EDITOR: | September 11th, 2015 | 41 Comments

Molycorp – The Great Rummage Sale begins

| September 11, 2015 | 41 Comments
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gavelIt is sometimes said that after a nuclear holocaust the only lifeform that will survive will be the cockroach. That said there are some hardy cockroaches indeed in the Rare Earth space. Indeed some managements must be almost masochistic in persevering despite the opprobrium heaped upon the metals they pursue and their own companies. Nevertheless Darwinian forces are at work and the original 200 plus Rare Earth wannabes have shrunk to a couple of handfuls. These are definitely the cockroaches..

But one may well wonder whether it is much fun to live in a post-nuclear world. What is the future for the survivors?

All the Right Pieces in All the Wrong Places

The US Rare Earth “giant”, Molycorp, is now a wounded beast and is going down fast. The hyenas are circling and the question is what value can be rescued from the ruins.

In popular imagination Molycorp is a mine with a processing plant, but long before that it was an agglomeration of assets including some small manufacturers scattered around the globe and some larger assets such as the Silmet plant in Estonia. It then transformed itself with the pricy purchase of Neo Materials which brought it a processing and distribution Empire which also included assets in other metals, such as Gallium. So while the Mountain Pass mine itself may have gone the way of the dinosaurs, and much of the costly infrastructure around it appear redundant, there is still value to be rescued from the broader Molycorp empire.

As we well know the Neo Materials entity did very well all by itself in the Great Rare Earth Boom. It did not need to be vertically integrated with a mine (though there are some arguments that it may have inevitably been forced into that if China has applied the thumbscrews). However the Molycorp merger resulted in it being part of the same corporate grouping as a mine but was it actually vertically integrated? Was Silmet vertically integrated with Mountain Pass? Silmet’s raison d’etre was to process product from the Loparite mines in Russia’s Kola peninsula, not to take product from the Californian desert.

We have all played Monopoly at some time or another with one of those players that buy whatever property they fall upon and they end up with a ragbag of assets and no sets of properties that you can take further (i.e. build houses or hotels). Molycorp’s strategy was akin to this. It had some interesting “bits” of the global Rare Earth equation and while Neo Materials was like Monopoly’s Park Lane card, Mountain Pass was definitely more like the Old Kent Road card.

Mayfair Monopoloy Rebecca Reid

So what might play out here? Clearly Mountain Pass is likely to return to being a playground for rattle snakes and jackrabbits. It is a great shame that so much above-ground infrastructure is there that shall be surplus to requirements. It has long been my contention that Molycorp should have had a second string to its bow in the form of a smaller Heavy REE focused mine somewhere. If it had done this then the existing processing facilities could have been utilized, repurposed and/or relocated to service a new mine with a more market-amenable REE mix. Instead we have a sizeable plant in the wrong place, designed for the wrong REE mix and arguably way over-sized for whatever “new” REE mine might be able to supply it.

So Who Gets What?

The emotions of Molycorp management must be torn. Most coming from the old Neo Materials are probably wondering how they can get their hands on their old assets and ride off into the sunset. Possibly even Silmet and the other “early” acquisitions of Molycorp could be bundled with the Neo Materials processing and distribution network and make some sense. Ideally a private equity firm might back the escape bid giving the MCP debtholders some “widow’s mite” to, in some small way, compensate them. The question though is what happens to the mine (essentially useless) and the plant at Mountain Pass. This is where opportunity knocks. But it is also a test of the credibility of the remaining REE cucurachas.. We could conjure with at least 4-5 names that could “do something” with the MCP mill and plant, if only their own projects were in a state to move forward. Even more critically though the managements would have to be serious about becoming producers. Conceivably an owner of a North American REE mine project could make a case to the debtholders for knocking together their mine with the Mountain Pass kit and making a more viable concept than the original Molycorp proposition. Why are they not stepping forward for this once in a decade opportunity?

On other fronts, the Silmet asset is looking vulnerable with its Russian supply source exhausted and its US “source” (even if merely theoretical) being shuttered. Then what to do…? The answer is for a combine between Tasman with its Norra Karr deposit in Sweden and the Silmet plant just across the water. Will this happen? We doubt it.. makes too much sense…

Conclusion

Rare Earth assets may be at giveaway prices these days and Molycorp may look like a doomed wildebeest, but there is material here to make a silk purse out of a sow’s ear. The core Neo Materials assets are largely intact within the stricken corporate shell and the secret is going to be to apply some financial wizardry to liberate them without letting the debtholders realise the value of what they have. Even the rump Mountain Pass processing operations could be combined with an existing project and given renewed life force. Silmet is somewhat more problematical but a combine with a European-based REE wannabe could give both parties a well-needed fillip.

Fortune favours the bold and the travails of Molycorp are producing a unique opportunity to other Rare Earth players to become hyenas and pick over the bones for tasty morsels.


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Comments

  • Jack Lifton

    Chris,

    The rump in California although it resembles that of Kim Kardashian is in fact worthless to any of the remaining cockroaches. The mine can perhaps be worked to provide concentrate for an existing separation plant ELSEWHERE IN THE WORLD, but Project Phoenix has only, in my opinion, scrap value. The issue with an SX plant is process management with (today more than ever before) strict control of reagents (recycling whenever and wherever possible) and the “zeroing out” of process wastes and pollution. Most of the cost of the operation is tied up with these aspects. The cost of extractants is a very small part of operational costs. The lack of a functioning chlor-alkali plant was in fact the financial death knell of the operation. This has not changed, and the idea of one of the cash strapped cockroaches putting Project Phoenix into shape is risible. Project Phonenix would need a competent technical due diligence prior to any thought of reviving it. Who is capable of that other than the Chinese, Japanese, French, or Australians (Lynas). When any of them takes an interest it will be time to option some Molycorp shares.

    Jack

    September 11, 2015 - 12:01 PM

  • Tim Ainsworth

    Wot then of Molymet’s $600M, pissed against the wall?

    September 11, 2015 - 12:07 PM

  • Jack Lifton

    Tim,

    Perhaps a big Chilean mistake or perhaps an even bigger Chinese mistake?

    Jack

    September 11, 2015 - 12:11 PM

  • Tim Ainsworth

    With Austrian overtones, perhaps similar to Chinese nickel interests, wandering into niches they don’t understand.

    September 11, 2015 - 12:14 PM

  • hackenzac

    Molycorp going 86 certainly changes the landscape in North America, Mountain Pass partially salvaged or not. It seems to me that there is more elbow room for the cockroaches even if they technically don’t have elbows. For example, Ucore probably wasn’t figuring on having much market for their light rare earths but maybe now they do.

    September 11, 2015 - 1:08 PM

  • Tim Ainsworth

    Where?
    Lynas now focused on US autocat & FCC.
    Read the WSJ.

    September 11, 2015 - 1:11 PM

  • JACK LIFTON

    Tim,

    The WSJ has no clue about Lynas’ marketing plans or its finances. Come to Toronto October 14 (www.TechnologyMetals.com) and your questions can be answered.

    Jack

    September 11, 2015 - 1:40 PM

  • Tim Ainsworth

    A little tongue in cheek Jack, was referring to the reported interview with Amanda Lacaze: wsj.com/articles/lynas-ceo-digs-in-as-rare-earth-prices-slump-1441097886

    “Lynas—which currently sells most of its resources to customers in Japan—intends to pursue wind turbine manufacturers in Europe and auto makers in North America as part of an aggressive strategy to widen its customer base.”

    Some healthy doses of reality in there also:

    “When this company was conceived, the idea was: Build it, and they will come,” she said. “But Lynas was born when prices were high, and the market has well and truly moved on.”

    “She said many manufacturers had cut rare earths from their products when prices ballooned five years ago — after China restricted its exports — but hadn’t yet reintroduced them despite sharp price declines.

    “Now we need to convince end-users we are stable and financially viable, and that it is time to engineer rare earths back in,” Ms. Lacaze said.”

    Lynas is all about building ROW supply chains, while simultaneously improving recoveries, quality and driving economies of scale thru steady state SX to match the front & back ends.

    RE industry better hope those manufacturers respond.

    September 11, 2015 - 11:52 PM

  • springer

    Author and commentators miss few key points and show lack of specific knowledge in European REE business:
    – Where is the factual proof that Silmet can’t buy (hasn’t bought in the past) concentrate from Russia? Moreover, Silmet plant also produces Nb and Ta from raw material that comes not from US (i.e. Mountain Pass), but from Brazil.
    – Norra Kärr HREE project can’t be combined with a LREE processing plant this way. It doesn’t just work. First, Norra Kärr mine doesn’t produce any (!) REE-concentrate in the next years and lacks local community support to do so in the future. And secondly the whole NK project has very low NPV at current REE-pricing. It can only work other way around – Silmet gets Norra Kärr for free, identifies smaller project pieces with positive NPV and uses its know-how (and regional expertise to deal with local communities) to get part of the project on sound footing. NK cannot buy cash generating operating entity like Silmet, it is just not possible.
    – Combining Neo and Silmet is completely funny proposition. What is the rational for Neo to have another processing plant, which relies on non-chinese feedstock?? The aggregated capacity (mostly Ce and La) of Silmet and NEOs chinese plants exceeds the demand of Neo’s upstream production.

    Combination Lynas plus Silmet is much more rational proposition. Malaysian plant serves asian customers and european plant european/US customers. Lynas has enough mined and milled concetrate and could feed Silmet processing plant (after recalibrating existing process to accept monazite based concentrate).

    September 12, 2015 - 2:57 AM

  • Christopher Ecclestone

    In reference to Springer’s comments… it is somewhat bizarre that you suggest “Silmet buys Norra Karr”.. Silmet is a bust entity as part of Molycorp. The idea would be for Tasman to pick up Silmet for stock only and then the creditors of Molycorp would be distributed the Tasman stock in part payment.

    Your claims on local opposition to NK are preposterous. There are excellent synergies between the two… Lynas buying Silmet? That just repeats the mistake of MCP buying Silmet…

    Tasman with Silmet would become the European REE champion

    September 12, 2015 - 3:25 AM

  • springer

    Christopher, happy to have a different (european expert) view on Silmet, which is not a bust entity nor part of MCP Chapter 11 process. Feel free to read Silmet’s 2014 Annual Report and you will recognize that this entity earns money on a operating level.
    Again, there are zero synergies between Norra Kärr and Silmet. If Silmet needs LREE feedstock, then plentiful russian feedstock is times cheaper (i still wonder about your statement, that Silmet can’t get concentrate from Russia. This is actually bizarre and non-factual speculation). Moreover, Silmet can’t handle HREE-concentrate and separate it. Please, where is the synergy? And in how many years NK will be able to deliver stable and quality feedstock – 2017 or 2020? Silmet is better off of deciding whether to buy cheapest concentrate from Russia or China or Brazil or from any new REE-mine. There more mines than processing plants, it is supply driven market soon. And claim that NK can just do a stock transaction is strange. In this part of the region cash transaction is general rule and not swap of papers.
    With regards to local opposition please read Urbergsgruppen Grenna – Norra Kärr (unfortunately in swedish)
    Lynas: On contrary, Lynas is years ahead of MCP in terms of stability of processes. Simple tolling arrangement would be the first step. I agree, that such a tie up leads to strong additional supply of LREE at current low prices. But Silmet’s annual production is 3000 tons LREE, which is a fraction of MCP 40kt target.

    September 12, 2015 - 6:29 AM

  • Christopher Ecclestone

    Read my lips… Silmet is part of the Great Molycorp Rummage Sale and does not have a ‘corporate brain” of its own… and never has had…

    Where is this proliferation of Russian REE product coming from? Not the loparite mines? Or Kyrgyzstan?

    As for a Norra Karr protest group (in Swedish – could be Abba’s lyrics for all anyone else knows).. so what? Sweden is very mining friendly…

    September 12, 2015 - 6:45 AM

  • Jack Lifton

    Chris,

    I am with you on all of this. Molycorp’s Wall Street lawyers created what they thought was a clever split between the California operations and the ROW Molycorp to “shelter” overseas’ assets, but the Bankruptcy Court in Denver took a dim view of this from the beginning. The “original investors” in Molycorp had a hell of a payday in 2012, and as I noted then, every time thereafter that Molycorp needed just a “little” more cash the very best that the original investors could ever come up with overall and in total was about 2% of their profits, and even then, they made a very big deal out of it. I have never met anyone from Molymet or Oak Tree, but I believe that both of them wish they had never heard of Molycorp.
    The Neo purchase by Molycorp actually probably extended its, Molycorp’s, life by two years, and it was an absolute windfall for Neo shareholders. I am beginning to think that the time may have passed for Neo’s revival as a freestanding business. Like a sailing ship the masts and sails of which have been shot away but are still dragging behind it Neo has to get free of the wreckage or circle endlessly from the weight. Don’t cry for Neo. Its original shareholders, like those of Molycorp, made out like bandits. Its the latecomers who went down with the ship.

    The commenters on this thread, by the way, know very little about Silmet and nothing at all about Tasman.

    Jack

    September 12, 2015 - 7:10 AM

  • springer

    Jack, Christopher,
    do you really believe there will be tie-up with Norra Kärr and Silmet?? Happy to return to this thread at the lastest 1Q.2016 and review all statements. My bet against yours is that there will be no tie-up of Silmet and NK.

    September 12, 2015 - 7:36 AM

  • Jack Lifton

    Springer,

    I do NOT believe there will ever be a tie-up between Tasman and Silmet. In fact Tasman looked at Silmet, when the Silmet sale was opened in 2012, and rejected it. Silmet has no money or access to anything near what it would take to bring Nora Kaar into production and Silmet’s business has lately been processing Molycorp concentrates from California, and as we all know intracompany transfers are on much easier terms than purchases from outside suppliers who have COD terms. It is foolish to say that an SX plant will simply “shift’ from bastnaesite to monazite feed stocks. This takes time, money, EXPERIENCE with both, and skills. Perhaps the Estonian government will keep it running to avoid 500 layoffs, but I don’t know any other reason to keep it going. Silmet’s Japanese “business” will probably go to Lynas now.

    Jack

    September 12, 2015 - 7:53 AM

  • springer

    Silmet has proven processes, skills and vast practical experience, more than any junior (incl. NK). But true – no money (which doesn’t imply that money can’t be raised). Just to be precise – there was no blank statement that SX switch from bastnazite (carbonate) to monazite (phosphate) (loparite to bäsnazite switch was obviously successful in the past) will be “simple”, “easy” or “fast”. And this statement also applies even more to untested bastnazite to euydialite concentrate switch, propagated by earlier “expert commentator”. Running a SX plant is complex chemistry juniors on average tend to underestimate. Being junior doesn’t automatically equal to the intrinsic (“god given”) ability to run (a half-a-century old) SX plant. Silmet is even more complex – not only REE (incl. REE-metal production), but also world-class Nb/Ta-metal production.

    September 12, 2015 - 8:30 AM

  • Tim Ainsworth

    Former Neo assets will certainly be interesting, and you have to wonder if Oaktree has done its homework.
    Since the expiration of the original Magnequench patent July 14 former customers are now competitors with a subsequent drop in ASP $43kg to $37kg, although volumes have largely been maintained.
    Dig deep enough you’ll also find minority Chinese holdings in mainland assets, no idea how that might impact a sale process.

    September 12, 2015 - 9:49 AM

  • Jack Lifton

    Tim,

    You bring up a very good point. When Neo originally went into China and brought in Magnequench it brought technologies and skills that the Chinese domestic industry did not have. In those days a foreign company could be set up with only “minority” ownership by a Chinese “partner.” Today not only do the Chinese compete with Neo domestically but more and more globally. In addition any restructured Neo will be subject to current rules on the allowed percentage of foreign ownership of a venture. Perhaps that is why Neo was so receptive to Molycorp’s 2012 offer. Perhaps Neo knew the clock was ticking.

    Jack

    September 12, 2015 - 9:58 AM

  • Tim Ainsworth

    “NEO and its Magnequench affiliate report that 85 percent of their manufacturing facilities are in China (the other 15 percent is in Thailand); that 95 percent of their personnel are located in China; and that all of their China manufacturing facilities are in the form of “joint ventures” with Chinese state-owned enterprises.”

    heritage.org/research/reports/2008/05/magnequench-cfius-and-chinas-thirst-for-us-defense-technology

    Dig deep enough and you can find that verified in Neo AR’s.

    “PM (Neo sub) produces rare earth based and other engineered materials through its ownership in two Sino-foreign equity joint venture enterprises in China. Although referred to as equity joint ventures, PM controls these enterprises and they are considered to be subsidiaries of PM. Jiangyin Jia Hua Advanced Material Resources Co. (“JAMR”) is owned 90% by the Company and Zibo Jia Hua Advanced Material Resources Co., Ltd. (“ZAMR”) is owned 95% by the Company.”

    quote.morningstar.com/stock-filing/Annual-Report/2009/12/31/t.aspx?t=:NEMFF&ft=&d=6e3375aca8123840894234bae260561b

    Given Moly threw 60x normalised earnings (2009) at Neo SH’s I doubt they even blinked before signing, rather ironic that US interests paid $1.2B after the original purchase of Magnequench 17 yrs earlier for $70M, and little doubt the Chinese JV partners came along for the ride.

    I wonder if Neo assets could be bought and relocated out of China as easily as Magnequench was, then again, with former customers now duplicating the product offering perhaps it wouldn’t be so hard, just need to pay off the Chinese JV IP watchdogs.

    Have to wonder just how deep Oaktree investigated their “security”.

    September 12, 2015 - 11:09 AM

  • Michael Schuss

    What about the environmental liabilities at Mountain Pass? I agree the plant is worth scrap value but after the California government picks through the mess will NEO end up with the California government. I see a long drawn out battle over the clean up

    September 12, 2015 - 11:28 AM

  • Jack Lifton

    Michael,

    I believe that Chevron kept responsibility for any future liabilities associated with Molycorp’s 1998 thorium spill in the desert, and I would suspect that if Mountain Pass were abandoned then it could become a superfund site and the liability for this plus the existing liability would revert to Chevron. If the bankrupt company is terminated then there will be no one to keep the site on care and maintenance, which is the way that mining ventures avoid clean-ups. This is a costly factor to be considered by any “buyer.” And I suspect that Oak Tree did very little due diligence. I suspect also that if I am right about the past liabilities for the thorium spill then Chevron’s lawyers are already involved in the bankruptcy.

    Jack

    September 12, 2015 - 11:59 AM

  • Michael Schuss

    I have to go back in my memory because my notes are buried from years ago. I got a preliminary prospectus from the underwriters on MCP that showed the first $100 million or so went to reclamation and a big part of the offering was from seed investors cashing out (always a bad sign) The final prospectus had that changed to “mine development” Obviously the corporate finance guys over rode the lawyers who did the first draft. I have the waste discharge permits from the California EPA some where which were basically zero discharge to the tailings. Even galena was collected. Historically Mountain Pass had 60% recovery because of the fine grained nature of the REE mineralization and as MCP never disclosed operating parameters of the mine its impossible to evaluate with whats in the public domain. This may end as a REE story but the cleanup story and who will pay will go on for decades. Glad it wasn`t a Canadian company because will be another Galactic and Summitville that followed Friedland for decades. My advice to anyone in this space that new black box technologies to make complex metallurgy in deposits to go away be wary. There is huge amount of existing REE processing capacity in the world that need clean feed. If I told you I had a gold deposit that has a new black box process to extract gold and building a special black box refinery to recover it I know what the mining industry would say

    September 13, 2015 - 12:32 PM

  • asrms

    I don’t think (and hope) that Lynas will be looking to pick up any assets arising from the MCP BK. I seriously doubt that Japanese financiers have any interest in seeing ‘their’ company which has achieved so much over the last year re focus on product specification, reliability, production and cost efficiencies etc, now take on board more debt, product, manufacturing and logistic problems. However, Lynas will look to take full advantage of any potential ROW customers looking for consistent non Chinese supply. I get the sense that their financial backers see non Japanese customers as ‘iceing on the cake’ for Lynas whose primary job is to provide present (and future) Japanese customers with their LREEs. Do this and Lynas will survive and probably eventually prosper – why mess with this future?

    September 13, 2015 - 1:03 PM

  • Steve Mackowski

    FYI. When purchasing shutdown chemical plants ie Mountain Pass, disassembling, reasonable transport and re-erection costs ~50% of new. A good deal if the capacity is right. Caution on accelerated corrosion due to problematic start up.
    For anyone interested in Chinese SX plants, be very sure about future supply of REO concentrates. If you are not, or not likely to be, part of the big six, that be very careful.

    September 13, 2015 - 8:09 PM

  • JOE O

    Jack
    Would love to know your thoughts on what you think Tasman does going forward

    September 14, 2015 - 3:15 PM

  • Jack Lifton

    Joe O,

    Tasman’s CEO, Mark Saxon, is a truly global businessman. He is more involved in the European Union’s critical metals agenda than any other junior mining executive. He is surely Europe’s leading authority on the domestic (European) sourcing and processing of the rare earths and graphite. If anyone can create a rare earth sourcing (mining or recycling) industry in Europe it will be Mark Saxon. I’m going to have a meeting with Mark next week in Europe, and I will tell you after that my thoughts on Tasman going forward.

    Jack

    September 14, 2015 - 10:27 PM

  • irishrover

    Doubt that anyone wants a single train 20,000 TPY SX plant. I think people are waking up that bigger is not better. There are other plants around the world that would be better to relocate. There is a very good reason why Chinese plants are no larger than 5,000 TPY as Steve pointed out earlier.

    September 14, 2015 - 10:39 PM

  • Jack Lifton

    Irishrover,

    Up until now, in fact, the “average” Chinese SX plant for rare earths separation is less than 2500 tons annual capacity. In Ganzhou, which is in Jiangxi Province, I was told that there were 38 rare earth SX plants in “existence” in 2013. The largest was 4000 tons per year capacity and the smallest a 1000 tons. Admittedly the 61,000 tons of separation capacity in Jiangxi Province were driven mostly by the demand for the heavy rare earths. I asked why the small (by American “expert” standards) average capacity. the answer was “process control.”
    I note that the only large scale SX separation plant successfully built outside of China, so far, has been Lynas’ LAMP with two 11,000 ton capacity modules. LAMP’s chemistry was licensed from Solvay China and its implementation was overseen by experienced engineers mostly from China but also from France. There were very serious start-up problems at the LAMP creating an enormous, previously unbudgeted for, over-run and a loss of nine months operations, The Chinese do not need such an enormous capacity SX plant, because, along with financial reasons, they do not have a primary ore body such as Mt Weld and they already have vast overcapacity. The Chinese along with the French and Malaysians learned a great deal about the problems of managing such an enormous chemical engineering undertaking and overcame them The Californians did not.
    Project Phoenix I believe is mostly only of scrap value now.

    Jack

    September 15, 2015 - 8:55 AM

  • irishrover

    JAck
    Given that nearly all the manufacturing capacity and sales are in Asia would it not make sense to have an Asian based company pick up the Neo assets? Or at least have management in Asia now that the USA dream is up in flames?

    September 16, 2015 - 4:01 AM

  • Christopher Ecclestone

    I do not think the “USA dream has gone up in flames”. Certainly it has shot itself in the foot and its weakest part has long been the individuals. The unbusinesslike approach of so many in the REE space has been a subject of ongoing perplexity to both myself and Jack Lifton.

    I still believe that Mountain Pass could be picked over (ie. scavenged) for residual value and redeployed to an up and coming mine.. But at that point the fact that lesser mortals are sitting in the driving seats of projects that might be way farther advanced by now if the managements weren’t faking it while waiting for a greater fool to come along and buy them up. Greater fools are in short supply in the REE space these days as their has been a Bonfire of the Vanities that has consumed the available supply..

    September 16, 2015 - 4:13 AM

  • Tim Ainsworth

    Perhaps part of the answer to the lack of downstream engagement to RE primary production by USA Corp:

    “The two motors use the same stator, but use different rotors. The smaller-output, or “A” motor, uses ferrite rather than rare earth metals, cutting overall rare-earth metal use from 3.2 kg to 1.2 kg, and the use of heavy rare earths (primarily dysprosium) from 282 grams to just 40 grams.

    The two-motor drive unit is more efficient than its predecessor, operating at 5 to 12 percent more efficiently. GM declined to specify what metrics that referred to.

    It’s also 100 pounds (45 kg) lighter than the existing system.”

    greencarreports.com/news/1095146_2016-chevy-volt-bigger-battery-more-motor-power-new-range-extender-engine-details

    Appears ROW innovation not only designing out HRE (Dy less 86%) but also more efficient use of RE & alternate (RE less 62%).

    Presuming 1.2kg RE translates roughly to 3.6kg NdFeB 40g Dy represents a little over 1%, in the drive train.

    That would be quite an advance on Showa Denko’s data from Nov 13 showing a reduction from 8% to 4%, probably about the time the 2016 Volt was in the early design stages.

    sdk.co.jp/english/news/13382/13817.html

    Which probably begs the question, where are GM sourcing their NdFeB magnets?

    Guess the upside is that while GM using less RE overall they are making a commitment to them as a preferred platform, as per Siemens, by using them far more efficiently.

    Given the decision to use ferrite was probably made when RE prices were higher can the NdFeB supply chain compete weight/efficiency/cost somewhere off the current low base, and remain viable?

    Brave New World.

    September 18, 2015 - 4:10 AM

  • Jack Lifton

    Tim,

    About 5 years ago a Washington trade group, the Magnet Materials Association, was formed, and I was recruited as a “senior advisor.” America’s three largest magnet makers were members. All of them had previously made rare earth permanent magnets of the NdFeB:Dy type.I asked the CEO of one of them during a lull in our testimony to a House Committee what it would take to put his company back into rare earth permanent magnet production. His answer was that for 25 million dollars he could facilitize to manufacture 1500 tons of NdFeB magnets per year and that was the lowest volume he thought would be profitable.
    He said that he would not spend that money so long as there was no “reliable” domestic supply of raw materials and with Chinese selling prices where they are [were in 2010].
    I personally believe that today prices and competitive advantage would allow for American production of rare earth alloys and magnets, but the situation of “no reliable American domestic supply of raw materials” continues.
    Although I have not spoken with that CEO is some time I know that he, as I did, never felt that Molycorp had reached reliability as a domestic supplier.
    There is also an issue of the Japanese magnet industry. No American company is large enough or technologically strong enough to go up against Hitachi or Shin-Etsu, both of which are vertically integrated from the mixed oxide concentrate forward. Chinese companies are edging towards US based production and this is the greatest fear of the Japanese industry, since many Chinese magnet makers are part of vertically integrated entities.
    There can still be an American domestic integrated magnet making operation but it will have to use cunning not volume to be competitive.

    Jack

    September 18, 2015 - 7:36 AM

  • JJBeswick

    Jack is it REALLY a problem that, to quote, there’s “no reliable American domestic supply of raw materials” for magnets?
    I rather think that “ex-Chinese” should replace “American” in that quote, perhaps with a rider or 2 about the likes of Estonia.
    Do US manufacturers really care less whether it’s (say) Lynas or Arafura providing reliable Nd/Pr supply rather than Ucore or Quest (I assume Canada is OK) or whoever…..
    Similar comments might apply further along the supply chain where it’s now clear that JARE (JOCMEG and Sojitz) along with Lynas are rebuilding the RE magnet supply chain outside of China.
    I assume Japan and Australia regarded as reliable trading partners….

    September 18, 2015 - 10:56 AM

  • Jack Lifton

    jjBeswick,

    The US DoD seems always to have been of two minds. Some in their command structure agree with you, but for others a non-domestic supply is considered insecure. I note that Airbus and Daimler are moving production to the USA to escape high labor cost Europe. Hitachi is already magnetizing in North Carolina, for a German auto parts maker, Zdf, Malaysian machined Chinese/Japanese produced magnet alloy produced from REEs separated in China, Japan, Viet Nam, and Malaysia from mixed concentrates from Chinese and Australian rare earth mines. Talk about globalization all you want, and this is a good example.
    I want there to be a domestic American supply chain, so Americans can get the maximum benefit from their own technological history and prowess.
    I want my friends and neighbors to have and maintain a high standard of living not just a high standard of spending.
    The global rare earths supply chain is a financial mess at this time. The same old, same old solutions are not working. The root causes of REE markets’ destruction will be fixed, and its every nation for itself.

    Jack

    September 18, 2015 - 11:48 AM

  • JJBeswick

    Jack if that’s the thinking in the US it leaves me wondering why they recently bothered with a free trade agreement with one of their closest strategic partners, Australia.
    Given this is the 21st century you might wish to face some realities such as the fact that the US now have effectively NO part of the RE magnet supply chain onshore.
    Take some comfort in the fact that friends (Japan, Australia) have rebuilt that capacity and will no doubt be happy to supply US users.
    The US is of course important (less so than before) but it’s not the centre of the financial universe in this modern globalised world.

    September 18, 2015 - 12:37 PM

  • Jack Lifton

    JJ.

    Other than mining at Mt Weld I am not aware of any Australian rare earth supply chain participation at all. Amazingly the US DoD seems to count Australia as a “friend” more so than it does Canada. I suspect that this is to do with Australian readiness to commit combat troops to various adventures around the world rather than “peacekeepers.” Also the RAN is much larger than the RCN even though Canada is I think the wealthier nation. as to Japan it has its own local wok in which to fry.
    Globalization has come and gone many times in the last two centuries, and each time the pundits tell us that “this time it’s different.”
    I don’t really care if the US is considered the center of the financial universe; its the center of my financial universe and that of my friends and neighbors. I note that one of the reasons that the US Fed Reserve did not raise rates yesterday was a fear of causing a flood of FDI into the USA thus crashing the new “centers of the universe.”

    We can never agree on this, so lets not try.

    Jack

    September 18, 2015 - 1:00 PM

  • JJBeswick

    Jack I assume your comment “Other than mining at Mt Weld I am not aware of any Australian rare earth supply chain participation at all” is tongue in cheek. Lynas are currently supplying 60% of the Japanese Nd/Pr demand (through JARE).That supply is being used for magnets rather than doorstops. Currently the Japanese RE Magnet industry makes the US version look like very minor players whatever your “US uber alles” ideology would like to claim.
    The US may well be the centre of your financial universe, and more power to you for that. But if you claim it is (or should be) the centre of the (ex-China) RE magnet universe then frankly I think you’re deluded.

    September 18, 2015 - 1:21 PM

  • Tim Ainsworth

    Jack, beg’s the Q, where the hell are GM sourcing their 1% Dy NdFeB?
    Totally ironic after offloading Magnequench, but Chinese JV’s or are they in bed with the Japanese mainland?
    Hitachi USA just doesn’t have the capacity at last public report.

    September 18, 2015 - 7:51 PM

  • Jeff Thompson

    JJ,
    A civil tongue and the ability to disagree respectfully are rare commodities these days. As a child those basics were emphasized in particular with those who are senior to us, but these days those basics are evaporating away as the internet puts a wall between people encouraging them to speak in ways they would be far less likely to do in person.
    Jeff Thompson

    September 19, 2015 - 5:56 AM

  • JJBeswick

    Jeff I’d have said exactly the same face to face and meant it.
    Online the use of “deluded” is I agree a bit harsh so consider it replaced by “mistaken”.

    September 19, 2015 - 7:54 AM

  • Tim Ainsworth

    “Other than mining at Mt Weld I am not aware of any Australian rare earth supply chain participation at all.”

    Jack, rather than geographically perhaps that ‘participation’ would be better described as under Australian control (with heavy Japanese support) as distinct from the outright Chinese majority ownership, or significant equity, in many of the non US wannabes.

    Some minority SH’s appear to celebrate this situation, but the tale of two masters rarely ends well.

    September 20, 2015 - 7:07 PM

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