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