EDITOR: | January 15th, 2013

Rare Earths and Critical Minerals Weekly Review: Key Regulatory Developments

| January 15, 2013 | No Comments

DoDThe first full week of 2013 was, as might be expected, not swarming with news or highlights from rare earths and critical minerals producers. However, there were some interesting regulatory developments in both China and the United States, which will certainly have a long term impact on the sector over the next months and beyond.

Last week, the Chinese Ministry of Land and natural resources, announced the 2013 rare earths mining quotas: of course, these quotas are very important for the industry and the world market as a whole. Indeed, China has set the 2013 limit for the first tranche to 15,501 tons of REE, or 27% lower than in 2012 last year. Typically, China then issues an additional tranche mid-year. China’s trading partners have accused the country several times of controlling or manipulating prices through export quotas and taxes. The quotas reflect developments from last November, when China’s top rare earth producers went ‘offline’ for a few weeks noticeably curtailing the amount of REE on offer. Rumors of production cutbacks in China likely contributed to generating something of a trend reversal. The Chinese regulations, as reported to ProEdgeWire by our source in China, Hong Po, have also boosted measures to combat illegal mining and smuggling of rare earths. This is very important, given that some analysts believe that the share of illegal exports of REE from China exceeded legal exports by about 20%, meaning that the actual Chinese contribution to REE world markets was over a third higher than what authorities in Beijing had approved.  Should China be successful in reducing contraband, rare earth prices should get some good lift.

Meanwhile, in the United States, legislators have grown more concerned about American resource independence. Republican Congresswoman Marsha Blackburn (R) introduced the Smart Sale Act, aiming are to protect the interests of American taxpayers, promote American technology and jobs and ensure the availability of critical materials and technologies needed to protect the United States. Clearly, the Act, should it be passed into law, would help the rare earths sector in the United States and in countries closely allied with it (implying far less uncertainty of supply). Molycorp could be one the beneficiaries of such legislation; however, the Company continues to struggle amid rumors of a takeover (over which ProEdgeWire also speculated), internal problems reflected by the sudden departure of the Company’s CEO last December and an announcement, last week, that investors should lower their expectations for revenue and cash flow for 2013 while the much discussed processing plant expansion has been postponed. The stock, after an optimistic start, fell sharply by the end of the week.

As for rare earth miners exploring in other potentially REE rich regions, Great Western Minerals (‘Great Western’, TSX: GWG) announced key additions to the Board of Directors including a new CEO and an independent Board member. On January 9, Great Western Marc LeVier was appointed to the position of President and Chief Executive Officer, subject to regulatory approval. Mr. LeVier, who has accumulated forty years of mining experience, joined the Board of GWMG in late 2012 was closely involved in completing the Preliminary Economic Assessment (“PEA”) of the Company’s Steenkampskraal project in South Africa. Mr. LeVier’s appointment comes as Great Western shifts from exploration toward manufacturing stage of rare earth permanent magnet alloys of all types and chemistries and rare earth metals. The former CEO, Gary Billingsley, resigned shortly after the Thanksgiving holiday last November. One of the reasons suggested for the change was a need for GWMG would need more engineering and separation specialists than exploration and geological experts as operations shift from exploration to production. Indeed, Mr. LeVier, a metallurgical engineer, has years of experience in developing technologies for hydrometallurgical, chemical and engineering design processes. Great Western also appointed Lenard Boggio to its board of directors.


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