EDITOR: | October 16th, 2013 | 17 Comments

George Bauk shares his insight on how Northern Minerals is driving a pathway to heavy rare earth production

| October 16, 2013 | 17 Comments
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gbrbaThere’s a problem (probably) unique in metals terms to rare earths. That is, the people at each end of the process spectrum have little in common, and often don’t understand the work of the people at the other end. At one end there are the people who set out to find deposits, the exploration companies; at the other, are those end-users or off-take trading companies. The first bunch are all-risk. The second simply do not like taking risks. So it’s an achievement to get each end working with the other.

In Sydney this week, I sat down over coffee with George Bauk and Robin Wilson, chief executive and exploration manager respectively at Northern Minerals. The company this week issued its new resource figures and an investor presentation. They’re all posted here on InvestorIntel, so I won’t recap other than to say that this shaping up as a significant heavy rare earth project. The next big task is to expand the resource. But, rather than go over all the ground which is covered in the Northern Minerals releases, I wanted to talk to George about his take on what is happening in the rare earth space at present.

Last month it was revealed that Northern’s previously unnamed off-take partner was Sumitomo Corp of Japan. The latter has agreed to work toward a binding agreement under which Sumitomo will take 1,500 tonnes a year of heavy rare earths. Then I asked George the question he told me gets asked a lot: is your major shareholder (Conglin Yue and Associates with 45.98%, and with close ties to Chinese interests) relaxed about the rare earths going to Japan, especially as China is facing a HREE shortage itself? The reply is that Conglin Yue, who is on the Northern Minerals board, was part of the board discussion about the Sumitomo deal.

Northern Minerals and its Browns Range project (located in the Western Australian section of the Tanami Desert, close to the border with the Northern Territory) has dysprosium in xenotime grades that compare favourably with those of the Jiangxi ionic clays of southern China and are sharply contrasted with content in typical monazite or bastnasite. (And when you read the latest resources figures, keep in mind these include one area of low grades which has taken down the overall grade; exclude that area, and Browns Range leaps well head of the Chinese ionic clay deposits.)

Drilling-at-Browns-Range1

Drilling at Northern Minerals’ Browns Range Project.

Getting Conglin Yue on board has been the key. He brought A$27 million into Northern Minerals, making it possible for the company to get cracking with its drilling to expand the resource. The problem, as George explains it, is that end users are very large companies which, unlike exploration juniors, are extremely reluctant to take any risks. And the problem in 2011 was that so many players moved into the rare earth space (suddenly there were between 300 and 400 projects) that the end users were bewildered. How could they possibly decided which were likely to produce results and which were hopeless? They simply did not have the expertise to make that judgement, so they keep their wallets in the corporate pockets.

But he admits to being astonished that more effort was not made by Japanese and U.S. end users to find new suppliers and encourage them when it became obvious that Chinese supplies were going to be problematic. He is also bemused by the fact that buyers who were prepared in 2011 to pay $4,000/kg for dysprosium now see the $500/kg price tag as too high.

George Bauk is only too aware that time is not to be wasted. He heard it many times from Dudley Kingsnorth and now is telling everyone else: there needs to be a non-China source of dysprosium ASAP to head off end users looking for substitutes. Security of supply from non-China miners is vital. “The market has to be confident that dysprosium is coming,” he adds. This is why Northern has produced a brochure titled “Pathway to Production”. It wants to reassure potential customers that Browns Range is on its way (with yttrium and terbium, as well as dysprosium).

Here’s another thing. Don’t think alliances will necessarily mean you are the sole supplier. Sumitomo already sources HREE from Kazakhstan, and Northern Minerals is a way of diversifying the sources for the Japanese giant. All the end users will want this diversity of supply (which presumably means that even if one non-China HREE projects gets under way, there will be room for others).

Only about 1,500 tonnes of dysprosium is being produced in China. But some of that is going into China’s strategic stockpiles and Bauk believes that the dysprosium being exported is being sold only for needs of cash flow by Chinese producers.

But there is another problems as he sees it as a result of Chinese dominance. Non-China rare earth hopefuls don’t know what the cost curve is. No one in China will tell them. This is something they will find out only as their own production gets going.


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Comments

  • Bill Keenes

    Hi Robin,
    Northern Minerals now seem to be now ticking a lot of boxes (especially the metallurgy which appears very well advanced), and assuming approvals (EPA etc.) and formal off take agreements are put in place sometime next year – then what are some of the alternatives available to Northern Minerals to raise the required capital expenditure and working capital to get into production ?

    October 17, 2013 - 3:37 AM

    • merlion

      ‘Northern’ is a gem. After much due diligence, I’m ‘in’ with a heavy long position.

      I’ll indulge a few P’s.

      Right Partner. Sumitomo is the first offtake partner. Tenth biggest company in Japan.

      Right Principal. Conglin Yue brings understanding of markets and long term relationships in Asia

      Right Place. Australia is well placed to supply Asia to the north as well as RoW.

      Right Product. Revenue will split as 50% Dy, 25% Y, 10% Tb

      Right Price. George Bauk says Northern will be a low-cost producer. Scoping Study due end 2013.

      Right Plant. Capex of ca.AUD140 to build Beneficiation plant and AUD40 for hydrometallurgy thanks to very amenable host rock and simple proven xenotime metallurgy.

      October 17, 2013 - 6:54 PM

      • Veritas Bob

        “Right Price. George Bauk says Northern will be a low-cost producer. Scoping Study due end 2013”

        Looking at operational production costs (ignoring capex), who does not say they will be a low cost producer?

        It reminds me of several years when my local full service supermarket advertised it had warehouse prices. Yet, the food warehouse across the street had lower prices. Well, it turns out that paradox was easily resolved upon noting that the food warehouse had “below warehouse” prices.

        Everyone will have a low cost of production – until they actually produce, that is. PowerPoint costs are always low, real-world costs not necessarily. Actually, Molycorp advertised for years that it would produce at $2.77/kg – didn’t quite come to pass.

        October 17, 2013 - 7:30 PM

  • black jack

    people are scared after Moly and Lynas

    October 17, 2013 - 3:46 AM

  • Bill Keenes

    exactly right black jack … that’s why we need a success story in the rare earth sector to turn sentiment around – and the sooner it occurs the better

    October 17, 2013 - 3:54 AM

  • Hiwayman

    Robin,

    Enlightening and refreshing copy–thank you 🙂
    With a smidgen of research and intelligence-even an oaf could
    see [twelve months ago] in which direction Northern was heading.
    Neil Armstrong once said, ‘You only have to solve two problems
    when going to the Moon: first,how to get there; and second,how
    to get back.The key is don’t leave until you have solved “both’
    problems.

    Northern are a class act,because they never embraced a problem
    without also presenting a solution. Accuracy builds credibility! 🙂

    October 17, 2013 - 9:54 AM

    • Sue Glover

      Thanks for your contribution. Your commentary and feedback is appreciated!

      October 17, 2013 - 4:07 PM

  • Ty Dinwoodie

    A visionary CEO + an exceptionally solid company + a ridiculously accomplished writer + coffee = this article

    Great, great story, Robin.

    October 17, 2013 - 10:17 AM

  • Jim

    Is anyone concerned about the very high ownership by the Chinese
    subsidiary ?

    Thanks

    October 17, 2013 - 5:47 PM

    • Robin Bromby

      Whether or not anyone is concerned, there are two points to keep in mind.

      1. Without that $27 million from Conglin Yue, Northern Minerals would not be able to progress. Rare earths staying in the ground is in no one’s interest.

      2. The fact that there’s been no apparent problem with doing the deal with Sumitomo would suggest that business interests win over geopolitical ones.

      October 17, 2013 - 7:36 PM

      • merlion

        Conglin needs the Northern management team as much as Northern needs Conglin’s cash, market knowledge and Asian relationships.

        The CY group has a ten year plan and they know they cannot do it alone. They need the local management’s savvy.

        Once the RE business is rolling, the CY people will then go looking for Au and U (with help from the local management).

        October 17, 2013 - 8:34 PM

  • Longtermlegs

    … also the fact it’s on Australian soil, and that they plan to build the plant here on Australian soil … gives me as an investor considerable comfort ….

    October 17, 2013 - 8:13 PM

  • Ern Sandral

    Exceptionally clear précis by George Baulk – he is a no bs man and has produced consistent results that I cannot see slowing! Further he is shrewd enough to have a very accomplished team around him.
    Conglin Yue? Well, we still have the National Interest, PM Abbott and the resource in the NT!!!

    October 17, 2013 - 8:45 PM

  • vacuum

    Folks, we are in the midst of a outrageously humungous revolution in material science/technology and also manufacturing (3D & robotics). You gotta begin to think in new ways and not merely reapply the old supply/demand paradigm of the British industrial revolution–the then new use of coal to iron to make steel, the cotton gin, and the steam engine.

    Because this new industrial revolution is offering not just new applications and products, but an entirely new ontology–the very constituents of reality! e.g., the 2D material graphene with quantum mechanical electron tunneling properties, quantum computing using niobium (3 ontological states: 1, 0 and Qbit) , and now there’s purple gold (nano-gold).

    Go ask someone what utility is gold, they’d say its only practical application is connection tips for coaxial-cable, a few medical devices, and jewelry. They’d say gold is just like Buffett claims–it’s dug up then reburied. …… But that ain’t true.

    JOHANNESBURG (miningweekly.com) — The prospects for the greater industrial use of gold are increasing encouragingly, the top brass of South Africa’s State-owned minerals research organization Mintek said this week. http://youtu.be/2ZN6FS_lM3k

    October 19, 2013 - 11:05 PM

    • Veritas Bob

      Gold nano-particles can be used as a fat-reducing agent. They work by reducing the fat from your wallet or bank account,.

      What is not addressed is the cost effectiveness of the various applications. Even if they were to be cost effective with gold at $300/ounce when the project was started, would they be at $1300/ounce, or higher if increased use of gold drives the price even higher?

      October 20, 2013 - 8:36 AM

      • vacuum

        one could ask whether human beings would form differently social interactions if living in community on Mars. What affect would it be, say, to live detached from earth. Wouldn’t that alter the sense of self due to being detached from Adam, the anthropological archetype (born of dust of the earth).

        or, what is life on earth if the house had its own fuel cell, spray on solar roof and CellCube vanadium redox flow battery–there to charge the Tesla in the garage 24/7; and graphene purification of grey water from the kitchen sink. This two would be a detachment.

        this presents a paradigm shift, and therefore extrapolation from current lifestyles, while ostensibly useful in the near term, also misdirect attention from what is inchoate and underway for the longer term.

        What is the shortest distance between two points? . . . Not if the points are on a sphere.

        To compare the rise in graphene patents now with the rise of silicon patents during the time of the youthful Bill Gates–then to try to make a comparison between what silicon did for the economy and what graphene might do for the economy; what limited silicon so as what limits graphene. … This is spoils accuracy with precision.

        Accountancy grapples with known knowns. Don Rumsfeld: http://youtu.be/GiPe1OiKQuk?t=7s

        Additionally, there’s looks to be a fundamental change in the status of the world’s reserve curren$y. This impacts especially commodities pricing. If China, while supplying most all the techonlogy-metals & graphite, how does a loss of dollar reserve status affect these commodities for North American industry; how does that affect the value of any of the US and Canada based mining projects.

        And not to mention the paradigm shift that Bitcoins–detachment from central banking. Or crowd-source funding. Or direct democracy compliments of internet. It seems the list could go on ad infinitum.

        Yes what you say is important for consideration during the next weeks and months and year(s). But we should be mindful to realize the forest.

        ; ^ )

        October 20, 2013 - 3:04 PM

  • Bill Keenes

    Hi Robin,

    can you please explain to me why the heading of this excellent and informative article was changed from:-

    George Bauk: No time to be wasted getting dysprosium to market

    which I thought was more appropriate and really nailed what was going on and driving this push by Northern Minerals into production.

    Kind regards
    Bill

    October 20, 2013 - 8:37 PM

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