Tasman Metals is the key to Europe achieving a rare-earth supply chain
Recently Tasman Metals (“Tasman”, TSXV: TSM | FRANKFURT: T61 | NYSE MKT: TAS) and Flinders Resources (‘Flinders’, TSXV| FDR) announced that they held preliminary discussions to merge the two companies. Flinders, also based in Sweden, runs one of the few flake graphite mines in Europe. Tasman and Flinders believe that they have complementary project portfolios as both companies are focused on supplying critical materials to traditional and high growth sectors of European industry. Flinders is preparing to resume production at its Woxna mine in order to supply graphite to Germany and expects production to start by the third quarter of 2014. Flinders offers lower than average operational costs and capital expenditures, given that it already has a productive capacity. Flinders, along with a handful of others, which may include Focus Metals and perhaps Zenyatta Ventures, may be ready to move to production stage in the medium rather than the longer term. Ideally, the entity resulting from the merger of Tasman and Flinders would gain a larger market presence through greater operational efficiency as well as greater liquidity.
The European Commission’s Department of Enterprise and Industry has described rare earths and graphite as “critical”. In turn, Mark Saxon, Tasman’s President & CEO, stated, “the proposed merger of Tasman and Flinders would bring together a portfolio of assets , which fits very well with the needs of European industry…. we believe that the proposed operation will support our goal to become the ‘supplier of choice’ for safe and ethically sourced critical materials in Europe”. Indeed, especially in France and Germany, there has been a strong effort, at the official level, to gain more control over the production and distribution of strategic metals and rare earths in particular. Tasman is one the keys to achieving a more European rare-earth supply chain. Moreover, the Russian invasion of Crimea and the related crisis have led many European investors to be less concerned about a negative impact on global economic growth dynamics and more aware that raw material prices are increasing in price, benefiting from the uncertainty.
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Tasman has a unique potential in this regard. It is a heavy rare earths (HREE) mine, based in Sweden and with easy access to Europe’s main industrial areas. Tasman has the only NI 43-101 compliant resource in mainland Europe featuring one of the highest concentrations (50%) of HREE vs. total rare earth oxides (TREO), especially rich in yttrium and dysprosium. The project is backed by excellent infrastructure and it is based in one of the most politically stable regions of the world.
Rare earths are very important to European industry from the seemingly ‘basic’ to the most sophisticated applications. For instance, Osram, the largest European light bulb manufacturer derives more than 60% of its 4.6 billion euro revenue through the sale of energy-efficient products such as the innovative metal-halide lamps. In order to produce such modern lighting technology, Osram, a Siemens subsidiary, needs rare earths such as dysprosium, holmium and thulium. The automobile industry has become even more reliant on these materials; without these, neither Daimler nor BMW would be able to bring to mass production electric or hybrid cars, whose batteries require up to 15 kg of lanthanum plus one kilogram of neodymium. The more hybrid automobile technology advances, the more economical the more rare earths are required. Security of supply is as critical as the metals themselves because a bottleneck would be unsustainable.
Bosch and other manufacturers of electrical equipment – and the small electric motors that are found in an ever wider range of consumer products – consume large amounts of rare metals such as the tiny magnets based on praseodymium or neodymium. Without rare earths, microelectronic manufacturers like Siemens Fujitsu or high quality industrial glass producers like Zeiss would not be able to operate. The chemical industry needs cerium catalysts for various techniques. Production stops when the supply fails. Graphite, meanwhile, is needed to make the anodes of the batteries powering the electric cars of the present and, even more so, the future. France is ready to become a major rare earth processor, as it can offer producing mines facilities such as the Solvay – former Rhodia – processing facility in La Rochelle.
China has a monopoly on rare earths and Europe has become very anxious to avoid having to depend on it. China still supplies more than 95% of the world market in rare earths and increasing demand can only serve to extend this virtual monopoly. Western companies and governments are very alarmed by announcements from China that the People’s Republic plans to limit rare earths export quotas more. The strong demand for clean energy alternatives in China, in the wake of record pollution, has prompted Chinese officials to reserve more domestic production because the largely state-owned mines are producing barely enough of such high demand rare earths as dysprosium and terbium for the growing Chinese market.
Tasman Metals says there are some 70 million tons of ore at its Norra Karr property and with an annual mining rate of 1.5 million tons a year; the company expects the mine could run 40 years.