Tantalus reaches another milestone with another rare earth offtake agreement
Tantalus, AG, a German rare earth junior miner with a mostly ionic adsorption clay deposit on the Indian Ocean nation of Madagascar that last month announced an off-take agreement with the Chinese, Shanghai exchange listed, vertically integrated rare earth magnet producer, Shenghe Industries, has announced today that it has now executed a second off-take agreement. This time with Thyssen-Krupp Metallurgical Products, the long established global metals and alloys trading unit of German steel giant, Thyssen-Krupp.
The two off-takes now in force are each for 30% of Tantalus’ output for an initial period of three years at full production renewable for additional terms of 7 years by mutual consent. Perhaps the most important aspect of these two agreements is that each off-take receiver in order to get the 7 year extension has agreed to finance the development of the deposit into a producing mine in an amount proportional to their off-take percentage. This, of course, indicates a high degree of confidence, by large and experienced global players in the rare earths trade, in the probability that the company will be able to put the Madagascar deposit into production beginning by late 2016 and ramp up the output to the full target amount of 10,000 tpa by 36 months after start-up.
Tantalus capex for the project as well as its opex are among the lowest proposed so far, and for their output size are the lowest I have ever seen for a non-Chinese project while their predicted profit margins are impressive. Their target date to begin production is also the nearest in time of any project I know of.
Perhaps the most significant aspect of the Thyssen-Krupp off-take is the fact that they have been granted exclusivity for Tantalus products are to be exclusively sold into the German domestic market. T-K M is a member of the well known German Rohstoff Alliance and my guess is that it will be offering its allocation to other Alliance members.
Those of you who follow the announcement circus of the rare earth juniors will recognize that the German Rohstoff Alliance is a group that almost every rare earth junior has approached and been rebuffed by. German manufacturers maintain the manufacturing world’s tightest specifications for quality, on-time delivery, service and price among the world’s manufacturing industries.
Investors should note that Tantalus is a public (German) company, and that its shares traded yesterday on the Dusseldorf exchange at a price of 16 euros, a figure that no other rare earth junior can match.
Get our daily investorintel update
Tantalus has been invisible to North American investors, because it doesn’t as of yet market its shares in North America, and its announcements are few and far between although they are always significant.
The Tantalus project on Madagascar has been in development for more than five years. I was on its supervisory board of directors from 2011-2013. I resigned from the supervisory board as its vice-Chairman in August, 2013. Its current chairman, Mr Ulrich Krauskopf was my colleague then and is my friend now. The board and highly competent management team have guided the company’s development to a venture that is the right size, and their combined years and extensive contacts in the International and German metallurgical industry assured that Tantalus was designed to produce what the market(s) want and in quantities and qualities dictated by the needs of those markets.
All but a very few North American rare earth juniors have overspent and thereby wasted their investors’ capital trying to emulate the major miners. Tantalus, has instead, worked with its potential customers from the first day so as to become a valued and reliable supplier of the right size. This cannot be emphasized enough it is the size and cost of the output of a rare earth venture that determines success or failure not the grade of its deposit.
The cost of separating the rare earths depends in great part on what extractive and pre-separation separations it takes to prepare a clean PLS for ultimate mixed rare earths separation into individual elements
The Tantalus deposit is one of the closest in type to China’s ionic adsorption clays. This makes the extraction of the mixed rare earths far easier and far less costly than hard rock mining.
Thirty percent of Tantalus output is already sold and dedicated to the Chinese domestic market and thirty more percent is now sold and dedicated to the German domestic market. I doubt that the remaining forty percent will be hard to pre-sell, and I suspect that some North American and Japanese global100 corporations are sharpening their pencils and doing the math already.
Marketing of the rare earths is not of the “we will mine it and they will buy it” type as so many Canadians and Americans thought. It was the very first thing that Mr Krauskopf addressed when he joined the company’s board.
Knowledge, experience, skill and contacts have now brought Tantalus to the brink of success.
Jack Lifton is the CEO for Jack Lifton, LLC and is a consultant, author, and lecturer on the market fundamentals of technology metals. Technology metals ... <Read more about Jack Lifton>