InvestorIntel Rare Earths Monthly – PT II
In this series of articles, I am presenting rare earth pricing data, publicly released company information and relevant market information. I am going to provide commentary on these information pieces where I feel it is either a significant change in the fundamentals of rare earths or is a significant development for the company. It is important to note that the company information will not simply be a reflection of progress through to PEA and onwards. I will be limiting my commentary to some of the more significant matters that you need to be aware of and understand.
So fundamentals. The single most important fundamental issue in the rare earth oxide (“REO”) business is what is happening in China. As you all will know China is such a behemoth in REO production and value adding, that it is essential to understand where China is, and is going, if you want to understand the environment under which non-China REO developments are taking place.
Ten years ago, Dudley Kingsnorth produced what became known as the “Dudley Graph”. It showed a world REO market of approx. 100,000 tonnes broken up into China and Rest of World (ROW) production against predicted demand. The key fundamental in the “Dudley Graph” was a demand growth CAGR of 8-10% that required a new REO production facility to come on-line every year to meet the gap between production and demand. That gap was proposed to be filled by non-China projects. Well, that growth has never been witnessed. There are many theories. But between China rationalising its REO industry, Chinese illegal production, reduced demand due to substitution or improved utilisation of REO, that growth just hasn’t appeared. However, as a fundamental it still holds true. The expected expansion of magnet-centric technology is still predicted, as is the increased need for lanthanum, it’s all about the timing. The improvement in REO prices of late coupled with improved share prices of the remaining REO players may be an indication that the “Dudley Graph” uptrend is getting closer. Now this is good news for the light rare earth (LREO) projects, but of late I have become a little apprehensive on the heavy rare earth (HREO) space. Let me explain my thoughts.
Yttrium has continued to fall in price. It was expected to recover as excess inventory (following over exploitation of dysprosium) dumped into the market place was depleted. It appears that the growth in the LED technology that decreases the need for phosphors has exceeded predictions and there is now an oversupply of yttrium. As yttrium plays a not insignificant part of the economic equation for HREO projects, this poses questions. Also, the price of dysprosium has not responded as well as the other magnet REO. This is clearly a result of substitution and reduced usage brought about during the boom of 2011. As dysprosium is generally the significant portion of a HREO project revenue, again questions are posed. Agreed, price is always an important component of any ROI calculation, but particular care may need to be given in regard to HREO projects and their reliance on dysprosium and yttrium.
Company news. (To access reference materials, return to “InvestorIntel Rare Earths Monthly – Part I”)
I have been impressed by the progressive production model of Canada Rare Earth Corp. They have made significant progress in the permitting of their rare earth refinery and are developing a very useful cash flow in the marketing of rare earth concentrates and products.
Get our daily investorintel update
The proposed sale of the Mountain Pass operations, formerly held by Molycorp, is an interesting development. It appears that a potential investor considers that the property is potentially profitable. Maybe there is more to the Russia : Trump story still to be played out?
The potential construction of an on-mine site pilot plant by Northern Minerals Limited (ASX: NTU) is a story to be followed. Scheduled for completion by the end of 2018, the then three years of operations should allow thorough definition of the flow sheet and project economics whilst producing significant products for potential customer assessment. Financing of the construction and ongoing operations will be a key factor in this development.
The Burundi project of Rainbow Rare Earths has piqued my interest. And that is due to its almost unique approach to production. Normally ore is mined using excavators and trucks. It is then crushed and ground before going through a mineral processing plant to produce a high grade mineral concentrate. This mineral concentrate then becomes the feed material for a downstream chemical processing facility. Burundi is different. They are selectively mining the rare earth mineral and so do not need the CAPEX or OPEX of the mineral processing stage. If you can imagine miners following the rare earth mineralised “seam” in such a manner that the waste rock is not recovered, you need to picture that seam and it needs to be consistent. That is consistent over the extent (length, width and thickness), it has to be hand-mine recoverable (not too deep), and has to be of sufficient scale. I would expect there to be many locals employed to do that mining. With extremely low CAPEX and OPEX, I am looking forward to more details as the project develops.
I have been closely tracking the development of the MRT technology by IBC Advanced Technologies Inc. and the involvement of Ucore Rare Metals Inc. (TSXV: UCU | OTCQX: UURAF). So it is interesting to note that Ucore may purchase IBC. This could be a very interesting development. The commercialisation of MRT outside of the platinum group metals into rare earths and other metals will certainly turn some technology heads around. I am awaiting sufficient operational data and economic performance (suitable for feasibility study level assessment) to be made public for review.
As you can see I am not commenting on all of the information sources presented. I am only focussing on those that are significant. See you again next month.
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>