EDITOR: | December 12th, 2013 | 12 Comments

Tasman and Flinders seek merger — and lay down road-map for the critical metals sector

| December 12, 2013 | 12 Comments
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CA16901In what seems a striking new strategy, graphite and rare earths projects (and possibly tungsten, too) on Europe’s doorstep are to be merged into a new entity. All three materials are classified by the European Commission as critical, and all three are potentially available from Sweden — just an overnight truck journey from Sweden over the Øresund Bridge, via Denmark, to the metal-hungry factories of Germany.

Two Canadian-listed companies are now setting a fascinating new road-map for the rare earths and critical metals sector: the concept of building a diversified critical metals supplier, and therefore being less exposed to any market weakness in any one commodity.

Tasman Metals (TSX.V:TSM) and Flinders Resources (TSX.V:FDR) have begun what they describe as preliminary negotiations for a merger. Tasman brings to the table the Norra Kärr project in southern Sweden, one of the world’s largest known heavy rare earth deposit, and is now also looking at the recently acquired Yxsjöberg tungsten project. Flinders is developing the Woxna flake graphite deposit in central Sweden where initial production is scheduled for the third quarter in 2014. Woxna is expected to produce flake graphite at the rate of 10,000 tonnes a year. The mine operated between 1996 and 2001, when it was forced into care and maintenance by falling graphite prices. Woxna is fully-permitted and will require limited capital to get back into production — and able to supply Europe’s lithium-ion battery makers. Incidentally, Yxsjöberg is also a shuttered mine: it once produced 90% of Sweden’s tungsten needs.

Norra Kärr is enriched in dysprosium, yttrium, terbium and neodymium, all on Europe’s shopping list.

As we have reported many times, the Europeans are very concerned about the availability of certain critical metals, especially those where production is dominated by one or two countries. In the case of rare earths, graphite and tungsten, China dominates global output.

The joint statement from the two companies notes that, within Europe, there is a substantial degree of overlap between the industrial consumers of REE, tungsten and graphite. (In addition, Sweden’s engineering giant, Sandvik, is a large tungsten consumer; the metal’s main use is to provide strength in products like machine and cutting tools, its melting point being 3,410C. It should also be mentioned that Tasman has also been in contact with the Japanese government agency Jogmec —Japan Oil, Gas and Metals National Corp — where it was learned that Japanese industries have been finding great difficulty in acquiring tungsten and are taking a keen interest in Tasman’s Yxsjöberg.)

The statement says the boards of Tasman and Flinders believe a merged entity will provide a larger market presence, provide operational efficiency, and “deliver a much stronger voice in the global critical metals sphere”. Tasman brings with it an additional attraction: its dual-listing in New York (NYSE-MKT:TAS) which is an opening for institutions looking for critical metals exposure. In the other direction, Tasman President Mark Saxon says his company will benefit from the skills the Flinders team is gaining as it goes through the development process under Swedish laws and its negotiation of sales contracts.

Under the terms being considered, Tasman may acquire all of the outstanding common shares of Flinders on a yet to be determined ratio.

As I said near the start, the big story here is the concept of a company with multiple critical metal resources. The next important factor is the proximity to the European market, especially Germany. And then there’s another plus: the fact of Sweden’s low political risk compared with many other potential sources of these three commodities.

But don’t ignore Japan in this story, especially in relation to tungsten. Yxsjöberg is just one of six tungsten properties acquired by Tasman. The Japanese are investing in many tungsten projects around the world, including in Australia.


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Comments

  • J. Best

    Interesting article Robin. There seems to be a ‘natural marriage’ if you will between rare earths and graphite as critical metals. Very progressive of these companies to forge ahead looking to become a diversified critical metals supplier. I will follow there progress with much interest.

    December 13, 2013 - 12:10 PM

  • Gareth Hatch

    It should be noted that the two companies have four directors and a corporate secretary in common. In addition, the wholly owned Sweden-based subsidiary running the Tasman projects is helmed by a director of the wholly owned Sweden-based subsidiary running the Flinders projects.

    December 13, 2013 - 1:46 PM

    • Veritas Bob

      So this would be laundering a de facto “living in sin” arrangement by getting legally married by a provincial registrar?

      December 13, 2013 - 2:37 PM

    • Venture capitalist

      Mawson shares some directors with these two as well, adding some high grade gold and uranium as well would be nice, if only Finland didn’t have very slow and difficult permitting processes.

      December 16, 2013 - 5:22 AM

  • vacuum

    Flin & Tas each have access to former, historic mines. Stans is another company handling land which before has produced. But isn’t it correct that there ain’t many more like that; the others are dealing with territory chock full of drill holes but no mine shafts. (excepting recent mine construction, e.g. Molycorp, Lynas)

    so, there is something unique about the merge of Flin & Tas. If they could pick up Stans, then it would be complete.

    there might be a merger trend here. Molycorp and Lynas should merge. That would be a ton of shares outstanding but still less than GE’s 10B. And anyway, mergers present the opportunity to rollback shares.

    December 14, 2013 - 3:41 PM

    • Gareth Hatch

      To my knowledge, neither of Tasman’s primary REE projects, Norra Karr and Olserum, have been subject to historical mining.

      December 14, 2013 - 3:46 PM

    • Al

      Elliot Lake in Ontario, Canada has produced heavy rare earths commercially in the past. It is the only mining camp in Canada that has commercially produced heavy rare earths historically. In the late 1980s, Elliot Lake produced 35% of the global supply of yttrium. Pele Mountain Resources is developing the Eco Ridge Mine Rare Earth and Uranium Project in Elliot Lake.

      December 15, 2013 - 10:41 AM

      • Dave G.

        Important point you make there Al. In the late 1980s, Elliot Lake produced 35% of the global supply of yttrium and Pele is exploring the Eco Ridge Mine Rare Earth and Uranium Project in Elliot Lake now…worth checking out

        December 16, 2013 - 2:27 PM

  • vacuum

    Tasman website says: Tasman Metals Ltd is a Scandinavian focused mineral exploration company with extensive claim holdings in Sweden, Finland and Norway that are prospective for strategic metals, including rare earth elements (REE’s) and iron ore. The region is rightly regarded as the “home of REE” as many REE’s were first discovered in Sweden, including cerium, erbium, holmium, lanthanum, scandium, terbium, thulium, ytterbium, yttrium. The mineral bastnaesite is named from the Swedish village of Bastnäs, where cerium ore was mined in the late 1800’s, which lies close to Tasman Metals Ltd’s exploration project areas. The Scandinavian region has a long and prosperous mining history, which has developed into a modern, highly mechanized and low cost region to explore and develop mines.

    ___________
    compare that with Texas and Nebraska. It’s a remarkable difference in cultural synergy. And it’s close enough for horseshoes.

    December 14, 2013 - 4:33 PM

    • Veritas Bob

      If my company has an office near the New York Federal Reserve building, and hence near its basement containing a very large amount of gold (including gold held for countries around the globe, not just the U.S.), it does not mean that I have access to that gold.

      December 14, 2013 - 6:29 PM

  • vacuum

    And if a gold bar falls in that NYF building, would anyone hear it? No, because we must suppose that the FedRez hasn’t gold in reality. E.g., Germany’s unfulfilled return request–fail to deliver. And also the vicious (humungous volume sell) COMEX slam some nights, 4-5am EST. . . . Apparently it’s all been leased fifty ways and otherwise shipped to China.

    Admittedly, for anyone who has a periodic table on their wall, the historical dimension of the TAS story is quaint if not awfully romantic.

    For all others: cf. Tasman Metals’ Norra Kärr is ‘the only advanced rare earths project within the EU’ – c. November 6, 2013 by Ty Dinwoodie

    December 14, 2013 - 9:52 PM

  • Sue Glover

    Terrific article Robin, garnered a lot of comment and discussion. Thanks to Gareth Hatch, vacuum, Al and Dave G for the valuable insights

    December 16, 2013 - 4:47 PM

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