EDITOR: | August 7th, 2013 | 17 Comments

Professor Dudley Kingsnorth’s bullish position on REE markets

| August 07, 2013 | 17 Comments
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Weslosky-KingsnorthAugust 7, 2013 – Tracy Weslosky, Publisher and CEO of InvestorIntel.com, interviews world-renowned REE guru, Professor Dudley J. Kingsnorth, for his perspective on where the REE markets are at and, more importantly, where they’re headed.

Professor Kingsnorth apprises InvestorIntel viewers on both Lynas Corporation Limited (ASX: LYC) and Colorado’s Molycorp, Inc. (NYSE: MCP) and how these two companies, in particular, have impacted rare-earth forecasts.

“For the past 12 to 15 months we’ve been waiting for Lynas and Molycorp to finally ‘trip the switch’ and start producing rare earths,” explains Kingsnorth. “That’s happening now and I believe this is going to lead to a great rejuvenation and rebirth of the rare-earths industry. Things are going to change with Molycorp and Lynas coming online. We are now going to have diversity in supply that we haven’t had in 15 years.”

“All the money that’s being invested in finding alternatives to rare earths, in my opinion, within the next three to four months, is going to revert to finding new applications for rare earths. I believe that Lynas and Molycorp are going to surprise us with some of the volumes they’re producing – and selling – over the next six to 12 months because there is a lot of support for alternatives to China.”

Commenting on the recently released J.P. Morgan rare-earth research report that had REE analysts’ forecasts -30% lower than Professor Kingnorth’s forecasts, he stated: “I watch the rare-earth market fairly closely – and I talk to both the end users and the producers. I think what’s happened is that people have underestimated the amount of REEs that China sold in 2010 and 2011; when we saw huge hikes in prices, accompanied by uncertainties of supply. As a result, the West built up huge stockpiles of rare earths that was probably equivalent to three or four year’s worth of consumption.

Over the last few years, we have seen what’s happened. China has really clamped down on the illegal mining and supply… and that’s really having an impact on the material that’s available coming out of China. China’s stockpiles have been run down. When people look at the present REE market situation, they say, ‘when I look at metal pages, the prices are coming down and the volumes don’t look that great.’

In 2010 and 2011, companies bought a lot of the illegal REE material that came out of China. They are now getting towards the end of that material. As a result, we are going to witness a big pick up in REE purchases toward the end of this year. We are going to see a recovery in prices in the fourth quarter, but more importantly, we are going to see a return to the volumes we saw a few years ago… in spite of the reduction of supply coming out of China. If we had the same reduction in the demand for hybrid vehicles, iPads and smartphones, we would have had millions of people laid off. That hasn’t happened. The growth and demand for those consumer items – which consume a lot of rare earths in their manufacturing – has remained unchanged.  And that, to me, is fundamental to the fact that rare-earth consumption has remained very much the same the past few years. It hasn’t fallen. J.P. Morgan might have a different view, but my view is that the demand has remained very much the same and we are now in a situation that the stockpiles that were built up – because of panic – in 2010 and 2011 are being run down.

We are about to witness a rebirth and rejuvenation in the REE space – specifically at the end of this year/beginning of 2014.”

The following is Professor Dudley J. Kingsnorth’s Presentation to the AusIMM Critical Minerals Conference 2013. Professor Kingsnorth’s subtheme was that the Rare Earths Industry is Undergoing Rejuvenation. The start-ups underway at Mountain Pass and Mt. Weld are providing comfort to the end-users so that they are ceasing to seek alternatives to use rare earths; which should lead to growth in demand. It is worth noting that under the influence of the global financial crisis and the limitations on production and exports put in place by China, global rare-earths demand has remained static at approximately 120,000tpa REO over the past 6 years (2008 to 2013 included). With the rebirth, Professor Kingsnorth believes that we will see a return to a growth in demand of 8% to11% per annum over the coming years; resulting in total global demand of 160,000tpa REO in 2016 with a real prospect that demand will exceed 200,000tpa REO in 2020 for the first time. Nevertheless, the lack of any rest-of-wrold heavy rare earths producers remains a real concern to consumers, but is recognized as a real opportunity and being addressed by several junior companies.

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Comments

  • Ty Dinwoodie

    Excellent interview, Tracy. I’m not trying to sound like E.F. Hutton & Co. here, but when Dudley Kingsnorth talks, people (should) listen. I found his arguments to be incredibly interesting, well-researched and logical. I would love to see an analyst from J.P. Morgan or Goldman’s debate him on this.

    August 7, 2013 - 2:20 PM

  • Ty Dinwoodie

    Looking forward to the Molycorp conference call tomorrow…

    Molycorp to Report Second Quarter 2013 Financial Results on August 8, 2013.

    GREENWOOD VILLAGE, Colorado [7:00 a.m. Eastern, July 11, 2013] — Molycorp, Inc. (NYSE: MCP) today announced that it will release financial results for the second quarter ended June 30, 2013, after the market closes on Thursday, August 8, 2013. Release of Molycorp’s financial results will be followed by an investor conference call at 4:30 p.m. Eastern. Constantine Karayannopoulos, President and Chief Executive Officer, and Michael Doolan, Executive Vice President and Chief Financial Officer, will host the call.

    There will also be a simultaneous live audio webcast available on the Investor Relations section of the Company’s website at http://www.molycorp.com/investors. The webcast will be archived on the website.

    August 7, 2013 - 3:06 PM

  • Tracy Weslosky

    I would like to thank Dudley and AusIMM Events for allowing us to publish Dudley’s PPT…and of course Dudley, for providing us with this very informative and positive update.

    August 7, 2013 - 4:31 PM

  • Ann Pamplin

    i found this website from youtube. i posted a comment on this video that i’ll repeat here: aren’t some of these rare-earth materials critical? i mean, i know about hi-tech and green tech use of rare earth metals in manufacturing, but don’t they have critical applications that go beyond commercial manufacturing (military, for example)? depending on the country and where it’s located, wouldn’t countries need to ensure they maintained a certain amount of certain urgent metals. is there a real upside potential to investing in some of these stocks? i’m a novice investor but i think this sector of the stockmarket is very appealing. thanks!

    August 7, 2013 - 5:02 PM

  • Ty Dinwoodie

    I (literally) just received an email from Professor Kingsnorth. In it, he further elaborates on the “rebirth” of the REE sector with the following points:

    1. Consumers rediscover rare earths in the light of security of supply.

    2. Consumers switch from seeking alternatives to increased purchasing.

    3. Molycorp and Lynas will be the main beneficiaries as they start-up and move through to output at their Stage 1 and 2 design capacities.

    4. Opportunities will be created for additional LREO aspirants in 2-4 years once this situation has been reached.

    5. However, in reality this is not far off as it takes a long time from Project Commitment to Production (assuming one goes from mining through to separation); based on the Lynas/Molycorp experience 3-4 years (1year for detail design then 2+ years for construction and start-up).

    6. The criticality of heavy rare earths remains; with Alkane Resources Limited (ASX: ALK) the most advanced in progress towards commitment.

    August 7, 2013 - 7:54 PM

  • C.Boyd

    Professor Kingsnorth: “I watch the rare-earth market fairly closely – and I talk to both the end users and the producers.”

    What about the ROW middle supply chain? Surely this would be just as important as the end users.

    August 8, 2013 - 7:50 AM

    • Dudley Kingsnorth

      I talk to people throughout the supply chain.

      August 9, 2013 - 2:21 AM

  • Bishton

    From the heavy REE side, Alkane is in a good position, but what does Mr. Kingsnorth think about Great Western Minerals Group from Canada with their South African Steenkampskraal project? Does he anticipate an expected start date for production? Also, Less Common Metals recently produced neodymium metal from electrolytic cell process, supposedly the first and ONLy producer outside of China to do so. What are Mr. Kingsnorth’s opinions on that?
    Thanks.

    August 8, 2013 - 10:06 AM

    • Dudley Kingsnorth

      GWMG are well positioned to complete the necessary funding arrangements, complete construction, move to start-up and then production in the not too distant future. I am reluctant to forecast a date.

      August 9, 2013 - 2:25 AM

  • aurelius

    Bishton. I second your request. Hope Ty Dinwoodie will be in a position to comment. I personally believe that Great Western Minerals is the most nimble and well positioned REE, although not nearly as big as Lynas and MCP, to secure not just the raw material but to produce the finished product at the lowest cost. We’ll soon know.

    August 8, 2013 - 11:09 AM

  • aurelius

    Thanks Ty. Am also an investor in Lynas, but I have been bitten so many times! From all appearances, Lynas has all it takes to be a large producer of REE, but 1) will it be vertically integrated to make money off the most profitable segment of the business i.e., the finished product; 2) isn’t their cost of production so high that the likelihood of making a profit is very unlikely? and 3) Is there a possibility that Lynas and Great Western might be working on a tolling arrangement? Thanks again for passing on the question to the professor.

    August 8, 2013 - 11:45 AM

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  • Andrew

    What does Prof. Kingsnorth think about the possibility of Lynas merging or buying out Great Western Minerals as a way of better competing with Molycorp?

    August 9, 2013 - 9:57 AM

  • Bill Keenes

    Professor Kingsnorth, I recall previously reading your views that it’s only a matter of time before China stops exporting rare earths to the West.

    Is this still your view, if so will that be both lights and heavies, or just heavies, and what sort of a time frame do you envisage this will occur.

    August 10, 2013 - 5:00 AM

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  • Lars-Erik Hedström

    Very interesting. I wold like to have some more information.

    Lars-Erik Hedström

    October 19, 2013 - 12:52 AM

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