Jack Lifton on Rare Earth Supply Chains and Value Chains

Rare earth sector analysts have finally recognized that a project’s place in a total supply chain is very important to its economic viability. Before a junior mining deposit goes into (usually expensive and time consuming) development into a producing mine there must first be an evaluation of what possible product(s) of that mine are demanded by the next step in the supply chain and what price(s) they may bring when the mine begins production. Most such evaluations are at best extrapolation and at worst pure speculation due to unpredictable commodity price cycles. Even for producing mines like MP Materials Corp. (NYSE: MP) and Lynas Rare Earths Limited (ASX: LYC) their places in the total supply chain differentiates them from each other because of the different value of their current respective delivered products.

The sale of rare earth permanent magnets brings a majority of the revenue in the total rare earth products supply chain. But no non-Chinese company has ever been vertically integrated from a mine to a magnet maker. The closest that a Western owned company (Canadian) has come to being a total rare earth permanent magnet supplier is Neo Performance Materials Inc. (TSX: NEO), which has everything (in the total rare earth permanent magnet supply chain) but a mine. Neo Performance sells rare earth products (oxides and chemicals) as well as rare earth enabled products (e.g., magnets) and has been consistently profitable with revenues exceeding $500,000,000 per year. This year, 2021, Neo will shortly begin taking delivery from America’s Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) of 70 tons per month of clean mixed rare earth carbonates (MREC) extracted from domestic American monazite. Energy Fuels is the first American company to produce rare earth concentrates free of radioactive elements and interfering ions in at least 25 years. The MREC can be put into solution directly at Neo’s European rare earth separation plant and fed into the system as a pregnant leach solution (PLS). Thus, Neo Performance can deliver to its customers downstream products, such as separated oxides, metals and magnet alloy powders and bonded magnets (made at its Thailand operations) that are produced by a total rare earth supply chain with no Chinese involvement.

Energy Fuels reports that its monazite extraction/purification system to produce clean MRECs is profitable. MP says that its bastnaesite ore concentrates now sold exclusively to China’s Shenghe Resources are profitable. Lynas says that its in-house separated rare earth oxides are sold at a profit. For rare earth juniors, the successful (I.e., profitable) sale of ore or clean mixed rare earth carbonates is the key metric and few of them succeed.

The total rare earths’ (enabled products) supply chain has the following composition:

  1. Mining,
  2. Extraction of the rare earths from the mining concentrates and the preparation of a clean, pre-PLS, mixed rare earths product,
  3. Separation of the mixed rare earths into individual oxides and blends,
  4. Manufacturing of chemical products, such as phosphors and catalysts, and of individual metals and alloys forms, and
  5. Manufacturing of rare earth permanent magnets from rare earth alloys.

Historically mining companies have done steps 1,2, and sometimes 3, while specialized smaller companies have done steps 4 and 5 as separate ventures.

The rare earths’ value chain is not the same as the supply chain. It is very difficult to make money mining, extracting, or even separating mixed rare earths into individual rare earths and blends. Lynas, for example, has become profitable by reducing the costs of separation to where they are comparable to those of the Chinese. Lynas’ monazite ore body is much richer than, for example, MP’s bastnaesite or even that of China’s Bayan Obo. Lynas is now profitable selling individual rare earth salts and blends, but it has taken a decade and $2 billion to reach this point, and the company’s survival was actually due to long term low interest loans from a Japanese government agency designed solely to give Japan a backup to Chinese sourcing.

MP Materials is today only an ore concentrate producer, and its original capital needs were only to re-open a relatively recently closed large-scale well-run mining and ore concentrating operation. MP basically acquired some $2 billion of sunk costs for about 1% of that. The real challenge now is for MP to (attempt to) match the Lynas model, and deliver separated rare earths and blends just as the original Molycorp did until 20 years ago. I am told that Molycorp II’s Project Phoenix ran first just before the bankruptcy, but I only get silence when I ask if it was running economically and efficiently. I am very skeptical about MP’s announcements that they will be separating rare earths at Mountain Pass in 2022 if by that they mean economically and efficiently.

Lynas has never advanced beyond separation in the supply chain, and I have never heard it said that they plan to do that or want to do it. The Lynas 22,500 tpa operation in Kuantan, Malaysia, took seven years and $1.3 billion to begin commercial operation, and it is limited to processing monazite to extract and separate light rare earths only. If Lynas chooses to build a light rare earths separation plant in the USA as has been announced I suspect it will take 2 to 3 years to build and burn-in and that if it is to be a 5000 tpa system as announced, and that it will cost far more than $60 million on a greenfield site in Texas.

Project Phoenix was to be a 20,000 tpa system. It never ran commercially even though well over a billion dollars was expended on it over a four-year period. It is extremely unlikely that Project Phoenix can be resuscitated and brought into profitable operation in just one year, if ever.

Molycorp II, in its attempt to vertically integrate bought the rare earth permanent magnet alloy making operations of Santoku, America, in suburban Phoenix, Az. In 2011 for $17 million. Within two years the operations were shut down as the necessity to buy Chinese metal as feedstock made profitability impossible.

Energy Fuels is buying monazite concentrates and removing the uranium and thorium as well as non rare earth elements in its existing White Mesa uranium mill in Utah. Less than $2 million was needed in additional equipment to give the mill the capacity to process 2500 tpa of monazite to recover the contained 55% of total rare earths.

Neo Performance can distribute costs across its almost total in-house supply chain. It can thus maximize profits in its highest margin end-use products. MP is literally a start-up beyond the mine, and the jury is out on its potential for success. Lynas’ operations were designed by former Solvay chemical engineering managers with the longest continuous experience in rare earth separation in the world. The chemistry chosen for Kuantan was that proven by experience and use by Solvay, China. Neo Performance Materials is the successor in interest to Neo Materials, which was founded in the 1990s and is helmed today by one of its original founders. Neo Materials perfected the bonded rare earth permanent magnet and is today the supplier of 80% of the world’s supply of them.

Energy Fuels has been in business since the late 1980s, and is America’s sole licensed uranium mill and thorium storage site. From the inception of the plan to process monazite until commercial operations took just one year. Uranium is purified by solvent extraction, and Energy Fuels has more than 500 man-years of experience with solvent extraction. The company is doing a scoping study on a dedicated rare earths solvent extraction system and has been awarded a contract by the US Dept of Energy to study the separation of rare earths derived from coal and phosphate-acid residues.

MP and Lynas are the largest, rare earth miners outside of China. Lynas and Neo Performance are the largest processors of rare earths to separate them by solvent extraction outside of China, and Energy Fuels is the sole producer of clean mixed rare earth carbonates in the Americas.

I am watching the following juniors: USA Rare Earths, Rare Element Resources Ltd. (OTCQB: REEMF), Vital Metals Limited (ASX: VML), and Appia Energy Corp. (CSE: API | OTCQB: APAAF).

The next five years will be the critical time for the development of a domestic American or European total rare earth enabled products supply chain. Canada is at a crossroads; it may build a domestic supply chain anchored on mines and going downstream with licensed European separation, metal and alloy making, and magnet making, or it may build a trans-Atlantic one with the EU.

The game’s afoot.




Jack Lifton with Appia’s Tom Drivas and Frederick Kozak on the revival of the Canadian rare earths industry

In a recent InvestorIntel interview, Jack Lifton spoke with Tom Drivas, CEO and Director of Appia Energy Corp. (CSE: API | OTCQB: APAAF) and Appia’s newly appointed President, Frederick Kozak about the Alces Lake Project that has some of the highest-grade monazite-based rare earths and gallium mineralization in the world.

In this InvestorIntel interview, which may also be viewed on YouTube (click here to subscribe to the InvestorIntel Channel), Tom went on to say that Appia has started a bench-scale monazite processing and metallurgical testing at the Saskatchewan Research Council to produce a mixed REE carbonate from monazite-bearing rocks.

Monazites are rich in magnetic rare earths but are radioactive because of the presence of uranium and thorium. Jack pointed out that “Appia could be the only company in Canada which can address monazite as the feedstock.” He added that with SRC capable of handling the radioactivity “the world is going to see a revival of the Canadian rare earths industry but with a new emphasis on monazite.”

To watch the full interview, click here

About Appia Energy Corp.

Appia is a Canadian publicly-listed company in the uranium and rare earth element sectors. The Company is currently focusing on delineating high-grade critical rare earth elements (“REE”) and uranium on the Alces Lake property, as well as prospecting for high-grade uranium in the prolific Athabasca Basin on its Loranger, North Wollaston, and Eastside properties. The Company holds the surface rights to exploration for 65,601 hectares (162,104 acres) in Saskatchewan.

The Company also has a 100% interest (subject to a 1% Uranium Production Payment Royalty and a 1% Net Smelter Return Royalty on any precious or base metals payable, provided that the price of uranium is greater than US$130 per pound) in 12,545 hectares (31,000 acres), with rare earth element and uranium deposits over five mineralized zones in the Elliot Lake Camp, Ontario. The Camp historically produced over 300 million pounds of U3O8 and is the only Canadian camp that has had significant rare earth element (yttrium) production. The deposits are largely unconstrained along strike and down dip.

To learn more about Appia Energy Corp., click here

Disclaimer: Appia Energy Corp. is an advertorial member of InvestorIntel Corp.




Appia appoints Frederick Kozak as President as they progress the Alces Lake high-grade rare earths monazite project

Appia Energy Corp.‘s (CSE: API | OTCQB: APAAF) (‘Appia’) stock price has been on a tremendous run the past year, up 364%, as shown below. Today I take a look at why the stock has done so well, and what’s next for Appia Energy, potentially soon to be renamed Appia Rare Earths & Uranium Corp. (retaining the same stock tickers).

Appia Energy Corp. 1 year stock price performance

Source

The reasons why Appia has had a great past year are multiple but would include:

  1. Rising prices for rare earths, and to a lesser degree uranium.
  2. Greater recognition by investors on Appia’s potential.
  3. Successful exploration by Appia on their Alces Lake project and progress towards next stage development.

Regarding higher rare earth prices, on March 3, 2021 Appia stated:

“In the oxide form, the Shanghai Metals Market quoted February 28 prices per kg in US$ are: Nd $105, up over 100% year over year (“YoY”), Pr $74.95 up over 18% in one month, Dy $424.95 up nearly 100% YoY, Tb $1468.02 up nearly 200% YoY. There is an unusually high concentration of gallium at Alces Lake compared with other deposits and the price of Gd Oxide increased by 18% in one month to $35.93.”

A lot of investors may not yet know about the surge in rare earth prices, but here at InvestorIntel, we have been warning for some time to expect higher prices for critical metals. This is because we are just at the beginning of a new era of renewable low carbon energy (wind, solar, nuclear) and electric vehicles (EVs), which all need critical metals.

This leads to the reason for Appia’s proposed name change. Appia Energy is focused on rare earths (Alces Lake Project) and uranium (Athabasca Basin uranium prospects).

Appia state the reason for the name change as:

“In order to better identify the Company’s focus on the Alces Lake Project and the Athabasca Basin uranium prospects. The Property hosts some of the highest-grade total and critical rare earth elements (“CREE”) and gallium mineralization in the world. CREE is defined here as those rare earth elements that are in short-supply and high-demand for use in permanent magnets and modern electronic applications such as electric vehicles and wind turbines, (i.e: neodymium (Nd), praseodymium (Pr) dysprosium (Dy), and terbium (Tb)).”

Appia’s Alces Lake Project (100% owned)

The Alces Lake Project is unique for its exceptional high grade rare earths (2nd highest globally with average grade 16.65 wt% TREO and 3.85 wt% CREO) hosted in the favorable monazite ore. Critical rare earth elements (‘CREE’) at the Alces Lake Project include neodymium (Nd), praseodymium (Pr) dysprosium (Dy), terbium (Tb). There is also considerable gallium (Ga). The property has huge potential exploration upside, over a 45 km regional trend, as less than 1% of the Property has been explored with diamond drilling.

Note: TREO is Total Rare Earth Oxides and CREO is Critical Rare Earth Oxides.

Appia Energy Corp.’s Alces Lake has the 2nd highest global average grade at 16.65 wt% TREO hosted in monazite ore (some super high grade zones shown below)

Source

The Alces Lake project area is 17,577 hectares and is 100% owned by Appia. The project is located close to an old mining camp with existing support services, such as transportation (15 km from the nearest trail), energy infrastructure (hydroelectric power), a 1,200 m airstrip that receives daily scheduled services and access to heavy equipment.

The Property is located in Saskatchewan, the same provincial jurisdiction that plans to develop a “first-of-its-kind” rare earth processing facility in Canada, scheduled to become operational in 2022. This means Appia may have the opportunity to fast track early stage production of rare earths, at a low CapEx. I wrote about that previously here. Appia state: “Appia would “ideally” consider a surface and near-surface operation to start production, smaller than open pit scenario, easier to permit and manage, potentially low CAPEX/OPEX.”

Appia’s goal is to maintain a small environmental foot-print with a possible low CapEx start and initially use the Saskatchewan Research Council Rare Earths Processing facility in Saskatoon, Saskatchewan

Source

What’s ahead for Appia Energy in 2021

Appia plans to continue to further rapidly develop their Alces Lake Project under newly appointed President Mr. Frederick Kozak. Mr Kozak is a highly experienced capital markets and resource executive with a background in geological engineering, business, and as an equities analyst at Canaccord Genuity & Haywood Securities. This boosts the team at Appia as they expand exploration and begin the next steps towards production.

During the Summer of 2021, Appia intend to drill in excess of 5,000 metres at their Alces Lake Project with a goal to further grow their rare earths resource, in particular, to potentially discover further high grade rare earth oxide occurrences. Appia has also commenced bench-scale metallurgical testing at the SRC facilities. The intent is to refine the extraction process to separate the rare earths oxide and ultimately produce Nd and Pr oxides, gallium oxide, as well as uranium oxide.

Appia also intend to further exploration for high-grade uranium in the prolific Athabasca Basin on Appia’s Loranger, North Wollaston, and Eastside properties.

Closing remarks

Appia Energy now has a new President, and if approved on May 18, 2021, will change its name to Appia Rare Earths & Uranium Corp.

After a blockbuster past year Appia is now positioning for a solid 2021. If things go well I would expect we would also see an upgrade from the CSE to the TSXV, and a further re-rating for Appia.




Why are uranium stocks booming?

Uranium stocks have been rising since November 2020 and are now very clearly in a strong bull run. We asked some of our InvestorIntel team members and experts about what’s their view as to why uranium stocks are booming.

If we look at the two leading US listed uranium miners their stock prices are both up around 150% over the past 3 months (see chart below). Some of the other uranium miners such as Western Uranium & Vanadium Corp. (CSE: WUC | OTCQX: WSTRF) and Fission Uranium Corp. (TSX: FCU | OTCQX: FCUUF) have seen impressive gains around 70% over the past 3 months.

What is going on, asks InvestorIntel CEO Tracy Weslosky. This is extraordinarily. Something is up! The impeachment vote? War mongers? The Biden factor? What?

Leading US uranium miners Energy Fuels Inc. (NYSE American: UUUU) and Ur‐Energy Inc. (NYSE American: URG) are up about 150% the past 3 months

 

Looking at the chart below we can see uranium prices have picked up a little but not enough to explain the uranium miners stock prices surging. So why?

Uranium spot price 1 year history – Uranium prices started a new uptrend back in mid Nov. 2020

Source: Trading economics

Here are a few experts views sought this week by InvestorIntel:

Jack Lifton, host of The Technology Metals Show – “The USA imports 95% of the uranium it needs to operate its 25% of the worlds civilian nuclear reactors that provide almost 30% of American baseload (available at any time) electricity needs and accounts for more than half of all carbon free power generation in the USA. It’s imperative therefore that America produce uranium domestically for its security of supply of carbon free electric power. The US Congress has recognized this need and recently funded a program to buy domestic uranium.”

Peter Clausi – InvestorIntel Host, CBLT Inc. (TSXV: CBLT) CEO – “No matter where you are on the political spectrum, utilities and a nuclear fleet need uranium.”

Industry insider Fission Uranium President & COO Ross McElroy stated back in August 2020 – “I think we are in the start of a bull market right now. That’s happened because there’s been so many production shutdowns globally. All the major mines, even all the production in Canada has been shutdown. So, we know the demand is there and it continues to grow, supply is constricting and these are the things that are making the bottom of the bull market happen.”

Spot on Ross, you called it before most others.

Here is how investors can track the uranium miners

InvestorIntel readers can track the uranium sector at Uranium Watchlist

InvestorChannel’s uranium Watchlist – January 14, 2021

Source

Uranium stocks that we follow closely at InvestorIntel include:

Closing remarks

My view is that the uranium stocks are booming the past 2 1/2 months as a result of the Biden victory. The market thinks Biden will support nuclear energy as a way of reaching his 100% carbon-free electricity target by 2035. If Biden’s US$2 trillion green infrastructure and jobs plan gets passed through the Senate during the course of 2021, then it looks like the uranium miners will have a tremendous decade ahead.

In any event I also hear what insiders have been saying for some time, and that is that uranium demand continues to grow as supply constricts. This is also a positive for the underlying fundamentals of the uranium bull market.

Happy to hear what InvestorIntel readers think in the comments section below. Also if you think the uranium miners bull run can be maintained.

Further reading




Appia Energy’s monazite ‘a particular gem in the world of rare earths’

Appia Energy Corp. (CSE: API | OTCQB: APAAF) is a company focused on strategic minerals in Canada, specifically uranium and rare earths. The company has a high-grade rare earths project at Alces Lake and is also targeting uranium in three additional properties, all of which are located in the Athabasca Basin in northern Saskatchewan. In addition, the company has uranium (and associated rare earths) in a property near the town of Elliot Lake, Ontario. Thirteen underground mines on this property produced approximately 360 million pounds of U3O8 from 1955-1996.

After a very successful summer drilling program on the Alces Lake property, the company has raised new equity in the form of non-brokered private placements of equity and flow-through shares. In early December 2020, the company closed a non-brokered $0.4 million flow-through financing. This was preceded by another flow-through and equity raise announced in October, which raised a total $1.8 million in new equity. In addition, the company raised a further $0.8 million through the exercise of share purchase warrants between September 14 and November 5, 2020. All of the new capital raised is intended for continued exploration on the company’s uranium and rare earth properties in Saskatchewan.

Particularly important to the company and shareholders, the rare earths continue to draw more market attention. For industry watchers and participants, the recent global activities are bringing the scarcity and security of supply of rare earths to the fore. So much so that at the end of September 2020, President Trump signed an executive order regarding critical materials, declaring a national emergency as related to rare earths. To further exacerbate the global focus on rare earths, on December 1, 2020, China implemented its Export Control Law, which is going to have impact on the export of rare earths from the country. China arguably has the world’s most complete rare earth industry chain, which means in order to make full use of the rare earths mined in various countries, they must come to China for processing. China produces approximately 80% of the world’s rare earths but can only supply about 30% of the input.

Reminiscent of other industries and other parties’ attempts to corner particular markets, the world of rare earths appears to be undergoing a seismic shift. Governments outside of the US are also recognizing this trend and the provincial government of Saskatchewan (Canada), via the Saskatchewan Research Council (SRC), announced in August 2020 plans to have an operational rare earths processing facility completed and operational in late 2022. Unknown to most people, the SRC has world renowned rare earths experts who have over 30 years experience in the sector. This facility is a first of its kind in Canada and is strategic for the rare earths properties in western Canada.

All of these global activities are relevant to Appia and the rest of the exploration industry’s move away from a stranglehold on rare earths supply from China. In particular, according to the company, the Alces Lake property has the second highest average grade of rare earths in the world. Combine this with access to infrastructure in the immediate area and the further potential of the Alces Lake property (less than 1% of the property explored with diamond drilling), including six new areas of the rare earths system on the property.

One word – monazite. The significance of the Alces Lake property should not be underestimated. Why? The rare earths on the property are 100% hosted within monazite, which has proven simple extraction methods dating back to the 1950s. But more importantly, the monazite at Alces Lake occurs as isolated grains, 1 – 3 cm thin lenses and as isolated clusters with further metres thick massive clusters which have been found to be outcropping at surface. The monazite ore has critical rare earths Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy), and Terbium (Tb) which are necessary for the permanent magnet industry and represent approximately 85% of the potential value at Alces Lake.

While it is far too early to declare Appia Energy a leader in the global race to develop new supply sources outside of China, their Alces Lake asset is compelling and the timing is excellent. Investors should be watching this company keenly, as the global rare earths story evolves.




Appia well-positioned with recent Critical Materials Executive Order, the ‘planned nearby’ SRC Rare Earths Processing Facility, and a recent round of drilling completed at Alces Lake

Appia Energy Corp. (CSE: API | OTCQB: APAAF) (‘Appia’) has just completed a round of drilling at their 100% owned Alces Lake Property, in the Athabasca Basin area of northern Saskatchewan, Canada. The project has monazite ore containing valuable rare earths Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy), and Terbium (Tb). Alces Lake hosts the 2nd highest average rare earth element (REE) grade in the world at 16.65 wt% TREO.

The key result of the drilling campaign was that Appia was able to confirm the REE minerals system over a 875m strike length, as deep as 340m from surface, still open in all directions and in two sub-parallel trends.

The original trend includes the high grade REE zones of Wilson, Richard, Charles and Bell which now look to be all joined at depth over a strike length of 145m. As a result the 4 zones have now been combined into one larger zone and named the WRCB zone.

Another positive was that 15 out of the 18 drill holes intersected the REE mineralized system. Assay results from the drill campaign are expected to be released soon.

Source

Shown below from a different rotation is one of the newer trends which includes the Ivan/Dylan and the Mikaela/Dante zones. The other has the Cone Zone.

Alces Lake REE mineralization is running in two sub-parallel trends to the original trend

Source

Appia Vice-President, Exploration and Development, James Sykes, commented:

“This suggests that the System (total REE mineralized zones at Alces Lake), and both first-order lithological emplacement controls, could be present across the entire 45 km geological strike length of the Property at/near surface and continuing at depth.

The Alces Lake Project’s rare earths start from or near surface and hence are suitable for an open pit mine. Permitting should be smooth being in northern Saskatchewan Canada and the CapEx and OpEx should be reasonably low given the good grades and near surface resource. The fairly recent development by the Government of Saskatchewan to develop a “first-of-its-kind” Rare Earth Processing Facility in Saskatchewan is also very promising for Appia.

Other properties owned by Appia (rare earths and uranium)

In total at Appia’s Athabasca Basin properties Appia has 57,048 hectares which includes Alces Lake, Loranger, North Wollaston, and Eastside properties. They all have uranium.

At Elliot Lake Camp, Ontario, Canada, Appia has 12,545 hectares with both rare earth element and uranium deposits over five mineralized zones.

Appia Energy Corp. is currently trading on a market cap of just C$27m. Given the high rare earths grades at Alces Lake, the planned nearby Saskatchewan Government Rare Earth Processing Facility, renewed interest by governments (the recent US Executive Order on critical materials), and Appia’s potential also with uranium; things are looking very promising for Appia Energy.




Jack Lifton with Tom Drivas on the Saskatchewan Research Council’s Rare Earths Processing Facility

InvestorIntel’s Tracy Weslosky moderates a discussion with the Technology Metals Show host Jack Lifton and Appia Energy Corp.’s (CSE: API | OTCQB: APAAF) CEO, President and Director Tom Drivas on the Saskatchewan Research Council’s (SRC) plans to develop a “first-of-its-kind” Rare Earth Processing Facility in Saskatchewan, Canada.

In an InvestorIntel interview that can also be viewed on our InvestorIntel YouTube channel, Jack started, “This is the first time it has been done in North America,” he continued, “The Canadian companies that are associated with the SRC are going to be the leading companies in Canada in the rare earths space.”

Tom went on to say that Appia has a high-grade rare earths project in Saskatchewan. “Having a rare earths processing plant in Saskatchewan, in the same area where we are and in the same jurisdiction, is a game changer,” he added. Tom also explained how the processing facility is going to benefit Appia Energy and its shareholder.

To watch the full interview, click here

To learn more about Appia Energy Corp., click here

Disclaimer: Appia Energy Corp. is an advertorial member of InvestorIntel Corp.