March REE Leaders Index Down 8.55%: TRER Skyrockets +59%, Mkango Follows +33% and Medallion Rises +25%
March 2013 Rare Earths and Critical Minerals Month in Review: REE prices remained low in March. The Rare Earth Leaders’ Index (REEL) dropped 8.55% while the ProEdgeWire rare earth and critical minerals sponsor index, fared a little better, dropping 4.69%. Texas Rare Earths (OTCQX: TRER) saw the most significant jump, moving 59.46% for the month in response to announcements that its simple (by industry standards) acid leach process has been successful in separating heavy rare earth elements with consistent 80% recoveries at its Round Top project in Texas. Lynas Corporation (ASX: LYC | OTCQX: LYSDY) further disentangled itself from legal chains launched by environmental groups with one last phase remaining. In that context, a Malaysian election should be called by next June, which will lift some of the political risk facing the project, owing to political and environmental opportunism from the opposition. The latest signs are that the opposition leadership has shown far more willingness to consider the benefits of Lynas rather than allegations against it from populist local representatives masking as environmentalists.
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Medallion Resources (TSXV: MDL | OTCQX: MLLOF), after dropping steadily in January and March, hitting the lowest point on March 7, climbed rather dramatically achieving a 25% increase on the TSX and 20% increase on the OTCQX. That stock made a huge leap on the very day after it hit a new bottom, rising more than 47% on March 8. There was no official news corresponding to the jump; however, Medallion is a different kind of rare earth explorer as it does not have a mine in the typical sense of the term. Medallion’s model is based on processing monazite from mineral sands, which in effect cuts out the ‘mining’ risk, focusing only on the processing and separation, the logic being that such a method ultimately saves many of the traditional miners’ development costs. The highly experienced Medallion management undertook an important trip during March to evaluate the potential site for the mineral sands processing site. No official decision has been taken, but the longstanding rumors are that it will be in a secure area of the Arabian Peninsula.
Mkango Resources (TSXV: MKA) also witnessed as significant share price jump in March, rising 33.33%, suggesting investors were pleased with the pre-feasibility study for the Company’s Songwe Hill rare earth project in Malawi. The NI 43-101 technical report for the Project showed a much higher than expected resource at the project in Malawi after the second phase of drilling. The resource is rich enough in carbonatite that Mkango does not foresee the need for more drilling. The other industry news came from Molycorp (NYSE: MCP), which almost appears to be setting the tone for the sector with a combination of good and bad news.
Molycorp released their fourth quarter results on March 14 and they actually exceeded the gloomy expectations. The highlights from Molycorp’s results delivered an optimistic message for the industry in general, as its revenue increased and because the main reason for its announced loss was a much publicized benevolence impairment charge that was announced before the Quarter. China will maintain its rare earths monopoly for a few more years but Lynas Corp, Molycorp and a few others among a ‘herd’ of emerging plays will continue to grow. Meanwhile, a mere look at the numbers would hide some important news.
There was also a lot of rare earth news from China in March, and much of it concerned an apparent shortage of demand from all of China’s major enterprises due to domestic and international consumption patterns. Certainly, China may be facing lower demand from Japan – much expected due to the ongoing and intensifying Sino-Japanese diplomatic duel over the Senkaku/Diayou Islands – however, it is difficult to take the negative sentiment at face value. New sources of rare earths are coming on line (i.e. Lynas Corp) and some of the conspiratorial among us may see the Chinese data as intended to discourage the development of alternative sources. That said, the argument can also be made that China will become, before the end of the decade, a rare earth importer itself. It seems that Quest Resources ((TSX: QRM | NYSE MKT: QRM) and the ProEdgeWire Technology Metals Summit (TMS 2013; April 21-22, Toronto) have received much attention in China. Quest’s CEO has been a strong proponent of the prospect of China becoming an REE importer, while the TMS 2013 will address the role that rare earths and critical minerals will have in what may well be the next Industrial Revolution.