EDITOR: | July 1st, 2014 | 11 Comments

Northern Minerals on path to becoming a leading dysprosium producer by 2016

| July 01, 2014 | 11 Comments
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Northern Minerals (‘Northern’, ASX: NTU) is one of the rare earth stocks that is challenging the market trend, as it continues to perform well in the markets. From last May 30 to June 30, Northern rose 16.13%. The Company experienced an intense month, characterized by its demonstrated confidence in the future of the rare earths market. Indeed, Northern decided to retain an AUD$ 26 million minority interest in its Browns Range heavy rare earths project in Western Australia rather than selling it to the Australia Conglin International Investment Group (ACIIG). Northern Minerals also announced that a AUD$ 5.3 million placement for its Browns Range Heavy Rare Earth (HRE) project in northern Western Australia, adding to AUD$ 6.5 million already in Northern’s coffers, easing the path to completion. In late June, Northern also announced the completion of its preliminary feasibility study (PFS) for the Browns Range project.

The PFS confirms that, says Northern, Browns Range could be “the first significant world producer of high value dysprosium outside of China.” Northern says production could begin as early as the latter half of 2016. This means that the Browns Range project offers excellent economics because, apart from the presence of dysprosium (which commands premium prices), the PFS was based on “a conventional mining operation involving both open cut and underground operations, and a relatively simple processing flow-sheet with all infrastructure located on site”. The PFS also identified a base production of 279 MT of dysprosium per year and a total of 3,200 MT of mixed rare earth oxides. Such is the concentration of ‘heavies’ in the mix that Northern could survive on the production of dysprosium alone. Northern also noted that it has faced little difficulty in extracting the xenotime (the mineral containing the rare earths) from the host rock. Having completed the feasibility study, therefore, Northern has also maintained a degree of financial ‘independence’, managing to keep control of funding mechanisms as it moves to secure the capital to bring the project to production stage. The current resource estimate for the Browns Range project now stands at 4.13-million tons of at 0.68% (or 28,084 tons TREO).

Due to the global economic downturn, the rare earths market was marked by lower demand in the past two years, resulting in a price consolidation and a determined effort by the Chinese government to cut down on price distorting mechanisms as ‘black market’ rare earths trading. China’s rare earth policy has also established the increasing buildup of strategic reserves by the Chinese government including terbium oxide, neodymium, gadolinium, dysprosium and praseodymium.

Heavy rare earths are mainly used in “green technologies” (electric transportation, wind turbines, energy saving lamps) and until somebody starts to produce heavy rare earths outside of China, the supply situation with these rare earths is still at risk. Meanwhile, technology is not standing still and innovations requiring rare earths are launched every day. Recently, General Electric announced that it has developed a new and very efficient generation of refrigerators that require magnets based on a gadolinium alloy. Clearly, given the size of the market for refrigerators and the rising costs of electricity worldwide, this will boost global demand for gadolinium.  In the automotive sector, if Tesla succeeds in expanding its annual production from 22,500 to 500,000 cars a year, there will be a huge impact on demand for such metals as copper, lithium and rare earths.  As the Chinese government increases reserves stocks, it is reasonable to expect that prices for rare earths in China will rise in the coming weeks or months. China’s plan to introduce a new environmental tax on rare earths from 2015 is also likely to increase prices while, Lynas and Molycorp are not expected to bring any relief to rising heavy rare earths demand.  All of this is good news for those companies like Northern Minerals, focusing on heavy rare earths and taking the necessary technical and financial steps to head toward production just as the rare earths market should reach new peaks.


Editor:


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Comments

  • Robert Sills

    Hi Alessandro, may I suggest you check your figures stated in the article? I think you have mixed up tonnes with kg’s.

    July 2, 2014 - 2:44 AM

    • Alessandro Bruno

      Actually I converted the Kg’s to tons – 279 MT = 279,000 kg and 3,200 MT = 3,200,000 kg – those were the numbers on the press release

      July 2, 2014 - 9:50 AM

  • Venture capitalist

    He just added a false M to the T, I guess it can be corrected. Some other things I am really interested in are the added capex and cash cost per kg of doing mixed oxides inhouse, the base case Dy price and the reason for this relatively low IRR (33%) for such high percentage HREE.

    July 2, 2014 - 6:03 AM

    • Alessandro Bruno

      By MT, I meant ‘metric tons’ rather than ‘million tons’ but thanks for noting.

      That said your suggestions are interesting and will include them in the next piece

      July 2, 2014 - 10:08 AM

      • Venture capitalist

        Thanks, you are right, I’m just not used to it.
        Looking forward to your next article. Another issue I have is the large Chinese interest in this company, I think Conglin and friends have over 50% now. So any future production probably goes just one way: to China. Wouldn’t be surprised if it gets taken out by them soon.

        July 3, 2014 - 5:44 AM

  • Bill Keenes

    Northern have proven up one of the best heavy rare earth deposits in the world, and have the very best of “rare earth” experienced management teams.

    July 2, 2014 - 8:37 PM

  • JJ

    One competitive advantage Northern has over all other producers or producers to be is “simple” mineralogy, the importance of which cannot be emphasised enough. It is piss easy to upgrade and “no” (none at all) material handling issues in the hydromet. The kiln operation and the kiln feed no issues.

    July 3, 2014 - 2:13 AM

  • merlion

    Nice piece, Alessandro. Let’s do some housekeeping first and then a bit of modern history.

    You stated: “The current resource estimate for the Browns Range project now stands at 4.13-million tons of at 0.68% (or 28,084 tons TREO).” This was upgraded by Northern Minerals on 26 FEB 2014. Their announcement stated 47,997 tonnes (1 tonne = 1,000kg) @ 0.74%.

    Some modern history …

    Japan went to war in 1941. FDR froze Japanese assets in the US and Japan could no longer buy 4/5ths of its oil from the US. At that time, Indonesia was shipping refined oil at 10 times the volume it was selling to Japan. A hit on Pearl Harbour followed by swift military expansion to the south (beyond Indonesia as far as Australia). This was the obvious move for a nation that had invaded and occupied Korea, Manchuria, China and French Indochina in its recent past.

    The message is: if you cannot source your resources at home, best you secure them from reliable, secure and friendly trade partners. Or go to war!

    Fast forward 50 years. Comrade Deng Xiaoping, the architect of China’s reform, noted in a speech made in January 1992 during his Southern Tour, ‘The Middle East has its oil, China has rare earth.’

    Fast forward a further 20 years. China still has its Rare Earths and a prodigiously profitable middle supply chain that develops and exports products with gadgets carrying vital rare earth content. But at what cost? Pollution and loss of arable land is the shortest answer. But in crisis, there is opportunity and that is what it spells today for a greater regional zone. Or hemisphere. A strategic revamp has forced Beijing’s hand to source the vital rare earths elsewhere and to hibernate its domestic stack for some very distant day, if needed.

    Both Japan and China have intimate association with Australia’s resource industry. Australia has been supplying Japan for more than 50 years. The Japanese have then engineered those shiploads into consumer products with an inventiveness that drove Japan’s wealth creation curve for 40 years. In 1990, Japan’s lost decade began but only after it had set an example for other Asian Tigers – Korea, Taiwan, Malaysia, Singapore et al – to emulate. China is now the next Tiger and 15 years into its wealth creation trajectory. There are about 25 years to follow.

    Next week Japan’s Prime Minister Abe will visit Australia’s Pilbara, which is located in the North of Western Australia. The region boasts extensive deposits of you-name-it resources. Abe will first visit Canberra next Tuesday and address federal parliament, meet Cabinet Ministers and sign an economic and trade agreement.

    Chinese Leader Xi will attend the next G20 meeting to be hosted in Brisbane next November. It is widely expected Xi will sign an economic and trade agreement with Australia on the occasion of that visit. Today, the news headlines are carrying Xi’s visit to South Korea where bilateral free trade talks are being advanced. South Korea and Australia signed last April.

    Geopoliticians will marvel at this flurry of readiness to freely trade within the region. Military brass may wonder if they’ll be needed in the future … to go to war! Well, maybe at least do a bit of chest thumping and say ‘watch it, mate’. But China knows that peace and jobs will propel their restive peasant class and ethnic minorities into prosperity at a much faster rate than might war.

    China’s shopping list …

    In short, China is shopping for arable land and food products to feed its huge population and rapidly growing cashed-up middle class. And it also wants those key resources. It is obvious to me that Conglin Yue is in business at Northern Minerals to supply those resources to China. It is obvious to me that CY’s Northern Minerals shareholding of 45% is not about a Chinese takeover, but about control so that his Chinese associates – particularly in Beijing – can bank on a heavy rare earth supply from a reliable, secure and friendly trade partner. Refer above to the second paragraph under the history heading.

    Northern’s Mission …

    And so we have a PFS from Northern Minerals. Funding is to follow. When the plan evolves into reality in 2016, as first cab off the rank, Northern may well become the first non-Chinese heavy rare earth supplier to the world. In doing so, Northern aspires to help restore a free market in heavy rare earths for global subscribers. Australia’s FIRB (= Foreign Investment Review Board) will stamp this project as National Interest to ensure, as it grows, it becomes not only a supplier to China, but also Japan, Europe and North America. Northern’s tenements have the size and prospectivity to enable a scaling up to take on the opportunity.

    July 4, 2014 - 1:44 AM

  • Veritas Bob

    Theorem: All junior rare earth miners are 2 to 3 years from production … and always will be.

    July 4, 2014 - 8:22 AM

    • Fred

      I view this as similar to wanting to get married and raise a family. The only timeline you’re reasonably sure of is 9 months of pregnancy. You don’t have as much influence as you want over the other parts of the timeline. Up front, if you’re willing to chance getting screwed, you can advance the timeline, but you decrease the chances of living happily ever after. And there will be many spinsters.

      July 5, 2014 - 2:05 PM

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