Uranium Stocks go wild: Northern Minerals releases dramatic news on heavy rare earth projects
We saw an unusual occurrence on the Australian Securities Exchange this week. The Japanese hinted they might restart their nuclear reactors — something that was not exactly “hold the front page” sort of stuff, as anyone who follows the nuclear story in Japan expects this will have to happen at some stage — and uranium stocks went wild, with individual shares rising; Deep Yellow was up 50%, Aura Energy 26%, Paladin Energy up 23%. That was news that wasn’t news. As Warwick Grigor at Canaccord Genuity noted, “anyone with an ounce of common sense knows that Japan will continue with nuclear power … it can’t keep spending 30% of its import bills on hydrocarbons”. Many analysts who follow the uranium story think along the same lines.
Then we had Northern Minerals (ASX:NTU) with some dramatic news on its heavy rare earths (HREE) projects, and saying it would be in production within two years. The rise on Wednesday in NTU stock was just 5.88%, but then the shares fell back by 2.78% on Thursday.
The bottom line: the rare earth story has a lot of convincing to do when it comes to winning back investor confidence (although NTU shares had risen 17.2% last Friday on no news). They now stand at A17.5c compared with their 2011 high of A$1.08. Yet, as outlined below, it seems that the HREE story is getting better but few are listening.
The Northern Minerals news should have evoked a more positive reaction. At its Brown Range project, there was a doubling of the total resource at the Wolverine deposit. The rare earth resource at the Browns Range project now stands at 47,997 tonnes of total rare earth oxides. The company says the resource remains dominated by what it describes as high-value dysprosium and yttrium and 84% of the TREO is comprised of HREE. Moreover 66% of the resource has now moved from the inferred to indicated category, which gives a great deal more confidence.
This is a 71% increased in contained tonnes since October. And, presumably as a result of financing brought into the company by 45.5% shareholder, Conglin Yue and his Chinese connections, the drilling programs in 2013 have resulted in a 350%, or 37,497 tonnes of contained TREO, increase. That is an extraordinary achievement, and suggests how the whole non-China rare earth complex could have made much more progress by now if that the level of financing had been available to more companies.
Wolverine is clearly the key. Of the 47,997 tonne resource, 38,269 tonnes is contained in this area. Gambit West contains 4,177 tonnes, Gambit 1,204 tonnes, and Area 5 has 4,347 tonnes. But, while not uniform across all the four areas, the HREE content is high. Crucially, at Wolverine it is 88%. At Gambit it comes in at 96%, Gambit West 89% and the lowest is Area 5 at 69% — and even that last grade would be one that many an REE explorer would be very pleased to report.
But, while much of the comment so far has concentrated on details of the announcement and disputes about how valuable yttrium is, this suggests that the wood cannot be seen for the trees.
Northern Minerals’ accompanying presentation has some interesting points to make:
- HREE suppliers are reporting upward pressure on pricing.
- HREE prices are proving resilient and are above their pre-2010 levels (which you can’t say about uranium).
- With Lynas and Molycorp shifting to the production phase, the LREE supply issue is now seen as resolved, with the focus moving to HREE availability.
- The Chinese government is stockpiling HREE while prices are low.
- The shortcomings of illegal mining are becoming apparent — there’s a glut of unmarketable product in Europe.
- Industry consolidation is ongoing in China, creating an import market in that country for non-integrated producers of HREE.
- Off-take clients are demanding a lower cost base in line with Chinese producers. Northern Minerals maintains this is possible only with REE in xenotime.
Now, all we have to do get is to get investors to understand the bigger picture.
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