Matamec to gain from cooperation with Toyota and Quebec’s mining strategy
Canada has the potential to become a major force in rare earths space in the next decade, gaining as much as 20% of the market share – ambitious considering China supplies more than 90% of heavy rare earths. Quebec has the potential to become a strategic producer of these critical resources and it can count on many companies and research centers to promote electric car development. Quebec is among the pioneers in Canada in regards to charging infrastructure deployment cars.
The electrification of transportation is one of the centerpieces of Quebec’s development strategies and Matamec Explorations Inc. (“Matamec”, TSXV: MAT | OTCQX: MHREF) is well positioned to become one of the first HREE mining projects to go into production in all of Canada at its Kipawa project in Quebec. A KPMG study, commissioned by Matamec and Toyotsu Rare Earth Canada (‘Toyotsu, a Toyota subsidiary), suggests that by 2020, the market for electric vehicles in Quebec could reach to 165,000. Quebec’s 2011-2020 ‘Action Plan’ for Electric Vehicles sets the goal of reaching 300,000 electric cars in 2020.
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The actual amount of rare earths used in hybrid vehicles is small; however, the parts requiring rare earths are essential in making the magnets, superconductors, catalysts and batteries that allow hybrid and electric vehicles to work. HREE’s are making it possible to reduce battery weight, dimensions while increasing their power in conjunction with developments in battery charging technology that will drive demand for EV’s and hybrids over the next few years. Demand for rare earths could soon exceed supply, given that China produces 97% of these critical metals and is tightening the reins on exports. The Kipawa project itself is significant because of the presence of such rare earths as europium, neodymium and dysprosium, essential metals for the production of electrical systems for hybrids and Electric Vehicles.
One of the challenges in producing electric cars is that over 95% of the heavy rare earths are produced in China, resulting in a significant risk in the supply of these materials. Toyota is the world’s largest manufacturer of hybrid cars and is therefore highly dependent on these minerals. China is and will remain, for some time, the dominant player in the rare earths space but its status in this regard is not unassailable as China is reducing and consolidating its annual production. Whether China will succeed in achieving these goals, and in shutting down so-called illegal miners, remains unclear, but the rhetoric from Beijing in this regard appears more determined than ever this year. Meanwhile, despite the jittery markets the demand for rare earths is growing and by 2020, the annual levels could be double the present one at 200,000 tons by most analysts’ estimations.
The investments of capital and effort to bring a rare earth production from mine to processing plant are enormous and in order to survive companies will have to engage in more cooperation, both with other miners and with specialized institutes. Canada is one of those countries where such cooperation has thrived. Matamec’s partnership with Toyotsu is expected to help the mine reach production stage by 2016. Matamec is unique in that it is the only rare earths company to have signed a major automotive manufacturer as a joint venture partner with a guaranteed sale of its products for the duration of the mine, estimated at 13 years. Toyotsu considers the Kipawa deposit as an essential source of HREE to build hybrid vehicles, an area in which the parent company Toyota has placed a great deal of its future growth prospects.
Last August, Toyotsu paid the final installment of a total USD$ 16 million investment to fund a definitive feasibility study (FS) for the Kipawa rare earths deposit. Toyotsu has agreed to buy all metals produced at the Kipawa property. Matamec has already started metallurgical tests, including the construction of a pilot test facility. Last April, Matamec announced the discovery of new REE zones, bringing the total number on the property to 12. The property includes HREE’s and some niobium (Nb). Niobium has a number of applications but in the automotive sector it is especially desired for its steel strengthening qualities and used to make the future ‘high strength low alloys’ to enable manufacturers to reduce weight and, therefore, lower fuel consumption.
The partnership has enabled Matamec to overcome the financial hurdle of funding the FS and the construction of the production plant, all but guaranteeing that production will go ahead by the second half of 2016 as scheduled. Matamec will then join Lynas and Molycorp as one of the few companies outside China able to supply high-quality rare metals. This will be no small feat, given the difficulties faced by other exploration companies in achieving project targets. Moreover, the Province of Quebec passed a new mining Law that clarifies mining license procedures, setting clear rules for companies – they must submit feasibility and marketing studies to maximize the economic benefits for Quebec. The quality and value of the ore have to be promoted.
Thus, the new law introduces the province into modern mining world, it lays the foundations for a prosperous mining, which benefits all parties and will certainly attract new investors to a mining jurisdiction – further boosting the Kipawa property – that has already earned a reputation for very low regulatory risks.