-earth-prices-most-juniors-to-disappear-says-lifton-2012-02-02

[10] rare earth juniors: http://rareearthinvestingnews.com/5372/non-chinese-rare-earth-projects-fail-tmr%E2%80%99s-jack-lifton-lynas-molycorp-lyn-mcp/

[11] Great Western Minerals Group Ltd: http://www.gwmg.ca/index.cfm

[12] GWG: http://www.google.ca/finance?cid=690489

[13] Alkane Resources Ltd.: http://www.alkane.com.au/

[14] ALK: http://www.google.com/finance?q=ASX%3AALK

[15] Steenkampsraal project: http://www.gwmg.ca/html/projects/mining/index.cfm

[16] Dubbo project: http://www.alkane.com.au/projects/nsw/dubbo/

[17] 2013: http://www.gwmg.ca/html/projects/index.cfm

Copyright © 2010 Rare Earth Investing News. All rights reserved.

Pele Mountain Resources Inc. - V.GEM

ready to move higher soon, imo


glta

North American Junior REE Miners Close to Production

January 30, 2012 @ 4:30 am In Feature Articles,Rare Earth Articles
By Robert Sullivan - Exclusive to Rare Earth Investing News [1]

North American Junior REE Miners Close to Production

As the leading source of rare earth oxide (REO) output outside of China at present, Molycorp Inc [2]. (NYSE:MCP [3]) has naturally commanded a lion's share of the recent interest in the North American rare earths sector.

Production of REO's across Molycorp's three properties in the US and Estonia totalled just shy of 5,000 tonnes in 2011, and has been forecast to reach 8,000-10,000 [4] tonnes in 2012.

There are, however, a number of other companies with an array of projects [5] and prospects in Canada and the US that could soon follow in Molycorp's footsteps, and even surpass the Colorado-based mining outfit.

Determining who will be able to make a splash in the market with a move to commercial production is hotly debated among analysts and investors, but one factor that is often brought up as key is first-mover advantage.

Brian Chin, a research analyst with Gabelli & Company Inc. [6], told The Critical Metals Report [7] in a November interview that “having the first-mover advantage is very important for these REE companies because the market isn't very large, but there is going to be demand from customers looking for secure sources of supply outside of China.”

Chin added that “the companies that are going to be able to get to production first and secure supply contracts are the ones that are going to be successful.”

Three first-movers to watch

Three companies frequently brought up in conversations about first-movers in the North American rare earths sector are outlined below. Important to note as well, is that all three have deposits that are NI 43-101 compliant, and are projecting initial output of over 10,000 tonnes of REO per year.

Avalon Rare Metals Inc. [8] (TSX:AVL [9]) - Core Project: Thor Lake, Northwest Territories

Avalon's Nechalacho Rare Earth Element Project at Thor Lake [10] in the Northwest Territories has one of the higher concentrations of heavy rare earth oxides (HREOs) in the world at the moment, with 26.1 percent of their 4.298 million tonnes of total rare earth oxides (TREO) composed of pricier HREOs.

The project is currently at the bankable feasibility stage, which is slated to wrap up in late 2012. Should this prove to be successful, the company is aiming to progress to construction between 2013-2015, with first production possibly coming in late 2015 [11] or early 2016. Once production is underway, Avalon expects output to hit 10,000 tonnes of REO within the first year.

Quest Rare Minerals Ltd [12]. (TSXV:QRM [13]) - Core Project: Strange Lake, Quebec

Quest is another Canadian junior who is holding a relatively high proportion of HREO's. The company's Strange Lake [14] project in Northern Quebec is believed to hold at least 2.1 million tonnes of TREOs in its B-zone section, of which 39 percent [15] is estimated to be HREOs.

Quest is currently lining up a pre-feasibility study for the B-zone section of the project, and is looking to start-up production in mid-2015 to 2016, with output initially expected to top 12,000 tonnes of REO per year.

Rare Element Resources Ltd [16]. (TSX:RES [17]) - Core Project: Bear Lodge, Wyoming

Rare Element Resources, meanwhile, find themselves facing a different situation than that of Avalon and Quest, as their projects have a higher concentration of light rare earth oxides (LREOs). This puts the company at a slight disadvantage given that Molycorp is already producing LREOs and will be ramping up production in the coming years.

Rare Element Resources' core property at Bear Lodge [18] in Wyoming, on the other hand, is believed to be one of the richest LREO deposits in the US. And with the company looking to begin production in 2015 [19], with an anticipated output of 11,400 tonnes of REO per year, it could be well-positioned to meet growth in demand for LREOs and to take up any market-share Molycorp hasn't managed to corner by then.



Securities Disclosure: I, Robert Sullivan, hold no direct investment interest in any company mentioned in this article.

Article printed from Rare Earth Investing News: http://rareearthinvestingnews.com

URL to article: http://rareearthinvestingnews.com/5965/north-american-junior-ree-miners-production-avalon-quest-rare-element/

URLs in this post:

[1] Rare Earth Investing News: http://rareearthinvestingnews.com../../../../../

[2] Molycorp Inc: http://www.molycorp.com/

[3] MCP: http://www.google.com/finance?q=NYSE%3AMCP

[4] 8,000-10,000: http://us1.campaign-archive1.com/?u=a9e8676e87fad805702b98564&id=1b6b16ac98&e=%5BUNIQID%5D

[5] projects: http://www.techmetalsresearch.com/metrics-indices/tmr-advanced-rare-earth-projects-index/

[6] Gabelli & Company Inc.: http://www.gabelli.com/

[7] The Critical Metals Report: http://www.theaureport.com/pub/na/11623

[8] Avalon Rare Metals Inc.: http://avalonraremetals.com/

[9] AVL: http://www.google.com/finance?q=TSE%3AAVL

[10] Thor Lake: http://www.avalonraremetals.com/projects/thor_lake/thor_lake_intro/

[11] 2015: http://www.avalonraremetals.com/_resources/Project_Sheet_2011.11.02.pdf

[12] Quest Rare Minerals Ltd: http://www.questrareminerals.com/index.php

[13] QRM: http://www.google.com/finance?q=CVE%3AQRM

[14] Strange Lake: http://www.questrareminerals.com/strangelakeproject.php

[15] 39 percent: http://www.techmetalsresearch.com/2011/10/a-visit-to-quest-rare-minerals-strange-lake-misery-lake-projects/

[16] Rare Element Resources Ltd: http://www.rareelementresources.com/s/Home.asp

[17] RES: http://www.google.com/finance?q=TSE%3ARES

[18] Bear Lodge: http://www.rareelementresources.com/i/pdf/BearLodge-Summary.pdf

[19] 2015: http://www.casperjournal.com/news/article_3e939fea-9664-5a97-a8eb-4204c51bad7c.html

MCP - HREEF - excellent video

http://www.uncommonwisdomdaily.com/2-rare-opportunities-to-bet-on-rare-earths-13570?FIELD9=4

Critical Reading for Rare Earth Metals Investors

Source: The Critical Metals Report Editors (12/27/11)
http://www.theaureport.com/pub/na/12115

Rare earth element coverage has exploded since The Gold Report started covering this sector in early 2009. At that point, the REE junior mining market was a $2 billion industry. Today, REE juniors are a $10 billion+ industry—give or take a one-day market fluctuation, and Streetwise Reports now has a dedicated a newsletter to cover the sector: The Critical Metals Report. Let's look back at how far we have come.

A quick search of media stories from the month of December, 2009 shows 24 clips including references to the 15 lanthanides and their related elements scandium and yttrium. By contrast, one day in December, 2011 produced 56 stories on the same resources. Even the tone of REE coverage has transformed over the years. Two years ago, an analyst piece from veteran metals consultant Jack Lifton titled "Underpriced Rare Earth Metals from China Have Created a Supply Crisis " was a common headline as the world discovered that cheap supplies had left manufacturers vulnerable to a monopoly with an agenda. That supply fear made REE the investment de jour and sent almost all of the rare earth prices through the roof. In December of 2010, the headlines in big outlets like The Motley Fool announced that the "Spot Price of Rare Earth Elements Soar as much as 750% since Jan. 2010."

Reality soon set in as investors realized that this was not a simple supply and demand industry. First, demand was still vague, subject to change and very specific about the type and purity of the product being delivered. Second, the ramp-up period for companies exploring, getting approval for development, mining, processing efficiently and delivering to an end-user was very, very long. Some became discouraged. That is why this year, the consumer finance site, The Daily Markets ran an article with the headline: "Why You Shouldn't Give Up on the Rare Earth Element Minerals" by Gold Stock Trades Newsletter Writer Jeb Handwerger.

Through it all, Streetwise Reports has focused on cutting through the hype to explain what is really driving demand, how the economy and geopolitics shape supplies going forward and which few of the hundreds of companies adding REE to their company descriptions actually had a chance of making a profit.

Back in June of 2009, in an interview titled "The Race to Rare Earths," we ran an interview with Kaiser Research Online Editor John Kaiser that concluded "China's export-based economy, once dependent on American greed, is now but a fading memory. While the U.S. was busy printing and preening, the Chinese were long-range planning. But America wasn't the only country caught off guard by China's strategic, if surreptitious, supply procurement." Even while other analysts were panicking, Kaiser was pointing out how investors could be part of the solution–and make a profit in the process.

"For the juniors, the opportunity right now is to source these projects. They get title to them, and when these end users want to develop them, they're going to have to pay a premium to have these projects developed," Kaiser said. "So it will not be economic logic that results in these companies getting bought out and having their deposits developed. It'll be a strategic logic linked to long-term security-of-supply and redundancy concerns. And we're seeing that sort of psychology at work in this market. It's a bit of a niche in this market. Not as big as gold, but it is an interesting one because of the long-term real economy link implications."

After years of covering the space by interviewing the growing chorus of analysts and newsletter writers singing the praises of rare earth elements, in June of 2011, we launched The Critical Metals Report to give exclusive coverage to the entire space, including rare earth elements, strategic metals and specialty metals. One of the first experts interviewed was Emerging Trends Report Managing Editor Richard Karn in an article called "50 Specialty Metals under Supply Threat." He warned that investing in the space is not as simple as some other mining operations. "The market is just starting to become aware of the difficulty involved with processing these metals, which, in many cases, more closely resemble sophisticated industrial chemistry than traditional onsite brute processing. Putting flow sheets together that process these metals and elements economically is no mean feat."

In this early article, Karn busted the myth that manufacturers would find substitutions, engineer out or use recycled supplies for hard-to-access materials. "The advances we have seen especially in consumer electronics over the last decade and a half have not been driven by lone inventors or college kids tinkering in their parents' garages, but rather by very large, well-equipped and well-staffed research arms of powerful corporations. The stakes are high and if a certain metal is critical in an application, they will buy it regardless of the price," he said.

Similarly, a July 2011 article for The Critical Metals Report featured Energy and Scarcity Editor Byron King sharing "The Real REE Demand Opportunity" driven by the automobile industry and beyond. He was one of the first to point out that not all rare earths are the same with Heavy Rare Earth Elements demanding big premiums.

"Going forward, the serious money will be in HREEs, which have a lot of uses other than EVs," King said. "For example, yttrium is used in high-temperature refractory products. There's no substitute for yttrium. Without it, you can't make the refractory molds needed to make jet-engine turbine blades. If you can't make jet-engine turbine blades, you don't have jet engines or power turbines. The price points for these HREEs will reflect true scarcity and unalterable demand. People will bite the bullet and pay what they have to in order to get the yttrium."

House Mountain Partners Founder Chris Berry also addressed the impact of electric vehicle demand on vanadium, a popular steel alloy strengthener now being used in lithium-ion batteries in the interview "Can Electric Vehicles Drive Vanadium Demand? "

"The use of vanadium in LIBs for EVs is not significant yet, but could eventually become important as the transportation sector electrifies. One of the real challenges surrounding LIBs is settling on the most effective battery chemistry. In other words, what battery chemistry allows for the greatest number of charge recycles, depletes its charge the slowest and allows us to recharge the fastest? Today, based on my research, lithium-vanadium-phosphate batteries appear to offer the highest charge and the fastest recharge cycle. It seems that the lithium-vanadium-phosphate battery holds a great deal of promise, offering a blend of substantial power and reliability. I am watching for advances in battery chemistry here with great interest," Berry said.

In September, Technology Metals Research Founding Principal Jack Lifton shared his insights on why some junior REE companies are prospering while others wither and die. In the article, "Profit from Really Critical Rare Earth Elements," he said: "Rare earth junior miners are now being culled by their inability to raise enough capital to carry their projects forward to a place where either the product produced directly or the value to be gained from the company's development to that point by a buyer can be more profitable than a less risky investment. The majority of the rare earth junior miners do not understand the supply chain through which the critical rare earth metals become industrial or consumer products. Additionally, they do not seem to recognize the value chain issue, which can be stated as 'How far downstream in the supply chain do I need to take my rare earths in order to be able to sell them at a profit?'"

Then Lifton made this important point for Critical Metals Report readers. "It is very important for the small investor to understand that the share market does not directly benefit the listed company unless the company either sells more of its ownership or pledges future production for present, almost always sharply discounted, revenue." As always, Lifton encouraged investors to follow the money to a specific end rather than the general market demand often envisioned by investors accustomed to the more defined gold market.

In October, JF Zhang Associates' Principal Consultant and Chief China Strategist J. Peter Zhang shared his insights on "U.S. Manganese Supply as a Strategic Necessity."

Manganese is now largely used largely in the production of low quality stainless steel, but is being incorporated into lithium-ion batteries. That increased demand is focusing attention on the limited supply outside China. "There really is no electrolytic manganese metals production in the U.S. or anywhere outside China except for a small percentage from South Africa. We don't produce even a single ounce in North America. Relying on other countries to supply essential commodities (like oil for instance) is always a problem. If China suddenly decided to reduce production, or in the likely event that its domestic demand increases, the world would be out of options. Policymakers need to understand this risk and Congress needs to take action to minimize the potential impacts," he said. "From the end of 2008 to 2009, China tied things up. Since then, the price has doubled, tripled and quadrupled. That should be a wakeup call. North America needs to either establish a strategic reserve system for critical metals or build production capacity to mitigate supply risk. I think there is some sense of urgency right now, but a lot more needs to be done."

Picking the right junior is the trick. In the November article "Navigating the Rare Earth Metals Landscape" Technology Metals Research Founding Principal Gareth Hatch outlined the odds. "TMR is tracking well over 390 different rare earth projects at present; I can't see more than 8-10 coming onstream in the next 5-7 years. Projects already well past exploration and into the development and engineering stage, and beyond, clearly have first-mover advantage."

Just this month, in an interview entitled, "The Age of Rare Earth Metals" Jacob Securities Analyst Luisa Moreno compared the impact REEs will have on our daily lives with the transformation in the Bronze Age.

"There is an economic war over the rare earths, with China on one side and other industrialized nations on the other—Japan, the United States and the E.U. China is probably winning. It has decreased exports in the last few years and increased protection. It has attracted a great deal of the downstream business and it is positioning itself well. At this point, it produces most of the world's rare earths, and prices are at record highs. Japan and the other countries have been left with few options, and those options are more expensive, such as substitution, recycling and adapting production lines to use less efficient materials." Moreno then pointed to the seven companies that could come to the world's rescue and usher in a miraculous new world of smaller, stronger, more powerful gadgets based on a steady supply of REE materials from reliable sources.

Macro-economic insights, specific investment ideas and the most current expert advice: That is why we have become critical reading for the REE investor today and will continue to be required reading in 2012. Are you getting the latest information on Critical Metals companies? Sign up here and enjoy a year of TCMR free. You can also hear top experts in the space commenting on the ideal way to start REE investing on our YouTube page.

Want to read more exclusive Critical Metals Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators and learn more about critical metals companies, visit our Critical Metals Report page.

DISCLOSURE:
From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Questions To Ask Prior To Investing In Junior Rare Earth Companies

http://seekingalpha.com/article/313472-questions-to-ask-prior-to-investing-in-junior-rare-earth-companies?source=yahoo

On Wednesday December 7th, Hudson Resources issued a press release announcing the results of the Preliminary Economic Assessment that Wardrop completed on its Sarfartoq rare earth deposit in Greenland. In the press release the company highlights its impressive net present value, internal rate of return, and all the typical measures we have become accustomed to seeing when junior mining companies complete this milestone.

However, when digging beneath the headline numbers, we think investors should walk away from this report concerned as to whether many of the deposits currently being developed by publicly traded junior rare earth mining companies are economically viable. When we refer to economically viable in this sense, we are speaking more to the all important question with junior miners: will the proposed project generate high enough returns to attract the funds necessary to fund mine and facility development CAPEX?

As many of our subscribers would note, our newsletter is very bullish on rare earth element prices in the long term, given that we see new applications for rare earth elements being developed in the next decade. But when investors are putting money into a company with no cash flow producing assets in order to develop a mine and accompanying facilities, they are going to be conservative in their demand assumptions. Better to be suprised positively (and look like a genius) than surprised to the downside (and have angry investors).

For that reason, the Hudson Resources Preliminary Economic Assessment [PEA] raises concerns that rare earth element investors should be watching out for in the coming months. This was the first document in an upcoming wave of milestone reports for junior rare earth mining companies, which will provide significant clarity as to which projects will become producing mines (if any) and which will not be developed. These include: Matamec Exploration PEA on Zeus property (we estimate early January 2012), Ucore Rare Metals PEA on Bokan-Dotson (1Q2012), Tasman Metals PEA on Norra Karr (1Q2012), Rare Element Resources pre-feasibility study on Bear Lodge (1Q2012), Quest Rare Minerals pre-feasibility study on Strange Lake B-Zone (1Q2012).

When looking at the figures in the Hudson Resources PEA, five things stand out immediately:

1) The discount to the basket price of 43% is signifcantly smaller than the 75% discount we hear from industry insiders that concentrate sells for in China . In our discussions with individuals involved in the re-development of the rare earth supply chain outside of China, we have been told that the separation facilities in China purchase concentrate for 25% or less of the end value of the separated oxides. It is possible that given the supply crunch outside of China, concentrate only mining operations will be able to negotiate a smaller discount. Given the current decision by Hudson Resources, just as Matamec Exploration and Tasman Metals are expected (in their upcoming PEA) to only operate in the mining and concentration portion of the rare earth supply chain, we will be carefully observing which reports assign a steep discount when generating the headline results.

2) Despite being primarily presented as a deposit with a very high relative distribution of neodymium, the combined revenue contribution from cerium and lanthanum make up 50.4% of the total revenue. In our opinion, this creates increased financing risk. We do not think investors will attribute any value to cerium and lanthanum revenue for the "third and potentially fourth mine" (or at best, a minimal amount) to be developed outside of China this decade after Mountain Pass and Mt. Weld. In the medium term (2012-2015), the rest of world (ROW) demand for cerium and lanthanum will be primarily supplied by dwindling Chinese exports, and production from Mountain Pass and Mt. Weld. There are even some estimates-- cited all too often by Molycorp (MCP) bears-- that these elements, in particular cerium, could even be in surplus. As a result, incremental cerium or lanthanum production would potentially result in a flooded market, which would cause prices to crash for those respective elements given the current demand projections.

Junior rare earth mining companies raising mine development CAPEX will need to show their projects can generate significant returns for investors putting up the mine development CAPEX with only a minimal or zero revenue contribution from cerium or lanthanum, given current demand projections for those elements and the supply coming online from Mt. Weld and Mountain Pass.

3) When we used domestic Chinese prices from late November (resulting in a 10.31% discount to the basket price), we calculated that the cerium and lanthanum contribution to revenue was only 26.61% of total revenue with neodymium contributing 40.95% of total revenue. Hudson's Sarfartoq resource gets some points in our book for this. In fact, if we only assume revenue from Neodymium, Praseodymium, and Europium at domestic Chinese prices, Hudson would receive 62.4% of the total revenue it receives when we apply current domestic Chinese rare earth oxide prices for all rare earth elements in the Sarfartoq deposit. However, the problem is that-- whether we take that crazy Nd, Pr, and Eu only scenario, or the scenario where we only take out cerium and lanthanum-- the internal rate of return will be significantly impaired.

4) Using the basket price in the PEA, the project has a pre-tax IRR of only 31.17%. Once we take out cerium and lanthanum revenue-- either from the price deck used in the PEA, or domestic Chinese prices-- and adjust for the difference in basket price, we are looking at either a 34% or 50% revenue impairment. We don't yet have access to the full PEA, it will be on SEDAR within 45 days of the press release. As a result, we cannot do a formal sensitivity analysis. However, a back of the envelope analysis using the operating cost per tonne highlighted in the press release tells us that operating income could be impaired by 39-57% if investors do not assign any value to the cerium and lanthanum revenue potential. Assuming a similar degree of impairment to the cash flows, both net present value (pre-tax & pre-finance) and pre-tax IRR are significantly impaired.

5) When Molycorp went public, its business model for Phase I production at Mountain Pass included an after-tax internal rate of return of over 34% (page 75 of S-1). The investing community in the United States knew practically nothing about rare earth elements during the roadshow, as evidenced by the fact that Molycorp priced at $14/share, below the indicated $16-$18/share range. Given that this project went through the ringer that severely-- with an after-tax IRR of over 34% using trailing 3 year average prices ending prior to the second half 2010 export quotas were announced, we see no reason to believe investors will be more forgiving and accept lower returns for rare earth projects with higher cost structures, less downstream integration (Molycorp's business plan incorporated metals and alloys in addition to oxides), assumes higher rare earth prices, and the potential that the project's production will push the market for some specific elements into surplus.

As we look ahead, there are clearly rare earth element specific deficits that still exist, even after Phase I & II of Mt. Weld and Project Phoenix come online. The question we then think investors should ask of each junior rare earth company is this:

If cerium and lanthanum (the two most prevalent rare earth element in every deposit with a potential start date before 2018 and TREO ore grade exceeding 2%) are removed from the revenue stream, can this project provide to investors returns similar or superior to those Molycorp Project Phoenix Phase I offered to investors in its initial public offering?

In the Molycorp IPO, assuming the remainder of Phase I CAPEX was raised at the same share price as the initial public offering, Molycorp raised capital at $14/share, which would have resulted in a net present value of $16.30/share (34% after-tax project IRR) using 3 year trailing average prices at the time of the IPO or $22.54/share (43% after-tax project IRR) using the June 15, 2010 prices (both net present values involved an 8% discount rate). This also did not take into account the potential for the company to scale the Mountain Pass project up to Phase II production if it raised additional capital.

As this wave of NI 43-101 compliant reports are released in the junior rare earth mining sector over the coming months, investors should look past the headlines numbers and ask whether the project can attract the significant capital necessary to fund mine development if investors assign zero value to any revenue contribution from cerium or lanthanum.

The key figures we will be looking for are:

1) The potential for a 30% after-tax IRR at a conservative price deck assuming zero revenue contribution from cerium or lanthanum.

2) Net present value per share greater than the offering price following mine development CAPEX capital raise.

There is a very decent possiblity that none of the publicly traded junior rare earth miners will meet those high standards in the milestone reports scheduled to come out between now and the spring of 2012. We will discuss the consequences of that potential outcome in a future missive.

Disclosure: I am long MCP, QRM, REE.

Additional disclosure: The facts in this newsletter is believed by The Strategist to be accurate, but The Strategist cannot guarantee that they are. Nothing in this newsletter should be taken as a solicitation to purchase or sell securities. These are Mr. Evensen’s opinions and he may be wrong. Principals, Editors, Writers, and Associates of The Strategist may have positions in securities mentioned in this newsletter. You should take this into consideration before acting on any advice given in this newsletter. Investing includes certain risks including potential loss of principal. The commentary of The Strategist does not take into consideration individual investment objectives, consult your own financial adviser before making investment decisions.