EDITOR: | August 3rd, 2016 | 17 Comments

Chinese show confidence in Northern Minerals — and dysprosium

| August 03, 2016 | 17 Comments
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One month we hear that Honda is engineering heavy rare earths out of engines for its hybrid cars, which made all the headlines — fortunately InvestorIntel Senior Editor Jack Lifton was ably to see through what he called a “craftily” written press release and pointed out that this applied to hybrid engines (a transitory, interim technology), not those in electric vehicles. Moreover, Jack added, “Honda does not want the electrification of cars, if it ever happens, to happen soon, because it has a huge investment in the design and manufacturing of internal combustion engines”.

A few weeks later (on Tuesday August 2, to be precise) a Chinese company decided to invest A$30 million in an Australian project that will be producing one of those heavy HREE, namely dysprosium — which handily reminds us of all those reports in recent years forecasting that China would be facing a heavy rare earth crunch in coming years.

The news this week that Huatai Mining will take up new equity worth A$30 million in Northern Minerals (ASX: NTU) received surprisingly little attention in Australia’s financial media. This is particularly astonishing since it was a further signal that interest is beginning to flow back into the rare earths sector. This week saw we saw not just the promise of A$30 million for an emerging REE player but, on the news, NTU shares jumped by 30.8% — both the size of the raising and the market response being trends you’re more likely to find in the lithium space these days.

Also, we have seen Lynas Corp. (ASX: LYC) complete its ramp-up to full capacity, a good boost to the share price for Arafura Resources (ASX: ARU) and a recent steady improvement in the share price for Hastings Technology Metals (ASX: HAS) after it earlier this year raised A$9.6 million at a premium to its then share price.

For those who have not caught up with the NTU development, Huatai is a subsidiary of Shandong Taizhong Energy Co, a private company that acts as an intermediary between suppliers and end users of coal. Another arm, Taizhong Energy was established to secure coal assets in Australia.

But now Taizhong is following a new strategy of diversying into strategic metals — and Shandong’s move into Northern Minerals is part of that strategy. Once the transaction has been completed, China-associated interests will hold 58% of Northern Minerals; Huatai will own 31% and the Australian Conglin International Investment Group another 27%. Australian Conglin has been a long-time shareholder in another Australian-listed rare earth explorer, Orion Metals (ASX: ORM) but there have been board changes last month after 57.95% of the company was taken up by Excellence Holdings (Hong Kong) Ltd.

While picking up the Wall Street Journal report and running hard with the Honda story this week, The Asahi Shimbun makes this point: “Neodymium magnets, used in drive motors for hybrid vehicles, lose their magnetic force under high temperatures. A heavy rare earth element such as dysprosium is often added to compensate for a lack of heat resistance”.

For the moment, I’ll put my money on Jack Lifton being correct. Which means we can all remain relaxed about the magnets-dysprosium story.

Northern Minerals recently produced some facts on EVs: that the German government and automakers have committed to spend €1.2 billion on electric vehicle production; China is targeting having five million hybrid and electric vehicles on the road by 2020. I would add the point that Chinese automakers have access to dysprosium for magnets; by contrast, as Jack pointed out, Honda has no REE supply chain on which it can depend.

Northern Mineral’s Browns Range project in Australia has dysprosium making up 60% of its valuation, with neodymium-praseodymium contributing 2.5% and terbium 11%. The company quoted forecasts that dysprosium prices are expected to double to $400/kg within 12 months.

As the presentation also notes, dysprosium is critical in high-end permanent magnets, and for which there are limited substitutes. It allows optimal performance at high temperatures; EV and hybrid vehicles require between 2kg and 10kg per car, standard vehicles 1kg and wind turbines 550 kg per megawatt.

In the end, though, you only have to ask yourself one question: would Huatai be parting with $30 million if it did not see a secure future for dysprosium demand?


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Comments

  • Tracy Weslosky

    Bravo Robin — and Jack, you too! On staying on top of a complex story that many of the major media outlets cannot even keep up with! The electric vehicle market needs HREEs….we need HREEs for global marketplace advancement of many technologies, and appreciate that you have been a global leader in covering this story! Thank you.

    August 3, 2016 - 9:19 AM

  • HC

    “In the end, though, you only have to ask yourself one question: would Huatai be parting with $30 million if it did not see a secure future for dysprosium demand?”

    Considering Huatai and its parent company have absolutely no experience or expertise in the REE sector, I would be very sceptical about this funding deal.
    The last funding deal with Jien Mining, an Australian subsidiary of a Chinese nickel company, fell through.

    DyO price currently US$185/Kg FOB, and considering stage 1 of NTU business plan is based on the companies DFS, which relies on REO prices at >3x current prices to be anywhere near viable, I assume the pilot plant will be a loss making exercise if DyO prices do not reach levels outlined in the companies DFS.

    I see no SH value in this deal IMO.

    August 3, 2016 - 9:11 PM

  • Tim Ainsworth

    So Robin, Daido & Honda are both totally misleading customers, share holders & the general public with published data for the sake of a RE conspiracy?

    And you base your conclusion purely on opinion, and expect credibility?

    Why not challenge Daido & Honda directly with your accusation, and publish their response here?

    August 4, 2016 - 10:13 AM

  • ann bridges

    Even I have a hard time keeping the players straight these days! I echo Tracy’s comment and bravo. My take is that the media only notices stories that continue the accepted narrative–partly so they can vet the facts by simply linking to the previous piece rather than having to source new facts, partly so they don’t have to understand these complexities. After all, most writers avoided these science classes during their school years (me included). So Honda’s PR engine is exactly the story they want to hear–no worries, some brilliant mind has a solution, we’ll meet somewhere over the rainbow.

    August 4, 2016 - 10:23 AM

  • Tracy Weslosky

    Perhaps getting your book “RARE METTLE” made into a film Ann would get the mainstream public’s attention for what is a REAL challenge for both sustainability and the output of competitive EVs. We n-e-e-d ROW sources of HREEs and where’s Dudley when we need him?

    August 4, 2016 - 3:13 PM

  • Nick

    Tim, has it ever dawned on you that not having a non-Chinese based supplier of Dy and Tb is holding Lynas back from expanding the market for Nd/Pr

    there are applications which do not require Dy or Tb – fact

    and there are applications that HAVE to have it – fact

    Lynas sells it Nd/Pr to the Japanese, who are putting Nd/Pr into applications which also require Dy. Then the Japanese have to go “on their hands and knees” to the Chinese to source the Dy

    Not having a non-Chinese based supplier of Dy must be holding back sales of Nd/Pr and must be restricting the Nd/Pr market from expanding

    That I believe is one of the reasons we have seen Lynas make mention of Dy and Tb in it’s last 2 quarterly activity reports

    this is from Lynas March 2016 quarterly activities report:-
    Lynas is immediately ceasing sales of its mixed Heavy Rare Earths material (SEG).Included in the SEG are significant amounts of Dysprosium (Dy) and Terbium (Tb), materials which are important in the production of electric vehicles and wind turbines, both significant growth areas. By stockpiling this material now, Lynas is confident of capturing upside value as demand grows in the future.

    and this from Lynas June 2016 quarterly activities report:-
    Dysprosium and Terbium price variations are mainly driven by speculation, as those elements remain important components of permanent magnets, especially for environmentally-friendly motor vehicles and high power density wind turbines. End use demand for Dysprosium and Terbium is increasing, and production from ionic clay deposits in Southern China continues to create environmental concerns. These factors influenced Lynas’ decision to stockpile SEG, with the aim of capturing upside value as demand grows in the future.

    the important thing is that those running Lynas finally get it – perhaps they have received feedback direct from those they sell their Nd/Pr to, hence the mention on Dy and Tb in the last two quarterly activity reports

    Given the above I expect Japanese company Shin-Etsu Chemical Co., Ltd (Shin-Etsu) to emerge with a binding off take agreement (converting their MOU) to secure a non-Chinese for supply of Dy and Tb, as Northern Minerals moves into production

    August 4, 2016 - 10:56 PM

  • Alex

    Japanese has joint venture with Kazakstan for Dy concentrate
    So, they have not Chinese sourse of Dy
    http://www.kazatomprom.kz/ru/#!/company/10

    August 5, 2016 - 1:13 AM

  • HC

    Nick
    I don’t think Lynas is too fussed about the sale of its mixed HRE material. It’s not a big earner for the company so if they don’t need to sell it, why bother? Especially if HREE demand and prices are so low.
    If demand and prices increase in the future, they can start selling it again. If not, well obviously the business is not reliant on selling mixed HRE material.

    If Dy was so important to demand of Nd/Pr why would Lynas stop selling it? As the Lynas announcement states, it’s mixed HRE material contains significant amounts of Dy. The Japanese companies do not need to “go on there hands and knees” to China.
    In fact its a complete contradiction to what your suggesting tbh.

    August 5, 2016 - 6:18 AM

  • Tim Ainsworth

    So, let’s take a look at Chinese DyO exports YTD May, a period where ROW NdFeB demand would appear to be running circa +20%.

    Total exports: 30.76t
    Total value: $8.84M
    Japanese imports: 11t
    Nth American imports: nil

    If you annualise those:

    Total year exports: 73t
    Total value: $21M
    Japanese imports: 23t
    Nth American imports: still nil

    Take that data to your financier and tell them you need a few hundred million because ROW desperately needs DyO.

    Read that refrain here constantly for years “ROW desperately needs HRE/DyO” but rarely if ever any substance as to exactly who, or why.

    So Who? Where? & Why?

    Frankly it’s an upstream concoction that bears little relationship to what the magnet manufacturers have been saying, incl now the Chinese (who are sitting on a pile of Dy) or the end users, such as Siemens, Nissan, Ford, GM & now Honda.

    Simple fact is Magnequench have not used DyO in any of their magnetic powders for several years when the last 1999 formulation was deleted.

    “However, bonded Nd-Fe-B magnets do not rely on Dy and offer equivalent performance to sintered Nd-Fe-B magnets for certain applications operating up to 180°C.”

    mqitechnology.com/dy-free-solution.jsp

    “The hot deformation method is a technology that enables nanometer-scale crystal grains to be well-aligned in order to realize a fine crystal grain structure that is approximately ten times smaller than that of a sintered magnet, which makes it possible to produce magnets with greater heat resistance properties.”

    daido.co.jp/en/event/160712_freemag_hevmotor.html

    “Honda designed a new motor which accommodates this new magnet. In addition to the shape of the magnet, Honda revised the shape of the rotor to optimize the flow of the magnetic flux of the magnet. As a result, the hot deformed neodymium magnet that contains absolutely no heavy rare earth became usable for the drive motor of a hybrid vehicle, demonstrating torque, output and heat resistance performance equivalent to those of a motor that uses the conventional type of magnet.”

    world.honda.com/news/2016/4160712eng.html

    Simply dismissing this global ROW effort to overcome the tyranny of Dy/HRE simply because it doesn’t suit a bottom up POV is frankly churlish.

    Dy/HRE will obviously remain in demand, but not “desperately”, likely to be met by incremental by-product such as Lynas’ (when its value justifies seperation) and the various waste stream processes currently in development, such as MDL.

    August 7, 2016 - 6:07 AM

  • Jack Lifton

    Tim,

    What’s “MDL”?

    Jack

    August 7, 2016 - 10:15 AM

  • investor

    Tim,
    We missed you.

    August 7, 2016 - 11:37 PM

  • Tony

    Jack

    I believe he is referring to:-

    Medallion Resources Ltd. TSXV: MDL

    August 8, 2016 - 5:40 PM

  • Bill

    HI Tracy, it would be good if you can get George Bauk back for an interview / update given the recent funding transaction and the new investor agreeing to pay a 90% premium to get set.

    Also with all the debate around new technologies like MRT I would be interested to know if MRT is something Northern Minerals have considered or are considering.

    August 24, 2016 - 7:25 AM

  • Bill

    Tracy, when are you going to interview George Bauk from Northern Minerals – an update on their progress would be appreciated

    September 19, 2016 - 1:26 PM

    • Tracy Weslosky

      It’s timely that you sent me this comment Bill….I spoke with George last night about this very item…..figure a few weeks maximum.

      September 19, 2016 - 1:33 PM

  • MetalHead

    Hi, I have a question: I read a lot about individual stocks. However, I am wondering about the “big picture”, the big “reset” and the possibility that metals will be a part of the new upcoming world currency system, a system that is backed up by real value, which the USD is NOT! America took us of the Gold Standerd, China and Russia want us back on, they don’t want anymore USD, which is understandable, the US just prints them… Since 2008, China decided enough is enough. They saw their trillions of USD loose value because the US just keeps printing. My question is: is there any possiblility that besides gold, maybe silver, other metals and even rare earth metals may have another bull run, when the public starts to understand that the “dollar”-world as we all know it, is going to change? I believe that all the metals are going to have the biggest run ever. Rare earth stock are now bargains. Can you do an article on this subject: “Gold Standard”, the “Big Reset”, a book by Willem Middelkoop. I believe that this event is too important not to explain to your investors. It will have a huge impact!

    September 19, 2016 - 4:53 PM

  • Chris

    Hi Tracy
    Just wondering when the GB interview or NTU up date can be expected.
    Thanks

    October 10, 2016 - 8:04 PM

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