EDITOR: | November 11th, 2013 | 10 Comments

2014 needs to be a good year for the rare earth industry

| November 11, 2013 | 10 Comments
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rbartree1InvestorIntel publisher Tracy Weslosky posed a very good question on this website yesterday: how long can we expect the rare earth downtrend to continue?

It occurred to me that the answer might be: it all depends what happens in 2014. Yes, I know, that is a rather obvious statement to make; but I was not just being a smart-aleck. My point is that, I fear, too little will happen in 2014, and that lack of progress across the rare earth complex will further discourage investors in REE companies. Let me define that point further: of course, a great deal will happen over the coming year but much of that will be progress towards a goal rather than the goal itself being reached. That goal is construction or, better still, the successful beginning of production (the word successful, in terms of delivery on time and tonnages, being the operative word).

Will there be a new rare earth project brought into operation in 2014? Even those that seemed to be close a few years ago have struck road blocks. Stans Energy might now have been close to producing much needed heavy rare earths if it had not been for problems with the government of Kyrzgystan. Stans Energy is at least continuing with the preparation work with the processing plant which is not caught up with the mining licence issue. Months of arbitration still lie ahead.

The year 2016 seems like a bumper year for non-China HREE producers. By then, according to the British commodity consultancy Roskill, the heavies should be being produced by Alkane in Australia, Avalon, Matamec and Quest Rare Minerals in Canada, Tasman Metals in Sweden, Ucore Rare Metals in the U.S., Northern Minerals in Australia and Tanbreeze in Greenland.

As for Roskill’s timetable for the light rare earth producers, following Molycorp and Lynas getting into production, the next start up was Dong Pao in Vietnam. Toyoto Tsusho, Sojitz Corp and state company Lavreco were to be producing 3,000 tonnes a year by now, rising to 7,000 tonnes a year by 2014. In fact, as Sojitz has explained, the Japanese trading house put money into Lynas’ Mt Weld project because it did not see Dong Pao in production until 2014 and viewed the Australian mine as an earlier supplier.

According to a paper prepared by Japan’s Institute for Geo-Resources and Environment, Dong Pao has a resource of 7.4 million tonnes at 5.22% total rare earth oxides. However, 48.7% of the resource is lanthanum, another 33.7% being cerium. Next down is neodymium at 11.3% of the total. Heavy rare earth content is minor. Given the recent report by JP Morgan on Molycorp which predicted a substantial cerium surplus, it would be interesting to get an update on the thinking by the Japanese partners. No doubt the Vietnamese remain keen, the country having in mid-2012 inaugurated its first centre for rare earth research and technology transfer in Hanoi. Signed as part of a deal with Japan, the centre is seen by Vietnam of giving the country entry not just into mining rare earths but processing in the country and developing high-tech industries as a result.

Also on the LREE scene, the other leaders were seen by Roskill as Great Western Minerals Group and its Steenkampskraal project along with Montero Mining in Tanzania. Then came Arafura Resources in Australia, Frontier Rare Earths in South Africa, GeoMega in Canada and MBAC in Brazil, followed by Peak Resources.

With all these companies, the rare earth story is intact. And, of course, there are many other REE companies toiling away, eager to pass milestones on their way to production. All and any successes will be applauded, but these might not be enough to turn the tide of market sentiment.

That will require solid news of start-ups.

But, as I suggested above, it may be that 2014 will be yet another year when we look longingly at the horizon waiting for our ship — any of the above ships — to hove into view. Meantime, we will continue to conjecture on the Chinese heavy rare earth situation, watch the Japanese go further down the “reduce, replace and recycle” road and allow China to have another year as the dominant player.

Which it will be beyond that, of course. The other point made by Roskill last March is that, even at its optimistic projections, China would account for 80% of world output by the end of 2013, 74% by 2015 and 61% by 2018. But even that has to be qualified: the impact of the rest of the world by 2018 will, they noted, be much greater in the LREE complex than the heavies.


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Comments

  • vacuum

    On this site, in the graphene dept there’s currently a story about Focus. One thing Focus has, and also Lomiko, is an alliance with a technology firm applying the material they want to mine. This makes dingy graphite exciting. And it makes one believe that one company’s mine has special graphite.

    whereas in the REEs space, it seems like only Molycorp has a materials application adjunct. And theirs, though quite fascinating, is always overshadowed by their mining operations. I think there was a company called Neomatierals just a few years ago, and after they got swallowed by Molycorp what people used to talk about vanished.

    The point is that perhaps what the North American REEs need to do is something value-added, if only for sizzle. Steak is meat when there’s a Chinese mammoth for supper.

    If I were a REE CEO I might get together with other REE CEOs and harvest one or two minerals and get it into the hands of a technology company. This so that they can say they are not just using cerium but our cerium!

    Many will scoff at this idea, but very many more at this very moment are standing in front of a fridge at a 7-11 store unable to decide a water for which to pay a lot of money. In the 1970s if you told an American that people would buy water like this in the future, they would not believe it.

    And of course to get a relationship like some of the graphite companies have that might be wonderful; for at least then you have also the tech space in the mix, possibly making chatter about local access to supply, etc. Yeh there’s lead times and a billion dollars until REE mine production, but in the meanwhile why not get a buzz from talking about practical application involving real tech companies and their needs for local supply. Instead, every REE website says: well, ya know, REEs are used in cellphones and drones.

    Probably these ideas involve oversimplifications and trade on my ignorance of the territory. . . . whatever.

    November 11, 2013 - 4:11 AM

  • Daniel McGroarty

    Sobering last paragraph. Bromby + Weslosky’s piece yesterday provide a great “tough-love” take on the REE scene.

    November 11, 2013 - 7:57 AM

  • Veritas Bob

    Most of these projects are, have been, and always will be 2 to 4 years from production.

    “The year 2016 seems like a bumper year for non-China HREE producers. By then, according to the British commodity consultancy Roskill, the heavies should be being produced by Alkane in Australia, Avalon, Matamec and Quest Rare Minerals in Canada, Tasman Metals in Sweden, Ucore Rare Metals in the U.S., Northern Minerals in Australia and Tanbreeze in Greenland.”

    Two years go, wasn’t 2014 going to be the bumper year for production?

    November 11, 2013 - 8:51 AM

    • Bill Keenes

      Right you are Bob, all the “early producers” have pushed back their planned production dates. There is one presently flying under the radar : Northern Minerals who intend producing a Mixed Heavy Rare Earth Oxide – that should get them to market first. Their scoping study is due next month when a better understanding of the economics of their project will be known.

      I believe that companies requiring capital expenditure exceeding $500 million (and there are a couple in the Roskill list) will find it near impossible to raise the money – it’s called The Issue of Capital Constraints

      2014 will be the year when we all begin to realise who the early producers will be – they will be the ones securing off take agreements, have low capital expenditure requirements and robust project economics (high IRR etc.)

      First mover advantage is critical due to the niche nature of the market.

      November 11, 2013 - 1:25 PM

    • Robin Bromby

      Precisely the point I was dancing around. I was straining not to be too harsh, but you’ve summed it up correctly.

      November 11, 2013 - 2:54 PM

      • Veritas Bob

        I must confess to “cheating” though. I adapted the saying “Fusion is the power source of the future, and always will be.”

        November 11, 2013 - 3:33 PM

      • Veritas Bob

        Here’s an example dovetailing nicely with this theory.

        Per http://investorintel.wpengine.com/rare-earth-news/rare-element-reports-september-30-2013-financial-results/ , “Pending timely permitting, Bear Lodge is slated for commissioning in late 2016 and should be in an excellent position to help meet this growing global demand.”. The word “pending” provides some nice wiggle room for failing to meet schedule. Also, they forgot to mention the relatively minor point of “pending timely and adequate financing”.

        November 12, 2013 - 12:07 PM

  • Jo

    Hello there is an other company with a projet in Greenland called Greenland Minerals and Energy any body has information on this… are they likely to produce any time soon? This is their website
    http://www.ggg.gl as I’m not e geologist I have no idea what their fesablity studies conclude… any comments will be hightly apriciated

    November 12, 2013 - 12:37 AM

  • InvestorIntel Week-in-Review: Nouveau Monde (+20.93%), US Rare Earths (+18.48%), Texas Rare Earth Resources (+15.61%), Stans Energy (+12.50%) & Hastings Rare Metals (+9.38%) | InvestorIntel

    […] an aside, my favorite piece of the week was InvestorIntel’s Robin Bromby article 2014 needs to be a good year for the rare earth industry, where Robin poses the question: Will there be a new rare earth project brought into operation in […]

    November 12, 2013 - 3:52 PM

  • joe carbone

    Without doubt the issue of securing capital is a major concern for small cap companies.

    The two Aussie companies in Northern Minerals and Hastings Rare Earths will each be seeking approximately $300m and $700m to develop their West Australia resources. I am unsure why there is such a large discrepancy in requirements. Look forward to feedback by those in the know.

    The other point appears to be that of strategic partners. Northern Minerals has disclosed their Japanese alliance but to date Hastings has kept it close to their chest. Unsure why.

    Feedback is most welcomed as I am unsure which of the two deserves my hard earned cash.

    November 22, 2013 - 1:49 AM

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