EDITOR: | May 27th, 2015 | 31 Comments

A Mixed Con is a Mixed Blessing in Rare Earths

| May 27, 2015 | 31 Comments
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I am pleased to note that Investorintel has now become a go-to site for discussions by industry recognized experts such as Dr Ian Flint in graphite mining and downstream processing, Prof Reed Izatt on the applications of Molecular Recognition Technology to the processing of technology metals from their ores; and Steve Mackowski on the actual operating experience of a mining/chemical engineer.

One can disagree with the conclusions on efficacy drawn by experts but even then reasonable people can disagree and still respect one another as I respect all of the above gentlemen.

Confucius is reputed to have said that wisdom begins with the proper naming of things, and so…

Five years ago, in 2010, when most of the then existing rare earth juniors were formulating their plans for developing a deposit into a mine while in accordance with the rules set out in Canada’s National Instrument 43-101, to enable them to publicly and legally raise money in Canada I observed that all of the plans terminated in the production and sale of a mixed concentrate, or as it was called (without any apparent realization of the irony of the nickname) a “mixed CON.”

Until recently the failed business models of the majority of the rare earth juniors were still focused on producing and selling “mixed cons.” Although none of them had any documentary or even anecdotal proof that such mixtures, or how much of such mixtures, were salable still the majority of PEAs showed the profitable sale of “mixed cons” to mysterious un-named entities. Those entities as we all knew were in fact Chinese rare earth separators none of whom had ever heard of or been approached by non-Chinese juniors for pricing information.

In fact the “discounts” taken by toll providers from the prices of the pure separated individual rare earth “oxides” in the PEAs were, in my opinion, and remain, pure speculation or even outright fabrication intended to make numbers work. If a particular rare earth junior company wishes to dispute this they merely have to show documentation of a firm offer by a credible service provider. Unfortunately the mandate of N.I. 43-101 that it be reviewed by a “qualified person” does not include a requirement for review by someone with economic common-sense.

In fact for the separation of the light rare earths from a light rare earth mixed concentrate in 2012 the discounts were 60% and more, since the separator would have had to get rid of at least 80% of the volume of the mixed LREE concentrate to get to the balance, the praseodymium and neodymium, which was then as now the only desired material in that mixture.

It was and is different for “clean” mixed concentrates and the discount varies also with regard to which rare earths are present in the mixed concentrate. I am defining a “clean” concentrate as one that has radioactive species in low enough concentration so that both the shipping jurisdiction and the receiving jurisdiction do not prohibit its movement. In addition a clean concentrate has as little as possible of cerium or lanthanum; ideally less than 2% of the total volume. It goes without saying that such a clean concentrate should also be free of elements that inhibit, prohibit, or contaminate solvent extraction systems. These include but are not limited to salts of iron, aluminum, and manganese as well as fluoride anions.

As of this writing I do not know of any demand for mixed concentrates of the LREEs unless they are clean. This means that the mixed LREE concentrate announced earlier this year by Rare Element Resources, which is in my definition “clean” is valuable and can be sold at a reduced discount because of that fact. I do not know the current discount rate for clean LREE mixed concentrates offered by Chinese separators or  by Chinese or Japanese separators operating in Viet Nam, but I am certain that it is competitive enough to make the construction of an in-house SX plant unattractive, or at least questionable, for the moment.

With regard to mixed concentrates of clean SEGs and HREEs that have been produced, for example, by Texas Rare Earth Resources I am very reliably informed that such materials can be sold into China or Viet Nam at a small discount to the prices that can be obtained for the individual separated SEGs and HREEs. Therefore at this moment it is problematic whether or not the cost of a separation plant is justified for SEG and HREE separation in-house. Of course if security of supply is capitalized or if the existing SX facilities of Lynas, Molycorp, Indian Rare Earths, or Solvay should become or are already tolling sites and are competitive then the question of whether or not to build an in-house SX plant becomes more complex .

Finally the decision whether to build in-house capability and capacity for rare earth separation and purification is also affected by the three new or newly applied rare earth separation processes in serious development:

  1. Accelerated SX;
  2. MRT; and
  3. CIC/CIX

All three processes have been shown to be highly effective at bench scale and all three are now moving to pilot plant scale, so as to de-risk the construction of full scale plants.

Each of these technologies is being first applied to a specific ore concentrate or type of ore concentrate, but it seems intuitive that any and all of them could be applied to clean concentrates.

Two of the above systems, MRT and CIC/CIX , so I have read or been told, take the PLS formed by the extraction of the ore or ore concentrate directly. The third, accelerated SX requires separate and prior processing to remove radioactive and base metal/ion contaminants.

All three processes, it is reported (claimed),  could be directly fed with clean mixed concentrates.

The open issues are CAPEX and OPEX, and there may be enough differences from the need to treat or not to have to treat initial feed stock (PLS) so that the CAPEX differential issue is moot. OPEX, I think, should be highest for an SX system among these three, but it has not yet been revealed what the costs for manufacturing the Superligands for MRT will be at scale. In addition accelerated SX seems to be much more compact and efficient than traditional SX, so that process management costs may be significantly reduced.

Traditional SX has a batch size threshold, so that the more of the feedstock that is of the desired metal values the better. This problem may be ameliorated by accelerated SX for which speed allows for smaller batch sizes. But in either SX case a clean mixed concentrate is necessary for optimal performance. MRT and CIC/CIX both seem to be able to either rapidly clean a PLS or operate in a highly selective fashion or both. With a clean PLS as a feedstock it will now have to be determined which if any nontraditional (non SX) separation technology is the most economical for that particular feedstock when compared with SX.

TRER’s Pr/Nd + SEG + HREE clean mixed concentrate would be I think the first valuable mostly HREE concentrate feedstock to be offered into the separation market by a domestic American producer if the company chooses to go to market at that point. Of course that decision will depend on whether or not marketing the mixed concentrate at that point will be more profitable than going forward with the complete separation of the concentrate into individual purified rare earths.

It is very significant that this decision point, whether or not to sell a mixed concentrate or to go forward to total separation, has been reached. The domestic American pack has thinned out to just the three survivors.

The economics of the domestic and of the global marketplaces for the rare earths will now in some combination determine which of the present juniors goes into production, but I think that American use of and acceptance of the need for innovative technologies has determined that American domestic rare earth producers will be in the winner’s circle.

It cannot be overemphasized here that the “discounts” for mixed concentrates offered by separators who buy such materials vary with the composition of the concentrate and the conditions (i.e., process) in the market places for the individual rare earths.

Press releases about qualitative achievements such as the production of a “mixed con” or the separation of an individual element no matter how pure need therefore to be placed in the context of total system economics. The questions to ask are what is the cost “all in “ of producing this “product;” what is its individual market size; and based on these numbers is it “competitive.” If not then as the philosopher said “cast it [the press release] into the flames.”


Jack Lifton

Editor:

Jack Lifton is the Sr. Editor for InvestorIntel Corp. and is the CEO for Jack Lifton, LLC. He is also a consultant, author, and lecturer ... <Read more about Jack Lifton>


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Comments

  • Alex

    Yes, you need 99.5% purity didim oxide to process it otherwise rare-earth impurity (HREE) just polute your system.
    Carbonate form has 50% water and transportation and TAX payments for water will make it not profitable.
    New concentrates will be suggested with 50% discount.

    May 27, 2015 - 9:16 PM

  • Fred

    TRER’s off take agreement for uranium is perhaps too new to be acted upon. My guess is that it is only economic to mine it if it is mined in conjunction with REEs or such. MCP is on hard times, but, at this stage of the game, its stock holders are gamblers. Here’s a suggestion: As long as people are still willing to bet on MCP, it can still raise money. Granted that the effective interest rate cost starts escalating, but a new venture could be funded more cheaply. What if TRER offers an REE concentrate to MCP to process? MCP brags that it can sell all of the REEs, and it probably can, even if its just as a distributor. MCP would probably be thrilled to shift some production to higher margin REEs, and MCP and/or TRER has a decent chance of raising money to get it to happen. MCP may get a few more innings out of the ball game, and may even win. And TRER can start getting busy at making money.

    May 28, 2015 - 12:33 AM

  • Tony

    One very important fact in this story very relevant to project economics of potential HREE producers, …….. “With regard to mixed concentrates of clean SEGs and HREEs that have been produced, for example, by Texas Rare Earth Resources I am very reliably informed that such materials can be sold into China or Viet Nam at a small discount to the prices that can be obtained for the individual separated SEGs and HREEs.”

    Thank you Jack.

    Tim Ainsworth it appears you have been proven wrong again with your incorrect theories of heavy discounts for potential producers of HREE concentrates.

    May 28, 2015 - 6:39 AM

  • Jack Lifton

    Fred,

    MCP has no domestic North American facilities to toll refine a mixed concentrate such as that of TRER or RER. In addition I do not believe that its Mountain Pass operation could handle small batches of mixed concentrates directly even to recover the Pr/Nd without accumulating them. Therefore MCP’s answer would be to send these concentrates to the former Neo separation facilities in China. I doubt whether the US DoD, for example, would consider this as domestic material upon its return. IF one must for the moment process a concentrate such as TRERs or RERs overseas it is most likely that Solvay, Larochelle or the Chinese operation in Viet Nam (which has lower OPEX than a domestic Chinese refinery) would be the better choice.
    Jack

    May 28, 2015 - 8:25 AM

  • JJBeswick

    Making several assumptions Tony; not least that the miner has the capacity to produce a “clean” concentrate, free of the problem impurities listed above.

    May 28, 2015 - 9:32 AM

  • Tim Ainsworth

    But Tony a discount to what?

    Recent piece from the Assoc China RE Ind reported DyO being offered at 1580 yuan (USD255kg) against 1700 yuan (USD274kg) cost.

    Presumably most of these mixed cons will be circa 50% Yttrium, currently offered at USD10.64kg.

    And 17% VAT separation ROW.

    Better a factual discussion on demand growth than theoretical mixed cons IMO.

    May 28, 2015 - 9:47 AM

  • JJBeswick

    Just been checking a typical HREE prospect: Northern Minerals in the context of this article. Seems they plan to market a 52% TREE concentrate. The end product analysis states
    “The concentration of other deleterious elements was also
    relatively low; (e.g. Fe-0.37%, Al-2.63%, Ca-0.40%, Mg-
    0.49%). Subsequent bench testwork at ANSTO has shown
    that these impurity levels can be reduced even further (e.g.
    Fe 0.13%, Al 0.15%, Th <1ppm, U 0.2ppm) making the mixed
    RE carbonate product suitable for downstream
    processing."
    Scarcely "clean" IMO.

    May 28, 2015 - 10:48 AM

  • Chris

    Now we are lead to believe that some HREE concentrates will command only a small discount to individual separated REO prices.
    Based on what evidence?

    What about the fantasy REO price forecasts most juniors are basing there BFS on? Shouldn’t the current REO prices minus a small discount for HREE concentrates be used in these BFS to find just how economical a company’s business plan is in today REE market?

    May 28, 2015 - 5:48 PM

  • Tim Ainsworth

    Jack was quoted elsewhere: ‘Jack Lifton, TRER board member, further commented: “There is a good market today for clean ‘mixed’ concentrates of the critical rare earths (free of radioactivity and of separation chemistry interfering base metals). In particular the market discounts for clean mixtures of the critical heavy rare earths are small enough to warrant marketing them as soon as they are available. Current global producers are offering mixed concentrates of critical rare earths. In the case of TRER we would offer praseodymium, neodymium, terbium, dysprosium, and yttrium. In fact the discounts offered by separation providers for terbium and dysprosium mixed concentrates are so small that the further strategy of separating them into individual rare earth products, either in-house or by tolling, is not economical unless further downstream processing into, for example, magnet alloys, is the target. In my opinion, should TRER decide to directly market its concentrates of mixed critical rare earths, TRER would become the first domestic American rare earth company to join an exclusive global club of sophisticated marketers of the rare earths.” ‘

    Perhaps if he could identify those “Current global producers are offering mixed concentrates of critical rare earths” some factual assessment might be made of their current profitability & business plan?

    May 28, 2015 - 10:21 PM

  • Alex

    SEG – Gd2O3 – 20-23% Eu2O3 8-10% other Sm2O3
    Price 30-35 USD per kg depends mostly from Eu content
    Sm2O3 99,9 price – 3 USD per kg
    Gd2O3 99,99 price 15-18 USD per kg
    Eu2O3 – 250 USD per kg
    yeld 95%
    Shinyetsu and China can process it only

    May 29, 2015 - 1:55 AM

  • Tony

    yes Tim, yttrium the cerium of the heavies – but you forget one important fact, and that is there is a market for yttrium, so some cost recovery can be achieved, unlike cerium which is in massive oversupply, no market and so for most cost recovery cannot be achieved ….. and how much cerium does Lynas manage to sell? …

    May 29, 2015 - 6:37 AM

  • Jack Lifton

    Tim,

    5% of Lynas production is of a mixed concentrate of SEG + HREEs. I have on my desk the first 100 grams of this material produced about 2 years ago. The 200 kg of which it was a part went to Solvay, and by sheer happenstance I was at Solvay the day it arrived as I had been at Kuantan the day it was produced.

    Jack

    May 29, 2015 - 11:41 AM

  • Fred

    Jack, get TRER to sign an off take agreement with an REE processor, that includes a pricing mechanism. It still wouldn’t mean that REEs would ever be produced there, but it would put some meat on the bone. My guess is that new mine processing goes to MRT, or some other such new technology. MRT’s advantage is that it is actually happening. When other new technologies get people to invest in them, they will get my attention too. The proof is in the pudding, but, at this stage, most of this stuff is still in the recipe stage. At the moment, it’s the chicken, the egg, or MRT. The big boys, like Solvay, appear to be going the way of the dinosaur.

    May 29, 2015 - 12:11 PM

  • Tim Ainsworth

    All of it to date Tony, why do punters constantly overlook their foundation catalyst offtakes?
    Guidance is 15ktpa ATM and realised prices would probably surprise the detractors, did you know La Rochelle was apparently running almost solely to clean up Chinese Ce & La at a cost circa $5kg?

    May 29, 2015 - 12:42 PM

  • Tim Ainsworth

    Jack, my very recent information suggests you need an update, and I say that with regret.

    May 29, 2015 - 12:45 PM

  • Tony

    Tim, I think Jack is a lot closer to the action than you:-

    Jack Lifton is a Founding Principal of Technology Metals Research, LLC. He is also a consultant, author, and lecturer on the market fundamentals of the technology metals, the term that he coined to describe those strategic rare metals whose electronic properties make our technological society possible. These include the rare earths, lithium and most of the rare metals. Jack Lifton is currently a non-executive Director for Texas Rare Earth Resources Corp. (OTCQX: TRER) and AMR, a private Turkish mining venture. He is a paid business operations/marketing consultant to Rare Element Resources (TSX: RES | NYSE MKT: REE), Ucore Rare Metals (TSXV: UCU | OTCQX: UURAF), Tasman Rare Metals (TSXV: TSM | NYSE MKT: TAS), and NovX21 (TSXV: NOV). He is also the founding co-principal of Technology Metals Research, LLC. His consulting is done through Jack Lifton, LLC, a consultancy he began in 1999 upon his retirement as the CEO of an OEM automotive supply company specializing in process chemistry and metals trading. Jack Lifton, LLC is a member of the Minor Metals Trade Association (www.mmta.co.uk) and Jack is an advisor to the Malaysian Academy of Science in Kuala Lumpur, and he is a member of that Academy’s Rare Earth Task Force.

    Perhaps Tim you could also post your bio for all to see.

    May 30, 2015 - 3:34 AM

  • Billy

    Come on Tim, “who are you” to be telling other highly qualified, well connected and highly respected posters that they “need an update”, …. when you never disclose your own qualifications.

    May 31, 2015 - 3:44 AM

  • Chris

    Tim
    Looks like you have a few Dy groupies that have taken offence to your comments.
    lol
    How tragic.

    So why is it that most of the RE juniors who are planning on producing a mix concentrate not using REO price forecasts anywhere near current REO prices in there feasibility studies?
    Most are 2x current REO prices and there is never any mention of a discount being applied for producing a mixed concentrate.

    What will be the catalyst that sees Dy prices more than double over the next few years?

    May 31, 2015 - 9:23 AM

  • Tim Ainsworth

    Lol, simply a mug punter with the time and inclination to get close to source, take it as you will.
    Once again I’ll point to one of the better analysis here, totally supported by GE Roskill’s 2014, that really should have sponsored further discussion. Particularly with recent reports of China’s phosphor capacity running around 25%.

    http://investorintel.wpengine.com/technology-metals-intel/lighting-way-rare-earths-lighting/

    Ain’t rocket science.

    May 31, 2015 - 10:13 AM

  • JJBeswick

    Good points Tim.
    As I pointed out elsewhere the Nd/Pr magnets space is dominant in the RE market even for the HREE (via Dy and some Tb in the mix for now).
    If, as seems likely, the demand for phosphors continues to weaken then there are serious questions about the viability of the HREE market even at the current poor prices.

    May 31, 2015 - 11:40 AM

  • Billy

    Tim, the link you posted is from June 20, 2014. Perhaps it’s you that needs an update.

    June 1, 2015 - 2:48 AM

  • Tim Ainsworth

    Billy, if you can’t grasp the implications from that analysis there is little anyone here can do to help you.

    June 1, 2015 - 4:32 AM

  • Caterpillar

    @Chris: this is exactly the reason why there is no REE project economically viable at the moment, by quite a distance, and don’t get funded at all. China is playing this game to perfection, the entire REE ROW sector will remain shelved as China is buying HREE projects around the world now.

    June 19, 2015 - 4:48 AM

  • Chris

    Chinese ION REE concentrate currently selling at USD26/Kg.

    Doubtful any HRE juniors, who’s business plan is to sell a mixed concentrate, will be economically viable competing with China in today’s REE market.

    July 11, 2015 - 10:06 PM

  • Tim Ainsworth

    Jack, Asian Metal offered a very recent insight to current southern HRE concentrate values:

    “BEIJING Asian metal 7 Jul 15 – Although Ganzhou rare earth industry association has increased ion rare earth concentrate prices to RMB220,000-230,000t 35,442-37,053 last week, the current mainstream price for ion rare earth concentrate is stable at around RMB165,000t USD26,582t,”

    Presumably that price includes recent concentrate tax by value @ 27% so the concentrate would have a pre tax value circa $21kg. Given China is highly unlikely to reward a ROW supplier with its 27% tax I’d suggest the economic value of landed HRE concentrate is currently $21kg, presuming that concentrate does not contain any impurities problematic to Chinese processors.

    Also gets interesting when you compare Southern Ionic concentrate to one of its potential competitors in NTU and note that its “basket” value is currently quoted around $56kg. Now we’d hope the China prices will recover fairly shortly, particularly with commentary suggesting they are at or below BE levels, but regardless that is a massive discount to currently perceived ROW values.

    Type B – NTU
    La2O3 2 − 5% – 2.5%
    CeO2 1 − 2% – 6%
    Pr6O11 1 − 2% – 1%
    Nd2O3 3 − 5% – 4%
    Sm2O3 2 − 4% – 2%
    Eu2O3 0.12% – 0.4%
    Gd2O3 6% – 5.5%
    (Tb – Lu)2O3 15 − 20% – 22.24%
    Y2O3 >60% – 56.7%

    July 12, 2015 - 7:12 AM

  • Jeff Thompson

    I would expect that “mixed concentrate” is a very generic term, and that each company considering producing a mixed concentrate would have a unique distribution of each of the rare elements, primarily determined by the characteristics of their resource/reserve (what ingredients are stocked in the kitchen), and secondarily determined by the selectivity of their processing techniques (their baking skill/experience).
    As such, any discussion of the prices/economics of selling a mixed concentrate would only be relevant in the context of the particular distribution that company could offer, unless at some point down the road a standardized set of mixed concentration definitions (recipes) emerge.

    July 12, 2015 - 12:21 PM

  • Tony

    Tim, this is from the above article….

    …….. “With regard to mixed concentrates of clean SEGs and HREEs that have been produced, for example, by Texas Rare Earth Resources I am very reliably informed that such materials can be sold into China or Viet Nam at a small discount to the prices that can be obtained for the individual separated SEGs and HREEs.”

    now Tim what part of …..

    “a small discount to the prices that can be obtained for the individual separated SEGs and HREEs”

    didn’t you understand

    July 13, 2015 - 4:26 AM

  • Chris

    Tony
    Tim has provided commentary based on factual information available in the public domain. That information seems to contradict the commentary provided by Mr Lifton, that is based on a “reliable” source.

    Can you provide a source that proves a company, anywhere in the world, is selling a “clean” HREE concentrate into China at a small discount to Chinese REO prices?

    July 13, 2015 - 5:31 AM

  • Tim Ainsworth

    Assoc of China RE Industry report confirms the published prices (translated):

    “Ganzhou rare earth Industry Association published early July 2015 ion-type rare earth ore price guide.
    Middle yttrium and rich europium price down 230,000 yuan to 190,000 yuan/ton/tons, Longnan high yttrium ore price cut 20,000 to 200,000 yuan/ton/tons, anyuan high yttrium ore price down 20,000 yuan to 190,000 yuan/ton/tons, Xunwu yttrium europium ore prices by 10,000 yuan/ton to 130,000 yuan/ton.”

    With Asian Metal reporting the current mainstream price of $26.58kg, as above, presumably incl 27% tax:

    http://www.asianmetal.com/news/data/1244340/Stable%20prices%20and%20few%20deals%20in%20Chinese%20ion%20rare%20earth%20concentrate%20market

    Little wonder with numerous reports of the demise of phosphors, Yt < $5kg and DyO apparently selling below cost with inventories at 700t:

    http://www.asianmetal.com/news/data/1243460/Sluggish%20demand%20in%20Chinese%20dysprosium%20oxide%20market

    With Chinese apparently struggling to find buyers above production costs, incl tax, where exactly does the ROW "discount" start or finish?

    July 13, 2015 - 9:15 AM

  • Tim Ainsworth

    Guangdong
    High-Y clay,
    Longnan,
    Jiangxi
    TREO 92%
    La 2.4
    Ce 0.6
    Pr 1.1
    Nd 5.4
    Sm 3.5
    Eu 0.0
    Gd 6.1
    Tb 1.2
    Dy 7.5
    Er 4.0
    Y 62.0
    Ho-Tm-Yb-Lu 5.9

    BEIJING Asian Metal 30 Dec 15 – A Source from Ganzhou Rare Earth Longnan Separation Co., Ltd. disclosed to Asian Metal that the plant halts production today owning to the sluggish downstream demand and low price levels of rare earth oxide products. “We resumed production in early March and halted separating rare earth ore in late September.

    BEIJING Asian Metal 30 Oct 15 – Although Ganzhou Rare Earth Industry Association raised their offers for ion rare earth concentrate by around RMB10,000t USD1,572t to RMB180,000-190,000t USD28,302-29,874t by cash payment on October 27th, the market prices for the material remain stable at RMB100,000-110,000t USD16,509-17,296t by cash payment, unchanged compared with those of one weeks ago. Most separation plants halted production in July or August and have no intention to resume production in the coming two weeks.

    There’s the current benchmark for 92% ionic concentrate 7.5% Dy > USD16.50 -17.30kg, and one can only wonder if that quote includes the new 27% production tax.

    Little wonder Jien did not progress NTU.

    December 31, 2015 - 1:59 AM

  • Jeff Thompson

    Yes, the 27% tax seems to have fallen by the wayside, presumably because of the delay effect of working through pre-existing inventories first (?), but it gives me doubt as to whether the new tax will be consistently enforced even after inventories are consumed, in the same way the “illegal” mining is being allowed to persist. Sounds like a big smokescreen.
    Happy New Year all.

    December 31, 2015 - 8:22 AM

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