EDITOR: | May 7th, 2017 | 3 Comments

InvestorIntel Rare Earths Monthly – April 2017

| May 07, 2017 | 3 Comments
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Thanks for the feedback on my new three-pronged series of articles. FYI. All of the ASX listed gold producers have now been contacted and I’m awaiting! I’ll get their responses to the success factor questions to you as soon as they arrive! Feeling not quite like the expectant father – but close! Enough of that, it’s rare earth monthly time!

And what a month it has been. As I will explain in detail later, two very important announcements have been made this month. The $56 million pilot plant announcement from Northern Minerals Limited (ASX: NTU). And Peak Resources Ltd. (ASX: PEK), together with Swiss-based mining investment fund, Pala Investments, are in discussions with ERP Strategic Minerals, LLC (ERP) to provide financial, technical and operational support to ERP for the restart and operation of Mountain Pass should ERP be successful in acquiring Mountain Pass under the US Chapter 11 bankruptcy sale process. I will contextualize the importance of each announcement later.

But for now, it’s back to the news on rare earth prices.

The positive signs are still encouraging on rare earths pricing and the news out of China concerning increases in domestic pricing is very welcome. Last month’s comments on dysprosium and yttrium not showing any upward trend is being maintained and could start to become concerning so we will need to be keeping a close eye on that situation.

As a reminder of the new format, below is the list of published information pieces (with hyper-links where possible) from:

  • Companies in the rare earths space
  • China
  • Other Countries
  • Rare Earths related market research and commentary

And where it represents a shift in an REO-business fundamental or a significant development for the company I will provide commentary. So the discussion on the two important news pieces will follow the table of news. Again, note that certain references will require registration or purchase (*). Also note that selecting the company name of members of the InvestorIntel Rare Earths family will take you their InvestorIntel member information page. Non-InvestorIntel members company name hyperlink will direct you to their website.

Alkane Resources Ltd. (ASX: ALK | OTCQX: ANLKY)

Date Source Title
5 Apr InvestorIntel Have you heard the Hafnium buzz?
10 Apr InvestorIntel Encouraging gold mineralisation in Tomingley regional exploration
10 Apr InvestorIntel The Hafnium truth about keeping nuclear energy cool
14 Apr InvestorIntel Alkane set for an incredible year
18 Apr InvestorIntel Quarterly Activities report to 31 March 2017
18 Apr InvestorIntel Quarterly Cashflow report – March 2017

InvestorIntel advertorial member

Arafura Resources Limited (ASX: ARU)

Date Source Title
12 Apr InvestorIntel Nolans Phosphate extraction piloting complete
20 Apr InvestorIntel Massive cash injection for anticipated Rare Earth Development
28 Apr InvestorIntel Quarterly Activities and Cashflow Report

InvestorIntel advertorial member

Avalon Advanced Materials Inc. (TSX: AVL | OTCQX: AVLNF)

Date Source Title
7 Apr InvestorIntel Avalon appoints Ms. Patricia Mohr to its Board of Directors
25 Apr InvestorIntel Avalon to pursue staged development approach for the Separation Rapids lithium project, Kenora, ON

InvestorIntel advertorial member

Hastings Technology Metals Ltd. (ASX: HAS)

Date Source Title
3 Apr InvestorIntel Mine permitting applications for Yangibana Nd-Pr Project lodged
28 Apr InvestorIntel Quarterly Activities Report
28 Apr InvestorIntel Quarterly Cashflow report

InvestorIntel advertorial member

Lynas Corporation (ASX: LYC | OTC: LYSDY)

Date Source Title
26 Apr InvestorIntel Quarterly Activities Report
26 Apr InvestorIntel Quarterly Cashflow Report
28 Apr InvestorIntel Receipt of Funds from Exercise of Warrants

InvestorIntel advertorial member

Northern Minerals Limited (ASX: NTU)

Date Source Title
18 Apr InvestorIntel Board approves Browns Range Pilot Plant development
19 Apr Business News Northern Minerals board approves $56m rare earths mine in WA
20 Apr ABC Online Construction to begin on Australia’s first heavy rare earths mine near Halls Creek
24 Apr InvestorIntel Investor Roadshow Presentation
28 Apr InvestorIntel Quarterly Activities Report
28 Apr InvestorIntel Quarterly Cashflow Report
3 May InvestorIntel Investor Presentation

InvestorIntel advertorial member

Peak Resources Ltd. (ASX: PEK)

Date Source Title
12 Apr Business News* Peak’s rare earth project to cost $475m
12 Apr InvestorIntel Ngualla Rare Earth Project – Updated Ore Reserve
12 Apr InvestorIntel BFS positions Ngualla as one of the world’s lowest cost rare earth projects
13 Apr Creamer Media’s Mining Weekly Peak ramps up offtake, financing talks for rare earths project
26 Apr InvestorIntel Peak to collaborate with ERP Strategic Minerals on Mountain Pass rare earths mine, California

InvestorIntel advertorial member

Search Minerals Inc. (TSXV: SMY)

Date Source Title
5 Apr InvestorIntel North American rare earths race heats up with patent advantage

Non-InvestorIntel advertorial member

Canada Rare Earth Corp. (TSXV: LL)

Date Source Title
18 Apr Searcy News Keeping Tabs on the Technicals for Canada Rare Earth Corp.

Non-InvestorIntel advertorial member

Frontier Rare Earths Limited (OTCQX: FREFF)

Date Source Title
7 Apr Financial Post Frontier Rare Earths resurrects plan for massive share consolidations

Non-InvestorIntel advertorial member

Medallion Resources Ltd. (TSXV: MDL | OTCQX: MLLOF)

Date Source Title
13 Apr Investing New Network Medallion process test work yields positive results

Non-InvestorIntel advertorial member

Mountain Pass (former Molycorp property)

Date Source Title
26 Apr The Wall Street Journal* Tom Clarke steps up to buy Mountain Pass rare earths mine
26 Apr Fox Business Tom Clarke steps up to buy Mountain Pass rare earths mine – update
26 Apr Yahoo Finance ERP Strategic Minerals named stalking horse bidder for Mountain Pass rare earths mine
26 Apr InvestorIntel Peak to collaborate with ERP Strategic Minerals on Mountain Pass rare earths mine, California

Non-InvestorIntel advertorial member

Namibia Rare Earths Inc. (TSXV: NRE)

Date Source Title
8 Apr MarketWatch Namibia Rare Earths Inc. announces private placement

Non-InvestorIntel advertorial member

Rare Earth Salts

Date Source Title
7 Apr Yahoo Finance Rare Earth Salts and BioLantanidos sign commercial agreement

Non-InvestorIntel advertorial member

China

Date Source Title
6 Apr Industrial Minerals* Jiangxi consolidates 22 rare earth recycling companies
12 Apr Industrial Minerals* China Northern Rare Earths Hi-Tech raises April prices
27 Apr China.org.cn Rare earth colourants to start production
28 Apr Industrial Minerals* China Southern Rare Earth Group publishes heavy rare earths prices
29 Apr Industrial Minerals* China Minmetals Rare Earth moves into profit in 2016

Other Countries

Date Source Title
5 Apr MultiBriefs Exclusive The next frontier: Mining the Deep Sea
7 Apr Financial Post Lawrence Solomon: The knee-jerk reaction against protectionism isn’t justified, just look at the military
10 Apr MetalMiner Rare Earths MMI: Senate Energy Committee condemns lack of US production
18 Apr ABC Online Next mining boom in Australia will be driven by tech metals for renewable energy and technologies
19 Apr Austin Business Journal* High-tech company eyes San Marcos for 100 job rare earth magnet production facility
22 Apr Jamaica Gleaner Guyana to explore mining of rare earth minerals
24 Apr The North West Star (AUST) Rare Earths are promising
25 Apr Times of India Dispose of rare earth mining co pleas: HC

Market Research and Commentary

Date Source Title
5 Apr Herald Analyst* Global Lutetium Oxide Market Vendors Coverage: Treibacher, Longyi Heavy Rare Earth and China
7 Apr InvestorIntel InvestorIntel’s 6th Annual Cleantech & Technology Metals Summit Corporate Line-up unveiled
8 Apr PostObserver* Worldwide Rare Earth metal market projected to reach USD XXXXmillion at forecast period
10 Apr InvestorIntel InvestorIntel Rare Earths Monthly – Part 1
10 Apr InvestorIntel InvestorIntel Rare Earths Monthly – Part 2
10 Apr WhaTech* Research focused on the Global rare earth metals market in 2017 with 20 top players
14 Apr DailyHover* Global Rare Earth Metals Market 2017 – Xiamen Tungsten, Sunlux Rare Metal
14 Apr Herald Analyst* 2017 Global rare earth hydrogen-storage alloy market in North America, Europe and Asia
14 Apr First Newshawk* Global Rare Earths Elements (REE) Market 2017 – China Minmetals Corporation, Ganzhou Rare Earth Group
15 Apr MilTech* Global Rare Earth Metals market analysis: Coverage of major and niche players with five forces analysis forecast to 2021
20 Apr Trade Calls* Rare Earths Industry 2017 Market research Report
20 Apr DailyHover* Global Rare Earths Polishing Powder market 2017 by key manufacturers
22 Apr Business Wire* Rare Earth Metals Market – Global assessment by application and forecasts from Technavio

OK. Let’s look at the big news and what are the implications?

First, let’s look at the $56 million pilot plant announcement for Northern Minerals Limited (ASX: NTU). On the 18th of April 2017, the Board of Northern Minerals announced to the Australian Stock Exchange (ASX) that they had approved the development of the Browns Range Pilot Plant. This is a three-year project with a capital cost of AUD$56 million, funded by a combination of equity, debt, offtake pre-payments and deferred payments. Construction is to commence immediately, with an 11 month build time anticipated. The processing plant is being constructed with a throughput of 60,000 tonnes per year for three years, and is approximately 10% of the size of the proposed full-scale development. The plant is expected to produce 148,200 kg of dysprosium in 1,719,000 kg of Total Rare Earth Oxide in a Mixed Rare Earth Carbonate. The project will assess, refine and confirm the optimal flowsheet and all design requirements for the full-scale development.

Now this is a very significant development in the rare earths industry. Why? You only have to look back to the development of Molycorp’s Mountain Pass project and Lynas’s Mt Weld & LAMP project, both of which were financed and developed in the boom of the REO space when financing was much easier. Of late the financing of any non-Chinese REO project has been all but impossible. But Northern have cracked it (excuse the pun for those who know about monazite processing). And they have done so in world that is nothing but sceptical and very risk-averse about any non-Chinese operator to come forward.

NTU has executed a Sales Agreement covering 100% of the production from the project to Lianyugang Zeyu New Materials Sales Co. Ltd. (JFMAG), a 51% owned subsidiary of Guangdong Rare Earths. Guangdong Rare Earths is a 100% subsidiary of Guangdong Raising Asset Management (GRAM). The details are available in the NTU ASX release.

Now, whilst the offtake arrangement is an achievement to be applauded, for me the crowning glory (and the model to be emulated) is the financing. The development has been financed by a combination of equity, debt, sales prepayments as well as deferred payment terms from Sinosteel MECC (the engineering, procurement and construction contractor).

In a recent interview, George Bauk, the NTU CEO, stated:

“Sinosteel has put in up to $11 million of deferred payment, with the ability to convert into equity.

We’ve also seen our offtake sales agreement partner doing the same thing, giving us a prepayment of $10 million and having the ability to have that paid over the back half of the project through sales or conversion to equity.”

A final element of the funding equation was the Australian Federal Government’s research and development tax credit scheme, which is paid quarterly, and for which Northern set up a factoring facility to smooth out cash flow.

Now I know there are nay-sayers out there who state that a limited term operation such as this proposed by Northern is an expensive exercise when compared to a smaller scale pilot plant in a capital city, but reflect on this:

  • Look at all of the other REO hopefuls. Have they run pilot plants? Yes.
  • Have they produced saleable samples of REO products? Yes.
  • Have they shown good NPV for their projects? Yes.
  • Have they been able to finance their projects? No.

What Northern have done, and deserve accolades for, is being able to build a financing model that complements the China REO behemoth. It is an approach that I have been promulgating for many years as the mechanism most likely to succeed for any non-China REO developer. Reference.

In short, they have developed relationships with suppliers, financiers and off-takers, that has enabled them to take the next big step on a path to becoming a significant player in the rare earths production world. And for that, the remaining REO developers should thank George and his team for showing the way.

The second big news story is that from Peak Resources Ltd. (ASX: PEK)

You will see from their news above that Peak are progressing along the success factor route to production that all projects need to go through. And I might add that they are doing a fine job of it in what can only be described as difficult times, but what has alerted me is their announcement concerning the ex-Molycorp Mountain Pass project. In a release to the ASX (26 April 2017), Peak announced that:

Peak to collaborate with ERP Strategic Minerals on Mountain Pass Rare Earths Mine California.

The announcement states that Peak is in discussions on a potential collaboration with ERP Strategic Minerals, LLC (ERP), which is part of the ERP Group of companies, regarding ERP’s stalking horse bid to purchase certain assets and surface real property rights of the Mountain Pass Rare Earths Mine (Mountain Pass) which has been filed by the Chapter 11 trustee of Molycorp Minerals LLC with the US Bankruptcy Court in Delaware.

The Mountain Pass mine, located in San Bernardino County, California, approximately 80 kilometres south of Las Vegas, Nevada, is the only mine and processing facility for rare earths minerals in the United States. The mine has an operating history dating back to the 1950s and was most recently placed on care and maintenance after the Debtors filed for Chapter 11 bankruptcy protection in 2015.

Peak, together with Swiss-based mining investment fund, Pala Investments, are in discussions with ERP to provide financial, technical and operational support for the restart and operation of Mountain Pass should ERP be successful in acquiring Mountain Pass under the US Chapter 11 bankruptcy sale process. The definitive terms of such collaboration are subject to negotiation, finalization and closing of mutually acceptable agreements and receipt of any applicable regulatory approvals.

The big question is why? For my thoughts, you will have to wait until my next article as the Publisher limit has again been broached.


Steve Mackowski

Editor:

Mr Mackowski is a qualified engineer in mineral processing with over 30 years technical and operational experience in rare earths, uranium, industrial minerals, nickel, kaolin ... <Read more about Steve Mackowski>


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Comments

  • Jack Lifton

    Steve,

    You left off at the most interesting part of todays tales of rare earths: The (proposed) restart of Mountain Pass operations. I am a bit confused. I understand that the aptly named “ERP” is proposing in some combination with PALA and PEAK to buy the “surface” real property rights at Mountain Pass. The Project Phoenix plant would seem to fit that description, but it never delivered any commercially acceptable material, and is best described as “over-engineered.” If the original SX plant is still there then perhaps it could be resurrected to process PEAK’s ore, which is considerably richer in Nd/PR than Molycorp’s, and which in any case may not be a “surface” property. I would like to ask your opinion, Steve, on the statement by I believe PALA that the Project Phoenix operation could be put (back?) into operation for a mere 40 million dollars more. If that were the case why then wouldn’t Oak Tree have put that “small” amount into the operation when it acquired the bankruptcy estate? And after doing that why not just process the PEAK material and sell the Nd/Pr to Neo Peformance Materials? Is the ERP/PALA/PEAK deal just to boost the PEAK share price? It can’t be to re-list Molycorp, can it??

    Jack

    May 7, 2017 - 6:36 PM

  • Tim Ainsworth

    No commentary Project Phoenix complete without reading transcripts last several QR’s, audio would be better if it is available, easier to understand what wasn’t said.
    And even if it could be made functional Jack, it circles directly back to your perceptive 2011(?) comments here re scale, but this time from a market perspective (presuming we have actually learnt something about the market since the bubble euphoria).
    Where exactly is the volume demand to support a 19ktpa facility scale to cost effective operation, irrespective of feedstock???
    No longer a theoretical question, the hard data clearly evident in Lynas’ progressive commissioning of assets and bringing each module to steady state, with successive reduction in CoP. After several Q’s optimising 100% of assets we see CoP down <$9kg with further to go, yet output <75% capacity.
    Lynas meeting current demand from the only two NdFeB markets of ANY consequence, and only planning incremental production increase until demand evident.
    Where exactly is the futuristic demand coming from that would offer a 19ktpa behemoth anything remotely like the scale to be cost effective?
    Incredible that Peak would publicly chase after this fantasy, just daze after releasing a BFS, based on spot prices, and $85kg NdPr.

    May 7, 2017 - 11:35 PM

  • Steve Mackowski

    I will provide my thoughts in an article later this week.

    May 8, 2017 - 4:34 AM

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