EDITOR: | August 20th, 2014 | 5 Comments

Paul Zink of Rare Element Resources sees higher rare earth prices on the horizon

| August 20, 2014 | 5 Comments
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Rare-Element-Resources-ZinkAugust 20, 2014 — Tracy Weslosky, Editor-in-Chief and Publisher of InvestorIntel speaks to Paul Zink, Senior VP and CFO for Rare Element Resources (‘RER’, TSX: RES | NYSE MKT: REE) about the current global rare earth pricing climate and what we should expect in 2014. Paul says that the Chinese government has started to stockpile rare earths again and that “there is a lot of pressure building for higher prices…The big six Chinese firms that have been designated to consolidate the industry there have reported pretty poor financial results and continue to face an escalating cost structure: their environmental costs are going up; their labor costs are going up; they’re mining lower grades….One industry watcher has suggested that that prices need to be 20 percent higher just so the Chinese can handle the new environmental rules alone.”

In other words, Paul suggests that prices will start to go up because Chinese producers, which account for some 85-90% of global rare earth production and 65% of consumption, will inevitably have a great impact on the overall market. Tracy then wonders which rare earths are slated to feel the upward price pressure first and most. Paul identifies three major areas of demand:

  1. The magnet alloys, which are critical to miniaturization, allowing for the design and production of smaller and ever more powerful electric motors. Neodymium, dysprosium, terbium and praseodymium will continue to enjoy strong market demand.
  2. The metal alloys will draw demand from battery manufacturers especially thanks to the growing market for electric and hybrid cars, which have a promising future.
  3. Lanthanum, which has drawn a more ho-hum reaction from the markets and which is slated to attract more interest because of the automotive market in places like China, where catalysts will see rising demand, especially in response to the use of heavier crude oils to refine gasoline and other fuels.

Then there is the whole subject of alternative energies such as wind or solar power that require magnets. Wind turbine applications are demanding the largest magnets now. Not long ago, computer disc drives were doing the same. Paul is also optimistic that the great American tradition of innovation will continue and deliver an entirely new set of applications and technology, which may well require more rare earths for magnets and beyond such that a “supply-push rather than demand-pull” system develops for magnets and their related materials. As to how the Bear Lodge project fits into the evolving REE market, the Project in the Black Hills, Wyoming, near Sundance, contains one of the richest REE deposits in North America. It has heavy rare earth elements (HREE) as well as critical rare earth oxides (REE oxides with the greatest value) in all deposits. The drilling results, moreover, suggest that its resource could see additional expansion both in the current deposit and in surrounding target areas.

Disclaimer: Rare Element Resources is an advertorial member of InvestorIntel.


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Comments

  • Alan Levy

    One other reason why Paul ( and the overall REE industry) might be right about pricing: the Baotao mine in Inner Mongolia is primarily an iron mine…with byproduct rare earths. Iron ore prices are getting clobbered owing to Rio Algom and BHP low-cost seaborne supply. In other words, everything that Molycorp tries to do with getting their rare earth costs under the Chinese; Rio and BHP have already done with iron ore costs.

    I certainly do not believe that Baotao will be shut down, but any additional revenue that can be squeezed out of the rare earths would be really helpful to them.

    August 20, 2014 - 2:25 PM

  • Stephan B. Feibish

    I believe Baotao has plenty of rare earths in the leftover materials they’ve produced. Don’t know if it’s worth it for Baotao to try to extract these REEs at this point in time.

    August 22, 2014 - 12:27 PM

  • Steve Mackowski

    I will comment on the facts around Baotou in my next article. The mineralogy is very interesting and is a lesson in how a by-product can become more important than the original product.

    August 22, 2014 - 11:00 PM

  • freethinking

    You say:- Neodymium, dysprosium, terbium and praseodymium will continue to enjoy strong market demand.

    Plus all reports are that China is cutting back production, and imposing a higher cost structure with new environmental regulations

    So why then aren’t we seeing rare earth prices creep slowly higher.

    Instead the opposite is occurring … prices are creeping lower.

    August 25, 2014 - 3:25 PM

  • Michael Roat

    Molycorp’s production increase will coincide with an industry rebound and a rise in prices.

    September 5, 2014 - 9:57 AM

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