EDITOR: | May 6th, 2015 | 5 Comments

China is looking everywhere for rare earths outside of China?

| May 06, 2015 | 5 Comments
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China is looking everywhere for rare earth sources outside of China now that export quotas have been replaced with a new tax. The first possible agreement between a Chinese and a Canadian company has been announced. Pele Mountain Resources Inc. (TSXV: GEM | OTCQX: GOLDF), declared March 30th that they have a memorandum of understanding, (MOU) with Sheng Kang Ning Mining Investment Co. Ltd., (SKN). SKN is a subsidiary of Shenghe Resources Holding Co. Ltd., listed on the Shanghai Stock Exchange: (600392.SS). They are one of the 6 major Chinese REE companies, and Pele owns the only mine that has previously produced rare earth oxides in Canada.

There was an announcement of government letters of support from all levels on May 6th, and the stock is currently 20% above what it was March 30th.

2015-5-05-Pele-Mountain

Pele is based in Elliot Lake ON. where they are sole owners of the Eco Ridge rare earth and uranium mine. Pele has written on their website that the recent market conditions haven’t supported large scale rare earth mining, and so they have moved into processing high-grade rare earth bearing monazite in Elliot Lake. They also state that, “management believes monazite processing will help Pele win the race to production of critical rare earths and, ultimately, will support the development of Eco Ridge as market conditions improve.”  Market conditions have greatly improved, this is likely why SKN is making this venture now, and why governments are eager to allow them to get started. Unless extended, the MOU will automatically expire on September 30, 2015.

SKN would be running the REE mining operation and a state of the art monazite processing facility, to be located on Pele’s property. The JV would be 50.1% owned by SKN and 49.9% owned by Pele. Since SKN is involved in the construction of rare earth separation technology, it is likely that aside from looking for critical rare earth sources outside China, they are looking to sell tech and build separation facilities.

Pele has been focusing on uranium mining, stating in 2013 that, “uranium revenue is forecast to exceed operating costs for the first five years of production and thereafter will offset the majority of operating costs, potentially reducing financial risks associated with rare earth production.” Since the advent of the Chinese export tax on May 1st, and the April market report InvestorIntel released May 4th, the market for REE’s is moving along like it hasn’t since 2011. This new era of rare earths is likely to continue as technology is the brightest spot in the modern economy and it needs to be made out of something. Right now that something is Technology Metals.

Even if this does not become a source of materials for the Chinese market, this mine is well placed to service other markets, as it is close to rail lines, great lake deep-water ports, and the American markets. Since Eco Ridge has produced REE’s before, it is a good place for SKN to begin it’s emergence into the Canadian Technology Metals industry. This could continue to be a boon for Pele. It will be interesting to see what other exploring Chinese companies will be doing now that the end of export quotas will mean continued searching for critical rare earth sources outside of China.


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Comments

  • David

    Great article Chris.

    Similarly Jien Mining is currently conducting due diligence to take a a 33.1% stake (subject to shareholder approval at the end of this month) in Northern Minerals NTU.AX and become a major strategic partner.

    Northern Minerals is poised to become the first significant world producer of dysprosium outside of China.

    Jien Mining is also tipped to assist NTU in providing a significant amount of funding to take the company into Production.

    Watch for the SP to positively re-rate in the short term when;
    1. Jien Mining takes a significant stake in NTU.
    2. Project funding and offtake agreements are announced.

    It appears that some ‘smart Asian money’ has already taken some major positions in NTU in expectation of a major re-rating of the SP. The stock is tightly held amongst long term holders.

    Rank Holder Name %
    1 AUST CONGLIN INTNL INV GR 44.69%
    2 KONG DEJING 4.13%
    3 HE YOUFEN 3.4%
    4 HO CHING 3.38%

    May 6, 2015 - 11:36 PM

  • bearcat

    Continued Chinese control of the global ree industry but just by another name, by remote control. Hopefully, if the West really is serious about ree security for industrial and military use, national governments will be smart enough to block these short-sighted giving over of their ree resources to profoundly nationalistic China. I bet these ill-advised FDI developments will come back to bite Western nations as a much more clever China with a far longer time horizon retains its stranglehold on global ree while the sort-sighted, naïve and even stupid West continues to complain about Chinese control. Canada seems especially eager for this granting of mineral resources ownership/control to the Chinese and thus perpetuating its colony-like export of minerals, wood products, grain, etc. Kind of like China is something akin to the Hudson’s Bay Company of 250 years ago!

    May 7, 2015 - 12:04 AM

  • Roger

    Money talks! The rest are just philosophies, ideologies and other..ies!

    May 7, 2015 - 12:34 AM

  • merlion

    David said: ”It appears that some ‘smart Asian money’ has already taken some major positions in NTU in expectation of a major re-rating of the SP.”

    Darn right David. They’re bullish in the penthouse.

    The accumulation by those top rank holders is proof. My archived data goes back 2 years and the strategy is clear.

    After JIEN is approved at the May 27 General Meeting, they’ll re-rate the JIEN listing on the Shanghai Exchange. The Asian smart money will have already plotted the subsequent ping-back to the partnered ASX listings.

    May 8, 2015 - 8:31 PM

  • merlion

    Jien Mining’s parent is Jilin Jien Nickel Industry Co Ltd, which is listed on the Shanghai Exchange.

    Chartwatchers may wish the track the parent listing here …
    https://au.finance.yahoo.com/q/bc?s=600432.SS&t=6m&l=on&z=l&q=l&c=
    It’s being positively re-rated already.
    The 6-month chart put in a mid-term low on 6th February.

    Did the Nickel price turn Shanghai investor sentiment?
    Hardly.
    Scroll down to see Kitco’s 6-month Nickel chart …
    http://www.kitcometals.com/charts/nickel_historical_large.html
    Nickel had a price of ca. USD6.8/lb early February and continued trending down to a low of USD5.6/lb about 3 weeks ago.

    The Jien Mining deal with Northern Minerals was announced on 18th February.

    Looks like some Shanghai ‘re-raters’ got a head start!

    May 11, 2015 - 7:25 PM

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