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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Rare Earths Industry Expanding Outside China’s Borders

Commodities / Metals & Mining May 03, 2012 - 12:53 AM GMT

By: Anthony_David


Best Financial Markets Analysis ArticleColorado based Molycorp Inc. is one of the few non-Chinese mining companies develop-ing rare earth metal mines. The company’s shares shot up by over 7% when it announced that its Mountain Pass rare earth mine in California contained at least 36% more proven or probable reserves than earlier estimated. The deposit is now estimated to contain about 2.94 billion pounds of rare earth oxide equivalent, an amount that is about 11 times the existing annual global demand of 120,000 tons. The number could rise further with progress in drilling.

Molycorp sold 3,050 tons of rare earth equivalents in 2011—most of which was from existing stocks, and hopes to successfully reach its Phase 1 annual target of 19,050 tons by the end of Q3 this year. Phase 2 of the expansion project is expected to be completed by the end of 2012 and increase production capacity to 40,000 tons per year.

Meanwhile, Molycorp is all set to purchase Toronto based Neo Material Technologies in a cash and share deal that will grant Molycorp access to the advanced rare earth processing abilities and patents of Neo. CEO Mark Smith of Molycorp said, “We are putting those two together (Molycorp’s massive production capacity and Neo’s abilities) and forming the best full supply chain capability known in the industry.” Commenting on the timing of the deal, he said, “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.”

The Molycorp-Neo deal is very significant since Neo owns facilities in China, Germany, Thailand and North America and it will give Molycorp a foothold in China, the world’s largest consumer of rare earth metals. Australia’s Lynas Corporation Limited is Molycorp’s closest competitor but the company has been facing several permitting delays with its Lynas Advanced Materials Plant (LAMP) being set up at Pahang in Malaysia. However, the project has made progress on many other fronts. A temporary license was secured in February 2012 and at that time, construction was 96% complete, pre-commissioning test packs were 60% complete, and customer contracts for each type of product and market segment had been signed. The project is expected to be ready as per schedule for the first feed to kiln and for first production by Q2 this year.

Meanwhile, the company’s Mount Weld Concentration Plant in Western Australia is operating normally. The company’s Central Lanthanide Deposit (CLD) contains about 15 million tons of resources with about 1.5 million tons of contained rare earth oxides (REO). Feed to the plant was initiated in May 2011. The production rate of the plant will be synchronized with LAMP in Malaysia, which will refine the concentrates from Mount Weld. Lynas’ Duncan deposit is not far from the CLD and has a current reserve of 2.08 million tons with 15.5% REO. Metallurgical test work is currently underway at the site to check if the rare earths can be extracted economically.

Canada’s Montreal based Quest Rare Minerals Ltd. claims that once its project at the Strange Lake Deposit in Northern Quebec begins operations, it will be able to meet at least 10% of the global light rare earths demand and 30% of the heavy ones. Quest aims to largely produce heavy rare earths. Chief executive officer Peter Cashin recently said, “It’s a large resource that obviously will be able to deliver and satisfy a long-term shortfall.”

Quest expects to be ready to produce 15,000 tons per year of rare element oxides by 2016. A prefeasibility study is currently underway and is scheduled to be ready by the end of 2012. The feasibility report after that is slated for a Q3 2013 completion. Cashin said that the company is in discussion with possible customers in the US, Western Europe and Asia and once the prefeasibility report is ready, Quest is likely to release customer names.

Canada’s Saskatoon based Great Western Minerals Group Ltd. (GWMG) is another non-Chinese rare earth producer with ambitious plans. It currently holds five exploration projects located at Steenkampskraal, Red Wine, Hoidas Lake, Douglas River and Benjamin River.

The Steenkampskraal mine contains some of the richest grades of rare earths. It was abandoned in 1963 and contains a significant amount of radioactive waste because of the presence of thorium. The company aims to reopen the mine as soon as possible in spite of the risks involved during the process. Earlier this month, the company reported satisfactory progress with the mine refurbishment while a technical report preparation is currently underway.

GWMG raised $90 million through a bond offering and plans to use the funds to complete a Canadian National Instrument 43-101-compliant technical report and to develop the project. Assay results have revealed the presence of a higher concentration of REOs compared to other mines. Contracts to set up a mixed-chloride facility and separations plant have already been signed. Power supply facilities and mine design work are next on the company’s agenda.

There are several other companies vying to get ahead and become the first large-scale non-China based rare earth producer but as Jon Hykawy, an analyst with Byron Capital Markets in Toronto said, “There is room for maybe four or five heavy-rare-earth companies out there, producing up to the 5,000 to 10,000 tons per year level.”

By Anthony David

The mission of the Critical Strategic Metals Web Site

is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course. Each month we will research and provide, in as short and concise a manner as possible, the most applicable information available on resources that will have the biggest impact on our day to day lives. Click here to sign-up for our FREE monthly report.

© 2012 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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