EDITOR: | December 30th, 2014 | 16 Comments

Texas Rare Earth Resources – The Ant and the Grasshopper

| December 30, 2014 | 16 Comments
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Ant_and_the_GrasshopperDistant memories of my High School French brings back a few stanzas of the Marseillaise, the opening line of Baudelaire’s poem Recueillement, “Sois sage, O ma douleur” (great advice for all those angsting in the mining space) and the beginning of Jean de La Fontaine’s La Cigale et la Fourmi (the Grasshopper and the Ant) which goes “La Cigale, ayant chanté, Tout l’été,”.. The grasshopper, having sung, all the summer…” and then goes on to relate how this feckless insect is outcompeted by the ant that spent the summer collecting food for the winter.

The grasshopper sounds depressingly like many in the REE (rare earth elements) space while the simile of the ant came back to us recently (in the dead of winter) with the latest news from Texas Rare Earth Resources Corp. (OTCQX: TRER).

Catching one of the Big Stars of the Rare Earth Firmament

Anthony Marchese at Texas Rare Earth Resources reminds us of a general marshalling his troops for battle. He has resolved not to sally forth into the corpse-strewn REE no-man’s-land until he has all his heavy artillery aligned. The latest addition to the Texas Rare Earth Resources board is somewhat akin to the Germans’ introduction of “Big Bertha” to World War One battlefields.. a key change in the balance of firepower.

Big_Bertha

I have got to say that Texas Rare Earth Resources sounds like a step up from his previous position as Eric Noyrez was, until June of this year, the Chief Executive Officer of Lynas Corporation. He had been appointed to the Lynas board in late March 2013. He had joined Lynas as President & Chief Operating Officer in February 2010. He had previously been the President of Rhodia SILCEA (its rare earths, silicas and diphenols division) with annual sales volumes over US$1 billion. He spent 11 years with the Shell group of companies, managing chemical and industrial businesses.

He began his career designing automobiles for the Peugeot / Citroen group.  He holds a Masters degree in Engineering and Mechanicals from ENSM (Ecole Nationale Superieure des Mines) in France, where he studied Mechanics and Robotization, specializing in Polymer processing.

Object Lessons

Having Molycorp and Lynas move into production so far ahead of the rest of the REE pack initially seemed like it put the junior players at a disadvantage. However, perversely, the larger the time gap the more lessons that have been learnt about “what not to do” in the Rare Earths space. In the case of Molycorp the errors are multiple but the gravest was to start with an initial pit that was not the best deposit that could have been exploited. In the case of Lynas the error was to chase after the elusive tax benefits of a Banana (well, palm-oil) Republic which ended up with complications that were legion, more than negating whatever the supposed economic benefits might have been. Noyrez, having to untie the Gordian knot made by the board’s feckless decision back in 2008 to go to Malaysia in the first place, is uniquely positioned to know the pitfalls and steer Texas Rare Earth Resources clear of those that he has previously had to grapple with at Lynas.

Brains Trust

The board Noyrez is joining is already freighted with intellectual (and practical) heavyweights from the REE and specialty metals space, our colleague, Jack Lifton, being prominent amongst them. Though the others are no lightweights either:

  • Dan Gorski – a veteran geologist (who just happens to have also worked as a cryptographer for the US Army)
  • Nicholas Pingitore – a geochemist of renown
  • James Wolfe – a metallurgist with deep experience of dealing with China is matters of REEs and specialty metals

Then the Advisory Board has:

  • Charles Groat – former head of the USGS
  • Dan McGroarty – a Washington mover and shaker of the first water
  • Phillip Goodell – a geology professor at University of Texas
  • Jim Hedrick – former rare-earth commodity specialist at the U.S. Geological Survey

The days of putting together dream boards are long past for most REE companies and in any case they were largely an exercise in “collecting the set” with their members treated like Cigar Store Indians to be seen and not heard. That Texas Rare Earth Resources is still putting together its team and paying attention to what they say shows a different level of seriousness altogether form the Vancouver promoters. Then again Anthony Marchese is most definitely not a product of the Vancouver sausage machine school of mining promotion.

Conclusion

Ironically there are a number of Rare Earth companies that style themselves as rare metals companies, and yet Texas Rare Earth Resources’ name implies only Rare Earths where it is in fact a whole array of metals in such quantities that Round Top could be a mine dedicated to any one of them in their own right rather than just by-product credits. To give just a reminder, Texas Rare Earth Resources has independently mineable resources in:

  • Rare Earths
  • Flourite (including Yttrio-flourite)
  • Beryllium
  • Lithium
  • Uranium

With such a multifaceted deposit we would not be surprised to see the Chinese interest perking up. It should be noted then that Noyrez has extensive experience in the Chinese natural resources and chemical processing sectors, where he is well regarded. However if the powers that be in Washington want to keep the Chinese at bay from getting their hands on the Beryllium at Round Top then they might designate some party to take Texas Rare Earth Resources out of temptation’s way.


Christopher Ecclestone

Editor:

Christopher Ecclestone is the EU Editor for InvestorIntel and is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten ... <Read more about Christopher Ecclestone>


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Comments

  • JJ Beswick

    As a Lynas investor Texas Rare Earth Resources are more than welcome to him.

    December 30, 2014 - 9:34 AM

    • Tracy Weslosky

      Already everybody – remember, I delete comments with slanderous intent. If you have something to say — please back it up with something that suggests a modicum of professionalism.

      For instance, I was very impressed with Eric and his efforts at LYNAS, and I met him while he was CEO. Privy to the ongoing challenges at LYNAS combined with the market plunging, I thought he did an outstanding job. Flash forward to today — the news that he has joined Texas Rare Earth Resources Corp.’s board of directors is indeed an impressive announcement. His management experience and international network alone should have everyone in the REE sector doing a double take at Mr. Anthony Marchese and his ability to attract star talent…and power.

      Kudos to the team at Texas Rare Earth Resources company for once again — showing the industry that they are indeed here to stay, and they have resource(s) worth taking seriously: because, a whole lot of talent is strengthening this team’s bench….and placing their names and reputation behind Texas Rare Earth Resources Corp.

      December 30, 2014 - 1:25 PM

  • Chris

    Mr Noyrez could not manage to get the LAMP operating at phase 1 steady state in his time at Lynas. LAMP uses traditional SX methods to process REE.
    How on earth will Mr Noyrez be any help in using a new method, MRT, to process REE?

    December 30, 2014 - 9:37 AM

  • Christopher Ecclestone

    Eric arrived at Lynas years after the fateful decision to go into Malaysia was made..

    December 30, 2014 - 10:09 AM

  • Christopher Ecclestone

    As you bought into Lynas on the basis of its deposit I shall take your last comment under advisement

    December 30, 2014 - 1:00 PM

  • Chris

    There is an excellent research paper prepared by gareth hatch that analyses the contained value in the ore. Very happy to supply the reference if you are interested.

    The comparison is, for $ value of RE per ton of ore:
    Mt Weld $2548/ton Round Top $23/ton.

    Of course Round Top has the advantage that it’s EASY to heap leach a mountain. I’m sure there are any number of previous exemplars; care to point some out?? Never been done before as far as I can ascertain.”

    December 30, 2014 - 2:02 PM

    • Tracy Weslosky

      Chris. I had to remove your one line that referenced a commenter and comment that has been deleted. Thank you for visiting and reminding us of Gareth’s previous piece on Texas Rare Earth Resources. Please visit and do comment again.

      December 30, 2014 - 3:56 PM

  • Christopher Ecclestone

    REE companies have to be boutiques not Kmart.. Pile em high, sell em cheap does not work.. there is a lot more to Round Top then mere REEs

    December 30, 2014 - 2:39 PM

  • Chris

    Mr Ecclestone
    What does Lynas decision to operate in Malaysia have to do with the companies inability, and more importantly previous COO and CEO inability, to get the LAMP operating at phase 1 steady state (11Kt/pa)?

    If Lynas was able to get the LAMP phase 1 operating at steady state 2 years ago, very doubtful the company would be in such bad shape as it is in today.

    BTW, you only need to look at Lynas customer base to know what potential the company has in becoming a first class producer and supplier of REO.

    To date, execution of the business plan has been less than satisfactory due to ongoing technical problems at the LAMP, which has nothing to do with bein in Malaysia.

    December 30, 2014 - 4:26 PM

  • Tim Ainsworth

    Best of luck to Eric & TRER, is a snide denigration of Lynas really necessary to make that point?

    Particularly when the author clearly doesn’t understand the primary problem Eric faced at Lynas, and it wasn’t geographical.

    Jack, perhaps inadvertently, “joined the dots” in his latest article, way back to his comment July 2011:

    “Rare-earth separation plants can be built with a flow-through capacity of 2,500 tpa year for under $25 million. The scale up is not linear. A 10 ktpa plant cannot automatically be assumed to cost $100 million; it may be much more due to increased process control requirements. Note well, that the largest rare-earth solvent-exchange facility ever built, is in China, and has a yearly flow-through capacity of less than 10 ktpa. Scaling up to this level and beyond has never yet been done, and the impediments are so far unknown and are thought to be challenging.”

    New CEO reset objectives and made a paradigm shift from driving volumes thru a flawed process, report card due in 4 weeks.

    December 30, 2014 - 5:51 PM

  • Andrew

    Shorters must be very happy to see him again! Period.

    December 30, 2014 - 9:03 PM

  • Christopher Ecclestone

    You clearly have not seen my past comments on Lynas.. To put it bluntly, the company put its plant in Malaysia for tax breaks (and cheapeness compared to Oz)… not for the weather, not for convenience, not for friendly locals.

    It blew up in their face… if they had built the plant in Australia it would have been operative maybe 18 months earlier.. ahead of Molycorp.. without the massive cost over-runs, debt build-up and dilution. And MOREOVER without missing the end of the REE price cycle..

    The root of Lynas’s problem well predates Eric Noyrez..

    December 31, 2014 - 5:12 AM

  • Chris

    That’s a rather BIG maybe there dude. Nothing but speculation suggesting that the LAMP would have been operational earlier without cost overruns had it been built in Australia and rather pointless IMO. Who knows, maybe the LAMP would have had the same issues even if it was built in Australia. You certainly do not know that for sure.

    How’s this for speculation. If the LAMP was built in Australia it would have been game over a long time ago for Lynas IMO.

    Over the long term, building the LAMP in Malaysia has far more benefits than if it was built in Australia. I have no doubt the LAMP would not be economical today had it been built in Australia, and the jury is still out wether or not it is economical in Malaysia where labour, water, power and reagents are cheaper by far.

    Over all just a pointless discussion really.

    Good luck to EN in his new role.

    December 31, 2014 - 7:05 AM

  • Jack Lifton

    Mr Ecclestone (to distinguish you from the commenter “Chris.” and not to emphasize that you were not on the New Year’s Honour’s List!)

    Thank you for your support of TRER’s decision to ask Eric Noyrez to join its board. A decision with which I heartily agree, and I am delighted that he accepted. Eric is the most knowledgeable OF and the most experienced IN ALL ASPECTS OF THE CONTEMPORARY GLOBAL RARE EARTH SUPPLY CHAIN person whom I have ever met.

    You, Chris, are entirely right about Lynas, and publicly available information bears out his value to them as it bears out the fact that Lynas’ problems came from well before his time and above his level at the company.

    As a young executive (CEO) of an American subsidiary Anglo-French chemical firm I was “discharged” by my immediate superior in the UK for what I saw as the inconvenient reporting by me of a plant manager who was a clever embezzler. Six months later my former immediate superior was suddenly discharged. Over drinks in a London pub afterwards he told me that he had been ordered to fire me as a cover up of top management’s incompetence and then when he complained of the injustice his fate was sealed also. Shortly afterwards the company’s Chairman Sir “F. W.” stepped down and the group was sold to a much larger one. I completely understand Eric’s former situation and its denouement.

    But whether Eric’s situation was analogous to mine or not the fact remains that he has been involved in the building and successful operation and management of a heavy rare earth separation plant (in China) that was a low cost success in a (to put it mildly) challenging environment. He has decided to assist TRER at the exact right time to put his past successes to their greatest use. He is a first class technology metals and materials marketer and as a chemical engineer he understands where costs must be contained in a supply chain. As Eric says (I paraphrase) it is the building of a mine that should be the most expensive part of the rare earth supply chain.
    On that note I want to say that the “heap-leaching” design for TRER’s Round Top was a brilliant development by TRER’s Dan Gorski a geologist/mining engineer with half a century of hands-on experience. The commenter who denigrated that concept simply has no idea of what he is talking. Round Top lends itself perfectly to heap leaching from the large scale railroad ballast aggregate company operating and shipping by rail from its base to the porous, easily fractured, rock from which the “mountain” has been constructed by nature. The fact that the rare earth yttrofluorite is unmasked in the mineral and easily dissolves in dilute sulphuric acid which is as common in Texas as bull**** is in many places on the Internet is a big plus. I have to note that the gentleman who was TRER’s CEO before Dan Gorski thought that only a multibillion dollar scheme could extract the desired values from the “mountain.”
    TRER has assembled a unique team. All are long in experience and everyone-especially me-has made enough mistakes in the past to recognize them again and try to avoid them.
    Eric Noyrez is a very welcome addition to TRER, and he joins the board at exactly the right time!

    Jack Lifton

    December 31, 2014 - 10:55 AM

  • ASRMS

    Whatever happened in the past is the past. Good luck to Mr. E.N at TRER. I’m sure he did his best at Lynas but he was caught in the transition over the last 2-3 years when they was a lot of collateral damage caused. Lynas in all probability will survive and eventually prosper. They have what TRER should take notice of in their quest for operation. Lynas now has large scale strategic money behind it in the form of major Japanese backing. Further, Lynas also has off take arrangements with a number of Japanese manufacturers who want simply a reliable and consistent supply of LREE. If Lynas in the next year can show it can hit required tonnage production and purity of product etc., the Japanese will ensure Lynas financial survival. Ensuring they have their LREE needs met outside of China is a major business objective for Japan and not just in REEs. For TRER to begin/prosper, I would suggest that they take these two major lessons which have been hard learned by Lynas. Without solid financial backing (preferably as you mention with a national tinge to it) and clear distribution pathways (a country(s) would be good), then TRER will I fear experience some of the obstacles that the front runners have.

    December 31, 2014 - 11:18 AM

  • Jack Lifton

    ASRMS,

    Well put and you well point out the strengths of Lynas buisness plan. I might add that here in the West where we have less state capitalism to contend with the backing of a very large volume end user may be substituted for that of a national entity or even an industrial group organization. I think this will be the ultimate direction and success of our North American enterprises and of one or at most two European based ventures.

    Jack Lifton

    December 31, 2014 - 11:27 AM

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