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Libertas
Companies mentioned
Molycorp (MCP-NYSE)
Lynas Corporation (LYC-ASX)
Alkane Resources (ALK-ASX)
Arafura Resources (ARU-ASX)
Avalon Rare Metals (AVL-TSX)
Cache Exploration (CAY-TSX-V)
Dacha Capital (DAC-TSX-V)
Etruscan Resources (EET-TSX)
Globe Metals & Mining (GBE-ASX)
Great Western Minerals (GWG-TSX-V)
Greenland Minerals and Energy (GGG-ASX)
Hudson Resources (HUD-TSX-V)
Kirrin Resources (KYM-TSX)
Matamec Exploration (MAT-TSX-V)
Metallica Minerals (MLM-ASX)
Neo Material Technologies (NEM-TSX)
Peak Resources (PEK-ASX)
Pele Mountain Resources (GEM-TSX-V)
Quantum Rare Earth Developments (QRE-TSX-V)
Quest Rare Minerals (QRM-TSX-V)
Rare Earth Metals (RA-TSX-V)
Rare Element Resources (RES-TSX-V)
Stans Energy (RUU-TSX-V)
Tasman Metals (TSM-TSX-V)
Ucore Rare Metals (UCU-TSX-V)
Rare Earths Review Is the hype justified?
� A fundamental growth story exists for a number of products made using
rare earths. The increasing use of rare earth magnets is potentially very
significant.
� There are strategic reasons for investment. China has cornered the market
and OECD Governments may encourage the development of non-Chinese
deposits.
� However the industry is capital intensive, and the mineralogy and
metallurgy of deposits is complex, now may be a good time to raise capital
owing to high levels of investor interest.
� Uranium and thorium are added complications for a number of deposits.
Greenland currently bans uranium mining, while monazite is a pariah for the
heavy minerals industry due to its thorium content.
� Ultimate returns may however disappoint as the industry is equity capital
intensive, and sales volumes and prices for the individual products may turn
out lower than forecast.
Rare metals include Rare Earth Elements (REEs) and a select group of
similar specialty metals used in technology applications. The increasing use
of rare earth magnets to miniaturise electric motors could transform the
wind power industry, as well as continue to find increasing applications in
the automobile industry. The outlook for Nickel Metal Hydride (NiMH)
batteries, which are significant consumers of rare earths, is however more
uncertain, while there are a number of other uses which might not
necessarily be growth markets, but are of strategic and military interest.
The US Government is embarrassed that the Abrams tank has a navigation
system that is heavily dependent on Chinese samarium metal production.
Lynas (LYC-ASX) and Molycorp (MCP-NYSE) are the two sector leaders and
may offer practical means of gaining exposure. Lynas is funded through to
first production, but may struggle in the short term owing to a lack of
newsflow. The Molycorp IPO disappointed and the company faces a
number of issues before and if 2012 production can be achieved.
Neo Material Technologies (NEM-TSX) appears to be an interesting
producer of end products, particularly rare earth magnets and alloys. It
trades at a modest 9.2 times consensus 2010 earnings.
The Canadian market appears to undervalue Great Western Minerals
(GWG-TSX-V) integrated operations. The ability to climb the value added
chain outside of China may become significant; they own 50% of the ten
most advanced rare earth mining, development, and exploration projects
in the world.
For a US$1bn current world market for Rare Earth Elements, that is
forecast to grow to $1.9bn by 2014, one can argue that the $3.6bn
current market capitalisation of the listed stocks which offer exposure is
excessive.
4th August 2010
Research
Roger Bade
+44 (0)20 7569 9675
Please refer to important disclosures at the end of this report.
Sector Research – Rare Earths Review
2
Rare Earths 4
Introduction 4
Rare Metals, Rare Earth Elements (REEs), Rare Earth Oxides (REOs) 4
Supply, Demand and Price Development 6
Rare Earth Element Uses 6
Nickel Metal Hydride (NiMH) Batteries 6
Magnets 7
Wind Turbines 9
Phosphors 9
Polishing Powders 9
Fluid Catalytic Cracking (FCC) 10
Autocatalysts 10
Supply/Demand Balance 11
Rare Earth Elements in Greater Detail 11
Global Rare Earth Production 17
China’s Impact 19
Rare Earth Oxides Uses and Prices 20
China: Export Quota History 21
US Government Accountability Office (GAO) 23
Global Rare Earth Resource Base 25
Rare Earth Applications by Weight and Value 27
Global Rare Earth Consumption 2008 28
2014 Forecasts by Weight and Value 29
Mineralogy 32
Carbonatites 32
Bastnäsite [(REE) CO3 (F,OH)] 32
Monazite [(REE, Nd) PO4] 33
Nepheline Syenite 33
Apatite 33
Ancylite (Sr (REE) (CO3)2(OH) (H2O) 33
Baddeleyite (ZrO2) 34
Loparite (Ce,Na,Ca(Ti,Nb)O3) 34
Xenotime 34
Metallurgy 34
Demonstration plant 34
Process Flowsheet – Explained 35
Ion-Exchange Extraction 35
Solvent Extraction 36
Prices 36
Project Finance 38
Rare Earth Producers 39
Bayan Obo Rare Earth Mine China 39
Longnan Rare Earth Mine China 40
Potential Rare Earth Mines 41
Contents
4th August 2010 Sector Research – Rare Earths Review
3
Potential New Suppliers 43
The Ten Steps To Rare Earths Commercial Production 44
Listed Rare Earth Equities 45
Molycorp (MCP-NYSE) 46
Lynas Corporation (LYC-ASX) 49
Alkane Resources (ALK-ASX) 51
Arafura Resources (ARU-ASX) 53
Avalon Rare Metals (AVL-TSX) 55
Cache Exploration (CAY-TSX-V) 57
Dacha Capital (DAC-TSX-V) 57
Etruscan Resources (EET-TSX) 57
Globe Metals & Mining (GBE-ASX) 58
Great Western Minerals (GWG-TSX-V) 58
Greenland Minerals and Energy (GGG-ASX) 61
Hudson Resources (HUD-TSX-V) 64
Kirrin Resources (KYM-TSX) 65
Matamec Explorations (MAT-TSX-V) 65
Metallica Minerals (MLM-ASX) 66
Neo Material Technologies (NEM-TSX) 67
Peak Resources (PEK-ASX) 69
Pele Mountain Resources (GEM-TSX-V) 70
Quantum Rare Earth Developments (QRE-TSX-V) 71
Quest Rare Minerals (QRM-TSX-V) 71
Rare Earth Metals (RA-TSX-V) 72
Rare Element Resources (RES-TSX-V) 72
Stans Energy (RUU-TSX-V) 72
Stans Energy’s properties in Kyrgyzstan 73
Tasman Metals (TSM-TSX-V) 74
Ucore Rare Metals (UCU-TSX-V) 75
Unlisted Companies 77
Dong Pao 77
Frontier Minerals Limited 77
Montero Mining 77
Spectrum Mining 78
Sector Research – Rare Earths Review 4th August 2010
4
Introduction
In this review we briefly introduce the Rare Earth Elements and we look at those
rare earth markets that are important in driving demand. These include the
nickel metal hydride battery, the magnet and the wind turbine motor markets.
We introduce the individual elements, their properties and uses. We discuss
China’s impact as a dominant producer and the recent US Government
Accountability Office review that attempts to address this control. Before we
introduce the Chinese producers, the listed non-Chinese hopeful producers,
explorers and manufacturers, and the unlisted companies that may look to list
on a public market, we look at the mineralogy of rare earth elements, the
metallurgy of their extraction, we discover current prices and discuss the project
finance opportunities and difficulties that exist.
We shall discover that the mineralogy and metallurgical extraction of rare earth
elements is complicated, while many projects may have environmental issues
with the presence of uranium and more significantly thorium.
It is clear that rare earth element grades need to be high in order to cover the
considerable capital and operating costs of the extraction process. In addition
producing concentrates for someone else to make the final extraction of rare
earth elements is likely to be a fairly unrewarding exercise, as although demand
is potentially high, there are only one or two players, all currently located in
China.
A lucrative market may develop for Lynas, Molycorp and possibly Great Western
Minerals to buy concentrates from non-Chinese producers for onward
processing, once their hydrometallurgical plants are up and running.
As there are neither terminal markets, nor futures markets for Rare Earth
Elements, and those markets which do exist are very shallow, project debt
finance may be very difficult to secure. High capital cost projects funded solely
by equity may not offer outstanding returns.
Rare Metals, Rare Earth Elements (REEs), Rare Earth Oxides (REOs)
Rare Metals include the unique elemental suite know as the Rare Earth Elements
and a select group of speciality metals produced primarily for technology
applications.
Rare Earth Elements are most simply defined as those chemical elements
ranging in atomic numbers between 57 and 71. These elements include
lanthanum, from which rare earth metals get their collective name of
lanthanides, through to lutetium. For reasons of chemical similarity, an
additional metal, yttrium, is commonly found in rare earth deposits. Other
collateral metals often found amongst REE deposits include uranium, thorium,
beryllium, niobium, tantalum and zirconium.
Rare Earths
4th August 2010 Sector Research – Rare Earths Review
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The Rare Earth Elements possess varying ionic radii, which produce different
properties, and have therefore been broadly classified into two groups: Heavy
Rare Earth Elements (HREE) and Light Rare Earth Elements (LREE).
Light REEs, or the ceric sub-group, makeup the first seven elements of the
lanthanide series. They are; Lanthanum (La, atomic number 57), Cerium (Ce,
58), Praseodymium (Pr, 59), Neodymium (Nd, 60), Promethium (Pm, 61) and
Samarium (Sm, 62).
Heavy REE's, which typically have high monetary value relative to other REE's,
are the following higher atomic numbered elements from the lanthanide series;
Europium (Eu, atomic number 63), Gadolinium (Gd, 64), Terbium (Tb, 65),
Dysprosium (Dy, 66), Holmium (Ho, 67), Erbium (Er, 68), Thulium (Tm, 69),
Ytterbium (Yb, 70) and Lutetium (Lu, 71).
Historically the term 'rare earths' has been applied to the lanthanide group of
elements, which range from lanthanum (atomic number 57), to lutetium (atomic
number 71), plus yttrium (atomic number 39), which has similar properties.
The National Instrument (NI) 43-101 and Joint Ore Reserves Committee (JORC)
definition of Light Rare Earth Elements (LREE) and Heavy Rare Earth Elements
(HREE) is based on the electron configuration of the rare earths and is as follows:
” The LREE are defined as lanthanum (Z=57) through gadolinium (Z=64). This is
based on the fact that starting with lanthanum, which has no 4f electrons,
clockwise spinning electron are added for each lanthanide until gadolinium.
Gadolinium has seven clockwise spinning 4f electrons, which creates a very
stable, half-filled electron shell. The LREE also have in common increasing
unpaired electrons, from 0 to 7. The HREE are defined as terbium (Z=65) through
lutetium (Z=71) and also yttrium (Z=39). This is based on the fact that starting
with terbium, counter-clockwise spinning electrons are added for each
lanthanide until lutetium. All of the HREE therefore differ from the first eight
lanthanides in that they have paired electrons. All of the lanthanides have from 0
to 7 unpaired electrons. The defining split at the LREE gadolinium, which has
both a stable half-filled 4f shell and 7 unpaired electrons, the following HREE,
beginning with terbium, have decreasing unpaired electrons. Terbium has 6
unpaired electrons with the addition of one counter-clockwise electron which
creates one electron pair. The number of unpaired electrons then decreases
through lutetium, which has no unpaired electrons and a full stable 4f shell with
14 electrons and 7 "paired up" electrons. Yttrium is included in the HREE group
based on its similar ionic radius and similar chemical properties. In its trivalent
state, which is similar to the other REE, yttrium has an ionic radium of 90
picometers, while holmium has a trivalent ionic radius of 90.1 picometers.
Scandium is also trivalent, however, its other properties are not similar enough
to classify it as either a LREE or HREE.
“To avoid confusion this definition should be used in all descriptions of the REE
and should be applied as the standard for 43-101 and JORC compliant deposit
evaluations."
Sector Research – Rare Earths Review 4th August 2010
6
Supply, Demand and Price Development
Source: Lynas Corporation.
Nickel Metal Hydride (NiMH) Batteries
The Rare Earth Elements required for NiMH batteries are lanthanum and, to a
lesser extent, cerium, selected owing to their hydrogen storage properties. To
limit purification costs to economic levels, residual traces of less common Rare
Earths are often tolerated. In fact many NiMH applications use battery-grade
mischmetal, (containing typically 27% lanthanum, 52% cerium, 16% neodymium,
and 5% praseodymium), rather than the pure lanthanum and cerium metals.
Research indicates that removing the neodymium content does not influence
the storage capacity; hence it is removed wherever possible.
A Hybrid Electric Vehicle (HEV) combines a conventional internal combustion
engine (ICE) propulsion system with an electric propulsion system. The presence
of the electric power train is intended to achieve either better fuel economy
than a conventional vehicle, or better performance. A Plug-in Hybrid Electric
Vehicle (PHEV), also known as a plug-in hybrid, is a hybrid electric vehicle with
rechargeable batteries that can be restored to full charge by connecting a plug
to an external electrical power source. A PHEV shares the characteristics of both
a conventional hybrid electric vehicle, having an electric motor and an internal
combustion engine; and of an all-electric vehicle, also having a plug to connect
to the electrical grid. PHEVs have a much larger all-electric ranges as compared
to conventional gasoline-electric hybrids,
Rare Earth Element Uses
4th August 2010 Sector Research – Rare Earths Review
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Hybrid electric vehicles represent more than half the usage of NIMH batteries
(57%). There is currently a great deal of debate surrounding the relative merits
of NiMH batteries compared to lithium-ion (Li-ion) batteries: Toyota’s Prius uses
NiMH batteries but other manufacturers, such as Renault, plan to use Li-ion
batteries for their forthcoming electric cars. According to Oakdene Hollins,
Toyota remains committed to the NiMH battery for its conventional hybrids,
citing NiMH’s ease of management, low cost and durability to last the lifetime of
the vehicle, although Li-ion will be the battery used for its PHEV Prius due for
commercial sale in 2011. Toyota expects almost universal adoption of Li-ion for
all EVs and PHEVs.
The consultants Roskill’s view is that NiMH batteries will remain the No.1 choice
for HEV applications until 2012-13 by which time Li-ion battery technology may
have matured. This view is also shared by Deutsche Bank who forecast the
market share of Li-ion batteries rising to 70% of the hybrid market between
2015 and 2020, although Deutsche Bank still expects NiMH to account for 70%
of the market in 2015.
Toyota Motor’s (7303 JP) decision to invest US$50m in private US electric motor
developer Tesla Motors might hasten the demise of NiMH batteries. The Tesla
Roadster, the company's first vehicle, is the first production automobile to use
lithium-ion cells and the first production electric vehicle with a range greater
than 200 miles (320 km) per charge.
The outlook for NiMH battery demand is important for many rare earth projects.
Returns may be negatively affected, particularly for those projects that could
produce significant quantities of lanthanum and cerium, if the mischmetal
market falls out of bed. This may be of significance in relation to the forthcoming
IPO of Molycorp Minerals who own the Mountain Pass rare earth project in
California, USA.
Magnets
The use of rare earths as magnets in electrical motors is likely to become the
major driver for growth for the whole rare earths industry.
Electric motors use electrical energy to produce mechanical energy, typically
through the interaction of magnetic fields and current-carrying conductors. The
reverse process, producing electrical energy from mechanical energy, is
accomplished by a generator or dynamo. At the heart of all electric motors is a
magnet. In alternating current motors, the alternating current produces the
magnetic field, whilst in direct current a permanent magnet is used. Permanent
magnets can also be used in alternating current motors
Rare-earth magnets are strong permanent magnets made from alloys of rare
earth elements. Developed in the 1970s and 80s, rare-earth magnets are the
strongest type of permanent magnets made, substantially stronger than ferrite
or alnico magnets. The magnetic field typically produced by rare-earth magnets
can be in excess of 1.4 tesla, whereas ferrite or ceramic magnets typically exhibit
fields of 0.5 to 1.0 tesla. The tesla (T) is the SI derived unit of the magnetic field
B, which is also known as the magnetic flux density or magnetic induction. One
Sector Research – Rare Earths Review 4th August 2010
8
tesla is equal to one Weber per square metre, while a particle passing through a
magnetic field of 1 tesla at 12 metres per second carrying a charge of 1 coulomb
experiences a force of 1 Newton. One tesla is also equivalent to 10,000 gauss.
There are two types of rare earth magnets, neodymium and samarium-cobalt
magnets. Rare earth magnets are extremely brittle and vulnerable to corrosion,
so they are usually plated or coated to protect them from breaking and chipping.
Samarium-cobalt magnets (chemical formula: SmCo5), the first family of rare
earth magnets invented, are used less than neodymium magnets because of
their higher cost and weaker magnetic field strength. However, samarium-cobalt
has a higher so-called Curie temperature, creating a niche for these magnets in
applications where high field strength is needed at high operating temperatures.
They are highly resistant to oxidation, but sintered samarium-cobalt magnets
are brittle and prone to chipping and cracking and may fracture when subjected
to thermal shock. The size of the samarium cobalt magnet industry worldwide is
approximately 1,000 tonnes of alloy.
Neodymium magnets, invented in the 1980s, are the strongest and most
affordable type of rare earth magnet. Neodymium alloy (Nd2Fe14B), also called
NIB, NdFeB or Neo is made of neodymium, iron and boron. Neodymium
magnets are typically used in most computer hard drives and a variety of audio
speakers. They have the highest magnetic field strength, but are inferior to
samarium-cobalt in resistance to oxidation and Curie temperature. Use of
protective surface treatments such as gold, nickel, zinc and tin plating and epoxy
resin coating can provide corrosion protection where required.
Originally, the high cost of these magnets limited their use to applications
requiring compactness together with high field strength. Both raw materials and
patent licences were expensive. Beginning in the 1990s, NIB magnets have
become steadily less expensive, and the low cost has inspired new uses such as
children’s magnetic building toys.
Their greater strength allows smaller and lighter magnets to be used for a given
application. This is particularly useful in the automotive and wind power
industries. Electric motors made with NIB magnets are half the weight of
traditional ferrite motors, having found many applications in electric seats,
windows and mirrors, in the starter motor and alternator, whilst replacing
hydraulic systems for steering, significantly reduces weight and power
consumption.
In hybrid motors, neodymium, praseodymium, dysprosium and terbium form an
important component of the electric motor and generator. A typical hybrid car
has 2.0 kg of rare earths in the electric motor and generator, in addition to a
further 12.0 kg in the NiMH battery.
High power NIB magnets are used in computer disk drives, and in mobile
phones, and IPods™, etc.
4th August 2010 Sector Research – Rare Earths Review
9
Wind Turbines
According to Lynas, wind turbine generator technology is moving to permanent
magnets for larger turbines, particularly those sited offshore. Demand of 400
units represented 2% of the market in 2008, but this is forecast by Lynas to grow
to 4,300 units per annum in 2020, which will represent 16% of the market. As
each 3.0 MW permanent magnet turbine uses 1.0 tonne of neodymium this
could represent a significant demand growth story. It has been suggested that
the Chinese have a target of producing 120 Giga Watts (GW) of power from
wind turbines by 2020. This could require a doubling of their requirement for
magnetic rare earth materials.
Source: Avalon Rare Metals.
The above photograph details one of the advantages of Neo (rare earth)
magnets, namely both size and weight savings. Imagine this in the head of a
wind turbine (the “nacelle”) which contains about 3 tonnes of rare earth
magnets, compared to the 6 tonne iron predecessor. The new General Electric
(GE-NYSE) wind turbine uses a 90 tonne generator with a 20 foot ring of
permanent neodymium magnets to eliminate the need for a gearbox, reducing
breakage and energy loss. At the same time the nacelle is lighter, allowing a
higher tower and less substantial foundations.
Phosphors
A traditional use of rare earths is to provide colour phosphors in television
screens. As new cathode ray tube, plasma screen and liquid crystal displays
(LCDs) have developed, their use in phosphors has been maintained. The ability
of europium, terbium and yttrium to emit red, green and white light respectively
is used in modern compact fluorescent bulbs, while the alternative Light
Emitting Diode (LED) technology also uses rare earth phosphors.
Polishing Powders
A further traditional use is as a polishing powder used in the manufacture of
television and computer screens, in addition to the production of precision
optical and electronic components.
Sector Research – Rare Earths Review 4th August 2010
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Fluid Catalytic Cracking (FCC)
Rare earths particularly lanthanum, is used in oil refining Fluid Catalytic Cracking
catalysts.
Autocatalysts
Rare earths, mainly cerium are used in gasoline autocatalysts; they improve
performance, increase thermal stability, extend durability and reduce precious
metals consumption. Nitrogen oxide traps under development also use rare
earths, while rare earth compounds added to diesel fuel allows diesel soot to be
trapped in a filter. Rare earths allow this soot to be burnt at lower temperatures,
thereby regenerating the filter.
Source: Lynas Corporation.
4th August 2010 Sector Research – Rare Earths Review
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Supply/Demand Balance
Source: Lynas Corporation.
The rare earth elements do not fit well into the periodic table. Therefore they
are usually separated from the main groupings.
Source: Lynas Corporation.
The term rare earth is disingenuous as they are neither rare nor earths. The rare
earths are apparently more plentiful than silver and some elements (lanthanum,
cerium, neodymium and yttrium) are more common than lead. Together rare
earth elements represent approximately a sixth of all known elements in the
Rare Earth Elements in Greater Detail
Sector Research – Rare Earths Review 4th August 2010
12
earth's crust (promethium is the exception as it does not occur naturally). As
these elements are of uncommon mineable concentrations and the individual
elements are difficult to separate, their selling prices are relatively high.
Monazite and bastnäsite are the two principal commercial sources of Rare Earth
Elements.
Most Rare Earth Oxides have sharp absorption bands within the visible,
ultraviolet and near infrared. This property, associated with the electronic
structure gives beautiful pastel colours to many of the rare earth minerals.
Lanthanum (Symbol La, Atomic number 57) is one of the most reactive of the
rare-earth metals being the prototype for the lanthanide series. It is silvery
white, malleable, ductile and so soft it can be cut with a knife. Lanthanum
oxidises rapidly when exposed to the atmosphere. Cold water attacks lanthanum
slowly, and hot water is much more vigorous in its attack. The metal reacts
directly with elemental carbon, nitrogen, boron, selenium, silicon, phosphorus,
sulphur and with halogens. Lanthanum is found in rare earth minerals such as
cerite, monazite, allanite and bastnäsite. Monazite and bastnäsite are the
principal ores in which lanthanum occurs in percentages of up to 25% and 38%
respectively.
Some uses of rare earth compounds containing lanthanum are as follows;
lighting applications especially in motion picture studio lighting and projection.
(Approx. 25% of the rare earth compounds are consumed in this application);
Energy Conservation, hydrogen sponge alloys containing lanthanum take up to
400 times their own volume of hydrogen gas. (This process is reversible). When
the alloys takes up gas, heat energy is released; Lanthanum oxide (La203)
improves the alkali resistance of glass; Lanthanum is also used in making special
optical glasses and in fluid cracking catalysts; while in addition it is also a
component of mischmetal used for making lighter flints.
Cerium (Ce,58) is the most abundant of the rare earth metals. It is found in the
following minerals: allanite (also known as orthite), monazite, bastnäsite, cerite
and samarskite. Monazite and bastnäsite are the more important known sources
of cerium. Cerium is the second most reactive metal in the lanthanide series,
Europium being the most reactive. Cerium decomposes slowly in cold water and
rapidly in hot water. Alkali solutions and both dilute and concentrated acids
attack the metal rapidly. In pure form the metal is likely to ignite if struck. Once
struck, tiny pieces of cerium are knocked off and once airborne they burst into
flame reacting quickly with oxygen.
Some uses of cerium are as follows; it is a key part of the three-way automotive
catalytic converter which reduces nitrogen oxides, carbon monoxide and
oxidises un-burned hydrocarbons; the oxide is an important constituent of
incandescent gas mantels; cerium compounds are used to stain glass yellow; it is
used in organic synthesis, permanent magnets and carbon-arc lighting especially
for the motion picture industry (in combination with other REEs); ceric sulphate
is used extensively as a volumetric oxidising agent in quantitative analysis; other
compounds are used as a catalyst in petroleum refining; it has a number of
metallurgical and nuclear applications; it is also used for phosphors and
polishing powders.
4th August 2010 Sector Research – Rare Earths Review
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Praseodymium (Pr, 59) is soft, silvery, malleable and ductile. It develops a green
oxide coating that falls off when exposed to air, and like other REM, it should be
kept under a light mineral oil or sealed in plastic. It can be prepared by several
different methods, such as by calcium reduction of the anhydrous chloride of
fluoride. Praseodymium uses are as follows: it assists in the effort to get to
within one, one thousandths of a degree of absolute zero which is -273 degrees
C (it forms a component of the cooling coils which are used to get the
temperature down); it is used in welders' goggles where it helps filter out
harmful types of light harmful to the human eye); and it is also used in
mischmetal (used in making lighters).
Neodymium (Nd, 60) metal has a bright silvery metallic lustre. It is one of the
more reactive rare earth metals and quickly tarnishes in air forming an oxide
that spalls off and exposes the metal to further oxidation. To prevent this from
occurring, neodymium should be kept under light mineral oil or sealed in a
plastic material.
Some of neodymium's uses are as follows: in hybrid/electric vehicles
neodymium is used to manufacture magnets which have high magnetic
strength, but lower weight. These can be used in electric motors to produce
higher power and torque with much lower weight. Neodymium magnets are
used in the miniaturisation of hard disk drives used in many electronic devices;
and in lasers to provide blue light.
Promethium (Pm, 61) is highly radioactive, it is not found in nature, and is
produced from the decay of other radioactive elements. It is a soft beta emitter
(although no gamma rays are emitted), while x-rays can be generated when beta
particles are impinged on elements of high atomic number. Promethium salts
luminesce in the dark with a pale blue or greenish glow due to their
radioactivity. Uses for promethium are as follows; a beta ray emitting source for
thickness gauges; it is absorbed by a phosphor to produce light for signs or
signals that require dependable operation; it can be used to convert light into an
electric current; a portable x-ray source; a heat source to provide auxiliary
power for space probes and satellites; in the manufacture of miniature nuclear
batteries and in measuring devices.
Samarium (Sm, 62) is found along with other members of the rare earth
elements in many minerals including the common sources, monazite and
bastnäsite. It occurs in monazite to the extent of 2.8%. While mischmetal
containing 1% of samarium metal has long been used, samarium has not been
isolated in relatively pure form until recently. Ion-exchange and solvent
extraction techniques have recently simplified separation of the rare earths from
one another. More recently, electrochemical deposition, which uses an
electrolytic solution of lithium citrate and a mercury electrode, is said to be a
simple and highly specific way to separate the rare earths. Samarium metal can
be produced by reducing the oxide with lanthanum.
Samarium has a bright silver lustre and is reasonably stable in air. Three crystal
modifications of the metal exist with transformations at 734 and 922 degrees
Celsius. The metal ignites in air at approximately 150 degrees Celsius. The
sulphide has excellent high temperature stability and good thermoelectric
Sector Research – Rare Earths Review 4th August 2010
14
efficiencies, while samarium changes oxidation stages very easily. Some uses for
samarium are as follows; it is a neutron absorber with many uses in nuclear
power stations; it is used in carbon arc lighting in the motion picture industry
(along with other rare earths); as a permanent magnet material it has the
highest resistance to demagnetisation of any known material (SmCo5 is used); as
an optical glass, it absorbs the infrared; in optical lasers, it is used to dope
calcium fluoride crystals; it is used for the dehydration and dehydrogenation of
ethyl alcohol. Compounds of the metal act as sensitisers for phosphors excited in
the infrared; while the oxide exhibits catalytic properties.
Europium (Eu, 63) metal was not isolated until recent years and is now prepared
by mixing europium oxide with a 10% excess of lanthanum metal and heating
the mixture in a tantalum crucible under high vacuum. The element is collected
as a silvery white metallic deposit on the walls of the crucible. As with other rare
earth metals (with the exception of lanthanum), europium ignites in air at about
150 to 180 degrees Celsius. Europium is about as hard as lead and is quite
ductile and is the most reactive of the rare earth metals; it quickly oxidises in air.
It resembles calcium in its reaction to water. Bastnäsite and monazite are the
principal ores containing europium. Europium has been identified by
spectroscopy in the sun and certain stars. Some known uses for europium are as
follows; europium oxide is now widely used as a phosphor activator as europium
activated yttrium vanadate in television screens; europium doped plastic is used
in lasers; it is used in the ceramics industry and it has nuclear applications.
With the development of ion-exchange and solvent extraction techniques, the
availability and the prices of Gadolinium (Gd, 64) and the other rare earth
metals have greatly improved. Gadolinium can be prepared by the reduction of
the anhydrous fluoride with metallic calcium. Gadolinium is silvery white, has a
metallic lustre and is malleable and ductile (like other related rare earth metals).
At room temperature, gadolinium crystallises in the hexagonal phase, close
packed alpha form. Upon heating to 1,235 degrees Celsius, alpha gadolinium
transforms into the beta form (which has a body centred cubic structure). The
metal is relatively stable in dry air, but tarnishes in moist air. It forms a loosely
adhering oxide film which falls off and exposes more surfaces to oxidation. The
metal reacts slowly with water and is soluble in dilute acid.
Gadolinium has the highest thermal neutron capture cross-section of any known
element (49,000 barns). Some known uses for gadolinium using this and other
properties are as follows: in Magnetic Resolution Imaging (MRI) gadolinium
changes the way water molecules react in the human body when scanned
allowing the contrast between healthy and non healthy tissue to be seen;
gadolinium yttrium garnets are used in microwave applications; gadolinium
compounds are used as phosphors in colour televisions; gadolinium’s unusual
superconductive properties improve the workability and resistance of iron and
chromium and related alloys to high temperatures and oxidation (as little as 1%
gadolinium is needed); gadolinium metal is ferromagnetic, it is unique in that it
has a high magnetic movement and for its special Curie temperature (above
which ferromagnetism vanishes), lying at room temperature. Therefore it can be
used as a magnetic component that can sense hot and cold.
4th August 2010 Sector Research – Rare Earths Review
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Terbium (Tb, 65) has only been isolated only in recent years with the
development of ion exchange techniques for separating the rare earth elements.
As with other rare earth metals, terbium can be produced by reducing the
anhydrous chloride or fluoride, with calcium metal in a tantalum crucible.
Calcium and tantalum impurities can be removed by vacuum re-melting. Other
methods of isolation are also possible. Terbium is reasonably stable in air, and is
a silver grey metal which is malleable, ductile and soft enough to be cut with a
knife. Two crystal modifications exist with a transformation temperature of
1,289 degrees Celsius. The oxide is a chocolate or dark maroon colour. Some
known uses of terbium are as follows; solid state devices use sodium terbium
borate; the oxide has potential application as an activator for green phosphors
used in colour television tubes; and in combination with zirconium dioxide it is
used as a crystal stabiliser of fuel cells which operate at elevated temperatures.
Dysprosium (Dy, 66) occurs along with other rare earths in a variety of minerals
such as: xenotime, fergusonite, gadolinite, euxenite, polycrase and
blomstrandine. Monazite and bastnäsite are the most important sources.
Dysprosium can be prepared by reduction of the trifluoride with calcium. The
metal has a metallic bright silver lustre. Dysprosium is relatively stable in air
temperature but is readily attacked and dissolved by dilute and concentrated
acids to produce hydrogen. The metal is soft enough to be cut with a knife and
can be machined without sparking if overheating is avoided. Small amounts of
impurities can greatly affect its physical properties. Dysprosium is very reactive
and therefore is stored in oil. Its thermal neutron absorption cross section and
high melting point suggest metallurgical uses in nuclear control applications for
alloying with special stainless steels.
Some known uses for dysprosium are as follows; dysprosium along with
neodymium is used in the production of the world's strongest permanent
magnets. The magnets have high magnetic strength, coupled with low weight.
Such magnets are used in the electronic motors used in Hybrid Electric Vehicles
(HEV) to produce higher power and torque with much lower size and weight;
miniaturisation of hard disk drives and many electronic devises also use these
magnets; owing to its ability to capture neutrons it is used in nuclear fuel rods
where it modulates the temperature progression of a nuclear reaction is getting;
dysprosium oxide-nickel cement can be used in cooling nuclear reactor rods. The
cement absorbs neutrons readily without swelling or contracting under
prolonged neutron bombardment; in combination with other rare earths and
vanadium, dysprosium has been used for laser materials.
Holmium (Ho, 67) occurs in gadolinite, monazite and in other rare earth
minerals. It has been isolated by the reduction of its anhydrous chloride or
fluoride with calcium metal. Pure holmium has a metallic to bright silver lustre.
It is relatively soft and malleable, it is able to stay dry in room temperature, but
it rapidly oxidises in moist air and at elevated temperatures. Holmium metal has
unusual magnetic properties, and has the highest magnetic moment of any
known element in the periodic table. It has the greatest number of impaired
electrons and these are what give rise to magnetism. Therefore, holmium has
many uses in magnetic materials. Very few other uses have been found for the
element. It also finds uses in ceramics and lasers.
Sector Research – Rare Earths Review 4th August 2010
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Erbium (Er, 68) metal is soft and malleable and has a bright, silvery, metallic
lustre. As with other rare earth metals, it's properties depend, to a certain
extent, on the impurities present. The metal is fairly stable in air and does not
oxidise as rapidly as some of the other metals. Erbium finds uses as a
photographic filter, it is apparently very good at blocking certain nuclear fissile
products; erbium tri-chloride is used in jewellery and sunglasses; erbium salts
are used in welding goggles in conjunction with other rare earths.
Thulium (Tm, 69) is the least abundant of the rare earth elements, and is very
difficult to separate from the other elements because of its similar size. It can be
isolated by reduction of the oxide with lanthanum metal or by calcium reduction
in a closed container. The element is silver grey, soft, malleable and ductile. It
can be cut with a knife. Due to the difficulty of separation it is very expensive
and rarely used. Chemists are however beginning to find uses for it and these
should increase in time. The few known uses for thulium are as follows; the
isotope 169 Tm bombarded in a nuclear reactor can be used as a radiation
source in portable X-ray equipment; while the isotope 171 Tm is potentially
useful as an energy source; natural thulium also has possible use in ferries
(ceramic magnetic materials) used in microwave equipment and it can be used
for doping fibre lasers.
Ytterbium (Yb, 70) occurs along with other rare earths in a number of rare
minerals. It is commercially recovered principally from monazite sand, which
contains about 0.03%. Ion-exchange and solvent extraction techniques
developed in recent years have greatly simplified the separation of the rare
earths from one another. Ytterbium is a silvery and lustrous metal that is very
soft and reacts very rapidly with oxygen. Even though the element is fairly
stable, it should be kept in closed containers to protect it from air and moisture.
Ytterbium is readily attacked and dissolved by dilute and concentrated mineral
acids and reacts slowly with water. Ytterbium is the least abundant amongst the
rare earths. Its chemistry is the least understood therefore it is not used often,
but it does have some possible uses; ytterbium metal may be used in improving
the grain refinement, strength and other mechanical properties of stainless
steel; it also has a use in the measurement of pressure within nuclear
explosions; it also has specialist metallurgical uses.
Lutetium (Lu, 71) occurs in very small amounts in nearly all minerals containing
yttrium and is present in monazite to the extent of about 0.003%, which is the
commercial source. The pure metal has been isolated only in recent years and is
one of the most difficult to prepare. It can be prepared by the reduction of the
anhydrous LuCl3 or LuF3 by an alkaline earth metal. The metal is silvery white
and relatively stable in air. The isotope 176 Lu occurs naturally (2.6%) with the
isotope 175 Lu (97.4%), although it is radioactive. Some known uses for lutetium
are as follows; stable lutetium nuclides, which emit pure beta radiation after
thermal neutron activation, can be used as catalysts in crackling, alkylation,
hydrogenation and polymerisation; it can also be used as a single crystal
scintillator.
As mentioned yttrium (Y, 39) is often considered to be a rare earth and is often
present in rare earth deposits. It is actually a transition metal, but is chemically
similar to the lanthanides. The most important use of yttrium is in making
4th August 2010 Sector Research – Rare Earths Review
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phosphors such as the red ones used in television cathode ray tube displays and
in Light Emitting Diodes (LEDs). Other uses include the production of electrodes,
electrolytes, electronic filters, lasers, superconductors, various medical
applications and as traces in various materials to enhance their properties.
Yttrium has replaced thorium in the manufacture of gas mantles. Yttrium is an
important component of xenotime type rare earth deposits, and can comprise
60% of the rare earth component. This compares to the up to 3% of rare earth’s
that make up bastnäsite and monazite rare earth deposits.
Scandium (Sc, 21) is another transition metal, which is in the same periodic
group as yttrium. It is sometimes classed as a rare earth, and can occur in rare
earth deposits. A main source is the Bayan Obo rare earth mine in China.
Scandium’s chemical properties are closer to magnesium (Mg, 12) rather than
Yttrium. The main use for scandium is as an alloy of aluminium in the aerospace
industry, but it is also used to make high-intensity discharge lamps.
Source: Kaiser Bottom Fish.
Global Rare Earth Production
Sector Research – Rare Earths Review 4th August 2010
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Source: Lynas Corporation.
Source: Kaiser Bottom Fish.
The annual REO production chart above shows how during the past 25 years
Chinese REO production has gradually displaced production from the rest of the
world, with the United States the biggest loser as a result of shutting down the
Mountain Pass mine in 2002.
4th August 2010 Sector Research – Rare Earths Review
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China’s Impact
Nearly 100% of the global supply of Rare Earth Elements, high power
Neodymium Iron Boron (NdFeB) magnets and all intermediate magnet materials
are controlled by, produced in, or manufactured from materials sourced
exclusively out of China. Consequently, all Rare Earth dependant technologies
are completely reliant on Chinese sourced Rare Earth materials for their
production. No technically viable alternatives to these Rare Earth materials are
currently known for these applications. Without continued export of Chinese
Rare Earth materials, there would be no means to manufacture these
technologies outside of China. Both production of Rare Earth materials in China
and export of those materials outside of China are strictly controlled by
government imposed quotas.
Molycorp’s (Figure 1 below) simplified representation of the flow of Rare Earth
materials (from the mine to magnet production and beyond), is that as applied
to Neodymium-Iron-Boron (NIB or NdFeB) magnets for Hybrid Electric Vehicles
(HEVs).
Source: Molycorp.
Sector Research – Rare Earths Review 4th August 2010
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In addition to controlling production of greater than 97% all Rare Earth Elements
on a world-wide basis (including those relied upon by all NdFeB magnet
producers outside China), China is also the world’s leading consumer of Rare
Earth materials on a global basis, currently consuming approximately 60% of
production and rising rapidly. Some leading experts project that by 2012, China’s
internal consumption of critical Rare Earth materials will rise to meet or exceed
their production. At the same time, global requirements for Rare Earth materials
outside of China are expected to grow dramatically, fuelled primarily by
continued development and deployment of emerging Green Energy
technologies such as Hybrid Vehicles, PHEVs, Energy Efficient Lighting and Wind
Power. Thus global shortages of these materials may be seen as early as 2010,
with shortages becoming severe by 2012. The implications of this trend are both
obvious and disconcerting.
Rare Earth Oxides Uses and Prices
Source: Ucore Rare Metals.
The Chinese government clearly recognises the strategic nature of its Rare Earth
deposits and is actively taking steps to ensure the longevity and security of its
Rare Earth resources for its own domestic consumption. This is illustrated by the
fact that while Chinese production of Rare Earth materials is increasing annually,
government issued export quotas are also decreasing annually, thus protecting
the flow of materials for rising internal consumption while at the same time
4th August 2010 Sector Research – Rare Earths Review
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reducing the amount of material exported to supply the needs of the rest of the
world. Chinese export quotas have decreased each year for the last eight years.
More recently, China has announced that export quotas for the first half of 2009
are being reduced by approximately 34% over the same period last year.
In addition to reductions in export quotas, official Chinese exports are subject to
15-25% export taxes, while Value Added Tax (VAT) rebates on exports have been
withdrawn. In terms of Chinese production, no new rare earth mining licences
are being issued and environmental legislation is being enforced. This may
curtail production at a number of the highly polluting southern clay operations
in China.
China: Export Quota History
Source: IMCOA and www.terramagnetica.com
The Ministry of Commerce of the People’s Republic of China has released 7,976
tonnes (t) of approved Rare Earths export quota for the second half of 2010.
This includes export quota for both foreign-invested firms (1,768 tonnes) and
local firms (6,208 tonnes). The total export quota for 2010 (30,259 tonnes) is
40% less than the total export quota for 2009 (50,145 tonnes). In addition, the
export quota for the second half of 2010 (7,976 tonnes) is 72% less than the
export quota for the second half of 2009 (28,417 tonnes). Below is a table
setting out the Chinese Rare Earths export quota for foreign-invested firms and
local firms for the last two years.
Sector Research – Rare Earths Review 4th August 2010
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Source: Lynas Corporation.
Used in electric car motors and wind turbines, neodymium and other Rare Earth
Metals are at the epicentre of the race between wealthy and emerging nations
to create green technologies, while poorer countries appear to be relegated to
spectator status. Molycorp reports that José Luis Giordano, associate professor
of engineering at the University of Talca in Chile, stated in an interview that
there is a battle between the United States, China and Japan over neodymium,
samarium and praseodymium with regards to ceramic superconductors, and for
alternatives to these materials, still in the experimental stages.
In the early 1990s, Chinese rare earth materials produced at low cost, like
neodymium, became abundant on the mining market, and prices fell from
US$12,000 per tonne (/t) in 1992 to $7,430/t in 1996. As a result of China’s
influence, the market volume jumped from 40,000 t to 125,000 t annually in a
few short years. In 2006 nearly the entire world production of these minerals—
130,000 t came from China. But in recent years, China has reduced its exports in
order to feed its own industries. That trend pushed up international neodymium
prices to $60 per kilogramme in 2007.
Independent consultant Jack Lifton, who specialises in supplies of nonferrous
strategic metals, said a US-China trade dispute over neodymium production
could be looming just over the horizon.
In a January 2010 presentation to US lawmakers, Mark Smith, director of
Molycorp, acknowledged that limited manufacturing capacity had created a gap
and that although the United States has the knowledge; it has lost the necessary
infrastructure.
The history of business development around neodymium shows how China has
imposed its conditions. In 1982, the US-based General Motors (GM), Sumitomo
Special Metals and the Chinese Academy of Sciences invented a magnet made
from neodymium, boron and iron. In 1986 they put it on the market through a
new division of GM known as Magnequench. The Chinese companies China
National Nonferrous Metals, San Huan and Sextant MQI Equity Holdings bought
Magnequench in September 1995. Neo Material Technologies (NEM-TSX) then
arose from the 1997 merger of Canada’s AMR with Magnequench. The new
company is based in Canada, with production centres in China and Thailand.
Chinese shareholding in Neo Material Technologies has subsequently been sold
4th August 2010 Sector Research – Rare Earths Review
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down. Commodity investor Pala Investments are now the largest shareholder
with 19.7%.
It should also be pointed out that state owned East China Mineral Exploration
holds a 22.3 % stake in Australian rare earth explorer Arafura Resources (ARU-
ASX). In addition, in May 2009, state owned China Non-Ferrous Metal Mining
agreed to subscribe for 700 million new shares at A$0.36 per share of rare earth
developer Lynas Corp (LYS-ASX), raising A$252m and offered Chinese bank
finance to restart their project. Total capex of over A$500m was envisioned for
this project at that time, US$286m to compete and commission the first phase
to produce 10,500 tpa of REOs and US$80m for phase two which would bring
production to 21,000 tpa of REOs.
However in September 2010, this tie up was dropped as Australian Foreign
Investment Review Board (FIRB) approval could not be achieved, with strategic
considerations being cited. Lynas subsequently raised A$450m in a share placing
with Australian based institutions.
Lifton believes that China will not allow western nations to purchase
neodymium for future delivery outside of their territories and not even for sales
inside China if intended for export. This means the Asian nation could harden its
strategy to acquire companies abroad and that the industrial powers and
developing countries would have to seek other suppliers of green technologies.
US Government Accountability Office (GAO)
In April 2010, US lawmakers called for a hearing after a government report
exposed potential “vulnerabilities” for the American military because of its
extensive use of Chinese metals in smart bombs, night-vision goggles and radar.
China controls 97% of production of materials known as rare earth oxides, giving
it “market power” over the United States, the GAO said.
According to Bloomberg, the Pentagon is studying how to increase domestic
availability of Rare Earth Elements “through developing new sources, re-
energizing previous domestic sources” and adding the material to the national
stockpile program. The department’s report on the issue will be completed by
September 2010 and will examine “how to better prepare for future
vulnerabilities.”
“China is a rapidly rising military and economic power and the fact is that they
cornered the market on these rare earth metals that are essential for a lot of our
advanced weapons systems as well as a lot of manufacturing in the United
States,” Representative Mike Coffman, a Colorado Republican, who asked for the
GAO report, said in an interview on Bloomberg Television. “We need to move
aggressively on this issue now before it’s too late.”
Shortages of some elements “already caused some kind of weapon system
production delay,” the GAO said, citing a 2009 National Defence Stockpile
report.
Molycorp’s Mountain Pass mine in California was once the world’s dominant
producer. It closed a separation plant in 1998 after regulatory scrutiny of its
wastewater line and suspended mining in 2002, the GAO said. As mining lapsed,
Sector Research – Rare Earths Review 4th August 2010
24
so did companies that turned the ore into metals found throughout US weapons
systems, the GAO said. Magnequench International Inc., (now owned by Neo
Magnetic Technologies (NEM-TSX)) a maker of neodymium magnets, closed an
Indiana plant in 2003 and moved equipment to China. By the end of 2005,
magnet makers in Kentucky and Michigan also closed.
“Government and industry officials told us that where rare earth materials are
used in defence systems, the materials are responsible for the functionality of the
component and would be difficult to replace without losing performance,” the
GAO report said. It cited several specific weapons systems, including the M1A2
Abrams tank, which has a navigation system that uses samarium cobalt magnets
with samarium metal from China; neodymium magnets from China in the Hybrid
Electric Drive propulsion on the DDG-51 Navy destroyers built by Northrop
Grumman Corp. and General Dynamics; and Lockheed Martin’s Aegis SPY-1
radar, also on DDG-51 destroyers, containing samarium cobalt magnets that will
need to be replaced during its 35-year lifetime.
Even if Molycorp does reopen Mountain Pass, the U.S. would still lack
companies to process the metals, the GAO said. It may take two to five years to
develop a pilot plant to refine oxides to metal, and foreign companies own
patents over neodymium magnets that don’t expire until 2014, the report said.
Rebuilding a U.S. rare earth supply chain may take up to 15 years, the GAO said,
citing industry estimates. That is dependent on infrastructure investment,
developing new technologies and acquiring patents, it said.
Developing new U.S. sources of the metals may take “enormous investment and
time,” Dan Slane, chairman of the Washington-based U.S.-China Economic and
Security Review Commission, said “Time is of the essence because the situation
is going to get worse” as China’s domestic consumption of the material rises, he
said. Smith predicted that if the United States does not renew its capacities, in
the best case it would become a source of raw materials for China’s production,
and not a manufacturer itself of advanced clean technologies.
So far there are no viable alternatives to the rare metals. Substitution of
neodymium is possible in wind turbines. The rare metal reduces the weight of
the magnet mechanism, which will be heavier using other metals. Heavier
turbines need stronger foundations, which mean fortified concrete and higher
resultant costs.
Neodymium magnets have a magnetic force nine times stronger than
conventional magnets. The most similar alternatives, but even more costly, are
made from samarium and cobalt or from samarium, praseodymium, cobalt and
iron.
4th August 2010 Sector Research – Rare Earths Review
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Global Rare Earth Resource Base
Source: Kaiser Bottom Fish.
Source: Kaiser Bottom Fish.
Sector Research – Rare Earths Review 4th August 2010
26
Source: Kaiser Bottom Fish.
The above charts have been constructed by Kaiser Bottom Fish by multiplying
the Chinese production figures for individual rare earth oxides during 2007 by
the average price of those oxides during 2007. The total amount is however less
than the 120,000 tonnes Roskill estimated for 2007 production. If we define the
heavy rare earth elements as yttrium and samarium through lutetium, the
production content chart shows that the light rare earth oxides represent 93% of
production by weight, with most of this supply coming from the Bayan Obo mine
operated by Chinese state owned Baotou Iron and Steel, while only 7% is
represented by the heavy rare earths which are produced mainly from the ion
adsorption clay deposits in southern China. This often gives rise to the dismissive
comment that future demand growth lies with the Light Rare Earth Elements
(LREEs) and all this fuss about the Heavy Rare Earth Elements (HREEs) is much
ado about nothing. The second chart, however, which distributes the production
by value, reveals that the heavies represent a surprisingly high 40% of the
estimated $1.0 billion production value in 2007.
The next two charts break down the rare earth oxide production in 2008 by their
applications both by weight and by value. This is apparently very complex
information assembled by Dudley Kingsnorth's Industrial Minerals Company of
Australia (IMCOA). What stands out is the high 31% of value represented by
phosphors, which are only 7% of the weight. Phosphors are used to create
colour in display and lighting systems and are made from heavy rare earths.
4th August 2010 Sector Research – Rare Earths Review
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Rare Earth Applications by Weight and Value
Source: Kaiser Bottom Fish, IMCOA.
Source: Kaiser Bottom Fish, IMCOA.
Sector Research – Rare Earths Review 4th August 2010
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Global Rare Earth Consumption 2008
Source: IMCOA, www.terramagnetica.com
Source: Lynas Corporation.
4th August 2010 Sector Research – Rare Earths Review
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2014 Forecasts by Weight and Value
Source: Kaiser Bottom Fish, IMCOA.
Source: Kaiser Bottom Fish, IMCOA
Sector Research – Rare Earths Review 4th August 2010
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Source: Lynas Corporation.
Source: Lynas Corporation.
4th August 2010 Sector Research – Rare Earths Review
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Source: Lynas Corporation.
Kaiser Bottom Fish reports that IMCOA believes that REO demand will grow to
180,000 tonnes by 2014, and the above charts show which applications are
expected to drive demand. The second chart applies the 2008 prices to the 2014
weight. When IMCOA published this forecast they apparently cautioned that it
does not incorporate a "positive" outcome for the Copenhagen Climate Change
forum that took place in December 2009. As we now know the talks
accomplished little in terms of firm commitments with regard to carbon dioxide
emission reduction goals. Kaiser Bottom Fish claims that this forecast is based on
conservative assumptions about the extent that technologies driven by climate
change concerns will be commercialised. In other words, if prices do not change,
the annual market for rare earth oxides will grow to a value of US$2.0bn, if the
world carries on without developing a major commitment to transforming its
energy foundation.
Sector Research – Rare Earths Review 4th August 2010
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The mineralogy of rare earths is complex; they occur in a number of exotic
minerals often with esoteric names, so named either from type location or
named after those who first discovered them.
Carbonatites
Carbonatites are rare alkaline intrusive or extrusive igneous rocks and are
characterised with a composition of greater than 50% carbonate minerals. Some
carbonatites are enriched in magnetite, apatite and rare earth elements. A
specific type of hydrothermal alteration termed fenitisation is typically
associated with carbonatite intrusions. This alteration assemblage produces a
unique rock mineralogy termed a fenite after its type locality, the Fen complex
in Norway. The Palabora complex in South Africa is the furthest advanced
carbonatite mine and has been in operation since 1960. It is mainly mined by
Palabora Mining (PAM-JSE-Rio Tinto (RIO) 57%, and Anglo American (AAL)
17%), and is a major copper, magnetite, phosphate rock (apatite) and
vermiculite (a clay mineral used for insulation) producer. Palabora is not noted
for its rare earth content, but has historical production of zirconia from
baddeleyite. Lynas’ Mount Weld rare earth project in Western Australia is also a
carbonatite, as are most of the projects being evaluated in Canada, Namibia and
Malawi. By now we speculate that most carbonates worldwide would have been
staked by Canadian juniors, just in case.
Bastnäsite [(REE) CO3 (F,OH)]
Bastnäsite is a mixed lanthanide fluoro-carbonate mineral that currently
provides the bulk of the world's supply of the Light Rare Earth Elements (LREE).
Although it is one of the more widespread rare earth containing minerals few
deposits are of sufficient size to be of commercial significance. Currently, only
two deposits in the world meet this criterion: Molycorp’s Mountain Pass deposit
in California and the Baiyun Ebo deposit in Inner Mongolia, China.
Bastnäsite is widely consumed as it is a major source of feed for downstream
recovery of the individual Rare Earth Elements. It is also the key ingredient in a
number of specialist polish products. High performing polish compounds made
from bastnäsite can be used on optical glass, mirrors, telescopes, silicon
microprocessors, hard disk drives and cameras.
Bastnäsite can also be used in television faceplates and glass melts in light bulbs
for ultraviolet shielding and de-colouring as well as for sulphur-getting in
alloying agents.
Another use of bastnäsite is in the production of a certain type of mischmetal
(mixed metal) which results when the oxides in bastnäsite are converted to
metal form. Mischmetal is used to make lighter flints and alloys for use in steel
(cerium improves the physical properties of high-strength, low-alloy steels due
to its affinity for oxygen and sulphur), batteries and magnets.
Mineralogy
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Monazite [(REE, Nd) PO4]
Monazite is a reddish-brown phosphate mineral containing Rare Earth Elements
and is an important source of thorium (Th), lanthanum (La) and cerium (Ce).
Radioactive uranium and thorium often accompany monazite and monazite
sand was for many years the main source of thorium used to manufacture gas
mantles. Monazite was the only significant source of rare earth elements, until
Mountain Pass bastnäsite began to be processed in 1965.
Due to its high density, monazite is found concentrated in alluvial sands, and is
associated with the other heavy mineral sands such as ilmenite and zircon.
However monazite sands typically contain between 6-12% thorium oxide with
variable amounts of uranium. Heavy mineral sands producers suffer severe
restrictions if this radioactivity “contaminates” ilmenite or zircon. Hence for
heavy mineral sands producers monazite has grown to become an unwelcome
waste material, which in some cases has to be stored securely.
Monazite sands are mainly composed of cerium, containing 45-48% cerium,
about 24% lanthanum, about 17% neodymium and 5% praseodymium, with
minor quantities of samarium, gadolinium and yttrium. Rock monazite from
Steenkampskraal in South Africa was processed in the 1950s and early 1960s
and became at that time the largest producer of rare earth elements. Great
Western Minerals (GWG-TSX-V) is looking to reopen Steenkampskraal.
Thorium and rare earth oxides can be separated from monazite by either
heating with sulphuric acid or sodium hydroxide. In the acid process, the rare
earths go into solution, while thorium is precipitated as a mud, while in the
alkaline process the solid residue containing both rare earths and thorium has to
be treated with hydrochloric acid. Here the rare earths report into solution with
thorium dropping out as a solid residue.
Nepheline Syenite
Nepheline is a so-called feldspathoid, a silica undersaturated aluminosilicate.
Syenite is a quartz poor (less than 5% silica) alkaline igneous rock. Nepheline
syenite is a holocrystalline plutonic rock that is a syenite that contains
nepheline, but more importantly also contains many other alkali minerals
including rare earths.
Apatite
Apatite is a group of phosphate minerals. Hydroxyapatite (HA) is the major
component of tooth enamel and bone. The major use of apatite is the
manufacture of fertiliser. Occasionally it can contain significant rare earth
elements such as that found at Hoidas Lake (Great Western Minerals (GWG-
TSX-V)) in Canada. Levels of radioactivity in apatites tend to be very low, and
this may be some advantage in rare earth mining.
Ancylite (Sr (REE) (CO3)2(OH) (H2O)
Ancylite is a rare hydrous strontium carbonate that contains cerium, lanthanum
Sector Research – Rare Earths Review 4th August 2010
34
and other rare earth elements.
Baddeleyite (ZrO2)
Baddeleyite is the main ore of zirconium oxide (Zirconia). It has a high specific
gravity and can be associated with economic levels of rare earth oxides.
Loparite (Ce,Na,Ca(Ti,Nb)O3)
Loparite is a rare earth oxide that occurs in nepheline syenite.
Xenotime
Xenotime is a rare earth phosphate, mainly yttrium orthophosphate (YPO4).
Dysprosium, erbium, terbium and ytterbium as well as thorium and uranium can
be important secondary components, all replacing yttrium. Small tonnages of
xenotime sand are recovered in Malaysia, and Neo Material Technologies
(NEM-TSX) is hoping to produce rare earths from the tailings of Minsur’s
(MINSURI1 PE) Pitinga tin mine in Brazil.
As already noted the mineralogy of rare earth deposits can be complex, the
metallurgy of extraction of the rare earth elements or their compounds from
these various minerals can be even more complicated!
Demonstration plant
IMCOA claim that the demonstration plant is often the most important step to
commercialisation. The aim is to demonstrate that the chosen metallurgical
processes are technically and commercially viable through continuously
operated plants that produce samples to future customer specification.
A total rare earth oxide (TREO) grade by itself is meaningless, because the
relative grade of the individual rare earths differs in each deposit, and even
within different zones.
The price of individual rare earth oxides is reported as US dollars per kilogramme
($/kg) and ranges from $3/kg to as high as $1,000/kg. To assess the monetary
value of a TREO grade you need the individual rare earth oxide grades and their
prices. All disclosures should include a table listing the individual grades as rare
earth oxides. The contained value of rare earths in a tonne of rock is calculated
by converting each rare earth oxide grade into kg per tonne, multiplying the kg/t
by the price per kg, and adding up the contained value to get the total contained
or gross rare earth value per tonne or “rock value” in industry jargon terms.
The conceptual flowsheet for Greenland Minerals and Energy’s Kvanefjeld
project is typical of the various extraction techniques required.
Metallurgy
4th August 2010 Sector Research – Rare Earths Review
35
Process Flowsheet – Explained
Source: Greenland Minerals and Energy.
It is extremely important to understand that the “mineral” value of a rare earth
deposit is simply a maximum value. The important number is the recoverable
value, which can be substantially less than the in-situ value. The recoverable
value will not be known until metallurgical studies have established the optimal
recovery process. "Optimal" will be a balance between the percentage of each
rare earth that will be recovered by a process, and the cost of that process.
The economic value of a rare earth deposit will not be even roughly be known
until it has completed the metallurgy stage of the exploration and development
cycle.
Ion-Exchange Extraction
Ion–Exchange Extraction is an exchange of ions between two electrolytes or
between an electrolyte solution and a complex. In most cases the term is used
to denote the processes of purification, separation and decontamination of
aqueous and other ion-containing solutions with solid so called ion-exchangers.
Typical ion exchangers are ion-exchange resins, and are either cation exchangers
that exchange positively charged ions (cations) or anion exchangers that
exchange negatively charged ions (anions).
Rare Earth Element separation by the so called ion-exchange lution process is
achieved in two stages. Firstly the resin is saturated with singly charge cations
Sector Research – Rare Earths Review 4th August 2010
36
such as ammonium ion or the hydrogen ion. A solution of mixed rare earth ions
accompanied by strong acid anions is added to the ion-exchange column. When
the Rare Earth ion encounters the cation containing resin, it replaces three singly
charged cations and these along with the strong acid anion will flow through the
column in solution and out the bottom.
Rare Earth Element ion-exchange has generally been superseded by solvent
extraction, but neodymium can be extracted by the organic compound di- (2-
ethyl-hexyl) phosphoric acid into hexane by an ion exchange mechanism.
Solvent Extraction
Solvent Extraction or liquid-liquid extraction is a method to separate compounds
based on their relative solubilities in two different immiscible (non-mixing)
liquids. In solvent extraction, a distribution ratio is often quoted as a measure of
the extractability of the solutions. The distribution ratio (D) is equal to the
concentration of a solute in the organic phase divided by its concentration in the
aqueous phase. Depending on the system, the distribution ratio can be a
function of temperature, the concentration of chemical species in the system,
and a large number of other parameters. The separation factor is one
distribution ratio divided by another; it is a measure of the ability of the system
to separate two solutes.
Solvent extraction has evolved as the most used separation process for rare
earths, but many extraction stages are needed. In the multistage processes, the
aqueous raffinate from one extraction unit is fed to the next unit as the aqueous
feed, while the organic phase is moved in the opposite direction. Hence, in this
way, even if the separation between two metals in each stage is small, the
overall system can have a higher decontamination factor.
Rare Earth Product Prices in US$
Rare Earth Product 2010A 2014F 2020F 2030F
Lanthanum oxide 7.5 6.0 7.0 10.0
Cerium oxide 4.0 2.5 2.5 3.0
Praseodymium oxide 22.5 30.0 40.0 60.0
Neodymium oxide 22.5 30.0 40.0 60.0
Samarium oxide 4.5 4.5 5.0 8.0
Europium oxide 475.0 600.0 750.0 1,000.0
Gadolinium oxide 7.0 8.0 10.0 15.0
Terbium oxide 500.0 650.0 850.0 1,200.0
Dysprosium oxide 120.0 155.0 200.0 250.0
Yttrium oxide 20.0 27.5 35.0 50.0
Source: Molycorp prospectus, IMCOA and Roskill.
Prices
4th August 2010
Sector Research –
– Rare Earths Review
37
Sector Research – Rare Earths Review
38
Source:
Project Finance
While the above prices and price projections are of value, on
that rare earth
market price,
project funding, as well as
the distinct possibility that
development
Although
Corporation
finance with its $125m deal with HVB
IM).
contracts, which o
prices. The bank used a 30% discount on the Mount Weld basket case to gain
comfort.
It should of course be noted that Lynas has not attempted to reactivate this
funding, should it be
funded
looking to raise US$100m in debt finance, but
in their April 2010
With signifi
into downstream processing, capital availability may become a limiting factor.
Source: www.metal-pages.com
Project Finance
While the above prices and price projections are of value, on
that rare earth prices and trades are by appointment only
market price, nor spot price, nor futures market.
project funding, as well as equity for exploration and
the distinct possibility that more equity will be required for any
development.
Although the facility was withdrawn as a result of the credi
oration (LYC-ASX) did demonstrate the possibility of obtaining project
finance with its $125m deal with HVB Group, now part of
This debt was apparently arranged on the back of signed customer
contracts, which offered a floor price for rare earth elements, with zero
prices. The bank used a 30% discount on the Mount Weld basket case to gain
comfort.
It should of course be noted that Lynas has not attempted to reactivate this
funding, should it be available, phase 1 of their production plan is now
funded solely with equity contributions. It has been suggested that
looking to raise US$100m in debt finance, but this is not immediately apparent
in their April 2010 IPO prospectus.
With significant capital costs for rare earth projects, particularly those that enter
into downstream processing, capital availability may become a limiting factor.
4th August 2010
While the above prices and price projections are of value, one should appreciate
are by appointment only. There is no terminal
or futures market. This has implications for
for exploration and evaluation; there remains
equity will be required for any project
facility was withdrawn as a result of the credit crunch, Lynas
did demonstrate the possibility of obtaining project
, now part of Unicredit Bank (UCG-
on the back of signed customer
ffered a floor price for rare earth elements, with zero caps on
prices. The bank used a 30% discount on the Mount Weld basket case to gain
It should of course be noted that Lynas has not attempted to reactivate this
production plan is now being
with equity contributions. It has been suggested that Molycorp is
is not immediately apparent
cant capital costs for rare earth projects, particularly those that enter
into downstream processing, capital availability may become a limiting factor.
4th August 2010 Sector Research – Rare Earths Review
39
Bayan Obo Rare Earth Mine China
Source: Kaiser Bottom Fish.
Source: Kaiser Bottom Fish.
Rare Earth Producers
Sector Research – Rare Earths Review 4th August 2010
40
The Kaiser Bottom Fish analysis of the relative proportions of rare earth
production from Bayan Obo indicates that although it is primarily a cerium
producer (50% of TREO’s by weight), lanthanum (23%), neodymium (19%) and
praseodymium (6%), are also significant in terms of volume.
In terms of revenues, neodymium is believed to be most important (44% of
revenue per tonne), but cerium (15%), praseodymium (15%), lanthanum (10%)
and europium (8%) are also important. Of course this analysis doesn’t take into
account mineral processing costs, and hence the contribution to profitability
could be significantly different.
Longnan Rare Earth Mine China
Source: Kaiser Bottom Fish.
4th August 2010 Sector Research – Rare Earths Review
41
As can be seen in the Kaiser Bottom Fish analysis, although Longnan is primarily
an yttrium producer (65% by weight), gadolinium (7%), dysprosium (7%), erbium
(5%), samarium (3%), and thulium (3%) are also significant. In terms of
estimated revenues, terbium (27% of revenues), yttrium (22%) dysprosium
(20%), erbium (10%), and lutetium (8%) are important. Again this calculation
doesn’t take into account mineral processing costs, so the profitability split may
be significantly different.
Potential Rare Earth Mines
Source: Lynas Corporation.
Sector Research – Rare Earths Review 4th August 2010
42
REO Content Comparison
Source: Great Western Mines Group (GWMG). Blue highlighted properties are owned by GWMG.
Rare Earth Oxide Compositions by Weight
Oxide Hoidas
SK, CA
Deep
Sands
UT,
US
Steenkampskraal
South Africa
Benjamin
River
NB, CA
Douglas River
SK, CA
(%) (%) (%) (%) (%)
Cerium Oxide CeO2 46.62 41.73 46.67 31.81 0.05
Neodymium Oxide Nd203 20.57 14.28 16.67 17.62 0.07
Lanthanum Oxide La203 20.44 22.30 21.67 12.88 0.01
Praseodymium Oxide Pr6011 5.97 4.34 5.00 4.40 0.00
Samarium Oxide Sm203 2.71 2.44 2.50 3.61 0.00
Gadolinium Oxide Gd203 1.24 2.06 1.67 3.99 0.00
Yttrium Oxide Y203 1.17 8.90 5.00 17.81 80.37
Europium Oxide Eu203 0.54 0.30 0.08 0.22 0.29
Dysprosium Oxide Dy203 0.35 1.41 0.67 3.22 11.83
Erbium Oxide Er203 0.24 0.76 0.08 1.68 3.64
Terbium Oxide Tb407 0.11 0.28 0.08 0.58 2.03
Ytterbium Oxide Yb203 0.05 0.72 0.07 1.18 1.57
Holmium Oxide Ho203 0.00 0.27 0.05 0.63 0.00
Thulium Oxide Tm203 0.00 0.11 0.07 0.22 0.00
100.0 100.0 100.0 100.0 100.0
TREO Contained Resources t(1)
95,000
Not
av. 29,066 Not av. Not av.
Value REO (US$/Kg)(2)
17.74 20.09 15.33 28.09 48.89
Total In-situ Value 1,685,000,000
Not
av. 446,000,000 Not av. Not av.
(1) Non NI 43-101 compliant estimate except Hoidas shown at 0% REE cutoff
(2) Asian Metal as at April 9, 2010
Source: Great Western Metals.
4th August 2010 Sector Research – Rare Earths Review
43
Potential New Suppliers
Source: IMCOA, and www.terramagnetica.com. Note this analysis doesn’t include Great Western Metal’s Steenkampskraal project.
Sector Research – Rare Earths Review 4th August 2010
44
The Ten Steps to Rare Earths Commercial Production
Source: IMCOA, and www.terramagnetica.com. Note this table doesn’t include Great Western Metal’s Steenkampskraal project.
Notes: Mountain Pass-Molycorp (MCP-NYSE)
Mt Weld-Lynas Corporation (LYC-ASX)
Nolans Bore-Arafura Resources (ARU-ASX)
Zandkopsdrift-Frontier Minerals Limited (Private)
Nechalacho-Avalon Rare Metals (AVL-TSX)
Hoidas Lake- Great Western Minerals (GWG-TSX-V)
Bear Lodge-Rare Element Resources (RES-TSX-V)
Kangankunde-Lynas Corporation (LYC-ASX)
Dong Pao-Japanese consortium
Steenkampskraal-Great Western Minerals (GWG-TSX-V)
4th August 2010 Sector Research – Rare Earths Review
45
Source: Kaiser Bottom Fish.
Listed Rare Earth Equities
Sector Research – Rare Earths Review 4th August 2010
46
Molycorp (MCP-NYSE)
Molycorp Inc., owner of the world’s largest non-Chinese deposit of rare earth
metals, declined in its first two days of trading after chopping the size of its
initial public offering by 18 percent. Molycorp sold 28.13m shares at US$14
each, raising $394m before expenses after its underwriters failed to attract
enough buyers at $15 to $17 apiece, according to Bloomberg data. The mining
company’s owners purchased about 8.9 percent of the shares in the IPO. In spite
of the share price fall the company is still capitalised at around $1bn. As at end
December 2009 shareholders’ equity totalled $74.6m.
The prospectus currently on Edgar is dated 16th April 2010.
http://www.sec.gov/Archives/edgar/data/1489137/000095012310035593/d704
69sv1.htm
Production of rare earth elements commenced at Mountain Pass in California,
USA in 1952. In 1965 the development of red phosphors for colour television
creates large demand for europium oxide; hence a europium recovery plant was
built. In 1977, the operation was acquired by Union Oil Company of California
(UNOCAL), and in 1981 separation plants to produce samarium oxide and other
heavy rare earths commenced. By 1990, the expanded facilities produce about
40% of global rare earth supply. In 1998, separation activity was suspended due
to wastewater disposal problems, and in 2002 the mine and mill closed. In 2005
UNOCAL was acquired by Chevron, while in 2008 the business was sold to the
current private owners. In 2009 processing of stockpiled bastnäsite concentrate
begins, while the company plans to mine fresh ore in 2011, post their recently
announced initial public offering.
The company was owned pre-IPO by Resource Capital Funds, Pegasus Capital
Advisors, Traxys North America and various other investors including the
company’s CEO Mark A. Smith. Goldman Sachs was until recently a shareholder
but sold its stake to other shareholders. The company’s prospectus did not
appear to clarify the reason for this sale.
The world’s two largest reserves of Rare Earth materials outside of China are in
Mountain Pass, California and Mount Weld, Australia. Neither of these deposits
is currently in production. Lynas Corporation (LYC-ASX) (the current owners of
the Mount Weld deposit), has begun development of a mine and concentration
plant in Australia and a processing facility in Malaysia. Lynas has not announced
plans to produce Neodymium Iron Boron (NdFeB) magnets or intermediate
materials but this formed an integral part of Molycorp’s plans post IPO.
Molycorp plans to restart mining operations and complete an extensive
modernisation and expansion of the related processing facility. Molycorp
further plans to broaden its operations to encompass the production of metal,
alloys and NdFeB magnets.
In early June 2010, Molycorp and Neo Material Technologies (NEM-TSX)
announced a rare earth “Mine to Magnets” supply chain agreement. This
contemplated a technology transfer agreement and a supply agreement where
4th August 2010 Sector Research – Rare Earths Review
47
Neo would purchase mixed rare earth carbonates as well as neodymium and
praseodymium oxides from Molycorp.
The initial planned production upon full restart at the end of 2012, is 40 million
pounds of Rare Earth Oxides (REO) per year (19,090 tonnes per annum (tpa)-
almost 7 million pounds of neodymium and praseodymium oxides). This
production can be achieved by using less than half the tonnes of ore that was
required in the past to produce 40 million pounds REO per year. According to
Harbinger Capital, the company will look to build capacity to ramp up production
to 40,000 tpa. Molycorp’s total proven and probable reserves are 2.21 billion
pounds of rare earth oxides at an average grade of 8.24% (higher than our 2%
criteria!)
Molycorp intends to produce a very wide range of rare earth products, these
include; bastnäsite concentrates containing 58-63% lanthanum oxides; leached
bastnäsite concentrates containing 68-73% lanthanide oxides; calcined leached
bastnäsite concentrates containing 85-90% lanthanide oxides; cerium oxide,
carbonate and nitrate; europium oxide; a yttrium-europium co-precipitate;
lanthanum oxide; a high lanthanum lanthanide concentrate; a lanthanum-
lanthanide chloride solution; a lanthanum-lanthanide nitrate solution;
lanthanum acetate solution; neodymium oxide; praseodymium oxide; yttrium
oxide; gadolinium oxide; samarium oxide; terbium oxide; erbium oxide and
ytterbium oxide.
Metals Mix at Mountain Pass
Element % of bastnäsite Ore
Cerium 48.8
Lanthanum 34.0
Neodymium 11.7
Praseodymium 4.2
Samarium 0.79
Gadolinium 0.21
Europium 0.13
Dysprosium 0.05
Other REE 0.12
Source: Molycorp prospectus and Hallgarten & Company
Bastnäsite ore is crushed and milled, and then floated away from the waste
material. The resultant bastnäsite concentrate is then processed by leaching
with strong acid solutions, followed by a series of solvent extraction steps which
produce the various individual REO minerals, generally in a high purity, greater
than 9% oxide form.
The company expects to sell and transport a portion of the REOs produced to
customers for use in their particular applications. The remainder of the REOs will
be processed into rare earth metals. A portion of these metals will be sold to
end users and we expect to process the rest into rare earth alloys. These rare
earth alloys can be used in a variety of applications, including but not limited to:
electrodes for Nickel Metal Hydride (NiMH), battery production; samarium
cobalt magnet production; and Neodymium Iron Boron, or NdFeB, magnet
production.
Sector Research – Rare Earths Review 4th August 2010
48
Initially, the company’s modernisation and expansion plans envisioned adding
facilities and equipment for metal conversion and alloy production at the
Mountain Pass facility. However, they have entered into a letter of intent to
acquire a third-party producer of rare earth metals and alloys in the United
States. If this acquisition is completed, instead of adding such facilities and
equipment at Mountain Pass, Molycorp plan to transport cerium, lanthanum,
neodymium-praseodymium (so called didymium) and samarium oxide products
from Mountain Pass to the new off-site location that already possesses the
technological capability to produce rare earth metals and alloys.
In March 2009, Molycorp signed an agreement to acquire a controlling interest
in Great Western Minerals (GWG-TSX-V), however in June 2009, Molycorp
announced that it had been unable to reach agreement and had let its interest
in GWG lapse.
According to Hallgarten & Co., Mountain Pass was always europium rich, and
has a specialised europium plant to produce red-phosphor. Molycorp maintains
a joint venture with Sumitomo called Sumiken Molycorp, which markets rare
earth products in Asia and produces permanent magnet materials in Japan.
According to Molycorp’s prospectus, they have secured letters of intent for
138% of their planned production in 2013. They could sell 268% more non-metal
lanthanum (oxides and other compounds) than they could produce (11,000
tonnes (t) versus 2013 planned production of 3,100 t), 10 times the neodymium
metal (3,300 t versus planned production of 313 t), 9 times the praseodymium
metal (1,090 t versus 116 t). Things are not so rosy as regards to lanthanum
metal, where only 17% of planned production of 2,507 t is spoken for, cerium
non-metal fares slightly better with 71% of planned production of 9,680 t
subject to letters of intent, while only 51% of planned production of NdPr in
NdFeB alloy is signed up.
Molycorp intends to develop new higher margin products and processes for
REEs that historically have had lower demand. For example, cerium is used
primarily for glass polishing and has typically sold at prices lower than those for
other REEs. However, the company has developed XSORBX® ASP or Arsenic
Sequestration Process, a proprietary product and process, primarily consisting of
cerium that removes arsenic and other heavy metals from industrial processing
streams and allows customers to more safely sequester arsenic and increase
their production. Molycorp has entered into a non-binding letter of intent with a
water filtration company to jointly develop water treatment products.
The company claims that, although the consultancy IMCOA predicts that there
will be a surplus of cerium in the future, they anticipate most of their production
will serve the new, proprietary XSORBX® ASP water treatment market segment
that they have under development. Molycorp believes that this segment alone
could consume many times more cerium units than they can produce.
Furthermore Molycorp believe the new segment negates the need for additional
letters of intent at this time.
Molycorp has suffered from a history of water related issues and indeed was
originally closed down by the US Environmental Protection Agency because of a
4th August 2010 Sector Research – Rare Earths Review
49
water leak. In the prospectus we learn; “Currently, processing of REOs requires
significant amounts of water. The technology being developing to significantly
reduce fresh water requirements, includes proprietary production of our own
hydrochloric acid and sodium hydroxide from waste water at our own chlor-alkali
plant, has not yet been proven at commercial scale and has not yet been
implemented. Although we believe our existing water rights and water supply
are sufficient to meet our projected water requirements, any decrease or
disruption in our available water supply until this technology is successfully
developed may have a material adverse effect on our operations and our
financial condition or results of operations. “
Lynas Corporation (LYC-ASX)
Lynas argue that they are the most advanced ex-China potential producer of
rare earth elements. Their analysis also indicates that potentially their Mount
Weld project in Western Australia has the greatest in-situ value of any of the
major projects outside of China.
The company has been looking to develop the Mount Weld open pit mine since
2000 and have raised A$679.5m since June 2006 in equity to advance this
project. The company was successful in obtaining A$200m of debt in 2008 and
convertible funding both to bring the mine and concentrator in Australia, and its
associated processing facility (the Advanced Materials Plant) in Malaysia on
stream. Prior to the credit crunch, it had undertaken foundation work at both
sites, as well as limited mining. However all work came to a halt in February
2009, as convertible note holders asked for their money back and the company
was unable to draw down its $125m funding, sourced by HVB Group, now part
of Unicredit Bank (UCG-IM).
In May 2009, state owned China Non-Ferrous Metal Mining agreed to subscribe
for 700 million new shares at A$0.36 per share, raising A$252m and offered
Chinese bank finance to restart the project. A$0.36 per share represented a
52.5% premium above the volume weighted average Lynas share price for 30
trading days prior to the announcement.
Total capex of over A$500m was envisioned, US$286m to compete and
commission the first phase to produce 10,500 tpa of REO and US$80m for phase
two which would bring production to 21,000 tpa of REOs.
However in September 2009, this tie up was dropped as Australian Foreign
Investment Review Board (FIRB) approval couldn’t be achieved, strategic
considerations being cited.
In October 2009, following the recovery in markets and improved sentiment
towards rare earths, the company raised A$450m of equity from institutions and
has recently recast capital cost projections. It has recommenced work on the
processing plant in Australia and the Advanced Materials Plant in Malaysia.
The company estimates that their Phase 1 plans will cost A$339m, with first
concentrate feed to the kiln in Malaysia anticipated in Q3 2011. This forecast
incorporates a major increase in Engineering, Procurement and Construction
Management (EPCM) fee from $100m to $136.4m.
Sector Research – Rare Earths Review 4th August 2010
50
Building the Advanced Materials Plant in Malaysia offers a number of
advantages, namely tax (0% for twelve years), plentiful natural gas, electricity,
nearby sulphuric and hydrochloric acid supplies. The company points out that 3
tonnes of reagents will be used to process one tonne of concentrates, so
bringing concentrates to the Advanced Materials Plant makes a lot of sense.
The company will enter into negotiations with the Australian tax authorities
regarding transfer pricing, as they will only be producing concentrates in
Australia. Concentrates are potentially worth very little as the Chinese are the
only other buyer. Hence the impact of the proposed 40% Australian Resources
Tax may be relatively small.
The company has outlined 12.24 million tonnes (Mt) of Joint Ore Reserves
Committee (JORC) compliant measured, indicated and inferred resources
grading 9.7% rare earth oxides (REOs) at Mount Weld, calculated at a 2.5% REO
cut off, and has already mined and stockpiled 773,000 t, grading from 8% up to
26% REOs. The company claims the low thorium content of 44 parts per million
in each percent of rare earth oxides, offers a competitive advantage against
other non-Chinese projects. Apparently beyond 100ppm per one per cent of
REO one will have problems with thorium. Uranium values are also very low.
Paterson Securities Limited- Lynas Corporation Revenue Forecasts
REO 2012
Production
tonnes
Price
per Kg
US$
Potential
Revenues
US$m
% of
Potential
Revenues
2013
Production
tonnes
Price
per Kg
US$
Potential
Revenues
US$m
% of
Potential
Revenues
Lanthanum 1,583 9.84 15.58 14.2% 4,355 10.04 43.72 13.6%
Cerium 2,901 4.92 14.27 13.0% 7,983 5.02 40.07 12.4%
Neodymium 1,148 30.62 35.15 32.1% 3,160 31.23 98.69 30.6%
Praseodymium 330 30.62 10.10 9.2% 909 31.23 28.39 8.8%
Samarium 141 5.19 0.73 0.7% 388 5.3 2.06 0.6%
Dysprosium 8 125 1.00 0.9% 21 128 2.69 0.8%
Europium 27 568 15.34 14.0% 76 580 44.08 13.7%
Terbium 4 656 2.62 2.4% 12 669 8.03 2.5%
Others 64
231.2
5 14.80 13.5% 175
312.5
7 54.70 17.0%
Total 6,206 15.34 109.60 100.0% 17,079 15.65 322.4 100.0%
Source: Paterson’s Securities Ltd & Libertas Capital Corporate Finance.
As can be noted, Mount Weld is dependent on lanthanum, cerium, neodymium
and europium revenues. It should be noted that these price forecasts are
considerably higher than those presented by Molycorp in its prospectus.
As part of their original funding effort they have signed a number of long term
customer agreements. A long term, greater than ten year agreement, worth
over US$200m, has been signed with French chemical major Rhodia (RHA-FP).
This is set to supply cerium, europium, terbium and lanthanum. This represents
about 25% of projected volumes, but due to the relative low prices of lanthanum
and cerium, a much lower proportion of projected revenues. The company has
also signed an approximate US$200m, 5 year contract to supply neodymium and
praseodymium to one customer, and has four other contracts worth from $20m
up to $80m to supply product from the Malaysian plant.
4th August 2010 Sector Research – Rare Earths Review
51
Mount Weld has significant undrilled potential, so Lynas is well placed to meet
increasing levels of demand. As the Mount Weld concentrator operation would
be permitted and in operation, there is the possibility that deals could be done
with the other Australian hopefuls Alkane Resources (ALK-ASX) and Arafura
Resources (ARU-ASX) to buy their potential production of concentrates for
processing in Malaysia. Lynas itself have a stake in the early stage Kangankunde
project in Malawi.
Lynas is currently capitalised at around £750m (A$1,300m) and has about
A$400m of cash. Having just raised the capital to restart construction at Mount
Weld and the Advanced Materials Plant in Malaysia, news flow for the rest of
the year may be fairly limited. Owing to this placing, the company has a wide
institutional shareholder base, with Morgan Stanley being the largest
shareholder with around 5%.
They remain well placed to become the first non-Chinese producer of rare
earths. Although the share price could drift, they should eventually be buoyed
by general sentiment towards the sector.
Alkane Resources (ALK-ASX)
Alkane is developing the Dubbo Zirconia Project (DZP), an open pit zirconium
mine in New South Wales, Australia. The company is also exploring for gold
nearby, and has recently reported progress on their McPhilamys gold joint
venture with Newmont (NEM-NYSE), where they have a conceptual target of
more than 4 million ounces (Moz) of gold, and at their Tomingley project, where
mine planning is underway on a 800,000 oz JORC compliant resource
So far at Dubbo they have outlined a Joint Ore Reserves Committee (JORC)
compliant measured resource of 35.7 million tonnes grading 1.96% zirconium
dioxide (ZrO2), 0.04% hafnium dioxide (HfO2), 0.46% niobium pentoxide
(Nb2O5), 0.03% tantalum dioxide (Ta2O5), 0.14% yttrium oxide (Y2O3), 0.75%
rare earth oxides and 0.014% uranium oxide (U3O8). An inferred resource of
37.5 Mt at similar grades has also been outlined.
Resource drilling was completed in 2001; the process flow sheet was developed
between 1999 and 2002, with trails to mini pilot plant stage. An Industrial
Commercial Ready grant of A$3.3m was received from the Australian
Government in April 2006 as a contribution towards process optimisation in a
demonstration pilot plant which was commissioned in March 2008. Product
samples from the demonstration pilot plant were distributed in the second half
of 2009. The company is currently revising and updating their 2002 feasibility
study with planned delivery by Q3 2010.
They aim to process 400,000 tonnes per annum of ore to produce 15,000 tpa of
zirconium products, 2,000 tpa of a niobium-tantalum concentrate, just under
2,000 tpa of light rare earth concentrates containing lanthanum, cerium and
neodymium and 600 tpa of a yttrium rare earth concentrate containing yttrium,
gadolinium, dysprosium and terbium. The zirconium products produced include
a zirconium basic sulphate, zirconium hydroxide and zirconium carbonate. These
are expected to contain a small amount of the transitional metal hafnium (Hf,
71).
Sector Research – Rare Earths Review 4th August 2010
52
DZP Yttrium & Rare Earth Element (REE) Output
Source: Alkane Resources.
Zirconium is used as a drying agent in paints, in solid oxide fuel cells, in
engineering ceramics where it adds toughness, and other hard wearing
properties, and has a rising use in automotive pretreatment, offering
environmental benefits over traditional zinc phosphate metal treatments.
Hafnium is used in control rods for nuclear reactors and a number of specialist
alloying purposes.
Zircon Supply Demand Price
Source: Alkane Resources.
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53
DZP Flow Sheet
Source: Alkane Resources.
Alkane is capitalised at around £50m (A$85m), and will possibly have to issue
more equity soon. As at end March 2010, they had A$1.8m of cash, having spent
$2.8m during the quarter. At present, private company Abbotsleigh Pty Ltd is
the largest shareholder with 28.5% of the outstanding shares.
It is difficult to determine how much value is ascribed by the market to their
Dubbo project, rare earth grades are low, and should be considered by-products
from this primarily zirconium operation. The flow sheet is complicated and could
be expensive.
Arafura Resources (ARU-ASX)
Arafura is developing their Nolans Bore rare earths, phosphates and uranium
project in the Northern Territory, Australia. East China Mineral Exploration &
Development Bureau owns just over 22% of the issued shares. The company
claims that the fluorapatite, apatite-allanite calcsilicate Nolans Bore resource is
sufficient to sustain production of 20,000 tonnes (t) of rare earth oxides, 80,000
tpa of phosphorus pentoxide (P2O5), 400,000 t of calcium chloride and 150
tonnes (0.33 Million pounds) per annum of uranium for more than 20 years.
Located close to infrastructure, it is 10 kilometres (km) from the Stuart Highway,
Nolans Bore has a total Joint Ore Reserves Committee (JORC) compliant
measured, indicated and inferred resource of 30.3 million tonnes (Mt) grading
2.8% rare earth oxides, 12.9% phosphate and 0.44 pound per tonne U3O8. The
company intends to chemically separate rare earths from phosphate. From the
phosphate line the company intends to produce phosphoric acid with a calcium
Sector Research – Rare Earths Review 4th August 2010
54
chloride reside. From the rare earth stream they intend to produce rare earth
products and uranium oxide.
Nolans Rare Earth Mix
Source: Arafura Resources.
In Situ REO Value (February 2010)
Source: Arafura Resources.
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55
Project Valuation (estimated costs)
Source: Arafura Resources.
Arafura is at a relatively early stage of its development, from 2010 through to
2013 they intend to continue drilling out the resource, and undertake the
various mine site selection tasks. They also need to seek finance and are looking
for a strategic partner.
The company has recently reported that the average price for a Nolans mix now
amounts to around US$22.23 per kilogramme an increase of 100% since the
December 2009 quarter. They are currently capitalised at around £130m
(A$225m), having just raised A$19.5m in a placement and rights issue. Nolans
Bore is relatively low grade, and relatively low returns seem evident in their
estimated 6 year project payback. Arafura also have an issue with uranium, the
Northern Territory is already a significant producer of uranium at Ranger in the
Kakadu National Park. Local authorities and native title groups have not been
keen on new uranium producers in the Territory.
Avalon Rare Metals (AVL-TSX)
Avalon is focused on their 100% owned Nechalacho underground rare earths
deposit, near Thor Lake in the Northwest Territories of Canada. A National
Instrument (NI) 43-101 compliant inferred resource of 64.2 million tonnes (Mt)
grading 1.96% total rare earth oxides, plus tantalum, niobium, zirconium,
hafnium and gallium has so far been outlined. Nechalacho is relatively well
endowed with gadolinium and dysprosium, and has low thorium levels.
Sector Research – Rare Earths Review 4th August 2010
56
N-S Composite Section (looking west)
Source: Avalon Rare Metals.
Following underground mining, the company is looking to recover a Rare Earth
Element concentrate (REE con) with grinding and froth floatation. A
hydrometallurgical plant is planned offsite; here the concept is to caustic crack
the REE con, followed by acid leaching. Solvent extraction is then hoped to
precipitate two mixed REE carbonates one mainly Light Rare Earth Elements
(LREEs) the other mainly Heavy Rare Earth Elements (HREEs). Final separation of
REE oxides may be achieved in Asia, whilst metallurgical testwork continues.
They hope to produce 5-10,000 tonnes per annum of rare earth oxides, 49.4%
lanthanum and cerium, 21.3% neodymium, 4.2% praseodymium, 3.7% samarium
or otherwise 25.6% heavy REEs plus yttrium. The company expects first
production in 2015.
Avalon’s recently released Prefeasibility Study is as feared, pretty poor, with pre-
tax and post-tax Internal Rates of Returns (IRR) of 14% and 12% respectively.
Project capital cost is estimated to amount to a huge C$900m, operating costs
amount to C$267 per tonne of ore mined or $5.93 per kilogram of product. The
PFS now models the construction of a hydrometallurgical plant, possibly using
some of the facilities at the historic Pine Point lead-zinc mine also in the NWT,
and also miles from anywhere. An additional capital requirement of $500m for a
hydrometallurgical plant does sound expensive, so it is possible that a number of
other costs have increased as well.
The poor returns illustrate the need for high grades; the Nechalacho resource
grade of 1.7% Total Rare Earth Oxides (TREO’s), 3.16% zirconium oxide, 0.41%
niobium oxide and 0.041% tantalum oxide doesn’t appear high enough.
Furthermore the difficulties and costs of extracting the TREOs from the
zirconium, niobium and tantalum, are also illustrated. It is however encouraging
that they have recognised the need for fully integrated production, returns
would probably have been even lower if they had stuck to their original plans to
sell two concentrates to the Chinese for final Rare Earth Element (REE)
extraction.
Avalon is capitalised at about £130m (C$210m), has C$15m of cash and a wide
institutional shareholder base. Grades at Nechalacho are not outstanding,
although they do claim a high HREE content and low thorium levels.
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Cache Exploration (CAY-TSX-V)
Cache is busy acquiring rare earth element properties, and has acquired
positions in the Welsford igneous complex in New Brunswick, Canada, the Louil
Hills peralkaline complex in Newfoundland, the Cross Hills plutonic suite also
located in Newfoundland.
They have a very modest capitalisation of C$4m, while their projects are too
early stage to come to a view as to their merits.
Dacha Capital (DAC-TSX-V)
Dacha is marketed as the first Exchange Traded Fund (ETF) to invest in rare earth
metals. From the first half 2010 Chinese export quota detail analysed by Lynas
Corp, one notes that the export quota for the first half of 2010 was 22,283 t, of
which 5,978 t was “available” for “Foreign-Invested firms”. Dacha Capital, has so
far this year purchased 53 t of REEs and 163 t of REOs. Overall Dacha has
therefore bought about 1% of the first half export quota or around 3% of that
“available” to Foreign-Invested firms, hence they have barely scratched the
surface and as yet don’t have the clout to move prices.
The share price of the worlds’ only Rare Earth Element (REE) investment fund
has plunged following the release of their maiden Net Asset Value. As at end
June 2010 this was C$0.38 per share based on 72.16m shares outstanding. In
addition to the 5 tonnes (t) of Dysprosium oxide, 30t of ferrous dysprosium, 20 t
of Gadolinium oxide, 3t of Lutetium oxide, 12t of terbium oxide and 20t of
yttrium oxide held outside China in their South Korean warehouse, they also
have 6t of Europium oxide and 120t of yttrium oxide held within China. They
also retain $6.7m of cash and other assets.
Dacha is an interesting concept and offers zero mining, processing, and uranium-
thorium risk. When it was placing 48.9m shares at 45 cents, the company had
hoped for them to trade at twice NAV. Obviously the market saw through that
argument when it noticed the NAV release. With rare earth prices continuing to
perform during the month following the Chinese quota news, a positive end July
NAV might be anticipated. At end June they were already up 15% on cost, so
C$0.33 per share might be a very interesting entry point.
Etruscan Resources (EET-TSX)
Etruscan Resources is a West African gold mining company that has just
undergone a management buy-in led by Endeavour Financial (EDV-TSX). One of
the stones unturned was a rare earths project in Namibia. The company failed in
its search for Iron Oxide Copper Gold (IOCG) style mineralisation, but the rare
earth containing carbonatite discovered could be world scale.
Over a 15 kilometre strike length at Lofdal, encouraging rare earth grab samples
of up to 1% total rare earth elements plus yttrium had been discovered. The REE
carbonatite dykes at Lofdal are enriched in HREEs. The average grade of all dyke
samples taken to date is 0.7% total rare earth elements plus yttrium ("TREE+Y").
The highest individual sample graded 8.9% TREE+Y and the highest heavy rare
Sector Research – Rare Earths Review 4th August 2010
58
earth (HREE) enriched sample graded 1.5% HREE. The company is hoping to
outline a 25-30 million tonne deposit. The company is looking to spin out its rare
earth interests into a new pure exploration company. This appeared to be too
small to impact the Etruscan share price.
Globe Metals & Mining (GBE-ASX)
Globe’s main focus is its Kanyika niobium, uranium, tantalum and zircon project
in Malawi. A Bankable Feasibility Study (BFS) was commissioned in August 2009
and production is planned to commence in 2013 at a rate of 3,000 tonnes per
annum niobium metal, principally in the form of ferro-niobium. Mine life is
forecast in excess of 20 years.
At the same time they announced that Thuthuka Group, a private South African
engineering and construction contracting company, entered into a formal
agreement to invest US$10.6m to earn a 25% interest. This $10.6m injection was
expected to fund 85% of the estimated cost of the BFS. In early April 2010, Globe
announced that a dispute between the two parties had slowed work on the
project and in June Thuthuka withdrew.
Globe is also exploring the Machinga rare earth project in Malawi, where they
are farming into a Resource Star’s (RSL-ASX) project. Here they could earn up to
an 80% interest. Recent trenching has shown Total Rare Earth Oxides (TREO) and
Niobium grades of up to 1% TREOs and 1.34% niobium pentoxide respectively.
Globe is currently capitalised at around £10m (A$17m), with A$3.0m of cash.
There remains considerable uncertainty about progress at Kanyika, while
Machinga is very early stage and possibly too low grade to be of interest.
Great Western Minerals (GWG-TSX-V)
Great Western Minerals (GWMG) is developing an integrated rare earths
business, and was formed by the merger of the exploration stock Great Western
with the manufacturing business of Less Common Metals (LCM).
LCM, located in Birkenhead UK, and Great Western Technologies Inc. (GWTI),
located in Troy, Michigan, USA produces a variety of specialty alloys for use in
the rechargeable battery, permanent magnet, automotive and aerospace
industries. LCM currently supplies 20% of the world’s samarium-cobalt (SmCo)
alloy for used in permanent magnets and is a significant supplier of alloys for
NdFeB permanent magnets. The company claims that they have the only fully
integrated mine to market rare earth elements business model outside of China.
LCM has a current productive capacity of 1,100 tonnes per annum (tpa) of rare
earth alloys, whereas Great Western Technologies has a 2,550 tpa capacity. LCM
currently sells 430 tpa of alloys, whereas GWTI sells 250 tpa. Potential
productive capacities may not sound large in tonnage terms, but the company
claims that they may represent US$150-200m in potential revenues.
LCM also produce other rare earth alloys, including magneto-optic and
magnetostrictive materials, hydrogen storage systems and master alloys, high
purity rare earth metals, spluttering targets and ultra pure indium. GWTI
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manufactures high purity custom made alloys, sputtering targets, precious
metals, special high purity alloy foils, ingots and rods, special low oxygen
powders, single crystal isotopes, rare earth special elements, brazing alloys,
raney nickel alloys and is involved in scrap metal recovery.
Overview of Rare Earth Alloy Production
Source: Great Western Minerals.
It should be mentioned before one gets too excited, that manufacturing
revenues amounted to a modest C$12m in 2009, but potential margins are very
high, particularly with their own feed from Steenkampskraal in South Africa.
The rare earth alloy business is evolving, with the industry moving towards strip
cast alloys for the magnet industry becoming the new preferred quality. Great
Western proposes to build two strip cast furnaces to meet this demand. The
company has been in discussions with potential customers and two of them
could consume the entire output of both furnaces. Coupled with production
from Steenkampskraal, the first furnace could have first saleable product in June
2011.
The company has an option to acquire the former operating Steenkampskraal
rare earth mine in South Africa where a New Order Mining Right has just been
issued and continues to explore the advanced Hoidas Lake rare earth prospect in
Saskatchewan, Canada. It also has two other less advanced rare earth prospects
in Canada, Douglas River in Saskatchewan and Benjamin River in New Brunswick
and a 25% share in the Deep Sands heavy mineral sands project in Utah, USA.
At Steenkampskraal, an underground in-situ resource of 117,550 tonnes (t) of
monazite grading 16.74% of rare earth oxides (REO), a broken underground
resource of 47,000 t grading 5% REOs, while a surface resource of 85,000t
grading 8.29% REOs remains from past mining operations. Steenkampskraal was
originally a thorium mine, and retains its licence to store that material. The
company intends to mix thorium with concrete for storage, but recognise if the
Sector Research – Rare Earths Review 4th August 2010
60
thorium market ever returns, the Indians are quite keen developers of thorium
for nuclear power, this thorium concrete can be acid leached for thorium
recovery.
Preliminary Cash Flow Projections (1)
– Mining Plus Downstream Revenue
Year 2012 2013 2014 2015 2016
Revenue (C$) 78,739,725 120,951,441 122,158,630 121,003,187 121,014,224
Cost of Sales 58,094,720 87,993,453 88,630,217 88,040,854 88,054,064
EBITDA 20,645,005 32,957,989 33,528,413 32,962,333 32,960,160
Note 1 – Assumptions:
1 Based on historical data and in-house engineering and economic assumptions
2 Converted from SA Rand-exchange rate projections
3 Escalation for certain op costs, no pricing escalation
4 Consolidated from Chloride Production, Separation, Metal Making and Alloying stages
5 Assumes using all Nd, Pr, Sm and Dy from Steenkampskraal, Partial La and Y.
Source: Great Western Minerals.
The company estimates that Steenkampskraal could be re-opened at a cost of
US$30m, and could supply 100% of GWTI and LCM rare earth element needs for
10 years. Like many rare earth projects, the proposed process flow sheet is
complicated, although as the mine successfully operated during the 1960s and
1970s the metallurgy is well understood. After crushing and grinding, the
monazite ore is gravity and magnetically separated from the gangue. It is then
floated to separate a copper silver concentrate, while the resulting monazite
concentrate is subject to digestion and leaching. A fertiliser tri-sodium
phosphate is separated in a solid-liquid separator, while rare earth hydroxides
are selectively dissolved in hydrochloric acid. The thorium hydroxide residue is
transported for safe storage, while the 45% Total Rare Earth Oxide (TREO)
concentrate is then subjected to solvent extraction. From this rare earth
carbonates are precipitated, they are calcined to produce rare earth oxides
which are then subject to electrolysis or metallothermic reduction to produce
rare earth metals or alloys.
GWML have already outlined National Instrument (NI) 43-101 compliant
measured and indicated resource of 2.5 million tonnes grading 2.075% Total
Rare Earth Elements (TREE) or 2.43% Total Rare Earth Oxides (TREO) at Hoidas
Lake. The level of neodymium at 0.42% is particularly encouraging. The company
intends to conclude its metallurgical and transportation tests with a pre-
feasibility study by late 2010, and a full bankable feasibility study completed by
2011. Production is slated for 2014.
At Deep Sands in Utah, USA the company has a target resource of 500 Mt
grading 0.25% rare earth oxides. This monazite deposit has a significant yttrium
and other heavy rare earth element content, so high potential in-situ values may
make up for the low overall grade.
Great Western Minerals is currently capitalised at just under £30m, with C$5m
of cash, and has a widely spread shareholder base. They have a unique
integration strategy with the hope of re-opening Steenkampskraal to supply
their manufacturing operations with raw material. The company forecasts that
the value added from manufacturing could be considerable, while Hoidas Lake
remains a prospective rare earth target. Due to the mix between exploration
and manufacturing, the company appears to be undervalued by the Canadian
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61
market. Vertical integration in the rare earths industry appears to be a virtue
rather than a problem, they deserve support.
Greenland Minerals and Energy (GGG-ASX)
Greenland, who have just raised A$21m in an equity placing is exploring the
Ilimaussaq intrusive complex, where they have defined at Kvanefjeld in
Greenland, at a cut off of 0.015% U3O8, a Joint Ore Reserves Committee (JORC)
compliant indicated and inferred resource of 457.0 million tonnes grading
0.028% U3O8 (0.62lb per tonne (lb/t)), 1.07% total rare earth elements
(including yttrium) and 0.22% zinc. Kvanefjeld is 7 kilometers from tidewater
with deep water North Atlantic Ocean fjords.
The company is currently undertaking a pre-feasibility study, with particular
emphasis on metallurgical testing. Alkaline pressure leach is being investigated
for uranium recovery, and the company hopes to build a pilot plant by mid 2012.
First production could occur in 2015. The company forecasts nominal production
of 43,700 t of rare earth oxides and 3,895 t (8.6 Mlb) of U3O8 per annum,
following a capital spend of US$2.31bn. Unit costs were estimated at US$29.6
per pound of U3O8 and $5.75 per Rare Earth Oxide (REO) kilogram. Using a REO
price range of $13/kg and $80/lb for U3O8, an Internal Rate of Return (IRR) of
24% was estimated.
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Source: Greenland Minerals and Energy.
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Kvanefjeld – Multi-Element Ore
Source: Greenland Minerals and Energy.
As well as metallurgical issues and a relatively low internal rate of return, the
company faces a major issue in that uranium production is not currently
permitted in Greenland. “Greenland Minerals and Energy Ltd are aware of and
respect the Greenlandic government’s stance on uranium exploration and
development in Greenland, which is currently a zero tolerance approach to the
exploration and exploitation of uranium. Any potential change toward the
current stance of zero tolerance is not expected until after the public consultation
and review process is concluded in the coming months. The company is currently
advancing the Kvanefjeld Project, recognised as the world’s largest undeveloped
JORC compliant resource of rare earth oxides (REO), in a multi-element deposit
that is inclusive of uranium and zinc. Greenland Minerals will continue to
advance this world class project in a manner that is in accord with both
Greenlandic Government and local community expectations, and looks forward
to being part of the community discussion on the social and economic benefits
associated with the development of the Kvanefjeld Project.”
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Process Flow Sheet – Base Case Scenario
Source: Greenland Minerals and Energy
Greenland is capitalised at about £60m (A$105m), and at the end of December
2009 had A$7.6m of cash. The recent placing raised $6m initially with $15m in
place as an equity facility with YA Global Investment (Yorkville). Two private
companies Quayside and Westrip hold 15.5% and 10.3% of the outstanding
shares respectively. Kvanefjeld is undoubtedly a very large potential rare earth
and uranium deposit, however rare earth grades are low and the metallurgical
characteristics look difficult. In addition the uranium issue has yet to be
resolved; uranium remains important for the economic viability of this project.
Hudson Resources (HUD-TSX-V)
Hudson is developing the 100% owned early stage Sarfartoq rare earth
carbonatite project in Greenland. It is also exploring the nearby Garnet Lake
diamond project, but the company points out that the potential in-situ value of
rare earths is up to ten times that of diamonds. Hudson claims an advantage
over Kvanefjeld in that uranium levels are very low at Sarfartoq.
2009 drilling highlighted 50.25m grading 2.189% total rare earth oxides (TREO),
with neodymium oxide and praseodymium oxide averaging over 25% of the
TREO’s.
With regard to location, Hudson point out that access to open water shipping is
critical given that reagents comprise 40% of mining costs, while power
comprises 30% of mining costs. Fortunately for Hudson, Alcoa is planning to
4th August 2010 Sector Research – Rare Earths Review
65
build an aluminium smelter with a 600MW hydroelectric power plant located
within kilometres of the project. Deep water access is located within 20km.
The company has a lot of exploration and evaluation work to undertake on this
project, a new drill programme has just commenced, funded by a $5m recently
concluded placement.
The company is capitalised at around £20m (C$32m), with $2.2m of cash and
has Teck Corp (TCKB-TSX) as the largest shareholder with an 8.22% holding.
Although early stage, Sarfartoq looks an interesting prospect.
Kirrin Resources (KYM-TSX)
Kirrin is accumulating a portfolio of early stage uranium and rare earth element
projects in Canada. So far interesting grab samples and limited drill results have
been recorded at their Alexis River in Labrador and Lost Pond property in
Newfoundland. They are earning 50% of Last Pond and 60% of Alexis River.
Kirrin is capitalised at less than £1m (C$1m) and will need to raise funds to
pursue its exploration plans.
Matamec Explorations (MAT-TSX-V)
Matamec has a number of exploration projects in Ontario and Quebec. It has
had recent success at its Kipawa rare earth project in Quebec. Kipawa
mineralogy appears complicated, but 2.57m grading 2.22% zirconium dioxide,
0.356% light rare earths oxides (lanthanum to neodymium), 0.037% medium
rare earth oxides (samarium to gadolinium), 0.121% heavy rare earths (terbium
to lutetium), and 0.242% yttrium oxide are worthy of note.
Kipawa Deposit Mineralogy
Source: Matamec Exploration.
The company has recently released a maiden National Instrument (NI) 43-101
resource for Kipawa. Reflecting the complex mineralogy the company has set
this out under two scenarios Scenario 1 is presented as a Total Rare Earth Oxides
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66
(TREO) resource with Zirconium Dioxide (ZrO2) by products. Scenario 2 is
presented as a Zirconium Dioxide resource with by product TREOs.
Source: Matamec Explorations
Matamec is capitalised at around £7.5m (C$11m) with C$1.2m of cash at the end
of December 2009. They will have to raise funds to pursue their exploration
plans.
Metallica Minerals (MLM-ASX)
Metallica is getting very excited about their Lucknow nickel cobalt and scandium
prospect at the former Greenville nickel mine in Queensland, Australia. This
project is sometimes called NORNICO.
The company claims this has the potential to make the company the world’s
largest supplier of scandium.
Metallica are initially planning to produce scandium oxide (Sc2O3 - so called
scandia), which sells for US$1,400 per kilogramme, but are also evaluating the
production of value added scandium aluminium master alloy and scandia
stabilised zirconia, used in solid oxide fuel cells.
Drilling at Lucknow has outing drill grades of plus 200 grammes per tonne (g/t)
scandium, the best result being 27m from surface grading 882 g/t scandium,
including 9m @ 1,417g/t scandium.
Metallurgical test work has shown that in addition to high nickel and cobalt
extractions, high extractions of scandium, (around 90%) can also be achieved
through the proposed heated Atmospheric Acid Leach (AAL) nickel-cobalt
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processing plant which will be located at the Greenvale mine site. There is
excellent potential to produce scandium oxide as a valuable by product from this
Ni-Co & Sc recovery process.
Grants Gully Cross Section
Source: Metallica Minerals.
Metallica is capitalised at around £16m (A$29m), with $8.8m of cash. They have
a large portfolio of Australian assets, which as well as NORNICO includes 56% of
Metro Coal (MTE-ASX), a Surat basin thermal coal and underground coal
gasification project, 33% of Cape Alumina (CBX-ASX) (close to Rio Tinto’s (RIO)
Weipa bauxite mine), 76% of Planet Metals (PMQ-ASX), which hold 85% of the
Wolfram Camp, tungsten-molybdenum project, and 100% of the Mt Cannindah
copper gold porphyry.
In early August 2010, their stakes in MTE, CBX and PMQ were worth about
A$40m, which suggests they are worthy of interest, particularly as NORNICO is
potentially very valuable.
Neo Material Technologies (NEM-TSX)
Neo Material Technologies is a producer, processor and developer of
neodymium-iron-boron magnetic powders, rare earth, and zirconium based
engineered materials and applications, and other high value niche metals and
their compounds through its Magnequench and Performance Materials business
divisions.
Magnequench’s Neo powders are used to produce bonded magnets generally
used in micro motors, precision motors, sensors and other applications requiring
high levels of magnetic strength, flexibility, small size and reduced weight. The
company believes it is the world’s number one producer with a 15-20% market
share.
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Rare earth and zirconium applications include catalytic converters, computers,
television display panels, optical lenses, mobile phones and electronic chips.
Gallium metal, nitrate tri-chloride and oxide sales from the newly acquired
Recapture Metals are primarily used in the wireless, Light Emitting Diode (LED),
flat panel, solar and catalyst industries. The company believes that it is a strong
number 2 in these various markets with a 10-15% market share.
Approximately 50% of sales are achieved in China, with 23% in Japan. North
America and Europe lag and represent 8% each of sales. Customers include
Daido, Ohara Optical (5218 JP), Epson (6724 JP), Canon (7751 JP), BASF (BAS
GR), Murata Manufacturing (6981 JP), Philips (PHIA NA), Panasonic (6752 JP),
Samsung (005930 KS) and Hitachi (6501 JP).
The company announced, in April 2009, an agreement with Peruvian tin miner
Minsur (MINSURI1 PE), to investigate the potential to produce a Heavy Rare
Earth Element (HREE) concentrate from the tailings and from newly mined
material from Minsur’s Pitinga tin and niobium-tantalum ferro alloy mine in
Brazil. The company has been quiet on progress at Pitinga, but brokers Fraser
Mackenzie forecast that Pitinga will likely go commercial by the end of 2011. It is
not immediately clear who will process the HREE concentrates.
Recently released Q1 results to end March 2010 are encouraging, revenues
increased 126% to US$65.1m, while EBITDA of $19m, net income of $12.8m and
earnings per share of $0.11 per share compares to a Q1 2009 negative EBITDA of
-$1.3m, a net loss of -$3.1m and loss per share of -$0.03. Cash provided by
4th August 2010 Sector Research – Rare Earths Review
69
operations in the quarter was $5.7m. During a traditionally slow first quarter
both divisions enjoyed robust demand for their products.
The company has recently announced a technology tie up with Molycorp (MCP-
NYSE). Both have probably noted that integration from mining, through
processing, to final product manufacture is the key to making superior returns in
the Rare Earth Element space.
Molycorp has the Mountain Pass potential rare earths mine in California, but
lost the manufacturing connections during closure in the 1990’s. Neo was
formed as those manufacturing operations were sold off by the Chinese, and has
grown by acquisition since. It has been searching for non-Chinese rare earth
supplies to become more integrated for some time and has been investigating
the re-processing of waste material from Minsur’s (MINSURI1 PE) Pitinga tin
mine in Brazil, but progress on this front has been quiet of late.
Bloomberg consensus forecasts for the full year amount to C$0.41 per share and
trade at 12.6 times that forecast. This appears undemanding, Bloomberg 2011
forecasts suggest a further rise in earnings to 47 cents. Pala Investments hold
19.7% and they usually know a thing or two. Neo are capitalised at around
£300m (C$480m) and had US$67.1m of cash at the end of the first quarter.
Peak Resources (PEK-ASX)
Source: Peak Resources.
Peak have a number of gold exploration projects in Australia and Tanzania and
are farming into the private company Zari Exploration’s Ngualla rare earth
project in Tanzania.
Sector Research – Rare Earths Review 4th August 2010
70
At Ngualla three test pits have confirmed consistent concentration of
mineralisation with grades up to 16.42% phosphate, 0.69% lanthanum, 0.33%
niobium, 0.48% neodymium, 0.14% praseodymium, 0.63% cerium, 0.03%
yttrium 306ppm, 1.79% titanium, and 0.007% tantalum in an unconsolidated
alluvial deposit.
The alluvial potentially could be quite large, the company has an initial target of
2.5 kilometres (km) by 1.5km to a depth of 10m (over 100 Million tonnes), with a
further 1.5 km by 0.8 km target to a depth of 7m.
Peak can earn 80% of the equity in this project upon sole production of a
Bankable Feasibility Study (BFS). Peak has committed A$1.9 m to produce a
JORC compliant resource estimate by November 2010 and a scoping study on
the alluvium by April 2011.
Peak is capitalised at around £6m (A$11m), with A$3.7m of cash.
Pele Mountain Resources (GEM-TSX-V)
Pele Mountain is developing its 100% owned Eco Ridge uranium mine near Elliot
Lake in Northern Ontario, Canada. Elliott Lake is a former uranium mining area,
with mines operated by Denison Mines (DML-TSX) and Rio Tinto (RIO).
A National Instrument (NI) 43-101 compliant indicated and inferred resource of
42.5 million pounds of U3O8 has been outlined. In 2008, Pele commenced the
permitting process by filing a Project Description with the Canadian Nuclear
Safety Commission and the Federal Government’s Major Project Management
Office.
Drilling has also confirmed the presence of low grade Rare Earth Elements (REE),
occurring as rare earth oxides in conjunction with uranium oxide (U3O8) in the
Main Conglomerate Bed at Eco Ridge. To date, all 30 drill intersections that
have been analysed for REE, have contained REE, although grades of no more
than 0.32% REO’s suggest that the economics of uranium will prove more
significant.
Although yttrium and heavy REE comprise a minority of the deposit’s overall
rare earth content, these minerals have far greater economic value than the
light REE and have demonstrated good recoverability. Preliminary leach testing
at SGS Canada Inc. indicates potential recoveries of approximately 64% of
combined yttrium and heavy REE. The Elliot Lake mining camp was a global
producer of yttrium during the 1980s as a by-product of uranium production.
Pele Mountain has a number of other gold and nickel exploration projects in
Ontario, and are capitalised at around £7m (C$11m). On 11th January 2010, they
had C$2m of cash.
4th August 2010 Sector Research – Rare Earths Review
71
Quantum Rare Earth Developments (QRE-TSX-V)
Quantum Rare Earth Developments are exploring a number of early stage rare
earth projects. At Archie Lake in Saskatchewan, Canada, the company is
exploring a monazite occurrence, where numerous grab samples have shown
very high rare earth anomalies. The company is also exploring the Jungle Well
and Laverton projects within 150 kilometers of Lynas’ Mount Weld project in
Western Australia, and has recently acquired the Elk Creek carbonatite in
Nebraska, USA.
Quantum has a market capitalisation of around £4m (C$6m), and presumably
will be looking for cash to advance their early stage projects. Cliffs Natural
Resources (CLF-NYSE) have inherited a 10.24% shareholding following their
acquisition of Freewest Resources.
Quest Rare Minerals (QRM-TSX-V)
Quest Rare Minerals which has just changed its name from Quest Uranium has
two rare earth exploration projects, Misery Lake and Strange Lake both on the
border of Quebec and Labrador in Canada. They retain their Plaster Rock
uranium project in New Brunswick, Canada.
Quest was the best performing TSX Venture Exchange stock in 2009 with a
5,530% increase in share price.
Strange Lake located 125 kilometres (km) west of Vale’s (VALE5 BZ) Voisey’s Bay
nickel copper cobalt mine. It has a historical pre-National Instrument (NI) 43-101
resource of 52 million tonnes grading 3.25% zirconium dioxide (ZrO2), 0.66%
yttrium oxide (Y2O3), 0.56% niobium oxide (Nb2O3) and 1.3% total rare earth
oxides (TREO). The company has recently outlined a maiden compliant inferred
resource of 115,000 t grading 1% TREO, 1.973% zirconium dioxide, 0.208%
niobium pentoxide (Nb2O5), 0.053% hafnium dioxide (HfO2) and 0.082%
beryllium oxide (BeO).
Source: Quest Rare Minerals
Sector Research – Rare Earths Review 4th August 2010
72
Misery Lake is at an earlier stage of exploration, but encouraging grab samples
grading up to 8.56% TREO plus yttrium, 42.4% iron, 7.12% phosphorus pentoxide
(P2O5), 4.85% titanium dioxide (TiO2), 3.05% zirconium dioxide and 2.72%
niobium pentoxide have been recorded. The target is associated with a 6 km
diameter magnetic anomaly.
Quest is capitalised at around £75m (C$120m) and at 15th April 2010 had cash of
C$5.1m. With relatively low rare earth grades, remote location and complicated
metallurgy this appears high.
Rare Earth Metals (RA-TSX-V)
Rare Earth Metals is developing their 100% owned Clay Howells carbonatite
exploration project near Timmins in Ontario, Canada. Recent drill results include
76.6 m grading 0.69% TREO, 0.12% Nb2O3 and 47.2% magnetite (Fe2O3). The
light rare earth component appears to be large with 92-94% LREE in the total
rare earths.
The company has a number of other rare earth exploration projects, Red Wine
in Labrador, and the Lackner project in Ontario.
They are capitalised at around £10m (C$15m), with C$9.6m of cash. This appears
reasonable particularly as magnetite may carry the day.
Rare Element Resources (RES-TSX-V)
Rare Element Resources is developing the Bear Lodge project in Wyoming USA,
which the company believes has similarities to Mountain Pass in California.
Newmont Mining (NEM-NYSE) is earning a 65% joint venture interest in the
Sundance gold venture, but Rare Element controls 100% of the rare earths
occurrences. Bear Lodge is an alkaline igneous complex, with the rare earth’s
contained in ancylite and bastnäsite in veins and dykes. The company is hoping
to outline a National Instrument (NI) 43-101 compliant resource by mid 2010.
The company has just announced a National Instrument (NI) 43-101 inferred
resource of 4.0 million tonnes grading 6.65% Rare Earth Oxides (REOs) using a
4% REO cut off grade. The company calculates the resource to a wide range of
cut off from 1% up to 5%, but gives a REO breakdown only at 1.5%, in this base
case scenario. At this cut off cerium oxide represents 47.1% of the REOs,
lanthanum oxide 31.2%, neodymium oxide 11.9%, praseodymium oxide 4%,
samarium oxide 2.3%, gadolinium oxide 1.2% and the rest 2.3%.
They are capitalised at around £65m (US$90m) with US$5m of cash. Considering
the projects are early stage, with a high proportion of Light Rare Earth Elements
(LREE) they appear expensive.
Stans Energy (RUU-TSX-V)
Stans Energy has a number of rare earths and uranium projects in the central
Asian state of Kyrgyzstan. They are looking to re-establish production at its 100%
owned Kutessay II rare earths mine and plant in Kyrgyzstan. Kutessay produced
80% of the rare earth elements for the former Soviet Union for 30 years. The
mine has a historic, non National Instrument (NI) 43-101 compliant Russian
4th August 2010 Sector Research – Rare Earths Review
73
reserve estimate of 63.3 tonnes of rare earths, with a 50:50 split between lights
and heavies. The deposit also contains thorium, silver, molybdenum, lead, zinc,
tantalum, niobium, hafnium and bismuth, but benefits from known metallurgy,
120 Rare Earth Element products have been produced from Kutessay
concentrate including oxides, metals and alloys. Historical Rare Earth Element
recovery rates of 65% were recorded in Soviet times.
Stans Energy’s properties in Kyrgyzstan
Source: Stans Energy.
Source: Stans Energy.
Sector Research – Rare Earths Review 4th August 2010
74
Kutessay II Rees by Value USD
Source: Stans Energy.
Stans Energy owns an exclusive option to purchase the Kyrgyz Chemical-
Metallurgical Plant (KCMP). KCMP was designed to separate rare earth elements
from Kutessay II concentrates, and produced oxides, metals and alloys grading
up to 99.99% pure. KCMP has been under care and maintenance since 1990, but
almost all equipment remains on site.
Stans Energy are currently calculating a Joint Ore Reserves Committee compliant
resource estimate for Kutessay II, and analysing the potential for reopening
KCMP. The company is due to report on progress by Q3 2010, when it hopes to
proceed with a pre-feasibility study.
Stans Energy is capitalised at around £18m (C$29m) and have just raised C$1.5m
in a share placement. The concept is interesting, but one has to question how
much of a processing plant mothballed in 1990, will be useable. Recent political
turmoil in Kyrgyzstan won’t help.
Tasman Metals (TSM-TSX-V)
Tasman is in the process of building up a portfolio of Rare Earth Element
exploration projects in Scandinavia.
Norra Kärr in Sweden is their most advanced project and benefits from past
exploration activity. A northern trench in nepheline syenite assayed 244m
grading 1.9% zirconium dioxide (ZrO2) plus 0.37% TREOs, while a southern
trench assayed 149m grading 1.5% ZrO2 and 0.43% TREOs and 52m @ 1.47%
ZrO2 and 0.54% TREOs. The company point out that these trenches were never
assayed for 6 of the 9 higher value Heavy Rare Earth Elements (HREE), while
subsequent grab samples showed elevated HREE values.
4th August 2010 Sector Research – Rare Earths Review
75
Source: Tasman Metals.
Recent drilling from Norra Kärr has confirmed the encouraging trench data.
108.1m from 43.4m grading 0.74% TREO and 2.1% ZrO2 was pulled from one
hole, while 149.2m from 2.5m grading 0.61% TREOs and 1.7% ZrO2 was pulled
from a second. The company believes that the high proportion of HREO (49% of
TREOs), including 278 parts per million (ppm) of Dysprosium oxide (Dy2O3) is
significant. The company also believes that the low content of radioactive metals
(averaging only 15ppm uranium and 10 ppm thorium) will simplify future
permitting, processing and mining options.
Tasman is capitalised at around £22m (C$36m), and have just raised C$3m of
equity in a placement. Rare earth grades don’t appear particularly special, while
the metallurgy doesn’t look straightforward.
Ucore Rare Metals (UCU-TSX-V)
Ucore Rare Metals, formerly Ucore Uranium, is exploring a historical non-
National Instrument (NI) 43-101 compliant resource of 374 million pounds
(170,000 tonnes) of rare earths, 11 Mlbs of uranium, 96 Mlbs of niobium at their
huge 100% controlled Bokan Mountain project in Alaska. The deposit also has
significant beryllium, zirconium and thorium mineralisation.
Sector Research – Rare Earths Review 4th August 2010
76
Source: Ucore Rare Metals.
Ucore – Bokan – I&L 2.5 m Drill Interval – REE $/t
Source: Ucore Rare Metals.
4th August 2010 Sector Research – Rare Earths Review
77
Recognising its strategic importance, the Alaska State House of Representatives
has unanimously passed a resolution in favour of expedited permitting and
production of heavy rare earth resources at the Bokan Mountain project in
southeast Alaska. Resolution 16 – Mining-Processing of Rare Earth Elements
recommends the continued exploration of rare earth deposits in Alaska and,
more specifically, the issuance of permits, as promptly as allowed by law, for
extraction, processing and production of rare earth materials on the Bokan
Mountain properties.
Bokan Mountain was a previous producer with significant remaining
infrastructure. Recent drilling has been encouraging with up to 95% HREOs and
up to 1.13lbs/ton Terbium Oxide (Tb2O3 and 7.69 lbs/t Dysprosium Oxide
(Dy2O3). The company intends to drill at least 3,000m in 2010 with a view of
declaring a National Instrument (NI) 43-101 compliant inferred resource.
Ucore has a market capitalisation of around £19m (C$28m), and have about
C$2m of cash. Bokan appears to be an interesting project, and may benefit from
considerable Alaskan state support.
Dong Pao
In 2009, the Japanese trading companies Toyota Tsusho Corp (8015 JP) and
Sojitz Corp (2768 JP), and a Vietnamese government-run resource development
company, launched a joint venture to start developing a major earth mineral site
at Dong Pao, about 280km northwest of Hanoi in Vietnam.
The joint venture will begin commercial mining operations as early as 2011,
supplying about 5,000 tonnes of the minerals, or about a quarter of Japan's
annual consumption, for about 20 years.
A study by the Japan International Cooperation Agency and the Metal Mining
Agency of Japan dated March 2001 indicated that reserves of the F3 orebody at
Dong Pau amounted to 890,000 tonnes grading 12% rare earth oxides.
Bastnäsite, being the main ore mineral, is apparently enriched in light rare earth
elements, while there are suggestions that thorium levels are quite high. It is not
clear whether the presence of the potential environmental contaminant arsenic
is an issue, the Governmental report also reports processing issues arising from
the weathered nature of the bastnäsite.
Frontier Minerals Limited
Private company, Frontier Minerals, is developing their Zandkopsdrift rare earth
carbonatite in South Africa, where estimated resources of 31.5 million tonnes
grading 3.6% REOs have been outlined. It is not clear to which standard these
resources are reported.
Montero Mining
Montero Mining is a private Vancouver company with listing aspirations. They
are exploring the Wigu Hill project in Tanzania. Wigu Hill is a prominent 3
Unlisted Companies
Sector Research – Rare Earths Review 4th August 2010
78
kilometres (km) by 6 km carbonatite intrusion, where historical rare earth oxide
grades of 10% with associated uranium and phosphate concentrations have
been reported. Montero is required to spend US$3.5m by November 2012 to
earn a 60% interest, with an option to purchase or earn an additional 10% for
$2m once it has earned in.
In 2009 they mapped the property, carried out scintillometer surveys and
extensively sampled the carbonatite dykes. The company is looking to raise
C$6m in a pre-IPO placement in order to advance the project. They feel they can
get to a National Instrument (NI) 43-101 compliant resource of 1 million tonnes
grading 10% rare earths pretty quickly, at which point they will able to list in
Vancouver.
Montero appears to be an interesting situation; it is always useful to start off
with high grades. They have yet to undertake any metallurgical tests, and their
95% exposure to light rare earths might be a disadvantage.
Spectrum Mining
Spectrum is a private company that has recently reported drilling on their
Wicheeda rare earths project in British Colombia, Canada. 48.64 metres (m)
averaging 3.55% Rare Earth Elements (REE), 72m grading 2.92% REE and 144m
grading 2.20%. As can be seen a staking rush has followed this announcement,
with a number of parties including Commerce Resources (CCE-TSX-V) getting in
on the act.
Source: Commerce Resources.
4th August 2010 Sector Research – Rare Earths Review
79
Sector Research – Rare Earths Review
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