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Amsterdam, January, 2009

 

ANALYSIS , SUMMARY and ASSAYING, NOT ACCORDING TO  CANADIAN NI 43-101 RULES, OF PAPERS AND DOCUMENTATION ON RARE EARTH ELEMENTS (REE)  RESULTING IN AN ADVISE READER NOT FOR PUBLICATION NOR DISTRIBUTION TO THIRD PARTIES.

 

 

The statements in this paper represents the considered views of ‘mARTin van britsom&diksmuide&rare earth’ It includes certain statements that may be deemed “forward looking statements.” All statements in this article, other than statements of historical facts, that address future market developments, government actions and events, are forward looking statements. Although  MVB&D believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments  may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements  include new RARE EARTH application, the development of economic RARE EARTH substitutes and general economic, market or business condition. The information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecast and conclusions contained herein. Accordingly, the statements in the article should be used for general guidance only.  

 

For the latest report to update investors on developments in the world of strategy metals (author Terence van der Hout) click here

 

INTRODUCTION TO RARE EARTH

The rare earth elements (REE) which include the 15 lanthanide elements 57 through 71 and yttrium 39 are so called because the elements were originally isolated in the late 18th and early 19th centuries as oxides from rare minerals. Most REE are not as uncommon in nature as the name implies. Many REE vary more common than tin and molybdenum. Promethium (61) is best known as an artificical element. The lanthanide elements traditionally have been divided  into two groups: light rare earths; LREE 57 through 63,  lanthanium through europium, and the heavy rare earths (HREE) gadolinium through lutetium, 64 through 71. Although yttrium is the lightest LREE it is usually grouped with the HREE to which it is chemically

and physically similar. The REE are lithophili  (litho=stone) elements that invariably occur together naturally because all are trivalent.

 

Second half of the 19th century and the first half of the 20th century, REE came mainly from placer deposits. Whit the exception of the most abundant lanthanide elements: cerium, lanthanum and neodymium. Individual REE were not commercially until 1940. Since 1965, most of the world’s RE have come from two hard rock deposit: Mountain Pass (U.S.A.) and Bayan Obo, China. Note that Mountain Pass has been shut down during the eighties and is supposedly to be full operational around 2012. Resumed operations in October 2007 and  started with the taling, since, in that time, only 1 element was taken from the deposits as commercially interesting enough to the owners of said mine.

 

The estimated value of  net import of refined rare earth  in the U.S. was more than $ 1 billion; net import reliance as % of apparent consumption: 100%..

<36.000 mt REEO (2007) up from 30.000 mt (2005)

 

The easily broken minerals such as bastanite, where more desirable in those old days as today. For the others, they had no application for.  Even GM were rejected and frustuated products made of rare earth. Today no (advance) modern  technology would  exist  without them i.e. hybride cars, screens for LCD t.v., lED illumination, batteries, magnets and much more.

 

95%  of the world’s REE raw materials come from China, 5% from +/- Australia,  mined from the  (so called) junior mine’s among them  : Mount Weld.

 

THE LANTHANIDE ELEMENTS

39   57   58   59  60   61   62   63  64  65  66  67  68  69  70  71

Yt    La   Ce   Pr   Nd  Pm  Sm  Eu  Gd  Tb  Dy  Ho Er  Tm Yb  Lu

 

Whereas

39 yttrium; 57lanthanum; 58 cerium; 59 praseodymium; 60 neodymium; 61 promethium;

62 samarium; 63 europium; 64  gadolinium; 65 terbium;  66 dysprosium; 67 holmium; 68 erbium; 69  tholium; 70  ytterbium; 71 lutcium.

 

AVAILABILITY REE

Extrapolations learns that  China will need  all rare earths it produces by 2013, leaving the rest of the world  screaming for the oxide.

It (China)  will need about 230.000 mt by that year, up from 135.000 the year 2008. Production isn’t expected to keep pace. A 50- 60.000 mt shortfall is likely.

 

World mine production is just started up on a very low scale. Development  of a mine will not only takes huge sums of money but also will take about 20 years before it’s  start producing.

 

Estimates (2007) by the U.S, Geological Survey of the world resources are that REE are relatively abundant in the earth‘s crust:

 

Country           Mine production        reserves

U.S.                                            x                   13.000.000

Australia                                    x                    5.200.000

Brazil                                     730              48.000

China                             120.000                       27.000.000

Commonwealth                   NA                       19.000.000

India                                27.000                          1.100.000

Malaysia                              200                                30.000

Thailand                                NA                                 NA

Other countries                   NA                        23.000.000

 

It’s been considered that China is not a reliable supplier over the long term outside of China. The country has been upping tariffs and cutting export quota’s. Tariffs vary between 15-25% up from 10% in 2006 and cutting  export to 41.000 mt from 48.500 mt three year ago. Non-Chinese sources has to go back into development and bring all known deposits into production.

 

BALANS OF SUPPLY

The ratio of REE which they occur doesn’t  always  match demand and the metal can’t be selectively mined i.e.

Demand by 2012:

Te demand 600 mt; supply 300 mt. 

Pr demand 7.000 mt;  supply 10.500 mt.

In short supply will be: Eu, Dy, Yt and Te.

Note that i.e. Ce is most abundant at 60 parts per million (which is more than nickel or copper) to Lu at about 0,5 parts per million!

 

BALANS AND PRICES

Price have risen significantly between 2006-2008 for certain REEO and vary greatly. $/kg

I.e.:             2006       2007         2008                                                            2009 (January)* Metal pages

LaO              1,45        3,10          8,50   [56,00/294,00 nano]                    7,00  [11,50]                                     

EuO         260,00      300,00   480,00  [688,00]                                      420,00  [800,00]                      

TeO          455,00                     730,00                                                       350,00   [560,00]

NdO           20,90         29,00     33,00                                                          14,50  [17,50]

PrO            19,00       23,00       30,00                                                         14,50   [17,50]        

DyO           78,00       85,00     109,00                                                         85,00   [140,00]            

TbO         522,00     555,00     825,00 [720,00]                                       340,00  [560,00]

Ce                                 2,00          2,50 [51.20/78,00 other specs]           4,60   [7,00 sec]

YtO                               9,50                   [225,00]                                        15,50   [45,00] 

ErO                             68,00

GaO                           10,00                                                                              7,00   [18,00]

SaO                              2,40

Th                            790,00

YbO                         132,00                   [273/755,00 nitrate]

SmO                                                                                                                         4,50  [20,50]

 

REE prices are linked to substitutability:

Cerium              : $ 4,280 tonne  substitute some PGM’s  automotive exhaust; polishing agent, substitute  none.

Lanthanamum :$ 7,700 tonne NiMH  batteries Lithium Ion: fluid cracking catalyst: substitute  none.

Neodymium     :30,000 tonne magnets; substitute none.

Paseodymium  : $ 29,950 tonne Magnets; substitute  none.

Dysprosium      : $ 113,000 improved magnets at temperature; substitute none.

Europium          :$ 460,000 tonnen phosphors colour panels; substitute  none.

Terbium            :$ 710,000 tonne phosphor for colour panels; substitute  none.

 

To get more insight on price developments  note i.e. that prices which are quoted are for the oxides. In brackets the price for metal. Quoted daily at Metal Pages.com . Real price indices of metallic  minerals and crude oil- 1948-2007 see http://www.imf.org/external/np/res/commod/index.asp                 

 

The commodity price of REE  as a whole is not that significant. Whilst the metal market as a whole makes a turnover of about 20 (twenty) billion $

a DAY, REE makes around 1,5-2 billion a year. REE at $10-15 per kgs. Note that even the price on oxide raising dramatically  it will have little influence on the end product price.

 

Due to cheap labor (in China), environmental measures outside China, added to the production cost shifted the production to China. Caused also  prices to collapse and driving out other mine out of business. Through this process the price of REEO is now going up (export tariffs), but also could go down, when other  miners might give too much of a  competition, China could flooding the market with REE, driving others  out again to destroy  said competition.

 

Since China not only focus on the raw material but also  is looking for an added value to the product,  developing their own manufacturing industry, it’s restricting more and more REE exports. Hence on the European Community list…examples  raw materials export restriction is China the winner . 10 Named  out of 24 countries (including China) , China is dominated the list

 

 

APPLICATIONS

 

Generally speaking expecting increasing demand /consumption in metric ton:

Application           2005           2008           2010                                    2013

Magnets               17,150     28,250       31,100                              47,000

NIMH batteries     7,200     24,000        27,300                              52,000

Catalyst                21,230     24,500        25,960                              35,000

Polishing              15,150     16,250        23,500                              23,000

Glass                     13,590     13,200        13,990                              14,000                  

Phosphors             4,007     10,000          7,512                               15,000

Other                   16,935       9,000        24,950                               14,000

Totaling                95,262  125,200      154,312                            200,000

                                                *cons.         *estimated 2006            * 2008

 

More specific

 

No Hybrid cars, magnets, LED lamps, t.v. screens nor cell phones not mentioning the defense industry as a whole.

Compact fluorescent lights (greenhouse gas reduction)

Hybrid vehicles (green house gas reduction)

Fluid cracking catalyst (oil industry)

Flat panel displays

Digital camera’s / television

Disk drives

Pod/MP3 players

Automotive catalytic converters

Glass polishing and glass additives

Fiber optics

Oxygen sensors

Super conductors

Magnets, base-metal alloys, super alloys, armaments

 

RUSHING MARKETS

General Motors, rushing to Japan (2005)  searching for the new technology, starting with Toyota’s and their  lovebaby: the Prius and looking worldwide for advanced batteries of gas-electric hybrid cars new project. Panasonic  EV Energy Co. ltd one of the top makers of hybrid cars batteries sent them away. This kind of business has rekindled to economic nationalism.  Not only to subtract the elements and separated them is quite complicated Important in this business is to have the knowledge on technology (but was lost  after the eighties) and the manufacturing of a said product.

 

Scientific publications and among them from the  European Rare-Earth and Actine Society (Yttrium and Hybride batteries) were in 1996  presumable better picked up  by Toyota than GM and his allied Honda (and not to forget Chevron/Texaco)  who’s also not a follower of the NiMH batteries to put it mildly.

 

Considering that Toyota has brought the Prius  already on the market in 1997, one can conclude that GM 10 years  walking  behind. All politics by GM during that time was aimed to killing their own version of the electrical vehicle ( the EV1)  and sabotaging his own design. GM worked together with Chevron (COBASYS), an oil company, suing Toyota to stop production of the electric car and suppress the success full batteries NiMH by patent laws. 

 

GM bought the worldwide patents from his inventor Ovonics. In 1994 GM sold control GM-OVONIC to Texaco. Texaco merged with Chevron and re-named  the company in CHevronOvionicsBAterrySYstems (COBASYS) and law suited Toyota. Toyota still kicking and very alive targeting at 1.000.000

Units by 2010. Only recently Chevron Mining has sold  Mountain Pass to Molycorp Minerals. Leaving the one and only US mine to deliver REE in the hand of others.

 

Taking also in consideration in spite what was all written before: Toyota’s announcement at the North American International Auto Show in Detroit beginning 2009 that it’s new plug-in hybrid wil be powered by Li-ion batteries is/was news  for  properties holding Lithium deposits. This change of policies by switching from NiMH batteries to Li-ion released Toyota, Panasonic EV  Energy Co and  from the stronghold GM patents has on them .

 

Strange things happening on the way to the forum; GM takes 10% in a Vietnamese REE mine. It’s true that an oil company worked with GM to sequester these batteries, and the oil company still retains ownership of the patent rights, aggressively defending them against any use for plug-in cars.

 

 Some small US manufacturer has started up the production for patented batteries  (lithium-ion battery) of the Prius plug-in-hybrid. However still has to import his oxides and ‘mischmetal’ (special metal alloys with REE 7- 11 $/kgs fob China (2009). Hybrid cars using about 20 kg. Not in particular  the batteries  only, not to forget are also the special strong magnets it carries)

 

MINING PRACTICE.

The mining industry is largely dominated by privately owned TRANS NATIONAL COMPAGNIES (TNCs), or mining majors. These ‘majors’

<150 represent only a fraction of the 4.000+ companies. If juniors find a deposit, it is usually sold to a major mining company, capable of raising the necessary capital, experience and competence to invest in actual production. Or in other words: The majors represent about 83% out the total value of all non-fuel minerals production, whilst the remaining <1.000 medium sized and <3.000 small companies is accounted for 17%. Juniors are essentially specializing in exploration. Only the top 10 took <33% of the value world mining production. Revenues in million $: 232.574. (2007)

 

Note: the cyclical nature of the metal industry can be observed throughout the 20th century. Since the mid-seventies, real metal prices  have displayed a gradually declining trend, generally believed to be the result of excess capacity and dematerialization of the industrial economies. In period of higher demand for raw materials, supply may not be able  to keep pace, resulting in higher prices. In the mining industry it typically takes many years between indentifying economically deposits and the start up of actual mine production. This is due to many factors, such as raising sufficient investment capital, long planning and permit phases, potential bottle necks in infrastructure, time lags in delivery of mine equipment and lack of skilled staff. Once supply catches up with demand due to increased production, recycling, substitution and/or innovation, prices usually decline again, and excess supply capacity may occur.

 

Rare earth is mined for 95% in China, 2% US, 2% India(!) *USGS

 

POLICIES FOR SECURING NON-ENERGY  RAW MATERIALS

 

AMERICA

According to the Strategic an Critical Materials Stockpiling Act (50 U.S.G. 98 et seq.) the US is conducting i.e. scientific, technological and economic investigations concerning the development, mining, preparation, treatment and utilization of ores and other minerals. In 2008 the US National Research Council released a report on the criticality of non-energy raw materials for the US economy. Of 11 raw materials that were analysed, 5 were assessed as being ‘highly critical’ indium, manganese, niobium, rare earths and the platinum group metals.

 

Beside Mountain Pass, secretly(?)  in Wyoming (bear lodge)  has reserves large enough with thoroughly rare elements reserves . Rear Earth Resourses could be in exploration. Until 1998, the U.S. was the second largest producer of rare earths from Molycorp mine in Mountain Pass. The facility was closed in December 1998 due to certain environmental concerns. Prices  were additionally impacted of this closure of the only large scale rare earth mine outside of China.

 

In another response  to the growing need for minerals information, the U.S. Geological Survey (USGS) is conducting a cooperative international project to assess the resources: Global Mineral Resource Assessment Project  (GMRAP) in cooperation with the French Geological Survey (BRGM)

 

In recent times, there have been more and more assessment of the importance and even criticality of the supply of non-energy raw materials to national economies.

 

In some countries assessments are being carried out, but are not always publicity available *(prepared by RPA. RWI Essen for the European commission, September. 2008).

 

 

 

EUROPE

First of all, high tech metals are important for the EU economy and are characterized by sudden demand peaks which are strongly driven by the production of new products based on a new technology; for instance mobile phones use tantalum, flat panel display use indium. It’s expected that new Light-Emitting Diodes (LED’s) making use of gallium will consume 50% less than incandescent light bulbs  using tungsten wire.

 

Net imports as % of apparent consumption (EU 27 mine production+imports-exports)= 100% *(BRGM)

 

Said report  of the commission of the European commission, staff document ..meeting critical needs (SEC (2008) 2741, states on the listing ‘high tech materials…innovative ‘environmental technologies’:the following, not detailed by writer;

 

 

 

 

Problem                                   solution                                      raw materials (application)

Future energy supply            fuel cells                                     REE                                              

                                                  Hybrid cars                                REE Ne (high performance magnets)

                                                  Alternative energies                REE     Ga

                                                  Energy storage                         LI, Zi, Ta Co  (batteries)

Energy conservation             Advanced cooling

                                                  technologies                             REE

                                                  New illuminants                       REE, In, Ga: LEDs, LCDs, OLED

                                                  Energy saving tyres                  various industrial minerals

                                                  Super alloys (high efficiency

                                                  Jet turbines)                              Rh

Environmental protection   emission purification

                                                  Prevention                              REE, Pt, Pl, Ag

High precision machines    nanotechnology                      Ag, REE

IT limitation                            RFID (handheld consumer

                                                  Electronic                                 In, Ag, REE

 

Not only America, Europe but also  for Japan there are high supply risk. High tech metals are often by-projects of mining/processing, which means that their availability is largely determined by the availability of the main product. Due to its low or very low elasticity (sometimes a by-product from a by-product), production cannot adapt easily to demand, which increases the crisis risk in 2000 due to the boom in mobile telephones.. The need for Europe to focus particular role of high tech metals is confirmed by the French geological survey BRGM. To conclude, in short: ….put it said material on the strategic list of raw materials and stockpile.*{ Commission of  the European Communities, Brussel SEC (2008) 2741; commission Staff Working Document: accompanying the Communication from the Commission to the European Parliament and Council; Raw materials Initiative- meeting our critical needs for Growth and jobs in Europe}.

 

JAPAN

Early in 2008 the Japanese government published its ‘guidelines for securing National resources’ which included the statement that Japanese

Government ”will support key resource acquisition project  related long-term contracts…resources to users in Japan”.

 

In 2004 the Japanese government created the Japanese Oil, Gas and Metals National Cooperation (JOGMEC: www. Jogmec.go.jp/English/index.htm).

Among JOGMECs important activities are providing financial assistance to Japanese companies for mineral exploration and deposit development, gathering and analyzing information on mineral and markets to better understand supply risk and managing Japan’s economic stockpile of  RARE metals as those that (a) are essential to Japanese industry, sectors as iron and steel, automobiles, information technology, home appliances and (b) are subject to significant supply instability. JOGMEC took over and manages the Japanese rare metal stockpiles in cooperation with private companies with the goal of having stocks equivalent to 60 days of domestic  industrial consumption  Stock exist and is closely observing 14 raw materials.

 

The Japanese newspaper Yomiuri of January 27th 2009, states the following; Quote:

“Obtaining the rights for REE deposits in Vietnam is a big step forward in securing a stable supply of the minerals to Japan, which relies entirely on foreign imports of the materials.

 

Currently, China produces about 97% of the world’s rare earth mineral output, making the supply and prices of the minerals highly susceptible to changes in Chinese government export policies and the operational status of production facilities.

 

Disruptions in supply would hit hard Japan’s major industries, such as automakers and home appliance manufacturers.

 

The government, keenly aware of the need for securing the steady supply of REE, has been stepping up efforts to develop better relationships with countries that produce the minerals.

 

In 2008, the government drew up a framework to support efforts by domestic companies to secure supplies of natural resources to the country.

 

However, even if all of Vietnam’s REE production was imported, it would only cover about a quarter of Japan’s annual consumption. Further efforts to diversify mineral supplies are needed.

 

The government is expected to make great efforts to secure natural resources supplies by heeding the conditions and request of REE producing countries, such as providing technical aid and developing ports, railway networks and other types of social infrastructure.

 

The Vienamese government says it will ensure a stable supply of REE minerals to Japan for manufacturing high-tech products.

 

The trading companies Toyota Tsusho Corp and Sojitz Corp and a Vietnamese government run resource development company will launch a joint venture to start developing a major REE mineral site in Vietnam in the next fiscal year.

The two countries plan to develop the Dong Pao deposits, about 280 kilometers northwest of Hanoi.

 

The joint venture will begin commercial mining operations as early as 2011 supplying about 5,000 tons of REE of the minerals, or about a quarter of Japan’s annual consumption, for about 20 years.

 At a meeting held in mid-January in Ha Long, Vietnam, Vietnamese government officials informed

Trade and industry minister of Japan, that it would ensure that Japan received a stable supply of REE. Unquote.

 

CHINA

Metal pages, 12th January 2009: Chinese export quotas  for REE for the first half of  2009 total 15,043, down about 34% compared  22,780 tonne in the corresponding period in 2008.

 

Metal Pages, 16th January 2009: CHINA to push forward national stockpiles of rare earth metals and minerals.

Quote: “China is pushing forward its national stockpiles of oil and rare metals and minerals, according to the newly announced ‘National Mining Resources Plan for 2008-2015’. Stockpiles of mining resources are very necessary especially when there is strong demand for resources and big economic fluctuation, said a spokesman at China’s ministry of Land and Recourse. ‘In view of the current economic situations and market conditions, it is very good accession to carry out the stockpiles, which will be help to protect our mining resources.. According to the plan, China will set up STOCKPILES  of oil and minerals including…..and rare earths etc

 

Headline in Metal Pages January 23rd 2009:”Ganzhou to stockpile 10,000 mt rare earths and tungsten”. The way the reserve would operate is that producers would deposit their products as security with some banks in exchange for loans to settle their cash flow problems. This would then discourage producers from competitively decreasing prices to sell their stocks to generate cash and they would be able to get some allowance from the local financial department when paying back the loan.

 

 Meantime the Chinese will set up an efficient management mechanism, which is designed to enable both authorities and local enterprises to take part in the stockpiles”. Unquote.  Market is sluggish (2008/9)  in the past two months, reflecting diminished demand from overseas due to global financial crisis. A Chinese report from 2006  (ATMSP)  recalls the need for 51,900 mt before melting and are expected to use 12,300 mt by 2010. Things happening over there* (Metalplace.com: rare earth,inc products) Although information was distributed in 2001 (one) its makes  some things very much clear. ( Quoting only from  the headlines of said report.)

 

In 2006 the government issued its first of currently two 10% export tariffs on rare earth. A third 10% tariff was expected before the end of 2007. Additionally, it began to strict the amount of quarterly export quota granted to producers to a very small percentage of the quotas first issued in 2005. In 2008, these factors are expected to force rare earth prices even higher with lower grade forms potentially becoming scarce further in the future.

 

Resumed:

China dominates the market. (200 plants or so plants in China are  competitive.

Using around 60% of the REEO and upping.

Strong growing manufacturing sector;

Secondary processing capacity by value adding industries. It’s not China’s aim to strangleholds REE’s nor about money (higher prices) but job creation;

Stockpiling, production quotas, export restriction

Export tariffs  up to 25%.

 

RUSSIA

Metal Pages;  December 31rd 2008

Quote:”he Russian Federal subsurface resources agency (ROSNEDRA) will not publish a list a federal deposits this side 2009. …The new version the law…federal status…all deposit….group of rare earth..bars foreign companies from buying more than 10% of companies that hold licenses to STRATETIC properties”, unquote.

 

 

 

 

 

AUSTRALIA

Has monazite deposits in Western Australia as a bi-product of their zirconium and titanium production from heavy mineral sands. In the early 1990s Astralia produced a substantial quantity of monazite for export to rare earth separation plants in Asia and Europe. However, production essentially stopped in 1994 due to the problems associated with the disposal of radioactive thorium. There have been several proposals to develop deposits in Western Australia, such as the Mt. Weld deposit in Pinjarra. Currently there are not any large commercial producers in Australia.

 

Not mentioned  in mining practice (see above)  is Australia, no reports as being too small, however relatively  a big player.  The company : LYNAS  Corp mines one of the big players outside China  could produce  around 2010,  10.000 mt a year, to be raised to about 15%  in 2015 of the worlds  output:  Mt. Weld project. Reserves  estimated at 2 million mt at 10-15 $/kg REO makes about  2 billion. When purity reach (*what is expected) 20% it could raise to 2 B., When higher upping to 5 B! Market capitalization around 190 million US$ expected profit 100mio p.a. To quote a  thread on internet: : Australian takes China’s secret raw materials monopoly  as a chalence and going fight for it. (www.wallstreet-online.de) As one of the tricks in this trade: they have sold/contracted  for delivering REEO  for the coming years  to a big processing plant of REEO: Rhodia.

 

POTENTIAL NON-CHINESE REE SUPPLIERS

 Mountain Pass , U.S.A.; Chevron/Molycorp

Mt. Weld, Australia/Malaysia; Lynas.

 

‘Under construction’.

Dubbo zirconia, Australia; Alkane resources.

Nolans, Australia; Afura recourses.

Hoidas lake, Canada; Great Western Mining.

Thor lake, Canada; Avelon ventures.

Kvanefjeld, Greenland; Greenland Energy & Minerals.

Bear lodge, U.S.A.; Rare element recourses.

 

KEY  STATISTICS

Summary world production demand rare earths for major application in metric ton.

REE                                        2004 demand             2005 demand           2010 demand

Application

Permanent  magnets          13,650                          17,170                         33,650  hybrid vehicles

NiMH batteries                      6,200                             7,200                         27,300  hybrid vehicles

Catalyst                                 20,440                           21,230                        25,960  gasoline, diesel, vehicles emission control

Phosphors                               3,652                             4,007                           7,512  LCD and PDP displays

Polishing powder                14,100                           15,150                         23,500  LCD and PDP displays    

Glass additive                      13,440                           13,590                         13,900  digital camera’s fibre optics

                                                                                                       Totaling <132,000 mt* estimated undated Great Western Minerals group

Roskill  and  IMCOA forecast for the year  2013 a demand of REEO of 207,000 mt and a supply/production of 230,000 mt

 

All in all; demand for rare earth magnet alloys has grown in the past years significantly to +/- 24,000 mt p.a. (2008);

Growth of the past 5 years 2003-2008 in demand was 15-25% p.a.;

Demand for rare earth magnets  like voice coils, electrical drives and audio-visual equipment  continues to grow;

When this continue demand could be run up to +/- 50,000 mt.

 

MARKET DEVELOPMENT

Rising prices

 

Increasing demand > 200,000 (2013)

 

Supply tight.

 

End users premium  on REEO rising price is negligible  (but can’t  without them).

 

Difficult market to enter by newcomers.

 

Seller and buyer establishing relationship i.e. long term contract for future deliveries.

 

End user manufacturer of REEO should be aware they could lay their hands on the REEO to apply for newly developed products

(due to China export quotas) which will put on said manufacturer a pressure to move to China (securing supply of REE).

China will not, presume,  ’starve’ the rest of the market  of REE. Would be an issue for WTO negotiations(?) and/or import restriction in case of flooding the market.

 

New projects had to be developed and running one’s speeded up. There’re only of few scarce sources to develop new mines (taking > 15 years). Environmental approval processes, a lot financing and skills(know how) will makes things going slow. Down streams:  REE must be delivered to manufacturer/smelters/refiners who know what to do with it to deliver  the oxide to customers seeking Non-Chinese sources.

 

THE SUPPLIERS OF REE.

 

 Chevron/Molycorp

Project:

Mountain Pass rare earths mine, California; opened in 1951; Being re-commissioned and bought from Chevron mining in September 2008.

Resource:

50 mt at 8-9% REO, 5% cut off for 4,3 mt rare earths.

 

Capicity:

Mine and processing plant set up; full production in 2012 at 10,000 mt REO p.a.; Processing as from 2008 up to 2011 lanthanum concentrates pond and stocks of baestnaesite concentrates.

 

Runner up, little down stream facilities. Could be frustrated  (again) by automotive industry.

Governmental stockpiling facilities?

 So far the only commercial REE resource.

 

Phase two will begin approximately September 2009 and will involve the processing from the vast stockpiles of bastnasite concentrate on site.

 

Phase 3 will involve the FULL restart of mining operations at Mt. Pass.

 

They also leveraged their REE chemistry in conjunction with industry ‘green’ technologies. Products are for sale now and are offering them to potential customers.

 

 Lynas

 

Bid A$ 0,305 offer 0,310  close 0,215 ;  52 week high/low  0,145/0,1675;*( pending on source 0,86-1,64 05.2008)

 

01.16.2009:A$ 0,295 (strongly advised may 22nd 2008 to buy at $ 1,53)

 

Capitalization: $1.027,2 M;  shares 671, 4 M.;  Debt 0;  Cash est $104 M.

 

Project:

Mt Weld mine and concentrator western Australia, processing in Malaysia.

 

Resources:

7,7 grading 12% REO, 8% cut off for 920,000 mt contained.

 

Capacity:

10,000 mt p.a. starting mid 2009; potential expanding to 20,000 in 2011-12.

 

Lynas has a strategy of creating a reliable, fully inter grated source of supply from mine through customers and become the benchmark for security of supply and environmental standards in the global REE industry

 

The company is an emerging miner in the phase  of capital rasing and investing. First regular revenues are expected after commissioning of the mine and the processing plant in 2010

Lynas owns the richest deposit of rare earths also known as Lanthanides, in the world at Mt. Weld. With the first mining campaign complete and all environmental approvals in place, Lynas has commenced construction of the concentration plant at Mt Weld, as well as an Advanced Materials Plant to process the Mt Weld concentrate through the final rare earth carbonades and oxides in the Gebeng Industrial Estate, kuatan, Pahang, Malaysia. Fist production scheduled 4th  Q 2009. REE is strongly enriched with the valuable heavy lanthanides.

 

Seconds largest resource in the world for Nb₂o₅

 

Lynas has signed  the sixth customer agreement for Mt. Weld Rare Earths to be produced from the company’s Malaysian Materials plant to purchase material from phase one 1 of the Advanced Materials Plant, which is planned annual capacity of 10,500 tonne REEO.  May 2008 was reported  futures sales contract of $ 675 M. Also signed, Bayerische Hypo- und Vereinsbank precedent related to off-take contracts for present drawdown of the US$ 105 M senior loan facility. The contracts signed to date are with industrial companies whom consume large quantities  of REEO rather than with intermediates trading companies.

 

Lynas was to relocate the concentration plant from China back to Mt Weld  to develop the Advance Materials Plant to process the concentrate through the final product.

 

All due to:

-Increasing Government control of the rare earths industries in China, thereby increasing the     project risk for theirs Plant.     

 -  Escalating operation cost in China due to the government policies noted above and also inflation affecting cost  of reagents, utilities and labor.

 

Opportunity to reduce cost base denominated in Renminbi and thereby benefit from a strengthening Chinese currency was a help. And beside many  other reasons to start in Malaysia is was including a 12 year tax free period.

 

Detailed commercially terms are confidential.

 

Branding; will establish a Lynas  Red Brand <RED®>, ‘Rare Earth Direct), to present a three key value proposition:

-         Building a fully intergrated supply system from mine to customer;

-         Producing Rare Earths that meet the world’s environmental standards

-         Marketing an international brand of guarantee quality.

Lynas development of the RED model will ensures maximum …across the value chain…entire business cycle.

 

Aswell as REE Mt. Weld hold potentially economic deposits of Ta₂O, Nb₂O, Tlo ZRO₂ Fe₂O₂ P₂o₅ Y₂o₃ Al₂o₃ Tio₃ collectively termed polymetalic by Lynas. 37,7 million tones at 30-60 meter depth.

 

 

Alkane resources ltd

Project:

Dubbo zirconia , New South Wales.

Market capalisation: 42,810,978 ; 52 Week High 0.5150 ; 52 Week Low 0.100 ;  closing

16.01.2009: bid 0,1650 ask 0,1700 A$

 

Resources:

73 mt at 0,9% REO for 675,000mt contained.

 

Capacity (potential):

1,000-2,000 mt p.a. REO by 2011.

 

Operates in China upgrading REE.

REE Production is largely on sold via annual contracts.

No down stream facilities outside China.

 

Alkane  (partner Newmont Cnd. in Au mining, has been operating the Demonstration Pilot Plant (DPP) for its 100%­ owned Dubbo Zirconia Project (DZP) since April 2008. In late November 2008, was presented at the 4th International Rare Earth Conference held in Hong Kong. The interest was there from potential customers was high and forwarding.

As said and quote CEO MD Ian Chalmers; Quote: “ the conference was very interesting and even though there was an amount of conservatism given the world financial situation, everybody is still very positive about the rare earth industry. Those views are primarily driven by legislated environmental issues such as emission controls for vehicles, low energy light bulbs, rechargeable batteries and high temperature magnets etc. Demand for these products will be reflected in demand for rare earths and the general feeling is that, while we may have a flat period for the next six months or so, the long term projections are good, ”unquote”.

Quote:”Market conditions have also moved in favour of towards to zirconium and niobium businesses. Most of the world's downstream zirconium output comes from zircon supplied by mineral sands operations. However, supply from that source is not keeping up with demand, resulting in upward price pressure and flow-on benefits for the downstream zirconium business. Niobium demand has been driven by the special steel industry and although we can expect some flattening in the next six months, the  discussions in Hong Kong suggest that there shouldn't be much impact on niobium demand or price longer term.”, unquote

Quote:”The only way to properly engage potential customers is to produce sample products. Alkane anticipate delivering zirconium and niobium samples early in the New Year and rare earths possibly around March. Hopefully we can then move on to discussions on sales terms including volume and price. I was pleasantly surprised on the number of positive responses in Hong Kong about the Project. Alkane have sized the DZP in a way that should cause the least amount of impact to the market and they seemed to appreciate that approach, particularly when you consider the size of the DZP resource could support a much larger project. Our base case model remains at 200,000 tonne per annum of ore throughput with an upside case of 400,000 tonne per annum. At the base case rate, the open pit has a life in excess of 400 years, so it's a very big resource.”, unquote.

 

Alkane has recently conducted the second 24/7 operating campaign for the DPP including the yttrium-rare earth recovery.

According to mr.MD Ian Chalmers  the plant is working well. In a mechanical sense, the second 24/7 campaign of approximately 30 days went smoothly with no major issues. They’ve been progressively resolving some chemistry issues, which were apparent in the previous campaign and we're now producing quality zirconium and niobium products. To date, we've produced nearly half a tonne of zirconium product and about 100kg of niobium product, but the early output is not what we would call our standard specifications The next campaign will be undertaken in February (2009) and will be a more definitive run. The light rare earth laboratory work is producing some good results and work is continuing on the yttrium and heavy rare earth recovery. We are quite excited because we could become the biggest yttrium and heavy rare earth producer outside China if we can get this part of the project incorporated into the output .

 

Arafura resources

52 weeks high low A$:  approx 1,30-0,05; closing  0,32

 

Project:

Nolans REE project; Northern territory, Australia.

 

Resources:

30,3 mt at 2,8% REO; 12,9% phosforic acid… Po-Uo.

 

Capacity (potential):

5,000 mt p.a. starting 2011 building up to 20,000 mt in 2013

Feasibility study underway; demonstration plant completed.

 

01.16.2009 Bid 0,325  offer 0,340  last 0,36; High/low 52 week 1,30-0,40

Resource risk : (more than 30 years)

Demonstration plant full operational, excellent results

Reserves  30,3 million ton REO% 2,8

Open pit maximum dept 130 meters

Current cost 100% at 14,17 Au$

 

Nolans REE mix:               Mt Pass    Baotou    Sichuan Mt weld

68% Sa, Eu, Ga, Yt, Te;     < 81          <76           <74          <73

28% Nd, Pr, Dy.                  < 18          <21           < 18         <29

4% Ce+La.                           <    1          <   3          <  6          <  4

 

The plan ahead:

-         Report on REE carbonate                                            : Q1 2009

-         Complete REE separation works                                :2Q 2009

-         Bankable feasibility study                                            :Dec. 2009

-         Mining lease approval                                                    :2009/2010

-         Undertake project costing, sourcing, financing      :2010

-         Consolidate partnerships                                             :on going

-         Looking for keystone investors                                   :on going

Runner-up; too late starter; downstream facilities planned?

 

Matamec  Exploration

Project:

Zeus property Kipawa complex; Canada

Just starting surveying  NI 43-101  calculation

Too slow starter no down stream facilities.

 

Great Western Mining Group

 

Bid 0,027 ask  0,076 €  closing 0,044 (01.16.2009) high/low 0,203/0,0140

 

Typically Canadian exploration company. The company is developing REE properties to mine REE as a source of supply for its downstream business. Taking over recently a small British manufacturer. Long history (1983) drilling, exploration  and private placements

 

Outstanding shares:142,500,000

 

Recent, private placement: August 26th                :   8,000.000 units;

                                                   September 12th  :   8,333,333 units

                                                    October 20th         : 15,000,000 units;

                                                    December 18th   :   3,333,333;  units

Totaling  34,666,666 units consist of one flow through common share and one-half share purchase warrant, and so on on top of the formally issued private placement.

 

Investment growth, putting  in GWG $Cnd 10.000 in 2004

2005: 32.000

2006: 20.000

2007: 12.000

2008: (-) 5,500

 

Large claims resources:  South Africa at Steenkampkraal. Expecting 2,500 tonne production p.a.  over 10 years and talings; open pit, dip to 250 meters; 3 African partners. Hoidas Lake Project  in Saskatchewan; the Deep Sand project in Utah; Misty project in Manitoba, Douglas River property Saskatchewan.

 

100% interest (downstream) in Less Common Metals Ltd manufacturing rare earth based alloys and other specialized products.

 

Hoidas not  (fully) producing. Proceeds goes to affliated company GWTechnologies, inc

Resource: 1,2 mt at 2% REO; 1,5% cut off for 30,000 mt contained. (NI-43-101 procedure)

 

Capacity:

3-5000 mt p.a. in 2011-12.

 

Too slow, little down stream doings, too many stakes to handle (January 8th 2009 the latest: Benjamin River Property, New Brunswick).

 

 Avalon ventures

Is Canadian mineral exploration and development company with a primary focus on the rare  earth metals and minerals.. Avalon presently owns five rare metals and minerals projects in Canada, three of which are at an advanced stage of development.

Project:

Thor Lake North West Territory.

Resource:

14 mt at  1.2% REO; 0,1%yttrium cutoff for 200,000 mt contained.

Capacity (potential)

3- 5,000 mt REO in 2012-13

Prefeasibility study to be completed in 2010,  if all goes well, is particularly rich in heavy  rare earth (HREE) that are crucial to some hybrid automotive technology and therefore more valuable then LREE.

Close 0,85; High/low 1,95=0,295

Typically Canadian exploration company: large private placements to apply for exploration, and not developing a ‘real’ mine.

Too slow starter, no downstream facilities.

 

Greenland Energy & minerals

Project:

Kvanefeld Greenland;

Resource:

Resumed test drilling for 15,000 meter 2008

Capacity:

Large deposit  multi-element metals. Mainly Uranium interfered by REO. Est. 2,3 mt

Starting  too late. No down stream facilities

 

Rare Elements resources

Project:

Bear Lodge U.S.A.;

Resource:

2008 resumed test drilling. Capacity:

3,9 mt  at 3,8% REO. Estimated in 1990 and not compliant with the Canadian mining rules N(ational)I(nstrument) 43-101  and just starting. 

Starting too late. No down  stream facilities

 

 

 

ASSAY TO PLACE  THE BETS:

 

Evaluating above mentioned REE producers,  and  making a choise to invest; while ALL stocks of all producers are on  a historical low there  might be 2 or 3  names good to invest  (not to forget the other ones, all running  very fast but not in the front line) in:

 

Lynas,   # 1: producing and downstream facilities; (A$ 0,27 January 23rd)

Alkana, # 2: allmost as far as Lynas; (A$ 0,155 january 23rd)

 

 

 

 

 

 

 

 

BIBLIOGRAPHY & FOOTNOTES

Industrial minerals and rocks; Stephen Castor et al

Bulletin Minor metals and rare earths ,2008, Dudley Kingsnorth

Walter T. Benecki LLC BBC research 2006

Wardrop engineering 2006

United States Geological Surveys (USGS) 2008

World mining data 2008

World refinery production USGS 2008

RWTH Aachen Germany 2008

BRGM 2008

Raw materials Data Stockholm 2008

World investment report U.N. 2007

Minerals, Critical minerals and the U.S. economy 2008

USGS fact sheet FS-053-03

JOGMEC: Japanese oil, gas, and metals national cooperation

RWI Essen, the European commission sept. 2008

Dechamps Y. et al BRGM/RP-51558-FR

Hocquard C. et al 2006 & 2008

USGS mineral commodity summaries, 2008, James B. Hendrik

Commission of the European communities,commission staff working document

Accompanying the parliament/raw materials, meeting  critical metals,

Brussel SEC 2008-2741

The Northerminer, Canada

Recourse investor, Jack Lifton

Barry Allen, Research cappital

Y. Lynk, Canacord capital

Andre Gautier, Matamec exploration

Metal-pages

Metal place

Eres newsletter, European rare earth and actine society .

Business Communication Company, inc

Université de chimie minérale et analystique

World Investment report 2007, United Nations 2007

Minerals, critical minerals and the US economy (2008), National

Research Council

Roskill

IMCOA.

 

 

 

 

 

 

 

Annex.

/ t J METAL - PAG E S

 

Metal Prices for 22 January 2009

Rare Earths

ill Ce Metal 99% min China 28000 - 33000 Rmb/mt

ill Ce Metal 99% min FOB China   6.9 - 7.2 $/kg

ill Ce Oxide 99% min China     12500 - 13500 Rmb/mt

ill Ce Oxide 99% min FOB China 4500 - 4600 $/mt

ill Dy metal 99% min China 690 - 720 Rmb/kg

ill Dy Metal 99% min FOB China   135 - 140 $/kg

ill Dy Oxide 99% min China     430 - 450 Rmb/kg

ill Dy Oxide 99% min FOB China 81 - 86 $/kg

ill Eu Metal 99% min China 4300 - 4500 Rmb/kg

ill Eu Metal 99% min FOB China   770 - 800 $/kg

ill Eu Oxide 99.9% min China           2200 - 2250 Rmb/kg

ill Eu Oxide 99.9% min FOB China         420 - 430 $/kg

ill Gd Metal 99% min China 70000 - 80000 Rmb/mt

ill Gd Metal 99% min FOB China   18 - 18.5 $/kg

ill Gd Oxide 99% min China    15000 - 20000 Rmb/mt

ill Gd Oxide 99% min FOB China 6500 - 7000 $/mt

ill La Metal 99% min China 46000 - 50000 Rmb/mt

ill La Metal 99% min FOB China    11 - 11.5 $/kg

ill La Oxide 99% min China 22000 - 26000 Rmb/mt

ill La Oxide 99% min FOB China   7000 - 7500 $/mt

ill Mischmetal La 35% Ce 65% China             25000 - 28000  Rmb/mt

ill Mischmetal La 35% Ce 65% FOB China 7 - 7.5 $/kg

ill Mischmetal low Zn and Mg China     50000 - 53000 Rmb/mt

ill Mischmetallow Zn and Mg FOB China 11 - 11.$/kg

ill Nd Metal 99% min China 90000 - 100000 Rmb/mt

ill Nd Metal 99% min FOB China   17 - 18 $/kg

ill Nd Oxide 99% min China     63000 - 68000 Rmb/mt

ill Nd Oxide 99% min FOB China 14000 - 14500 $/mt

ill Pr Metal 99% min China 90000 - 100000 Rmb/mt

ill Pr Metal 99% min FOB China     17 - 18 $/kg

ill Pr Oxide 99% min China 62000 - 67000 Rmb/mt

ill Pr Oxide 99% min FOB China    14000 - 14500 $/mt

ill Pr-Nd Metal 99% min China         78000 - 88000 Rmb/mt

ill Pr-Nd Metal 99% min FOB China      16 - 17 $/kg

ill Pr-Nd Oxide 99% min China        55000 - 60000 Rmb/mt

ill Pr-Nd Oxide 99% min FOB China     13600 - 14100 $/mt

ill REC03 42-45% REO China          6000 - 7000 Rmb/mt

ill REC03 42-45% REO FOB China       3500 - 3600 $/mt

ill Sm Metal 99% min China    95000 - 105000 Rmb/mt

ill Sm Metal 99% min FOB China             20.5 - 21 $/kg

ill Sm Oxide 99% min China   14000 - 15000 Rmb/mt

ill Sm Oxide 99% min FOB China            4.25 - 4.75 $/kg

ill Tb Metal 99% min China 2500 - 2800 Rmb/kg

ill Tb Metal 99% min FOB China    520 - 560 $/kg

ill Tb Oxide 99% min China 1500 - 1700 Rmb/kg

ill Tb Oxide 99% min FOB China   340 - 360 $/kg

ill Y Metal 99.9% min China    200 - 230 Rmb/kg

ill Y Metal 99.9% min FOB China             35 - 45 $/kg

ill Y Oxide 99.999% min China        41000 - 46000 Rmb/mt

ill Y Oxide 99.999% min FOB China     15000 - 15500 $/mt

Contact Metal-Pages - © Metal-Pages Ud. 2000 - 2008 All rights reserved

Amsterdam, February 2009.

 Martin Van Britsom


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