Updated June 28, 2022: Lynas’ Managing Director Amanda Lacaze provides answers below

I was intrigued last week when the U.S. Department of Defense (DoD) made the announcement that it had awarded US$120 million to Lynas Rare Earths Ltd. (ASX: LYC) to build a 3-5 kta heavy rare earth separation system in the USA. This is in addition to the $30 million the DoD awarded to Lynas (to be matched by Lynas) in February 2021, for the same thing. My guess is that since Lynas built and operates the world’s largest light rare earth separation system in Malaysia where it processes ore from its Mt. Weld Australia monazite mine (the world’s largest worked deposit of monazite), it seemed like an easy decision for the DoD, provided it was prepared to overlook the skills of the domestic American market and the mandate to buy American and reshore. 

But, since the DoD had already agreed to provide US$30 million of an estimated (by Lynas) US$60 million to build such a facility in Texas, why, I asked myself was an additional US$120 million necessary? 

So, I drafted a set of questions for Lynas, the answers to which would be particularly important in a due diligence study for the project, in case the DoD either did not do a due diligence (my guess) or would not publicly answer the same questions citing national security concerns, or some such nonsense. 

Here are the questions I sent to Lynas at the beginning of this week: 

1. What is the project’s location?
2. What is the detailed CAPEX and the estimated OPEX for the system?
3. When will the permitting be finished?
4. Is the plant design finished (It would have to be for the permitting to be finalized)?
5. What is the timeline for construction and first output?
6. What exactly will be the composition of the plant’s output in individual rare earths and tonnages of each, and when will the (nameplate) target capacities be reached?
7. Will the costs per KG of each individual rare earth and blend be competitive with the Chinese costs? 
8. Will the US DoD be the only customer?
9. Will any of the heavy rare earths be consigned to specific metal/alloy/magnet makers? and,
10. From where, exactly, will the feedstocks be sourced? 

Question number 10 is extremely important since there is today no commercial production of heavy rare earths outside of China. Also of note is the fact that Lynas has never commercially produced any separated individual heavy rare earths, nor is its Malaysian plant equipped to do so. 

I am awaiting a reply to these questions from Lynas, but I will let you know when I get them. 

Publisher’s Update:

In response to the above questions InvestorIntel editor Jack Lifton received the following answers by email from Amanda Lacaze, Managing Director of Lynas on June 27, 2022:

1.  What is the project’s location?

Following a detailed site selection process, the facility is expected to be located within an existing industrial area on the Gulf Coast of the State of Texas.

Texas is an excellent location from which to serve our U.S. customers and support the U.S. government’s moves to strengthen its industrial base and make supply chains more resilient through a diversified supply.

2.  When will the permitting be finished? / Is the plant design finished? / What is the timeline for construction and first output?

The design of the Heavy Rare Earths plant was completed as part of the Phase 1 contract. The construction timeline will be confirmed following the completion of detailed engineering and planning. The plant is targeted to be operational in financial year 2025.

3.  What exactly will be the composition of the plant’s output in individual rare earths and tonnages of each?

A typical Heavy Rare Earths separation facility of this type would produce between 2500-3000 tonnes of heavy rare earths per year.  We would expect our Heavy Rare Earths production to be in this range.

We have publicly stated our expectation that the Light Rare Earths plant will produce approximately 5,000 tonnes per year of Rare Earths products, including approximately 1,250 tonnes per year of NdPr.

4.  Will the US Department of Defense be the only customer?

This will be a commercial facility and will be designed to serve both the U.S Defense Industrial Base and commercial manufacturers.

5.  Will any of the heavy rare earths be consigned to specific metal/alloy/magnet makers?

This facility is a positive step towards reinvigorating the domestic Rare Earths market, and we will work to encourage investment in value-added downstream processes including metal and magnet making.

6.  From where, exactly, will the feedstocks be sourced?

Feedstock for the facility will be a mixed Rare Earths carbonate produced from material sourced at the Lynas mine in Mt Weld, Western Australia. Lynas is building a new Rare Earths Processing Facility in Kalgoorlie to process the Rare Earth concentrate from Mt Weld. The material produced in Kalgoorlie will be further processed at the new Rare Earths separation facility in the United States. Lynas will also work with potential 3rd party providers to source other suitable feedstocks as they become available.

Ever imagine what the world would look like if you closed your eyes and then saw the world 2 years later?

Last week’s PDAC 2022 was like opening a musty cupboard that has been closed too long. Likewise, it felt like a bad case of Back to the Future in that it was post-PDAC 2020 when the world shut down, I recall when we were all abuzz over who had spread COVID during that event.

Tired, and out of shape, there was an occasional dramatic betterment, as both George A. Brown and George Bauk of PVW Resources Limited (ASX: PVW) could attest to. Both confessed to substantial life changes and had left good solid poundage aside for exercise and nutrition. They both looked younger.

With our new Publisher and Editor in Chief Stephen Lautens onside this year, along with Byron W King, and Clint Adam Smyth on Stage 1, Level 700 for 3 days at the Metro Convention Centre: we completed 7 panels and we should have all these live by end of the week this week.

This morning? Jack Lifton has a story he is working on an opinion on the “USD$120 million by the U.S. Department of Defense to Australia’s Lynas Rare Earths Limited (ASX: LYC) to cover the costs of constructing what is referred to as a ‘heavy rare earths’ processing (separation) plant in the USA.” And I am tracking down the 3 companies that are referenced in Byron W King’s most recent piece on his highlights from PDAC. My favorite participants? I need one more week to drill through all the business cards, and do my research, and then, am happy to share some interesting facts that I surmised from my time during this event… including the resounding theme of  Copper, Gold and — uranium! Plus, when did Jamaica start advertising rare earths?

We have the benefit of news flow, analysts and journalists communicating with us endlessly. Starting this week and moving forward, let me send you some of the highlights I review, including re-reviewing this week’s upcoming InvestorTalk.com schedule, which includes:

InvestorTalk.com Schedule for June 21-23 (Click Here to RSVP):

• Tuesday, June 21 from 9-920 AM EST – InvestorTalk.com with Brent Willis from Voyageur Pharmaceuticals Ltd. (TSXV: VM)
• Wednesday, June 22 from 9-920 AM EST – Special Guest
• Thursday, June 23 from 9-920 AM EST – InvestorTalk.com with Terry Lynch from Power Nickel Inc. (TSXV: PNPN | OTCQB: CMETF)

 InvestorIntel Interview Highlights for the Week of June 13-20^th, 2022:

• June 20, 2022 – Hubert Lau talks about TrustBIX entering a new growth phase with major agreements in place https://bit.ly/3O6l3xN
• June 17, 2022 – Byron W King says it is time for investors to get back to “real things” like copper and gold https://bit.ly/3xrXKr6
• June 15, 2022 – Frederick Kozak of Appia Rare Earths & Uranium talks about new REE discoveries at Alces Lake https://bit.ly/3zpUaAr

InvestorIntel Column Highlights for the Week of June 13-20^th, 2022:

• Stephen Lautens · June 17, 2022 – We’re Back – PDAC mood positive in spite of sagging market https://bit.ly/3O3L5BE
• Dean Bristow · June 17, 2022 – Generation Mining looks to knock Russia off its palladium pedestal https://bit.ly/3xDdYOl
• Byron W King · June 16, 2022 – Fresh from Toronto: Three Mexican Beauties https://bit.ly/3xxOwJS
• Stephen Lautens · June 14, 2022 – InvestorIntel is digging for stories at PDAC 2022 https://bit.ly/39t2BjN
• Bob Hanes · June 14, 2022 – Rare earths giant MP Materials invests heavily to rebuild a U.S. magnetics supply chain https://bit.ly/3xPTAuH

 News Releases* InvestorIntel Published for the Week of June 13-20^th, 2022:

• June 20, 2022 – Romios Gold Begins Field Work On 3 Projects Near Newmont’s Musselwhite Gold Mine, NW Ontario https://bit.ly/3beqVXg
• June 17, 2022 – Awakn Life Sciences to Present in Upcoming June 2022 Conferences https://bit.ly/3y9e6GR
• June 17, 2022 – Nano One Announces Closing of Rio Tinto Strategic Investment and Collaboration Agreement https://bit.ly/3xZwwtu
• June 17, 2022 – Commissioning Commences at Vital’s Saskatoon Rare Earth Extraction Plant https://bit.ly/3tGEFAp
• June 16, 2022 – Voyageur Pharmaceuticals Ltd. Announces Closing of Over Subscribed $1Million Private Placement and Issuance of Shares for Debt https://bit.ly/3MWLLHH
• June 16, 2022 – TRU Signs Definitive Option Agreement for Consolidation of Final Contiguous Gold Property at Golden Rose Project https://bit.ly/3xUrDBD
• June 16, 2022 – ePlay Digital Announces the First Pet Store in the Metaverse https://bit.ly/3aY9mKR
• June 15, 2022 – NEO Battery Materials Signs a Collaboration Agreement with Applied Carbon Nano Technology Ltd. in South Korea https://bit.ly/3tDjyiq
• June 15, 2022 – Alphamin Operations Unaffected by Recent Closure of Bunagana Border Post with Uganda https://bit.ly/3tFrLCy
• June 15, 2022 – Nano One Appoints Lisa Skakun as Independent Director and Sets 2022 AGM Date https://bit.ly/3xRWTS1
• June 14, 2022 – Kalo Gold Provides Vatu Aurum Gold Project Exploration and Geological Update https://bit.ly/3aZtfkG
• June 14, 2022 – Valeo Pharma Reports Its Second Quarter 2022 Results and Highlights https://bit.ly/3Qr3PfZ
• June 14, 2022 – Awakn Life Sciences Reports Results for Quarter Ended April 30, 2022 https://bit.ly/3b0L0Aj
• June 14, 2022 – Appia Begins Trading on The OTCQX https://bit.ly/3xTc39E
• June 14, 2022 – Romios Gold Reports High-Grade Assays Up to 17.9 g/t Au from Previously Undocumented Prospects on the Kinkaid Project, Nevada https://bit.ly/3MQdtFZ
• June 14, 2022 – TRUSTBIX INC. Announces Release of BIX Origin https://bit.ly/3HjY7se
• June 14, 2022 – Hemostemix Announces the Incorporation of PreCerv Inc. And a Global Field of Use License to NCP-01 https://bit.ly/3zzjTGH
• June 14, 2022 – Appia Provides 2022 Drilling Update for WRCB and Augier and Confirms Continuity of Very Significant Augier Discovery at Alces Lake Rare Earth Property, Northern Saskatchewan https://bit.ly/3Oji05b
• June 14, 2022 – Drill Assay Results Demonstrate Significant Expansion Potential of the 170 MT La Paz JORC Resource https://bit.ly/3O6Ojoh
• June 14, 2022 – Metallum signs Negotiation Agreement with the Pays Plat First Nation https://bit.ly/39lji0B
• June 14, 2022 – Fission 3.0 and Traction Drilling Intersects Additional Anomalous Radioactivity at Lazy Edward Bay https://bit.ly/3NSGwKz
• June 13, 2022 – CBLT Options Chilton Cobalt https://bit.ly/3Hkp8vD
• June 13, 2022 – Bald Eagle Unveils New Porphyry-Style Copper Anomaly on Consolidated Hercules Land Package https://bit.ly/3OgcAYB
• June 13, 2022 – Kalo Gold Provides Vatu Aurum Gold Project Exploration and Geological Update https://bit.ly/3zF9ppn
• June 13, 2022 – Ucore Hosts ‘Secure Supply Chains’ Panel at PDAC 2022 – Rare Earths and other Critical Metals https://bit.ly/3Odiolq
• June 13, 2022 – Imperial Mining Receives Positive Results for the Preliminary Economic Assessment (PEA) for Crater Lake https://bit.ly/3xMMWFw

(*) The company news releases that are published are from ii8 System members. For more information, email me direct and special thanks to Assistant Publisher Raj Shah.

Look online, and you will discover that while Lynas Rare Earths Ltd. (ASX: LYC) is covered by 9 research companies, it is impossible to find one PDF Equity Research Report online. For Australian-listed companies, sometimes they publish the reports on their website; unfortunately, not for Lynas.

Dig deeper online and you may see a headline about whether Lynas has too much debt… these conclusions are in my humble opinion quite wrong, and underestimate this rare earths’ ruler outside of China, Amanda Lacaze.

I ran my conclusions by a semi-retired analyst, who requested anonymity and wrote me back promptly in agreement: “Saw their balance sheet and they are running just over 1x debt: cash flow and their cash flow is strong based on growing sales and commodity prices.”

The media loves to tout Chinese control of rare earths, but it is a woman with an iron fist that rules the rare earths world. Proud of how she likes to watch the pennies, it is unquestionably the reason why she has held the role as a Non-Executive Director for ING Bank Australia Ltd. for over 11 years.

Now let’s start with some prenuptial notes on Lynas, before you decide to make a commitment to this industry giant.

Lynas Rare Earths Ltd. is listed on the Australian Securities Exchange (ASX: LYC). The company also has a sponsored Level 1 American Depository Receipt (ADR) program through the Bank of New York Mellon (Code: LYSDY). On June 6 (Australia), the shares closed at AUD$ 9.35. There 902.4 million shares outstanding, giving the company a market capitalization of approximately AUD$8.4 billion (US$6.1 billion. At December 31, 2021, Lynas reported six month results including AUD$741.7 million positive working capital (including AUD$674 of cash and short term deposits) and AUD$156 million long term debt. Cash and short term deposits increased to AUD$768.4 at March 31, 2022.

Lynas’ quarter ended March 31, 2022, had the following highlights:

• All necessary approvals received for the Kalgoorlie Rare Earth Processing Facility (Australia based processing facility)
• Site clearing of the Kalgoorlie facility location is complete
• Delivery of major equipment to Kalgoorlie site with foundation and building work underway
• Kalgoorlie should be on track as part of the company’s 2025 Foundation Project program
• Planning is underway for the US Rare Earths Processing Facility including contracts signed with the US Department of Defense
• Record quarter for operations including:
  • Sales revenue of AUD$ 327.2 million (AUD$ 202.7 million previous quarter)
  • Sales receipts of AUD$ 262 million (AUD$151 million previous quarter)
  • Total REO production of 4,945 tonnes (4,209 tonnes previous quarter)
  • NdPr production of 1,687 tonnes (1,359 tonnes previous quarter)
• Lynas noted quarterly price strength for NdPr contributed to record financial results
• Automotive demand for rare earths “remains strong”
• Exploration drilling under the existing Mt. Weld extraction pit revealed continuous rare earth element mineralization along 1,020 metres of drill core. Further targeted exploration is to be conducted “with the goal of meeting accelerating customer demand”.
• The company targets to be operating four sites in three countries with global sales in 2025

Having heard Amanda speak on several occasions in her early role as Managing Director nearly eight years ago, I recall believing that her reign would be short-lived. Her valiant commitment to the bottom line above all else seemed conservative and backward compared to the charismatic marketing styles of other leaders I quite like in the market. Commenting that weekly meetings would necessitate accountability for every dime spent, seemed dismal and droll to me, it seems, however, she was quite right.

As down winds from the recession are upon us, or gales of a correction are indeed in full force, I look to the critical materials sector for which many experts harbor no fears. And with the demand for rare earths continuing to exceed supply, it seems that the noble Australian woman whose fearless tactics took me by surprise is now the one championing it all.

China’s Real Rare Earth Infrastructure is based on a dedicated, and educated, specifically Experienced, and Skilled rare earth industrial and R&D workforce, financed, where needed, and supported by the State.

There is a debate among Western economists on the value and effect of industrial policies, set by governments, on the marketplace. It’s argued that when governments, instead of the markets, pick winners and losers in industries it never ends well.

China’s admittedly authoritarian central government does exactly that; it defines an industrial policy for the long term, and it picks winners and losers. But, unlike the American government, it does not careen from policy to policy based on the politics of the moment. China’s government’s long-term focus is on the growth of the overall economy, price stability, and domestic social harmony.

I think that it is the issue of price stability that has caused the Chinese central government to step into its domestic rare earth’s industry lately. Stable, or at least predictable, prices allow the long term planning characteristic of the Chinese industrial economy.

Just before Christmas China announced that it had formed a large and state-supported vertically integrated rare earth products’ company called, eponymously, China Rare Earths. This event, a merger of the rare earths operations managed by three mostly state owned and state controlled  companies has been widely reported. What journalists seem to have missed is that this will be a well financed rare earth company from the start. The Peoples’ Bank of China (the PBOC) is the lender of last resort to any State Owned Enterprise (SOE) and if that enterprise is producing anything required by the current industrial policy then profit and loss take a back seat to security of supply. In rare earths, for example, mining and separation are today rarely, and then only barely, profitable especially in any country with strict worker health and safety and environmental management regulations. The profit is in downstream products, metals, alloys, and magnets, phosphors, and catalysts. This is why stand-alone rare earth ventures even with separation capability and capacity, such as Lynas Rare Earths Limited (ASX: LYC), make relatively little profit, while by contrast China’s vertically integrated, and so far, mostly private Shenghe Resources, which is vertically integrated from the mine to the magnet does much better in sales volumes and profits than Lynas.

China’s rare earths industry has had a long learning curve, and this has generated the world’s largest rare earth R&D, rare earth mining, and rare earths production (processing and manufacturing) engineering reservoir of skilled and well-educated individuals dedicated to rare earths, in the world.

China Rare Earths inherits this human infrastructure, and, unlike, an American venture, such as MP Materials Corp. (NYSE: MP), does not go far to seek out specifically educated, experienced, and skilled engineers and workers from outside of the new company.

Each year China has a ruthlessly competitive national exam to determine admissions to its top universities. Last year some 15 million sat for the national exam. The top tier was selected for China’s most prestigious universities. Those chosen were mostly directed to what we call the STEM curricula, (the hard) sciences, technology, engineering and mathematics. This choice of direction is made in accordance with and support of China’s Industrial Policy, of being independent of the West in 10 technologies by 2025, and becoming a permanent center of technological innovation, superior to any other nation.

The United States, where social forces are denigrating college admissions’ qualification through the cancellation of blind testing, and where even mathematics may be branded as “racist” by half-witted college faculty and administrators, is surviving today as the top tier innovation nation through the work of legacy researchers, many of whom are foreign born, and most of whom are already in their peak productive years.

The American military pretends to be surprised by Chinese prowess in modern weaponry, and the American mainstream media simply does not report on China’s astounding space program. Both are described as based on stolen intellectual property by a smug American media. Can they say the same about China’s dominance in rare earths and battery materials and the end-use consumer products mass produced in China based on those groups of metals?

The United States can and will supply its military needs for rare earth and battery metal enabled products from domestic sources or through domestic processing of imported ores, and, perhaps, restrictive tariffs to politically level the price competition.

But such self sufficiency will not be possible for the entire civilian economy. Compromise and rationing are the future of the domestic supplies of technology metals for green energy purposes. The best we can hope for is a hybrid energy supply, green where possible, but mostly from fossil fuels and nuclear, if the US intends to retain a domestic industrial economy.

More than ever now, the domestic production, processing, and fabrication of the critical metals and materials needed for a broadly prosperous technological society is itself critical. Depriving ourselves of STEM graduates to ensure those skills survive chosen is a step towards the national suicide of America’s standard of living.

Way back in 2011 there were nearly 250 rare earth themed junior mining ventures looking at 400 “deposits” mainly in Canada and Australia. Today, just two of them are producing, Lynas Rare Earths Limited (ASX: LYC) and MP Materials Corp. (NYSE: MP) (the successor in interest to the bankrupt Molycorp of yore). These two ventures, even then, stood out from the pack by their common purpose of delivering a value-added product, individual separated (or blended) rare earth chemical forms, in the case of Lynas, and “magnets,” in the case of Molycorp. All of the others, without exception, stated that their saleable product would be a “mixed con.” This was the great “con” of the rare earths’ boom and bust of 2010-2013.

A concentrate of a mixture of all of the rare earths, from which the chemical elements that interfere with the separation of those rare earths into individual, or purposely blended combinations, of individual rare earth salts, is what is targeted to be produced at a mining operation where the ore is “mined,” concentrated, cracked and leached, and then is chemically processed to remove elements that interfere with the next step, selective separation of the individual elements in a form required for the next step in the supply chain that ultimately results in a finished product for sale to consumers.

For the rare earths this concentrate is, for practical purposes of safety and economics, a mix of rare earth carbonate solids. This should have been the initial target of 2011’s 250 rare earth juniors. It wasn’t. They overwhelmingly (other than Lynas and Molycorp) did nothing to advance towards this target. That turned out to be a good thing, because the only non-Chinese customers for this “mixed con” before 2017 were Solvay in France (9,000 tpa capacity to produce individual rare earth salts), Silmet in Estonia (2,500 tpa), and assorted small operations in Asia, outside of China, with a combined capacity of perhaps 3,000 tpa. All of these bought their feedstock from China or (a tiny amount) from Russia at the time.

No 2011 junior sold a single gram of mixed con to the marketplace prior to 2017 (Lynas)

Why was the first 21^st century, rare earth boom, such a bust?

Because none of them had the knowledge, education, experience or skill in processing or mineral economics to see that integration into a total rare earths supply chain targeted to a final product is necessary for profitable operation. Almost without exception the profitable part of the rare earth supply chain is concentrated in the metals, alloys, and magnet making end, and the only way to make a mine and separation system profitable is to distribute costs along a total supply chain. (America’s Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR), which is operating on a total supply chain model through magnet alloys, is an exception, because it is able to make a profit selling a mixed carbonate due to the skill of its administrative and operation management and a unique, for North America, existing processing infrastructure).

If there is to be a domestic American, or European, total rare earth permanent magnet supply chain then there will have to be in place operating commercial rare earth separation systems, rare earth metals and alloys production, and rare earth permanent magnet production capability and capacity to support it.

In fact, if there are to be total domestic supply chains for any critical metals, then, not just a mine, but also all of the downstream elements of the supply chain have to be in place before that can happen.

I note that for the cobalt chemicals necessary for the production of lithium-ion battery cathodes, the Canadian integrated cobalt processing junior, Electra Battery Materials Corporation (TSXV: ELBM | OTCQX: FTSSF), has entered into a supply agreement for cobalt concentrates from the world’s largest non-Chinese producer, Glencore, to process that concentrate into fine cobalt chemicals for the battery manufacturing industry in its existing Canadian facility. When and if Electra can produce cobalt concentrates from its company-owned deposits there will already be in place the downstream operations to support that. In the meantime, it will buy feedstocks from others, and/or also toll them for others. Electra’s management looks also to have given considerable thought to pricing, so as to ensure profitability.

This business model, to have in-house as much of the total final product supply chain as is necessary to be profitable, is the only practical business model for the production of critical metals and materials.

As of December 31, 2021, America’s Energy Fuels (rare earths) and Canada’s Electra (cobalt) are setting the pace for the future development of a North American critical metals’ industry by commencing operations.

Happy New Year!

To achieve U.N. climate change management goals the world needs to shift rapidly to clean energy, and that means we need to build or secure, reliable sources of rare earths. While the USA and Canada have made some progress in this direction, Australia will also be needed to play a key role.

When looking at a chart of rare earths reserves by country, China shows the largest reserves followed by Vietnam, Brazil, Russia, India, and Australia, in that order. The USA is ranked 8th and Canada is outside of the top ten. Given Australia’s stellar track record as a reliable supplier of raw materials, it should not be surprising to know that the West is looking towards Australia to step up production of rare earths, especially those needed to support the surging cleantech sectors of electric vehicles, wind energy, and solar energy.

ClearWorld.us says it well, stating:

“Renewable energy development relies upon sufficient quantities of rare earth minerals, specifically neodymium, terbium, indium, dysprosium, and praseodymium. These are used in the production of solar panels and wind turbines. If the world is to meet the greenhouse gas emissions targets sought in the Paris Climate Agreement the availability of these minerals must increase by 12 times by 2050.”

(Emphasis by the author.)

Rare earths are key elements in the cleantech revolution

Australian listed rare earths companies:

Producers

Lynas Rare Earths Limited (ASX: LYC) (“Lynas”)

Lynas is the second largest neodymium and praseodymium (“NdPr”) producer in the world. Lynas owns the Mt Weld rare earth mine, which is one of the world’s highest grade rare earths’ mines, and the Mt Weld ORE Concentration Plant, both located in Western Australia. Lynas also owns the Lynas Advanced Materials Plant (LAMP), which is an integrated manufacturing facility, separating and processing rare earths’ materials in Malaysia. The Lynas 2025 growth strategy encompasses plans to build the Kalgoorlie Rare Earths Processing Facility (cracking and leaching) in Australia and an LRE/HRE separation and specialty materials facility in the USA. Lynas trades on a market cap of A$7.3 billion.

Iluka Resources Ltd. (ASX: ILU) (“Iluka”)

Iluka is a relatively new (April 2020) producer of rare earths at their Eneabba Project in Western Australia. Iluka intends to ramp to selling 50,000 tpa of a 20% monazite-zircon ore concentrate for further processing offshore. Iluka has an offtake agreement for 50,000 tpa. Iluka is working on developing a Phase 2 of the Eneabba Project which involves investigating techniques to beneficiate and purify the monazite to an 80% concentrate for sale further down the value chain. Iluka is mostly known for being an Australian heavy mineral sands, zirconium and titanium, producer. Iluka trades on a market cap of A$3.5 billion.

Vital Metals Limited (ASX: VML) (“Vital”)

Vital recently began mining ore at its Nechalacho’ Mine in Canada’s Northwest Territories (NWT), with commencement of ore processing at Vital’s, under construction, Saskatoon cracking and leaching facility expected to begin in 2022. The Nechalacho Mine is a high grade, light rare earth (bastnaesite) project with a world-class resource of 94.7Mt at 1.46% REO (measured, indicated and inferred). Nechalacho’s North T Zone, which is being mined by Vital, hosts a high-grade resource of 101,000 tonnes at 9.01% LREO (2.2% NdPr). Vital has a non-binding MOU with Ucore Rare Metals Inc. for the supply to it of a mixed rare rare earth carbonate, beginning H1 2024. Vital Metals trades on a market cap of A$250 million.

Explorer/Developers (in alphabetical order):

Arafura Resources Limited (ASX: ARU) (“Arafura”)

Arafura 100% own the Nolan’s Bore rare earth project 135kms from Alice Springs in the Northern Territory, Australia. Arafura states: “The Project is underpinned by low-risk Mineral Resources that have the potential to supply a significant proportion of the world’s NdPr demand. It is a globally significant and strategic NdPr project which, once developed, will become a major supplier of these critical minerals to the high-performance NdFeB permanent magnet market.”

The deposit contains a JORC 2012-compliant Mineral Resources of 56 million tonnes at an average grade of 2.6% total rare earth oxides (TREO). 26.4% of the total rare earths contained are  NdPr. The Project is supported by Export Finance Australia (EFA), and the Northern Australia Infrastructure Facility (NAIF), via non-binding letters of support for a proposed senior debt facility of up to A$200 million and A$100 million respectively. Arafura is looking to raise further funds to get the project started. Arafura recently stated: “The momentum with offtake discussion has enabled engagement to expand to include the options for strategic investment as part of the Nolan’s project funding.” Market cap is A$379 million.

Australian Rare Earths Limited (ASX: AR3) (“AREL”)

AREL is progressing in the exploration of a significant deposit of valuable ‘clay-hosted’ rare earth elements, located at their Koppamurra Project spread over ~4,000km²  of tenements in South Australia and Victoria. Past exploration of the Koppamurra region has shown it contains mineralization containing the rare earth elements neodymium, praseodymium, dysprosium and terbium. The Koppamurra Project is an ‘ionic clay’ rare earth opportunity with a 2021 JORC Inferred Mineral Resource of 39.9Mt @ 725ppm TREO. AREL trades on a market cap of A$98 million.

Australian Strategic Materials Ltd. (ASX: ASM) (“ASM”)

ASM owns the Dubbo Rare Earths Project in NSW, Australia. The Dubbo Project is a 100% owned ‘construction ready’ poly-metallic and rare earths project with potential to become a key global supplier of specialty metals and rare earths. ASM’s goal is a “mine to metal” strategy to extract, refine and manufacture high-purity metals and alloys, supplying directly to global technology manufacturers. Market cap is A$1.92 billion.

Northern Minerals Limited (ASX: NTU)

Northern Minerals own the Browns Range heavy rare earth minerals project in Western Australia. Northern Minerals has built a pilot plant to test a number of deposits and prospects that contain high-value dysprosium and other Heavy Rare Earths (HREs) such as yttrium, hosted in xenotime mineralization.

The Company states: “Northern Minerals is positioned to become the world’s first significant producer of dysprosium outside of China. Accounting for 60% of the Browns Range Project’s (the Project) revenue, dysprosium is the key value driver of the Project and is at the core of Northern Minerals’ marketing strategy. With a high value, high purity, dysprosium rich product, the Company is set to become a long term and reliable supplier of dysprosium and other critical heavy rare earths to world markets.” Market cap is A$339 million.

Peak Resources Limited (ASX: PEK)

Peak Resources 75% owns the Ngualla Tanzania rare earth project, which the Company states is one of the world’s, largest and highest grade, undeveloped rare earth projects. The Ngualla Project has ore reserves of 18.5 million tonnes at 4.8% REO; 22% of the total mineral resource is NdPr, with an expected 26 year life of mine. The Project is currently at the funding stage having completed a BFS in 2017. The BFS summary details are here. About 90% of the Project’s revenues will be coming from NdPr. Peak Resources state: “Operating cost of US$ 34.20/kg NdPr* Oxide, demonstrating potential to be the world’s lowest-cost fully integrated rare earth development project.” Market cap is A$135 million.

Closing remarks

With rare earths demand set to grow strongly this decade as the world moves towards cleaner energy and technology, investors would be wise to take a second look at the rare earths sector.

Australian critical minerals projects were recently in the news after the Government announced that they would receive an A$2 billion boost (via a loan facility), to support the sector. This bodes well for the Australian rare earths junior miners to join Lynas as producers. Stay tuned as this sector looks set to shine this decade.

In this InvestorIntel video, Tracy Weslosky lists InvestorIntel’s Top 10 Trending articles and videos on InvestorIntel.com for the last 30 days. You may find this quite interesting as this Top 10 list provides an indicator of what market trends our audience is finding interesting.

Presently trending #1 on InvestorIntel.com is Frederick Kozak’s take on the top 5 rare earths companies for 2021. Our Australian Editor Matthew Bohlsen’s coverage on the Australian Government’s extension of a $2 Billion loan facility for the critical materials industry is trending #2 followed by an update on Lynas Rare Earths Limited (ASX: LYC) trending #3. Appia Rare Earths & Uranium Corp. (CSE: API | OTCQB: APAAF) is presently trending #4 with their article written by Dean Bristow titled – Biden, the Chinese raw material hunt and the ‘massive’ monazite results of Appia Rare Earths & Uranium. Trending #5 is Tracy Weslosky’s update on Neo Lithium Corp.‘s (TSXV: NLC | OTCQX: NTTHF) acquisition by China’s Zijin Mining Group.

Here is the complete list of InvestorIntel’s Top 10 Trending Articles and Videos on InvestorIntel.com for November 2021.

1. The Top 5 Rare Earths Companies for 2021 https://bit.ly/3shB8X4
2. Australian Government extends a $2 Billion loan facility for the critical materials industry https://bit.ly/3AX4gqv
3. Lynas Rare Earths, making record profits and growing to meet the EV demand https://bit.ly/3m65cSW
4. Biden, the Chinese raw material hunt and the ‘massive’ monazite results of Appia Rare Earths & Uranium https://bit.ly/3lKR82m
5. China pays full value for Neo Lithium, the bull market has arrived. https://bit.ly/3Fxco3w
6. Byron King’s Top 5 “Outstanding” Yukon Gold (and Silver) Mining Names https://bit.ly/2WFj9yL
7. North American Rare Earth Juniors Consolidate Capabilities to Advance Towards a Total Domestic Supply Chain https://bit.ly/3bai3ia
8. Cesium, A Critical Metal and an Opportunity for Avalon Advanced Materials https://bit.ly/3ByGhOu
9. U.S. nuclear power generation at historical heights as investors buy uranium https://bit.ly/2XlRrY0
10. Canada’s Voyageur Pharmaceuticals Breaking a Chinese Monopoly https://bit.ly/3usOgdb

To watch the full video, click here

While the lithium-ion battery boom for EVs is getting most of the headlines, investors should not forget about the rare earths. The most valuable rare earths, neodymium (Nd), praseodymium (Pr), and dysprosium (Dy) are those used in the permanent magnets used in electric motors, key components in electric vehicles, EVs.

As shown on the graph below, China neodymium (Nd) prices are up 73% the past year as demand for the rare earth permanent magnet material continues to grow. Praseodymium (Pr) prices and dysprosium (Dy) prices are also on the rise.

Neodymium 5 year price chart

Source: Trading Economics

Lynas Rare Earths Limited (ASX: LYC) (“Lynas”) is the second largest NdPr [The trade term for the neodymium-praseodymium blend, which is the standard item of trade in the rare earth magnet raw material production industry], producer in the world. Lynas owns the Mt Weld rare earth mine, which is one of the world’s highest grade rare earths mines, and it operates there also the Mt Weld Ore Concentration Plant, both located in Western Australia.

Lynas has recently drilled up to 1 kilometer deep at Mt Weld discovering addititonal  carbonatite below the current rare earth open pit mine. Lynas stated: “The current exploration drillhole has ended in visible coarse grained REE mineralisation. First pass geochemical assay results, microscopic petrology, and mineralogical study reports are expected by November 2021 and the drilling report is expected to be completed in December 2021.”

Lynas also owns the Lynas Advanced Materials Plant (LAMP), which is an integrated manufacturing facility, preparing and separating the mixed rare earths from Mt. Weld into individual rare earth materials, located in Malaysia. In recent legal news, Lynas announced that: “….on 28 July 2021 the High Court of Malaysia at Kuala Lumpur dismissed the judicial review proceedings commenced by the anti-Lynas activists seeking review of the processes followed by the Government of Malaysia in reaching the August 2019 decision to renew Lynas Malaysia’s fourth operating licence. Lynas has received a notice of appeal by the anti-Lynas activists. Lynas intends to defend the appeal.”

In company news, Lynas recently announced a record net profit after tax of A$157 million for the 2021 financial year (July 1, 2020 to June 30, 2021). The profit was partly as a result of higher rare earths production, but mostly due to stronger rare earths pricing. Lynas stated: “Despite the global shortage of semi-conductors which affects all industries and in particular, the automotive industry, the NdFeB market is experiencing very strong growth, supporting the demand for NdPr and the Heavy Rare Earths’ blend produced by Lynas”

Lynas’ rare earth products (notably NdPr) are seeing strong demand and rising prices

Source: Lynas Rare Earths FY 21 results presentation

Latest progress at Lynas as part of their 2025 growth strategy

• Kalgoorlie Rare Earths Processing Facility (Australia) – Lynas is currently progressing their new Kalgoorlie Rare Earths Processing Facility, where site works have commenced and orders have been placed for all long lead time items. Fabrication of the five kiln shell sections is now complete. The final Environmental Review Document (ERD) has been submitted to the Australian EPA for the Kalgoorlie Project.
• LRE/HRE separation & specialty materials facility (USA) – Lynas has completed the Phase 1 detailed engineering and design work for a Heavy Rare Earths (HRE) separation facility in the USA, and it has been submitted to the US Government. The U.S, DoD is now conducting a merit evaluation of the submission. Lynas is progressing with site studies and planning for the American  integrated Rare Earths Separation Facility.

Lynas current facilities and 2025 growth strategy

Source: Lynas Rare Earths FY 21 results presentation

Closing remarks

Lynas Rare Earths is performing very well, buoyed by strong rare earth prices. Most analysts are forecasting a strong decade ahead for rare earths based on growing demand for the powerful rare earth permanent magnets used in electric motors in the automotive, aerospace, and appliance industries.

Lynas is steadily working towards achieving its 2025 growth strategy of developing new facilities to enlarge its capacities for rare earths processing and separation in Australia and the USA.

Investor interest in Lynas remains strong, because it is the largest non-Chinese based rare earth permanent magnet raw materials’ producer. Lynas trades on a market cap of A$6.4 billion. It is certainly one to follow as it makes steady progress towards achieving its 2025 growth target.

Rare earth’s producing miners in the West are very rare as China dominates most of the rare earths production. Two exceptions are both trading with US billion-dollar market caps – They are MP Materials Corp. (NYSE: MP) (US$6.24 billion) and Lynas Rare Earths Limited (ASX: LYC) (US$3.92 billion), with  Today’s company trades on a market cap of just US$55 million.

[Note from the Publisher: The breaking news yesterday Energy Fuels and Neo Performance Materials Announce Contract Signing and Launch of Commercial Shipments of Rare Earth Product to Europe in Emerging U.S.-Based Rare Earth Supply Chain confirms these 2 companies as players in the rare earths supply chain. And Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) market cap is  roughly CAD$1B and Neo Performance Materials Inc. (TSX: NEO) is CAD$615M according to Yahoo Finance at 945 AM EST.)

The Company has a plan to be ready to build their full-scale rare earths processing plant by the end of 2023 and once complete become a North American rare earths producer (potentially by about 2025 provided all goes well). Prior to reaching full scale production, the Company plans to operate a demonstration plant in 2022.

The Company is Search Minerals Inc. (TSXV: SMY | OTCQB: SHCMF) (“Search”). Search controls properties with rare earths in three areas of Labrador, Canada. These are:

• The Port Hope Simpson (PHS) property (flagship)
• The Henley Harbour Area in Southern Labrador
• The Red Wine Complex located in Central Labrador, plus some recently agreed acquisitions

Search Minerals flagship Port Hope Simpson (PHS) property includes Foxtrot, Deep Fox, Silver Fox, Awesome Fox, and Fox Meadow

Next steps (2021) at Port Hope Simpson – Foxtrot/Deep Fox updated PEA by Dec. 2021

The Preliminary Economic Assessment (PEA) of the Foxtrot Resource showed an estimated after-tax NPV10% of C$48 million and an after-tax IRR of 16.7% over a 14-year mine life. Start-up CapEx was estimated at C$152 million representing an after-tax payback of 4.4 years.

Search plans to do an updated PEA by December 2021 to include both Foxtrot and Deep Fox. Deep Fox will add to the existing PEA due to increasing the resource size and it has up to 15% higher grades than Foxtrot. The updated Foxtrot/Deep Fox PEA will double the past PEA production rate (increase production rate to 2,000 tonnes per day), increase recoveries from the optimized pilot plant process, increase revenue from higher grades at Deep Fox, extend mine life with material from Deep Fox and Foxtrot to a central processing facility, and decrease costs with reduced re–agents. The impact of all of this is expected to potentially improve the PHS (Foxtrot/Deep Fox) Project economics significantly.

Beyond this, there is plenty of potential to further grow the Resource estimate and economics in the Feasibility Study, as Search also has 3 more advanced prospects (Silver Fox, Awesome Fox, and Fox Meadow) and 20+ potential prospects at PHS. Silver Fox has had some exciting “very high occurrence of zirconium and hafnium“. Project CapEx and OpEx should also be attractive as there is existing infrastructure, a scalable processing plan, technical simplicity, and open pit mining. A local workforce and Search’s patented mining process (lowers environmental and reagents costs) should also help reduce costs.

Search has already achieved a dedicated pilot plant, proving an ability to generate high purity, refinement-ready product at a low scale. Added to this there are MOUs signed with Saskatchewan Research Council and USA Rare Earth for further refining collaboration.

Next steps (2022, 2023) – Demonstration plant in 2022 and full-scale production plant construction ready to begin in late 2023

Search’s master plan includes building a demonstration plant in St Lewis in 2022 as well as an Environmental Impact Statement (EIS) for Foxtrot/Deep Fox.

In 2023 Search intends to complete their permitting, a BFS, and commence raising capital to build a full-scale processing plant commencing by the end of 2023. All going very well that can potentially lead to Search commencing rare earth production in 2025 or shortly thereafter.

It should be noted that in the mining industry, unless governments act to support and speed up the process, permitting and funding can drag on for some years. The good news here is the Canadian and US governments finally appear motivated to support (perhaps via faster permitting and low rate loans) a local rare earths supply chain.

In news announced on June 24, 2021, Search was selected to participate in the Government of Canada Accelerated Growth Service Initiative. This provides Search with “coordinated access to Government of Canada resources” as Search continues to move quickly to production.

Search Minerals Strategic Plan – 2021 to 2023

Source: Company presentation

Closing remarks

Search Minerals has big plans in the rare earths sector. The road to production for junior miners carries plenty of risks and usually involves stock dilution increasing the market cap, especially when raising initial project CapEx. One plus for Search Minerals is their Canadian location, as US and Canadian governments are showing increasing interest to help support rare earth projects.

If successful Search Minerals (US$55 million market cap) can begin to follow in the giant footsteps of Western rare earth majors MP Materials (US$6.24 billion) and Lynas Rare Earths (US$3.92 billion). As you can see successful Western rare earths miners command very significant size market caps.

Investors will need to ‘search’ for their patience cap and be prepared for a long ride, but the potential rewards for success can be excellent. Stay tuned.

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.