EDITOR: | April 20th, 2014 | 23 Comments

Lifton & Weslosky Technology Metal Report

| April 20, 2014 | 23 Comments
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On this holiday weekend, I thought I would extend a complimentary viewing of the Lifton & Weslosky Technology Metal Report, a special weekly video that is published on InvestorIntelReport for members every Wednesday.

IIR

Jack was in Toronto on Wednesday and Thursday, and during lunch he explained that he preferred the term “Intelligence” — so the name InvestorIntelReport may be a placeholder, but moving forward we will be producing this video weekly for publication on our InvestorIntelReport only. And please, for those that are not in love with this formula appreciate that all of the content you find on InvestorIntel is all-original and is all-paid for. In fact, we are one of the few online companies in the world that actually pay for content. More and more, major online media sites woo great writers and talent with the opportunity for exposure. Well, for someone who was supposedly being distributed into 290 million households for 3 years with a  TV series I co-owned, I can tell you that PR is just that — publicity.

So like us, love us or hate us, please appreciate that we hire the top industry specialists and we want to pay them what they are worth. So for today, please enjoy your Easter weekend ‘freebie’. My mother always told me that Easter was a new beginning, a chance to start the year off anew. Well, whatever your religious or spiritual commitments are, I think this is an especially nice idea, so here’s to the start of something wonderful.

Now for the Lifton & Weslosky Technology Metals Report, we discuss the recently established Baotou Rare Earths Products Exchange or the rare earth stock exchange. The Chinese government has taken this unusual step in conjunction with efforts by China’s State Bureau of Material Reserve (SBMR) to proceed with a new round of rare earth stockpiling…and of course, I draw your attention to First European Metals that is already providing this service. Speaking of this, Founder Iain Macpherson sent me a quote via Skype a day or two ago with: “FEM is continuing to increase its foothold as being a European source for REE and strategic metals which is being financed by their individual investors of the physical metals.” — Jack and I see the Chinese getting into this market aggressively, and FEM is showing entrepreneurial fortitude by already being there.

Jack suggests the Chinese are very new to this, calling the current effort “baby steps”, and again — noting that the entire concept is very new. Further observing: “It’s a good start, but I’m not sure that it’s anything more than an academic exercise at this point.”  Nonetheless, I comment that this is a good signal for investors that the technology metals market is expanding. And just for the record, if I could get Charles Lew from Hastings Rare Metals on camera — everyone would be a believer. Charles understands that the smog in China is more than a driver for electric cars and that the Asian market will drive the technology metals market, and a smart investor has rare earths and other technology metals such as lithium, graphite, cobalt and tin: in their portfolio.

Other topics included Great Western Minerals signing a Memorandum of Understanding (MOU) for rare earth services. Jack offers a very cautious response in that the MOU is not very clear about exactly what kind of services are included under the MOU: “I’d like to know a lot more about what services they are discussing….” I share some of Jack’s concerns, noting that the press release fails to mention any detail about the identity of the other party in the MOU and wish Marc would come back on board and deliver an update to our audience as GWMG’s “stock fans” have quite the team.

Peter Cashin, CEO of Quest Rare Minerals (‘Quest’, TSXE: QRM | NYSE MKT: QRM) hosted a General Meeting in Montreal last week after delivering a very important announcement related to an improved Preliminary Economic Assessment (PEA) indicating a one billion dollar cost reduction. Jack notes, however, that the overall project still costs well over a billion dollars. He warns that “anybody looking for a billion dollars is standing in a short line and on the edge of a cliff….I would say that Quest’s number one problem is raising that kind of money in this market or the market in the near term…and I also noticed that their PEA shows they would be in operation until 2019 perhaps 2020; so it’s hard to factor anything like that into estimates of future supply and demand.” In contrast, I observe that the recently elected Liberal government in Quebec is very good news for Quest, as it should resume the kind of support to the resource sector that has made Quebec such a desirable mining destination. I would be willing to wager that Peter has investment suitors that are seriously reviewing…Quebec is the dark horse in this sector.

Jack seems more optimistic about Tasman Metals (“Tasman”, TSXV: TSM | NYSE MKT: TAS), which recently released the pre-feasibility study for the Norra Karr project in Sweden. In face he is “very impressed by the fact that Tasman has been able to raise money in this market and I am urging people to look at those who are able to raise money….Tasman is surely Europe’s best hope to be independent and Tasman has to be brought into operation or Europe will become a second rate place and Europeans don’t want that to happen.” Similarly, I point out that Ucore Rare Metals (TSXV: UCU | OTCQX: UURAF) and Geomega Resources (TSXV: GMA) also announced successful fund raising efforts, which would indicate that we might be witnessing a turnaround in the rare earths market. Without disputing the turnaround possibility, Jack thinks that what is actually happening is that “investors are selecting the winners.” Speaking of winners, Tasman Metals Ltd. TSXV: TSM was up +16.30% and their NYSE MKT: TAS up +13.82% for last week.

Jack adds, taking a cue from his recently published and very popular article on InvestorIntel,  that many companies will be hiring Solvay SA’s division in La Rochelle, France, for their toll refining needs: “Solvay is clearly the world’s leading rare earths separation company, there’s no question about it. But Solvay has a limit to what it can do; it’s not an infinite well of largesse or technology; we have to watch, who first becomes a supplier to Solvay….Unless somebody else builds a world-class separation facility with 45 years of experience, anytime soon,  Solvay like the market is helping us pick winners.” (and InvestorIntelReport members can hear Jack’s incredible commentary on the French rare earths market if you go to the site).

We discuss graphene and comment on the appointment of Thomas H. Cruikshank, former CEO of Halliburton, as a strategic advisor to one of the most promising graphene companies Grafoid Inc. In part because I found that to be one of the most intriguing announcements of the week and as Focus Graphite (TSXV: FMS | OTCQX: FCSMF) is a shareholder — Focus is one of those companies as Jack states that is “pulling itself from the herd; it’s obvious to me that we’re seeing winners.”

Jack ends the discussion by noting some of his forthcoming speaking engagements, the first of which will be SIMEXMIN in Belo Horizonte, Brazil (May 11-14), which is very important considering South America’s expanding role and interest in rare earths. This is where I would like to remind everyone that Largo Resources Ltd. (TSXV: LGO) is a new InvestorIntel member has an advanced stage vanadium property that is counting down to production in the next couple of weeks — and is located in Brazil. We have Luisa Moreno coming in on Tuesday to discuss the competitive landscape of vanadium, so this should be quite the exciting week to kick off the new year.

To access the complimentary InvestorIntelReport video, click here


Tracy Weslosky

Editor:

Tracy Weslosky is the Founder and CEO of InvestorIntel Corp., a company that publishes InvestorIntel.com. A leading e-news source for investors, entrepreneurs and industry leaders ... <Read more about Tracy Weslosky>


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Comments

  • Veritas Bob

    ” I also noticed that their PEA shows they would be in operation until 2019 perhaps 2020″

    Well, I will admit when I am wrong. Quest’s new PEA provides a counter-example to my theorem (see http://investorintel.wpengine.com/rare-earth-intel/avalon-rare-metals-takes-one-giant-step-towards-rare-earths-production/#comment-231704 ) “All junior rare earth miners are 2 to 3 years from production … and always will be.”. Indeed, per Quest’s own admission, it is now 5 years from production. This is what in Mathematics is called divergence.

    April 20, 2014 - 2:02 PM

  • wwwater

    Tracy & Jack – In regard to GWMG naming the other party to the MOU in regard to separation of carbonates, you and I are aware of the competitiveness in the Rare Earth Sector and I believe it was very prudent on the part of GWMG not naming the other party as the MOU states further negotiations are underway with an internationally recognized provider for REE separation services. The MOU also calls for ongoing technical support as the Company reviews and advances the design of its planned production facilities at SKK. The question I ask you how many other INTERNATIONALLY RECOGNIZED PROVIDERS for REE separation services are available to Western Producers other than Solvay? You will notice I stressed Internationally Recognized. In your comments you have stayed that Solvay is the only one http://investorintel.wpengine.com/rare-earth-intel/first-come-first-served/

    April 20, 2014 - 2:02 PM

    • Veritas Bob

      It remains to be seen whether your and Tracy’s definition of internationally recognized provider for REE separation services matches that of Great Western. What matters is not what you and Tracy consider to be internationally recognized providers for REE separation services, but what the author and Great Western management approver of the press release are willing to state constitutes an internationally recognized provider for REE separation services.

      April 20, 2014 - 2:09 PM

      • Tracy Weslosky

        It’s nice to see you have eaten your cheerios again VB…try not to get too excited here, but let’s not make Lifton and me a singular voice please.

        Allow me to clarify that what I simply stated that I would have liked to know who the MOU is with. After all, wouldn’t you? And while I appreciate the reminder of the competitive landscape “Water x’s 3” — remember, it is a very small industry and there are only so many suitors, so this is going to find its way to the light in relatively quick speed….better to insure precautions as a public company and get it out on the table. Looking forward to the eventual disclosure.

        Thank you both for your comments.

        April 20, 2014 - 2:24 PM

        • wwwater

          Tracy – Do you ever see Avalon’s LOI with Solvay materializing. One of the conditions put out in Avalon’s NR was that Commencing December 31, 2014, Solvay will have certain termination rights until project financing is achieved. CAPEX in excess of $1 Billion excluding the Separation Portion

          April 20, 2014 - 3:13 PM

        • Veritas Bob

          Tracy, I am not suggesting that you and Jack Lifton are singular voices as to what constitutes an internationally recognized provider for REE separation services. Rather, I am suggesting that wwwater restrain his unbridled enthusiasm in his conclusion that Solvay is the party in question So, it is possible that Great Western is the singular voice – well, not quite, as indeed, many rare earth juniors, fond of impressive sounding agreements for agreements, such as MOU, head of terms, or whatever else they are called, may employ similarly liberal definitions when it suits them.

          April 20, 2014 - 3:18 PM

          • Tracy Weslosky

            Thanks VB for the clarification. I agree that Solvay would not be the only suitor — 😉

            April 20, 2014 - 3:27 PM

          • wwwater

            Veritas Bob – Do some history research and find that Rhodia, now part of Solvay did in fact process monazite concentrate from Steenkampskraal when it was part of Anglo American.

            April 20, 2014 - 3:30 PM

      • Veritas Bob

        Indeed Tracy, there was a “typo” in my comment. Instead of “It remains to be seen whether your and Tracy’s definition of internationally recognized provider for REE separation services matches that of Great Western. What matters is not what you and Tracy consider to be internationally recognized providers for REE separation service …”, I meant to write “It remains to be seen whether your definition of internationally recognized provider for REE separation services matches that of Great Western. What matters is not what you consider to be internationally recognized providers for REE separation service …”. Sorry for the confusion.

        April 20, 2014 - 5:42 PM

      • Veritas Bob

        wwwater, the fact that Rhodia previously processed concentrate from Steenkampskraal does not negate the possibility that some company other than Solvay could be the counter-party to MOU.

        Tracy, in as much as there are more rare earth junior miners with aspirations of greatness (or at least funding) than there are rare earth processors outside China, it may not be a matter so much of Solvay not being the only suitor for Great Western, as much as it could be that Solvay is not the only suitee (if it wasn’t a word before, it Is now) of Great Western. Who, exactly, has the upper hand here?

        April 20, 2014 - 5:52 PM

      • aurelius

        One wonders where you developed that pathological dislike for Great Western. You are indeed the Derm we are all familiar with on the blog; one who claims to have no share in the Co., and yet writes, day after day, to deprave the Co without ever relenting. While you also claim to have no share in the Co., I strongly suspect you are one of the manipulators who now and then sells 200 shares at 10% below current market price before market close, an amount worth $18 plus commission. You are indeed a sick man.

        April 21, 2014 - 4:48 AM

  • Tim Ainsworth

    “we have to watch, who first becomes a supplier to Solvay”

    Tracy, it may pay to backtrack to Lynas’s foundation supply contract, extended to 10 years duration in January 2010:

    “The contracted quantities account for a significant portion of the cerium and heavier Rare Earths, including europium and terbium, as well as other products such as lanthanum from the Lynas processing plant’s initial 11,000 tonnes REO capacity”

    As I understand it, filling this contract is currently the first priority as production ramps at the LAMP. Not only is this Rhodia/Solvay contract important in the placement of Lynas SEG/HRE for final separation but it appears to have escaped many that it also underpins Ce production from the initial 11ktpa. As a bonus LAMP Ce/La will quite probably free La Rochelle capacity by eliminating the need for reprocessing as per previous Chinese supply. Any value add there? Believe we will get at least an indicative update re April production with the QR in nine days.

    April 20, 2014 - 2:09 PM

    • wwwater

      Tim Ainsworth – Being a supplier of separated and mixed oxides (which Lynas is through it’s LAMP facility) is somewhat different than being a supplier of a mixed oxide carbonate concentrate for complete separation into individual rare earth oxides.

      April 20, 2014 - 3:52 PM

      • Chris

        wwwater,
        Lynas also produce a SEG+HRE concentrate. Approximately 500t/pa at phase 1capacity and double that at phase 2 capacity.

        April 20, 2014 - 11:18 PM

    • DANIEL

      What makes you think Lynas will begin operation in the next couple of weeks. Do you know of financing for Lynas at a 10million per month burn rate. Massive equity dilution at Core.

      April 20, 2014 - 9:36 PM

      • Chris

        Daniel,
        Lynas began production in November 2012. While Lynas had issues ramping up to phase 1 11Kt/pa or 916t/month run rate, the issues seem to be overcome with production at the phase 1 run rate imminent.

        “The Company is pleased to report that production reached 575 tonnes in the month of March.”

        “Total tonnes produced for the March 2014 quarter were 1089 tonnes, on an REO equivalent basis. Total tonnes shipped were 751 tonnes.”

        “The Company expects to be operating cash flow(1) neutral at a monthly sales rate of around 750 tonnes REO.”
        “(1) Operating costs defined as all Group ongoing costs including overheads and excluding specific capital expenditure, financing costs and non-recurring items.”

        https://www.lynascorp.com/Announcements/2014/Operations%20Update%20April%202014_CLEAN%20final%20-%20correction.pdf

        April 21, 2014 - 1:27 AM

        • Daniel

          When will the co be operating at 750ton REO? Is there any news of new financing?

          April 21, 2014 - 11:20 AM

  • Steve Mackowski

    If I may add a little process engineering to the discussion. A 5,000 tpa facility such as La Rochelle was designed to process LREO predominant feed stocks. As such, it would be configured in a very defined manner. It would have a large capacity (~3,500 tpa) SX separation circuit to handle the cerium, lanthanum and Nd/Pr mix. It would have a medium capacity (1,000 tpa) SX separation circuit to handle the SEG mix. And would have a small (~500 tpa) SX separation circuit to handle the HREO and Y. These three circuits would convert +99 purity feed stocks to the first stage of separation, ~99.9 TREO purity. The products from these three circuits then go through additional SX separations circuits to upgrade to the final product requirements eg 99.99 for each of the individual REOs. Very detailed process engineering now required.
    For these individual circuits to perform with the limitations of SX capacity and to produce the required quality, requires a very close tolerance on feed stock quality. It is not possible for 5,000 tpa of HREO concentrate to go through a 5,000 tpa circuit designed with large LREO percentage feed stock as the key design parameter. So what does that mean in relation to Jack’s comments? Do not expect to see a list of HREO hopefuls going through somewhere like La Rochelle. It would not have the HREO capacity. So it is very much first come, first served, BUT that feed stock must balance with plant design in terms of tonnage, grade, impurities, and most critically the relativity of the spectrum of REOs contained.

    April 20, 2014 - 9:01 PM

  • Mark Jackson

    IMHO, I believe the attention should be on Stans and not Steen. What do you think?

    April 20, 2014 - 11:23 PM

  • springer

    for the time being there is only one company outside China who might benefit from Solvay´s tolling offer. This is Molycorp. The product they deliver could be La, Nd, Pr concentrate (Ce “free”). It could create immediately additional cash-flow on the top of existing volumes. Yet, without Ce!

    April 21, 2014 - 3:10 AM

  • J. Best

    Great interview with Jack Lifton, as always. Love how he just lays it out. Looking forward to this video each week on InvestorIntelReport.

    April 21, 2014 - 10:12 AM

  • Tim
    April 21, 2014 - 9:32 PM

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