EDITOR: | March 25th, 2013

LYNAS Finally…almost… Free from SMSL Group, Lifton Survivor List Spurs Debate

| March 25, 2013 | No Comments
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Indian_Ocean_bathymetry_srtmRare Earths and Critical Minerals Week-in-Review: The Indian Ocean was the setting for some of the biggest headlines in the rare earth sector last week as Lynas (ASX: LYC | OTCQX: LYSDY) untangled itself from the legal issues presented by the Save Malaysia Stop Lynas (SMSL) group. The Australian miner had already started production in February but the conclusion of the legal battle now allows it to look to the future with confidence.

SMSL have exhausted all avenues of appeal in respect of their application for a judicial review of the Atomic Agency’s Licensing Board (AELB) approving of the Temporary Operating License (TOL) approval decision. However, they still have an application for a judicial review of the Science and Technology (MOSTI) ministry’s decision to dismiss the statutory appeal outstanding. No hearing date has been set for that as yet. Under the legislation (Atomic Energy Licensing Act 1984) any party can appeal against a regulator’s (AELB) decision.

The electoral season will add some uncertainty lingering over Lynas in the next few weeks; however, most Malaysian pundits suggest the odds are still in favor of a victory by the BN ruling party, which has backed Lynas from the start.

Lynas was one of the major ‘survivors’ of Jack Lifton’s interesting analysis of rare earth producers in Australia, published this morning. The other companies to be honored in the article were Northern Minerals (ASX: NTU), Alkane Resources (ASX: ALK | OTCQX: ANLKY) and Hastings Rare Metals (ASX: HAS). All these companies have considerable merits; however, what struck Tracy and I in a conversation this morning is the absence of Crossland Uranium (‘Crossland’, ASX: CUX)  in this group. Mr. Lifton stressed that one of the main advantages held by Northern and Hastings is that both their deposits are dominated by the mineral xenotime also known as yttrium orthophosphate (YPO4). Lifton has described it as “probably the most desirable” rare earth bearing mineral, because of its high content of heavy rare earths and critical metals such as yttrium. Xenotime processing has advanced considerably in recent years and it has been generally recognized as one of the most economically efficient minerals for rare earth production, the others being monazite and bastnaesite.

Xenotime is one of the primary sources of the more valuable heavy rare earths such as dysprosium and ytterbium Crossland, which showed the highest share movement last week (+22.22%) is working on the Charley Creek REE project in Australia’s Northern Territory. The ore presents a much higher than average percentage (17%) of heavy rare earths (HREE) even when compared to other rare earth projects in Australia (Mount Weld for example) and beyond. Crossland’s targeted deposits are monazite and xenotime, which can be processed using common acids. The Charley Creek project is expected to produce high demand rare earths such as neodymium, dysprosium, terbium, yttrium and europium. Also in Australia, Hastings (ASX: HAS) announced the identification of two new REE target areas at the Hastings Project in Western Australia. Hastings Rare Metals  is noted for being one of the emerging rare metals plays with a strong potential to produce heavy rare earth oxides (HREO).

The development of the non-Chinese rare earth industry meanwhile will continues to be the subject of heated debates as the Sino-Japanese dispute over the Senkaku/Diaoyu islands evolved in a more complicated direction. While the media attention last week concentrated on President Obama’s trip to the Middle East, China’s new president Xi Jinping was visiting Russian president Vladimir Putin; the two discussed forming a much closer relationship, fueling panic in Tokyo. Relations between Moscow and Washington (and in turn between Moscow and the rest of Washington’s allies, of which Japan is the most important in the Pacific) are at one of the coolest points since the Cold War and Beijing and Moscow are said to have discussed the formation of a Russo-Chinese strategic relationship including mutual support for territorial and strategic interests. This would imply that Russia would have a say in the Senkaku/Diaoyu dispute, raising tensions and further complicating Japan’s rare earth sourcing.

The first sign that Tokyo is concerned about rare earths is the sudden and widespread reappearance of articles boasting of Japan’s discovery of a huge rare earths deposit off the Sea of Japan. This story is dominating the rare earth headlines on Google searches this week. Perhaps, the tighter geopolitical climate will help to tighten rare earth supplies from China and help boost resources in other parts of the world especially as new reliable producers such as Lynas have landed on the scene. Moreover, as noted in an article last Friday, there is a growing pressure in the United States to help promote more domestic sourcing of strategic materials for reasons of national security. The ever more complicated geopolitical picture failed to make a large impression on the market, busy as it was deciphering ongoing Eurozone issues rendered more uncertain by the Cyprus bailout and the fallout from the Italian elections; however, and the ProEdgeWire Rare Earths and Critical Minerals sponsors averaged down for the week at -1.93%.

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