Rare Earth Turnaround to continue despite some minor bumps
The ProEdgeWire Rare Earths and Critical Minerals index lost 4.23% for the week ending on May 17. The drop reflects the rather shaky commodities trend and the fact that many rare earths companies are listed in countries, whose currencies and market trends are closely tied to commodities such as Canada and Australia. Nevertheless, some companies in the index did manage to make notable gains. Peak Resources (ASX: PEK) gained 32.14%, confirming that investors appreciated the company’s deal that to ensure funding for its Ngualla REE project in Tanzania. On May 13, Peak Resources announced that it completed a placement of ordinary shares to investors raising AUD$ 2.5 million. This should enable Peak to lead the Ngualla Project to production.
The deal is especially significant as it comes at a time with junior miners are finding heavy barriers to the funds needed to bring promising projects to the next stage. Therefore, the agreement should be considered as an important vote of confidence in Peak’s rare earth project. Earlier this year, Peak noted that the Ngualla project is proceeding on schedule and that it will have relatively low operational cost (USD$ 10.09/kg REO – on average these exceed USD 11/ton – and capital costs of USD$ 400 million with annual revenues of USD$ 361 million) and long term potential as suggested by the scoping study and preliminary economic assessment. The Ngualla project also offers metallurgical advantages given the fact that the deposits have shown a mineralization, bastnaesite, with very little uranium and thorium content, which eases processing and reduces capital cost requirements. Peak appointed Australia’s ANSTO Minerals (ANSTO) to build its solvent extraction (SX) pilot plant using an acid leach process to produce four rare earth oxides and a first successful run was achieved last March.
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Meanwhile, Critical Elements (‘Critical’, TSXV: CRE | OTCQX: CRECF) rose 15.97%. ‘Critical’ is developing a high-purity lithium and tantalum project in Quebec, which promises to become one of the most important sources of tantalum and lithium, which are in high demand for a number of applications from batteries to medical equipment. Moreover, because of tantalum sourcing restrictions imposed by the US Dodd-Frank Act, there are very favorable prospects for a North American based tantalum source (found mostly in the conflict mineral coltan, much of which found in the DR Congo).
Finally, Cache Exploration (TSXV:CAY) rose 150% after it announced on May 13 that it has received encouraging results after re-assaying its 2012 drill core for Molybdenum. The re-sampling program from its Welsford property in New Brunswick has shown that the molybdenum mineralization is larger, and in greater concentration, than what was suggested by the results first published in January 2013. Molybdenum can withstand extremely high temperatures and it is sought out to form alloys for applications in aerospace, motors and electric contacts among other things including renewable energy technology: molybdenum coated soda lime glass is used for copper gallium selenide (CIGS) solar cells fabrication. Cache has also carried out an exploration program for Geodex (TSXV: GSM), which optioned the Jake Lee project to Cache, to continue exploration first started by Geodex. On May 16, Cache announced better than expected REE mineralization from Jake Lee (as well as gold exploration results). Cache has also found evidence of REE mineralization at the Welsford REE Properties, backed by existing and functional infrastructure including good roads, power and water. While still showing a loss on average, the rare earths sector still showing signs of life after making massive gains in the previous week (ending May 10), after suffering strong pressure for months.
The exercise of caution is always good advice; there is still strong potential for rare earths projects, especially those reaching more advanced stages with proven resources. Companies will need millions to continue development, but given that the rare earth dependence on China continues, there will be demand for those on their way toward the proverbial ‘finish’ line. The REE market appears to have entered a new phase marked by ups and downs and investors must neither weaken at the signs of ‘defeat’ nor get too enthusiastic over ‘gains’. Stamina and solid nerves are crucial in the confidence that rare earths are necessary and that the stock market will eventually and inevitably recognize this. Japan’s unexpectedly quick economic recovery should help boost demand for a number of rare earth intensive products