EDITOR: | June 17th, 2013 | 14 Comments

Alkane’s Chalmers sees positive REE market signs; Indian output near to start

| June 17, 2013 | 14 Comments
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We may see a turnaround in the rare earths business later this year, or as we move into 2014. That’s the view from Ian Chalmers at emerging REE-niobium-zirconium producer Alkane Resources.

He bases this projection on two factors. One, those end-users who started building stockpiles in 2011 are now running them down, and in many cases may be close to having run them down entirely. Two, an improvement in the global economy should see a lift in all the applications for rare earth elements, from television sets to computers to wind turbines.

One problem which has been weighing heavily on the market is the dumping of REE by the smaller and medium-sized Chinese producers. He says the information coming out of China suggests that some of these producers are selling at less than cost, and this has forced down prices and generated so much pessimism in the sector.

“It’s always been a complex business — and it’s even more complex now,” says Chalmers. The divergence has kept growing in regard to the saleability of the various elements. Those companies trying to sell the lights, especially lanthanum and cerium, have the hardest job of all. And then you have the factor of the inter-relationship: a miner may have to keep on producing those two lights as part of the process of also extracting the neodymium and dysprosium, so that all impacts on overall revenue.

As for Lynas Corp setting minimum prices for their output, Chalmers says it was a brave move, but he understands why they had to do it. “Someone had to take the lead,” he adds. In other words, producers cannot allow a situation where prices erode to such an extent that it threatens viability.

Take yttrium: it was selling at between $80/kg and $90/kg a year ago. Chalmers says it is fetching around $20/kg at present, not too far above production costs. And lanthanum and cerium are bringing in less than $10/kg. Dysprosium FOB out of China is now $500/kg, less than half of what it was fetching 18 months ago (and being supplied to Chinese buyers at RMB1,200, or about $196/kg).

Chalmers believes the transition by which we will see more non-China production is going to be slower than was expected a couple of years ago, and it may take as long as three years out before we see a critical mass of non-China output.

Chalmers also makes the point that, while the mining end of the business has been suffering, the other end — the end users — is in fairly good shape in terms of demand for electronics and cars. But, with Lynas and Molycorp in operation, he cannot see much room for more addition production of the light rare earths, especially if anyone has a mind to add 10,000 tonnes or more a year.

So far as Alkane’s Dubbo project in Australia is concerned, he is reasonably relaxed: about 50% of revenue is coming from zirconium and niobium while the company expects to sell all the rare earths, including the approximate combined total of 2,500 tonnes a year of lanthanum and cerium, along with all the neodymium and praseodymium, and that the shortages of dysprosium and terbium will continue. Alkane’s production levels are modest enough that they will not create market issues, he adds.

It’s been a long haul for Alkane. They acquired the Dubbo project in 1987, started work on the rare earths in 1998 and persevered even though, by 2002, as Chalmers says, you could not have given away rare earths (fortunately the company had it gold mine to keep revenues flowing). Then in 2005 the company really ramped up work and by 2008 had its pilot plant in operation.

Now there’s just the matter of raising that $1 billion for development. Chalmers is confident; there are no technical issues at Dubbo, the company is in good shape financially, and he hopes the financing will be in place in time for the start button to be pressed about this time next year.

RARE EARTHS: Talking of non-China production, the Nikkei news service says Indian output of rare earth metals will get going this northern autumn when the Toyota Tsusho Corp.-Indian Rare Earths Ltd joint gears up to supply 4,000 tonnes a year to Japan.

Nikkei says the operation should be at full capacity by the end of 2013. Indian Rare Earths will extract the uranium and thorium and the Toyota arm will refine the rare earth metals, including neodymium. The report reminds us that start-up has been delayed by disagreement between the partners on pricing: the Indians wanted prices set above present market levels, but the Japanese argued this would ensure financial losses. The impasse was resolved during talks between the two prime ministers, Shinzo Abe and Manmohan Singh, when they met last month. The Japanese stressed that the Indian operation would have to compete on price with Lynas and Molycorp, an argument which Nikkei says brought the Indians around to an agreement.


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  • Allan Branch

    One of the golden rules of any business is “to stay in the game” and as long as one has the resources to do so, they become front runners once things change. It is heartening that Alkane had the long term vision and staying power to do that with its rare earths. Alkane’s share price has followed the trend of other rare earth companies of course with a bump in 2011, but it has fared slightly better than the Australian Metals and Mining Index. I am positive no one thought it would be more than a decade wait. During the decade long 1929 crash, my understanding is that General Motors kept its Cadillac in production as a loss leader, and took the lead in the recovery once the world’s finances improved. With capital raising still all but impossible though, the need for Alkane to remain in the game is still paramount.

    June 18, 2013 - 8:26 PM

  • Bill Keenes

    Hi Allan, you mentioned that “capital raising is all but impossible”

    not for everyone ….

    one little rare earth company with a market current market capitalization of around $32M is about to complete a $58M capital raising

    the same little company is busy drilling and getting on with the business of development whilst everyone else is looking for cash

    the same little company has just reported grades of up to 31.64% TREO – probably the best ever reported globally speaking – with a distribution of 90% heavies and 10% lights

    the same little company has completed the metallurgy in producing Rare Earth Oxides exceeding 92% and is now working on optimization

    oh and every member of the board of this exploration company has prior production experience

    yes … I am talking about Northern Minerals (NTU on the Australia Stock Exchange)

    June 19, 2013 - 8:21 PM

    • Jim

      And Lynas owns 10% percent of the company.

      June 19, 2013 - 8:54 PM

    • Veritas Bob

      $58M ain’t the real McCoy. What’s that going to buy them – some more test drilling and studies?

      As for their heavies, most of that is Yttrium. Have you checked the price of Yttrium oxide lately? And that is before any of the Yttrium-dominated “HREE” operations go into production.

      Reported grades of up to 31.64% TREO? Yeah, for one tiny little location. You should go into politics.

      June 19, 2013 - 9:04 PM

      • JohnH

        Veritas Bob, just wondering what companies you are invested in? If that is not too personal a question.

        June 19, 2013 - 11:17 PM

        • Veritas Bob

          Currently not invested in any rare earth companies, but monitoring matters. As to the future?

          June 20, 2013 - 8:25 PM

          • Jim

            Veritas Bob,
            You mentioned the yttrium issue a lot I noticed, in regards to heavy rare earth resources. Can you give some resources/ miners that have the best heavies, that aren’t dominated by yttrium?
            Thank you
            Jim

            June 20, 2013 - 8:40 PM

      • merlion

        Veritas Bob, here’s some weekend reading for you.
        http://www.adamasintel.com/Previews/Adamas_Intel–CMIR–Yttrium_Shortages_are_Imminent-ToC_Preview.pdf
        Here’s a morsel for you to digest …
        “Beyond 2013, supply shortages are imminent in all scenarios and will grow to reach 5,227 tonnes to 14,967 tonnes annually by 2020, depending on near-term developments that will define the market’s supply-side trajectory. However, amidst impending Y2O3 shortages opportunities will exist for informed foreign companies to capitalize. We offer a suite of strategies for non-Chinese players to survive, thrive, and profit through 2020 while alleviating supply risks.”

        With regard to the TREO grades of 31.64%, I suggest you see it as one item within a bundle of evidence. It appears you don’t have much experience in geological modelling.

        June 21, 2013 - 6:59 PM

        • Veritas Bob

          Looks like a hype artist trying to sell a $3500 article. I’m not gong to give them the 3500 bucks to see if there is more substance and quality to their analysis than I suspect, but if you believe them, go hog wild investing in Y2O3 production.

          June 21, 2013 - 7:15 PM

          • merlion

            Veritas, you taunt your name.
            What it ‘looks like’ and what it ‘is’ can be poles apart. Suggestion: consider changing your name.

            And you miss the main truth. Nobody is about to ‘go hog wild investing in Y2O3 production’. It’s about Dysprosium and Terbium.

            June 21, 2013 - 7:55 PM

    • Allan Branch

      Dear Bill,

      NTU certainly have a strong board and executive group so I agree with you.

      Raising $58m is no mean feat and I congratulate you. Your proud announcement agrees with my comment that it is all but impossible at the moment. But there is nothing wrong with “looking for cash” which is what NTU has done to “stay in the game”.

      I also agree that having side activity in beneficiation is a smart move, so again well done NTU.

      My approach has been different. Instead of continuing to dilute my Krucible shareholders, I am converting our phosphate assets to cash, (in the same order of magnitude as NTU receiving $12m for half the assets of a company capitalized today at $5m), using those funds to continue our strong exploration program, continuing our industry-leading rare earth metallurgy research, and to develop long term sustainable business for Krucible, Just a different tack that’s all.

      June 20, 2013 - 2:16 AM

      • anonymous coward

        “I am converting our phosphate assets to cash using those funds to continue our strong exploration program, continuing our industry-leading rare earth metallurgy research, and to develop long term sustainable business for Krucible”
        and to ensure the continual payment of management fees through this downturn.

        Surely if you owned a world class phosphate deposit the last thing you would be doing is converting it to cash.

        Just looking after your own pocket it seems to me.

        June 24, 2013 - 5:47 AM

  • Bill Keenes

    How can we take anyone seriously that calls themselves anonymous coward.

    Allan made it very clear it’s about staying in the game, in a market where capital raisings is all but impossible for most exploration companies, and those that survive will take the lead once things improve …. and I would have to agree.

    anonymous coward, before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you’re a mile away and you have their shoes, … and if I agreed with you we’d both be wrong.

    June 24, 2013 - 8:18 AM

    • anonymous coward

      Hi Bill
      Sorry but it was not meaning to be critical. It is a truth that to stay in game the company need funds to pay its team. Allan is a unique md and ceo in that he is open and honest and not afraid to speek his mind. I like to listen to all sides. Ensuring there is money in the kitty to keep paying management team has top be a consideration as well as all of the other interests. He should have mentioned it, by not mentioning it, it does not seem to fit his profile. Know if the management team cut there own salary as recognition of tough times ahead I will take my hat off to them and acknolwdge that I am wrong. But not being critical.

      June 24, 2013 - 6:48 PM