China’s Rare Earth Industry’s Big Advantage is not Just in Mines

China’s Real Rare Earth Infrastructure is based on a dedicated, and educated, specifically Experienced, and Skilled rare earth industrial and R&D workforce, financed, where needed, and supported by the State.

There is a debate among Western economists on the value and effect of industrial policies, set by governments, on the marketplace. It’s argued that when governments, instead of the markets, pick winners and losers in industries it never ends well.

China’s admittedly authoritarian central government does exactly that; it defines an industrial policy for the long term, and it picks winners and losers. But, unlike the American government, it does not careen from policy to policy based on the politics of the moment. China’s government’s long-term focus is on the growth of the overall economy, price stability, and domestic social harmony.

I think that it is the issue of price stability that has caused the Chinese central government to step into its domestic rare earth’s industry lately. Stable, or at least predictable, prices allow the long term planning characteristic of the Chinese industrial economy.

Just before Christmas China announced that it had formed a large and state-supported vertically integrated rare earth products’ company called, eponymously, China Rare Earths. This event, a merger of the rare earths operations managed by three mostly state owned and state controlled  companies has been widely reported. What journalists seem to have missed is that this will be a well financed rare earth company from the start. The Peoples’ Bank of China (the PBOC) is the lender of last resort to any State Owned Enterprise (SOE) and if that enterprise is producing anything required by the current industrial policy then profit and loss take a back seat to security of supply. In rare earths, for example, mining and separation are today rarely, and then only barely, profitable especially in any country with strict worker health and safety and environmental management regulations. The profit is in downstream products, metals, alloys, and magnets, phosphors, and catalysts. This is why stand-alone rare earth ventures even with separation capability and capacity, such as Lynas Rare Earths Limited (ASX: LYC), make relatively little profit, while by contrast China’s vertically integrated, and so far, mostly private Shenghe Resources, which is vertically integrated from the mine to the magnet does much better in sales volumes and profits than Lynas.

China’s rare earths industry has had a long learning curve, and this has generated the world’s largest rare earth R&D, rare earth mining, and rare earths production (processing and manufacturing) engineering reservoir of skilled and well-educated individuals dedicated to rare earths, in the world.

China Rare Earths inherits this human infrastructure, and, unlike, an American venture, such as MP Materials Corp. (NYSE: MP), does not go far to seek out specifically educated, experienced, and skilled engineers and workers from outside of the new company.

Each year China has a ruthlessly competitive national exam to determine admissions to its top universities. Last year some 15 million sat for the national exam. The top tier was selected for China’s most prestigious universities. Those chosen were mostly directed to what we call the STEM curricula, (the hard) sciences, technology, engineering and mathematics. This choice of direction is made in accordance with and support of China’s Industrial Policy, of being independent of the West in 10 technologies by 2025, and becoming a permanent center of technological innovation, superior to any other nation.

The United States, where social forces are denigrating college admissions’ qualification through the cancellation of blind testing, and where even mathematics may be branded as “racist” by half-witted college faculty and administrators, is surviving today as the top tier innovation nation through the work of legacy researchers, many of whom are foreign born, and most of whom are already in their peak productive years.

The American military pretends to be surprised by Chinese prowess in modern weaponry, and the American mainstream media simply does not report on China’s astounding space program. Both are described as based on stolen intellectual property by a smug American media. Can they say the same about China’s dominance in rare earths and battery materials and the end-use consumer products mass produced in China based on those groups of metals?

The United States can and will supply its military needs for rare earth and battery metal enabled products from domestic sources or through domestic processing of imported ores, and, perhaps, restrictive tariffs to politically level the price competition.

But such self sufficiency will not be possible for the entire civilian economy. Compromise and rationing are the future of the domestic supplies of technology metals for green energy purposes. The best we can hope for is a hybrid energy supply, green where possible, but mostly from fossil fuels and nuclear, if the US intends to retain a domestic industrial economy.

More than ever now, the domestic production, processing, and fabrication of the critical metals and materials needed for a broadly prosperous technological society is itself critical. Depriving ourselves of STEM graduates to ensure those skills survive chosen is a step towards the national suicide of America’s standard of living.




Critical Materials Corner, Jack Lifton and Byron King discuss the coming War for Green Energy

In this episode of the Critical Materials Corner, Tracy Weslosky is joined by Critical Materials’ industry expert and InvestorIntel Editor-in-Chief, Jack Lifton, and Critical Materials Corner Co-Host & InvestorIntel Columnist, Byron King, to discuss how the world is heading towards an energy crisis as covered in Byron’s recent column published on InvestorIntel titled – Energy Rundown: 2022, A New Year of Living Dangerously.

In this InvestorIntel interview, which may also be viewed on YouTube (click here to subscribe to the InvestorIntel Channel), the panelists discussed how energy security ties in with economic development, and why the world is presently not in a position to reduce its dependence on fossil fuels to zero. They went on to discuss the global push towards green energy and electric vehicles, which has caused a significant increase in prices for critical materials such as lithium, nickel, and the rare earths. Explaining why there is “nothing green about green energy”, the panel also discussed solutions to the impending energy crisis.

To watch the full interview, click here.




In 2022 Neo Lithium Shareholders prospered, and Neo Performance Materials is in the spotlight

Neo Lithium Corp. (TSXV: NLC | OTCQX: NTTHF) was one of the standout performers in 2021 delivering a return to investors of 219%, a 5.35x gain for those investors lucky enough to have bought in at the IPO on July 20, 2016 at C$1.20 per share. Neo Lithium is now trading at C$6.42 with the Zijin Mining takeover offer at C$6.50 a share having recently been approved by Neo Lithium shareholders.

Today’s article gives an update on Neo Lithium and mentions another company that has several things in common with Neo Lithium, meaning it could be the next success story.

Neo Lithium stock price went from C$1.20 at IPO to $6.42

Source: Yahoo Finance

An update on Neo Lithium

As announced on December 10, 2021 Neo Lithium shareholders approved the arrangement effectively selling their shares in Neo Lithium to China’s Zijin Mining Group at C$6.50 a share. 91.42% of shareholder votes were in favour of the transaction. The announcement stated: “Subject to obtaining all required approvals and satisfying all required conditions, the Transaction is expected to close in the first quarter of 2022…..Following closing of the Transaction, the Common Shares will be de-listed from the TSX Venture Exchange.” There is the option for investors to buy into China copper-gold miner Zijin Mining Group (SHA: 601899) (HK: 2899) if they wish to still have exposure to Neo Lithium’s prized 3Q Project, whose Environmental Impact Assessment (EIA) was recently approved by the Catamarca Government in Argentina.

Effectively this ends the story for investors in Neo Lithium. But there is a another ‘Neo’ to consider.

Neo Performance Materials Inc. (TSX: NEO) – The next ‘Neo’

While there is no doubt that Neo Lithium President & CEO, Dr. Waldo Perez, (who also discovered Lithium Americas Cauchari Project) and its CFO, Carlos Vincens, played a huge role in the success of Neo Lithium, there is another person of interest. And that is Neo Lithium Chairman Constantine Karayannopoulos, who served on the Neo Lithium Board from February 9, 2016. He is also the President and Chief Executive Officer of Neo Performance Materials Inc. (TSX: NEO). Neo Performance Materials returned shareholders a 49% gain in 2021 and offers investors a similar early stage (to get in) opportunity, albeit this time in rare earths processing and permanent magnets materials.

For investors who believe success breeds success (as I do), and who look to follow star performers then I suggest you take a closer look at Neo Performance Materials. The Company is unique in the way it is positioning itself as the only non-Chinese processor of rare earth materials into separated rare earth chemicals that are then used internally to produce rare earth fine chemicals, metals, alloys, and “bonded” rare earth permanent magnets. You can read more about Neo Performance Materials in my linked article below.

In the above article global rare earths expert Jack Lifton quotes his view on Neo Performance Materials stating:

“Neo Performance Materials is today, the only Western company that is vertically integrated with the capability and commercial scale capacity to separate the rare earths, manufacture rare earth metals and alloys, and manufacture rare earth permanent magnets. It is the non-Chinese model for any venture seeking to enter or assemble a total rare earths permanent magnet supply chain.”

Neo Performance Materials position in the supply chain for rare earths based products

Source: Neo Performance Materials company presentation

Closing remarks

The story on Neo Lithium is now closing with the successful takeover by Zijin Mining now in its final stages. Investors who were in early, since the IPO, made a very nice 5.35x gain, and in some cases even more if they followed me buying at the 2019 low around C$0.58 (see my article here) and selling recently above C$6.40 for a 11x gain.

Looking ahead I see some similarities between Neo Lithium and Neo Performance Materials. Both have top quality management and Constantine Karayannopoulos is involved in both. Both companies are leaders in their field, noting Neo Lithium in lithium and Neo Performance Materials in rare earths processing and production of valuable rare earth based end products. Finally, both are beneficiaries of the EV boom and the demand for EV related metals such as lithium and the rare earths, NdPr.

They say follow the money and that is true, but better still is to follow successful top tier management, especially if they have the tailwind of a winning trend.

In 2022 we say farewell to Neo Lithium and hello to Neo Performance Materials. It should be another great year for those companies related to the electric vehicle boom.




Search Minerals is coming off a great 2021 but 2022 promises to be even better

Search Minerals Inc. (TSXV: SMY | OTCQB: SHCMF) (Search) stock price rose an impressive 223% in 2021 and looks set for another strong year in 2022.

Search Minerals 2021 in review

There were several reasons for the rise including positive sentiment towards the rare earths miners, particularly those with projects containing the valuable magnet metals Neodymium (Nd), Praseodymium (Pr) and Dysprosium (Dy) used in powerful electric motors. All three rare earth metals prices have been rising strongly the past year on the back of surging demand from electric vehicle manufacturers as we saw EV sales rise about 100% in 2021. Search’s flagship Port Hope Simpson (“PHS”) property has many key rare earth elements including Nd, Pr, Dy, and Tb (Terbium).

Another key factor for Search’s success in 2021 was that management delivered strong progress. This included a non-binding MOU with USA Rare Earth LLC for the future delivery of a rare earth mineral concentrate supply containing 500 tpa of NdPr. The MOU is part of a joint development plan to expand the collaboration to include discussions regarding separation, marketing and offtake of a portion of the future production at Search’s Deep Fox and Foxtrot deposits. During 2021 Search was able to purchase back a 2.5% Net Smelter Royalty (NSR) from B&A Minerals Limited in return for 15 million common shares of Search Minerals, leaving just an outstanding royalty now of 0.5%. Other progress in 2021 included a successful 7,000m drilling program completed at Deep Fox as well as several successful capital raises including the most recent C$15 million and C$5.3 million equity raises. This leaves Search very well-funded to advance its plans in 2022.

Search Minerals has district scale rare earth deposits at Port Hope Simpson (PHS) property (flagship) (includes Foxtrot, Deep Fox, Silver Fox, Awesome Fox, and Fox Meadow deposits)

Source: Search Minerals company presentation

Search Minerals in 2022 and beyond

Q1 2022 should see Search deliver an updated Preliminary Economic Assessment (“PEA”) for the combined Deep Fox and Foxtrot deposits at their PHS Property. It is anticipated that this will potentially be a very significant improvement of the 2016 PEA, which only included the Foxtrot deposit. It resulted in a post-tax NPV10% of C$48 million and post-tax IRR of 16.7% over a 14 year mine life. The initial CapEx was C$152 million, and a further C$57 million in year 8 for the underground stage of the Project.

Search quotes some of the reasons why the 2022 PEA should be better:

  • Increase production rate from 1000 tonnes per day to 2000 tonnes per day
  • Increase recoveries from optimized pilot plant process
  • Increase revenue from higher grades at Deep Fox
  • Extend mine life with material from both Deep Fox and Foxtrot for a central processing facility
  • Decrease costs with reduced capital and operating costs
  • Upward trending price escalations for permanent magnet material.

In Q2, 2022, Search plans to submit an updated Environmental Impact statement based on the updated PEA.

In Q3 and Q4, 2022 Search will continue to drill Deep Fox to potentially further grow the Resource as well as drill Fox Meadow and Silver Fox and commence a Bankable Feasibility Study (BFS).

All going well Search hopes to make a Final Investment Decision (FID) in 2023 and commence production in 2025.

Search Minerals 2022 catalysts

Source: Search Minerals company presentation

More about Search Minerals

Search Minerals Inc. is an emerging rare earths developer with three properties in Labrador, Canada. The three are:

  • The Port Hope Simpson (“PHS”) property (flagship) – Includes Foxtrot, Deep Fox, Silver Fox, Awesome Fox, and Fox Meadow deposits. PEA due in Q1 2022.
  • The Henley Harbour Area in Southern Labrador.
  • The Red Wine Complex located in Central Labrador.

Closing remarks

Search Minerals is coming off a great 2021 but 2022 promises to be even better. Certainly, it looks like Search can deliver an impressive 2022 PEA at PHS, given that the project economics will have potentially improved significantly. The PHS Project also has significant exploration upside and potential to further grow the Resource in 2022.

Search Minerals trades on a market cap of C$74 million. The next 3-4 years could be game changing for Search Minerals, if they can make it to production in 2025, or 2026.




Critical materials frontrunner ASM closes out 2021 with a pre-tax NPV of AUD$2.36 billion

Australian Strategic Materials Ltd. (ASX: ASM) management team closed out 2021 with a measurable project and corporate successes. Most significantly, in December 2021, the company updated the 2018 Dubbo Project Optimization Study. The updated study released in early December 2021, supports a 20-year mine life based on existing ore reserves, with Measured and Inferred mineral resources, (which have the potential to extend the mine life) being excluded for this study. The economics are robust – pre-tax NPV of AUD$2.36 billion and a pre-tax IRR of 23.5%. This is 6% higher than the previous study done in 2018 and is measurably significant.

The Dubbo Project is based on the Toongi deposit in southeastern Australia (New South Wales), which contains rare earths, zirconium, niobium and hafnium and reserves that support a project life of 20 years and resources that may support a much longer mine life. Importantly, on July 21, 2021, the company announced a new 20% partner for Dubbo development, the receipt of US$250 million from a consortium of South Korean investors, and a buyer for product from its Korean Metals plant in South Korea, which saw partial commissioning for the neodymium metal production furnace system last year with additional commissioning to follow this year and full scale production expected in the second half of 2022.

The Dubbo Project is ready for construction with all major state and federal approvals and licenses in place, along with a proven process flow sheet and solid project economics. Management has appointed Australian and New Zealand Banking Group Limited (ANZ) as debt financial advisor to assist in engaging with Australian and South Korean export finance agencies as part of the financing of the Dubbo Project.

The company has a “mines to metal” strategy and has executed on that in the past year. The company is nearing completion of the Korean Metals Plant (KMP) in South Korea and, as previously announced, as part of the framework agreement with the investors, a new and separate consortium will be established to develop a permanent magnet manufacturing business in South Korea (MagnetCo Fund).

Not to be outdone by the calendar, in mid-December the company announced the signing of a Joint Statement of Cooperation. ASM and KOMIR, the Korea Mine Rehabilitation and Mineral Resources Corp., have agreed to work together to expand the use of rare earths and critical metals in Korea and develop import opportunities that will secure the supply of these metals for Korean industry. While this is a lot of press-release-speak, it means that ASM has a deal to supply an alternative, secure and sustainable supply of critical metals to South Korea. ASM will commence production of critical metals at ASM’s Korean Metals Plant in 2022.

In Summary:

  • Dubbo Mine – fully permitted, updated optimization study, now funded and partnered. Have a feedstock purchaser in KMP for rare earths.
  • Metallization plant – under construction in South Korea. Partially commissioned in 2021 and expected to be fully operational this year.
  • Magnet producer – to be constructed, partnership established.

Or as keen observers of the Australian Open tennis tournament would observe “Game, Set and Match”.




Circling the theory of an EV revolution, Lifton takes on the ‘dumbest assumption of the greens’

The “law” of supply and demand is in reality an academic ideal “model” that only works in a prescribed universe in which both demand and supply have no limits. In the real world, the model fails when it is applied to the finite supply of natural resources of this planet.

Case in point: The demand for lithium expressed as the necessary amount of this natural resource to accomplish the transformation of the motor transportation industry from the utilization of fossil fuels for motive power by internal combustion engines (ICE) to storage battery fueled electric motors (BEVs) is not possible, due to the limitations of lithium separation from the Earth’s lithosphere (crust) by man-made operations that are economically palatable to our civilization. The so-called green new deal is ridiculously expensive; it would require that all of our focus be on destroying the society that cheap energy has bestowed upon the world and making the current broadly shared consumer driven economies impossible of continuation, and close off any additions to consumer economies from Africa, most of India, and South America. The dumbest assumption of the greens is that there is an infinite supply of money to be used to achieve an unlimited supply of resources that would be needed to meet their mandated demands to turn the global energy economy “green.”

The only way that an EV “transformation” could take place with the resources that are accessible to us would be if the current internal combustion engine motive power of land and sea transport were replaced by a hybrid system of combined internal combustion and battery electric power. This would conserve both types of motive fuels, fossil based for internal combustion and stored electricity produced by fossil, nuclear, and alternate (wind, solar, and hydro) fuels, by utilizing them in the most efficient way. The idealization of personal transportation would also require the end of consumer choice and its replacement by durable, commodity, easily maintained and repaired, recyclable vehicles with long use-lives. This, in fact, was the “ideal” that Soviet Russian communism was supposed to attain. It didn’t work although it was mandated by the State and put into proto-practice across the Soviet empire. It was maintained only by fiat and fear. As soon as the Soviet experiment failed Western consumer choice driven cars rapidly replaced the dull, inefficient, poorly designed and made Yugos, Trabants, Lada’s and Dacia’s of the Soviet communist experiment.

The Chinese Communist Party has for the last twenty-five years embarked on a re-modeled approach to achieving communism, which has resulted in a system based on first using market capitalism to offer choices to rapidly improve the lifestyles and standard of living of China’s people to be followed by a leveling of the inequality of income that inevitably follows when substantial private ownership of the means of production is allowed, by re-asserting the right of the state to control the markets for the products that capitalism has shown that the people want as a measure of a contented life.

The Chinese model of using capitalism with Chinese characteristics to bring about socialism with Chinese characteristics in order to bring about a society based on communism with Chinese characteristics is a work in progress.

Western thinkers believe that the intentionally chaotic system of modified free market capitalism used in the United States and Europe by their mostly republican, democratically elected, governments, is the “ideal model.”

Chinese rulers, elected by only a minority of the population, the members of the Chinese Communist Party, believe that their state managed economics with Chinese characteristics is the right model for the development of a Chinese Communist State, and express their beliefs in planning mandated long term industrial policies.

The Chinese don’t seem to want to bring Marxism with Chinese Characteristics to the world, by force, anyway, as the Soviets did. They are remodeling their own nation as a closed system using the outside world only to perfect and maintain that closed system.

It remains to be seen if the Western model of innovation through disruptive technologies will continue in the face of a green new deal that will exacerbate inequality and destroy the middle class which has allowed modern Americans to enjoy the highest standard of living in history.

I think that the chaotic disruption of the OEM automotive industry based on a false premise of an infinite resource supply to meet a mandated demand will fail and could bring about an accelerating decline in lifestyle, quality of life, and America’s standard of living.

For what purpose? Oh yeah. To save the world.

As an infamous American officer said during a meaningless war, “We had to destroy the village to save it.”

In the near term buy into the hard to produce battery and electric motor metals, primarily lithium and the rare earths, and those companies that have found accessible deposits of any and all of them. Even if I’m wrong and there is an EV transformation it will take a very long time, and it will require for many years more lithium and rare earths annually than have ever been produced annually before.

Finally, be on the lookout for economically efficient new and newly applied process technology. It’s the only thing that could get us through the coming grade deflation as the best deposits are high graded out.




Targeting next generation silicon anode materials NEO Battery Materials up 387.5% in 2021

2021 will be remembered as the year that the western world woke up to the electric vehicle (EV) boom, especially boosted by the fact that global electric car sales look set to finish up about 100% YoY. So what will 2022 bring? I previously wrote here my top 3 stock picks for 2022 and here are my top 5 graphite miners to watch in 2022; but today’s company looks set to benefit from a little-known trend in the EV world.

That trend is the increasing use of silicon in battery anodes to boost battery performance, especially charging speed and energy density (range). This is because when a battery charges the rate of charge depends on how quickly the ‘anode’ can absorb or fill up with electrons. By adding silicon into the graphite anode it is better able to absorb more electrons and therefore the battery has better capacity. Companies continue to work on some of the challenges of silicon in anodes which include swelling, cracking and lower cycle life.

NEO Battery Materials is making progress in developing better silicon anode materials

Source

Today we look at NEO Battery Materials Ltd. (TSXV: NBM | OTCQB: NBMFF) (“NEO”) whose stock price rose 387.5% on the TSXV in 2021. NEO is a Canadian battery materials company with a current focus on developing silicon anode materials through an ion-and electron-conductive polymer nanocoating technology.

Looking back on 2021, NEO had a strong year (company highlights here) especially in building up both their technology and their team. You can read some more on that in my last article: Making lithium-ion battery components more durable and efficient to improve battery capacity. In that article, I discussed how NEO’s ‘pure’ silicon anode materials were already achieving much higher cycle-life than competitors (NEO is achieving 1,000 cycles) with the main benefit of silicon material in anodes being greater energy density and charging speeds. Conventional lithium-ion batteries with graphite anodes have a cycle life of between 2,000 and 5,000+ cycles.

It should be noted that there is today a growing market for silicon anode materials to be used as an additional material combined with a conventional graphite anode to boost performance. Tesla is one of many that use silicon-graphite anodes.

In recent months NEO has made further progress as shown by three recent significant announcements:

Within the three announcements above the key progress for NEO is the launch of 3 types of silicon (“Si”) anode active materials (NBMSiDE-P100, NBMSiDE-P200, and NBMSiDE-C100), and the fact that NEO is on schedule for semi-commercial scale production of these materials by the end of 2022. Regarding the 3 silicon anode materials NEO stated:

“The three types of products are manufactured through NEO’s proprietary nanocoating technology and are based on metallurgical-grade silicon with purities of at least 99.95%…..NEO’s technology significantly improves the life span and cycling stability compared to conventional metallurgical silicon-based particles.”

NEO President and CEO, Spencer Huh, stated: “We are very glad to bring the 3 types of silicon anode active prototypes to the market as a result of valuable research and development for the past 7 years. All our business developments are aligned with our plans and strategy, and we have complete confidence in pushing towards the semi-commercial plant facility in South Korea. NEO is positioning itself as a low-cost, robust Si anode materials supplier for electric vehicle lithium-ion batteries, and we are set to provide long-term value for all stakeholders.

Note: Bold emphasis by the author.

The Company also stated: “NEO is expediting the process of developing its 100% pure silicon anode based on CNT (carbon nanotube) conductive additives and new robust binder technologies, and is currently conducting research and progressing commercialization projects regarding the graphite/silicon composite anode through active collaboration with companies that have signed NDAs……..Our process that effectively reduces the cost of Si anode production will act as a stark point of differentiation compared to existing and potential competitors.”

NEO recently launched 3 types of silicon anode active materials (NBMSiDE-P100, NBMSiDE-P200, NBMSiDE-C100) 

Source: NEO Battery Materials announcement on December 6, 2021

Also of significance is that NEO has established and built its R&D Scale-Up Centre at the Yonsei University of South Korea through NEO Battery Materials Korea Co., Ltd., a wholly-owned subsidiary of the Company. NEO believes that this R&D center “could speed up further development of additional NBMSiDE pipelines of silicon anode active materials.”

Closing remarks

NEO is at the leading edge in developing lower cost silicon anode active materials and recently launched 3 new silicon anode materials products with another 2 to follow soon. Usually, once product samples are released it often leads to off-take agreements. Planned semi-commercial scale production of these materials by the end of 2022 offers a strong potential catalyst for investors.

NEO Battery Materials trades on market cap of C$34 million and is definitely a stock to watch closely in 2022.