EDITOR: | June 11th, 2019 | 3 Comments

Search Minerals is well positioned for any potential trade crisis over rare earths

| June 11, 2019 | 3 Comments
image_pdfimage_print

If you have been keeping up with the latest on the US-China trade wars, by now you will be familiar with the rare earths story. Rare earths are called critical elements for a reason and that is because rare earths are essential materials for many of our everyday devices such as magnets, computers, cell phones, electric vehicles (EVs), wind turbines, fluorescent lighting, catalytic converters, military applications and much more. Rare earths are forecast by UBS to increase 655% in a 100% EV world. Right now there is a concern that if the US-China trade war worsens China may cut off the supply of rare earths to the US, as China controls ~90% of supply and also consumes 60% of rare earths.

Search Minerals Inc. (TSXV: SMY) is focused on finding and developing critical rare earth element mineral assets in Labrador, Canada. The Company controls properties in three distinct areas of this region; the Port Hope Simpson (PHS) Critical Rare Earth Element District in SE Labrador; the Henley Harbour Area in Southern Labrador; and the Red Wine Complex located in Central Labrador.

Projects location map

The Port Hope Simpson District

The Company’s Port Hope Simpson (PHS) District 100% owned property includes three promising discoveries known as Foxtrot, Deep Fox and Fox Meadow.

The flagship Foxtrot resource covers a 70 km long and 8 km wide belt. The Foxtrot resource, alongside in-channel samples assayed at the Deep Fox and Fox Meadow discoveries, show mineralized zones with high concentrations of Dysprosium (Dy), Neodymium (Nd), Praseodymium (Pr), Terbium (Tb) and Yttrium (Y). Looking at the table below, the higher grades of the very valuable neodymium jump out. Nd, Pr and Dy are the key valuable battery rare earths.

The Foxtrot resource is well developed and as shown below the total indicated resource for Foxtrot is 7,390,200 tonnes of ore with neodymium grades of 1,485 ppm.

Assay results from Foxtrot, Deepwater Fox and Fox Meadow

David Dreisinger, Director & Vice President of Metallurgy for Search Minerals Inc. stated: “The ones that we are finding, that are most economically interesting, are the neodymium and the praseodymium. Also, dysprosium and also terbium. They are basic magnet making materials. They go into the high-intensity magnets used for the electrification of our society. We see huge increases in demand for these materials as electrification takes place.”

Preliminary Economic Assessment

The April 2016 updated Preliminary Economic Assessment (PEA) on the Foxtrot Deposit resulted in a post-tax NPV10% of C$48 million and a post-tax IRR of 16.7%, based on a 14 year mine life, and applying Search Minerals’ proprietary Direct Extraction Process. The PEA included a low initial capital cost of C$152 million (including a $33 million contingency), and an after tax payback period of 4.4 years. Revenue estimates are dominated by Nd (39%), Dy (29%), Pr (14%) and Tb (8%), all elements that are projected to remain in supply deficit.

In 2017 Search completed a $2 million pilot plant using a breakthrough hydro-metallurgical process. The plant produced a 99% high purity mixed rare earth oxide concentrate from over three tonnes of Foxtrot material.

With a primary objective to extend the mine life to 14 years, the Company will develop Foxtrot and Deep Fox as their initial projects. Search Minerals is currently optimizing the flow-sheet to enhance recoveries and lower capital and operating costs. While the Company has identified more than 20 other prospects in the District, its primary objective and focus remain the development of Foxtrot.

Search Minerals catalysts and timeline to production

Search Minerals catalysts and timeline to production

In 2010 a boundary dispute between Japan and China resulted in the slowing of rare earth exports to Japanese industry, which caused rare earth prices to skyrocket. Right now there is a very real chance of a repeat involving China and the USA.

Search Minerals offers investors significant exposure to rare earths in the safe mining jurisdiction of Canada, reasonable initial economics including a low start-up CapEx, at a time when the globe needs rare earths supply outside of China. The Company believes their low capital cost and scalable Foxtrot Project is well positioned for any potential trade crisis.

Investors should remember that the Foxtrot NPV10% of C$48 million should have considerable upside assuming the mine life can be extended to 20 years and beyond. Foxtrot is just one of three discoveries at Port Hope Simpson, and other options exist at Henley Harbour and Red Wine Complex. Hence the “scalable” point should not be missed by investors. At current prices, Search Minerals offers plenty of optionality on rare earths.


Matthew Bohlsen

Editor:

Matthew Bohlsen is a Senior Editor for InvestorIntel.com. With a Graduate Diploma in Applied Finance and Investment, and a Graduate Diploma in Financial Planning. He ... <Read more about Matthew Bohlsen>


Copyright © 2019 InvestorIntel Corp. All rights reserved. More & Disclaimer »


Comments

  • Tracy Weslosky

    THX for the piece Matt. I inserted the photo I took of Greg Andrews at PDAC 2019 — and yes, he has a number of examples of rare earths in front of him. This is one of those ‘quiet’ stories that has been building….and will be one of the sources for NA rare earths in years to come!

    June 11, 2019 - 12:10 PM

  • Rare Earths Investor

    It is to be expected that RE companies with the present sector environment being at its most public (and positive) since 2010-11, would be presenting their projects in the most favorable light. In fact, not to do so would be abrogating responsibility to one’s company shareholders etc. However, I am left wondering where exactly the large majority of these companies expect to find offtakes and will be able to show how they fit into any RE expansion, or new value chain that may emerge?
    For example, North America has at least 20 RE companies the majority of whom sport mining focused projects. If we contend for argument sake that the most likely new/expanded RE value chain to be developed (outside China) will be seen in North America, then how much mining, processing (not too mention needed magnets and battery manufacture) will be necessary to sustain such a venture? Again, just as examples (because they are clearly seen out there already) beyond the MP Materials and Lynas Blue Line processing possibilities (not to mention the Medallion and Rare Earth Salts pilot), how much more RE processing will N. America need? If Lynas can use its own mine and MP already has one, how many more RE mines will be needed to meet first the US military needs and then any possible increased/new commercial needs?
    Further, how much need will the EU require (who are presently behind the N. America strategic drive for new RE mine production and processing) with their present spotlight on RE recycling projects? Will Australia need to look beyond (probably choosing between) Arafura, Alkane, Hastings etc. Or is it simply that any other potential mine will need to look to China for an outlet? But then the Chinese already have investment in Greenland Mins and Northern Mins., and have excess capacity in China.
    Again, my point here is that quite professionally many RE companies worldwide are presently engaged on a variety of media platforms presenting their projects and technologies in the best possible light, while wrapped in the almost frenzied coverage that the sector has been receiving.
    However, those interested in investing for the long term in this sector should be asking some fundamental questions both macro (as indicated) and micro (some provided in the above article) about the actual viability of a project making it to production. (Admittedly, traders may ask far fewer questions and be relying on that swan event’s arrival).
    MHO https://twitter.com/EarthsRare

    June 11, 2019 - 2:51 PM

Leave a Reply

Your email address will not be published. Required fields are marked *