Censorship; RE Exports - The Return of Blood; EU Magnet Grandstand; India's Magnets; Future of EV; Neo Comment; ASM's Achilles Heel; OZ Next RE Producer; Pensana's ESG; China RE Shares Nosedive;

Rare Earths 2021 September 5

Our relationship with China bases on trust and understanding. They don’t trust us and we don’t understand them. (Horst Damm, Canton Spring Fair, Guangzhou, 1991)


From August 27 onwards there will be only good economic news on China’s intranet, as one of the uncounted “rectification campaigns” now focusses on economic blogs and news:

The State Cyberspace Administration of China launched a special rectification of the Qinglang commercial website platform

The relevant responsible comrades of the State Cyberspace Administration of China introduced that this special rectification focused on four types of online communication entities, including

  • Financial "self-media" accounts [blogs];

  • Major public account platforms;

  • Major commercial website platforms, financial sections;

  • And major financial information platforms,

The focus is on cracking down on 8 categories of violation issues:

  1. Make unreasonable comments, distort and interpret our financial policies, macroeconomic data, maliciously sing about our financial markets, slander China’s economy, etc.;

  2. Reprint and convey overseas misinterpretations without any standpoint and judgment reports and comments on hot spots in the financial and economic field;

  3. Spreading “grass news”, spreading hype, even spreading rumors, and spreading rumors in the name of “revealing”, “heavy”, “exclusive revelations,” and “informed people”;

  4. Reprinting compliance: When manuscripts source financial news information, malicious tampering, out of context, one-sided misinterpretation and other "headline party" behaviors;

  5. Acting as a financial "black mouth", maliciously singing empty or driving up the price of individual stocks, speculating on regional property market fluctuations, and disrupting normal market order;

  6. Spreading negative information threatens, intimidates, blackmails, and seeks illegal benefits from relevant stakeholders;

  7. Spread vicious social events and negative extreme events, incites emotions such as sadness, anxiety, panic, etc., in order to promote the so-called "financial business class" and various insurances. Products, etc.;

  8. Failing to strictly perform the identity authentication procedures, fraudulently using the names of staff of the competent financial department or experts and scholars to open financial columns, accounts, etc.

During the special rectification period, supervision from all walks of life is welcome (the website of the Cyberspace Administration of China Illegal and Harmful Information Reporting Center: www.12377.cn), and the Cyberspace Administration of China will verify and dispose of the clues reported by netizens in accordance with laws and regulations.

But what does that mean for rare earths?

The occasional scoop we could gather from the Chinese intranet once in a while will likely disappear, for example environmental digressions or exposure of breathtaking balance sheet acrobatics of one or several of the Big 6.

Why controlling the media in terms of economic reporting is important for the China government:

China’s economic recovery woes increase as services sector activity contracts


Which brings us to the

Analysis of China Rare Earth Exports

First half exports of rare earth from China came in at 20,800 t, basically unchanged from H1 2020, but the value of exports increased 45.6% YOY to RMB 1.907 bio.

Source: Baotou Rare Earth Exchange

Rare earth oxides were the largest volume of H1 exports, followed by other RE compounds. RE metals share was only 9% (‘China dependence’ on RE metals):

Source: Baotou Rare Earth Exchange - quantity based

The analysis by product looks as expected, 69% of exports are dirt-cheap lanthanum and cerium. The horrors of China-dependence?

We couldn’t find any NdPr in the trade statistics, that is statistically lumped together in the same HS-code with “other RE Compounds”.

But even deeper drilling did not produce any NdPr numbers. The neodymium export number is just pure neodymium oxide (the Nd in NdPr), the praseodymium share is in the 0.x% zone (the Pr in NdPr):

Source: Baotou Rare Earth Exchange - quantity based

The sum of praseodymium, dysprosium, terbium, and europium exports doesn’t even make 1% of total RE exports.

The 45.6% value increase of exports rests on neodymium, price of which is up 95% year-on-year, and yttrium, whose price up 125% year-on-year.

And now we come to the real current world dependency on China, permanent magnets.

In H1 2021 China exported 20,600 t of permanent magnet products, up 36.8%, but the export value increased only 31.8% to RMB 8.685 billion (the permanent magnet capacity utilisation rate in China may be only 67%, with more capacity expansions announced. Fantastic timing for opening additional capacity in the US and EU…)

Source: Baotou Rare Earth Exchange - quantity based

The by far strongest export market growth was the EU.

Here is are the types of magnet products exported:

Source: Baotou Rare Earth Exchange - quantity based

Talking about dependence, last week China’s official New China News Agency re-posted an article, that culminated in

“The return of Red, the return of heroes, the return of blood.”

Given the domestic political climate in China, back to the 70s, we would no longer exclude the possibility of some form of absurd, mind-over-matter trade action.


Speaking of hell:

The EU is reportedly considering support for production of rare earth magnets used in EVs

The EU is working on proposals to jump-start home output of a type of specialist magnet vital in electric car motors by offering support to local producers so they can compete with Chinese rivals.

European firms say they cannot compete with Chinese producers, which they say get subsidies worth about a fifth of their raw materials costs.

The EU launched the European Raw Materials Alliance (ERMA) late last year to ensure the bloc has a range of critical minerals needed for its green transition and gave top priority to rare earths.

European firms say they cannot compete with Chinese producers, which they say get subsidies worth about a fifth of their raw materials costs, helping them to supply 90% of the global market for the magnets.

Right, and there is much more where this one came from. By 2025 China will have a capacity of 400,000 t of permanent magnets, which easily can cover world demand.

H.E. European Commissioner Thierry Breton

With the predator-instinct of a battle-hardened French politician, focussed on image and legacy, Commissioner Breton realises, the only thing he can do in rare earth which would not run into fierce oppositon from ever-present EU not-in-my-backyard environmentalists and that would not pop the feelgood bubble of the European voters, is permanent magnets.

However, in terms of running out of time in the fight against global warming and for carbon neutrality, after all these years of zero results of EU activity, with probably only 500 t of permanent magnets being produced in the EU each year, what Commissioner Breton dishes up seems pretty rich.

Licensing of even only one single, lonely rare earth mine, or finally attacking Europe’s potential mini-Bayan Obo, rare earths from the tailings of Europe’s largest iron ore mine, seems to completely overwhelm the willpower of the EU Commission.

We don’t think that Vakummschmelze owners Apollo plan to further invest in VAC to increase capacity 10-fold, but Apollo may try to attract buyers to the opportunity, potential EU magnet policy may offer. Subsidies would be more than welcome, in view of VAC’s continued losses.

Eminent expert Tim Worstall had this to say about Commissioner Breton’s stunt:

THE EUROPEAN UNION MISSES THE POINT OF TRADE ONCE AGAIN

Ooooh, that’s exciting. We do know our way around the rare earths world here so we welcome that as very good news. So, the EU is going to reduce the start up costs of mines for rare earths, is it? Possibly lighten the regulatory load to do so? Also, actually allow people to set up rare earth separation plants? Sort out the Reach and thorium disposal regulations that make those cost so much? Generally stop doing the things that stop people mining and producing the necessary metals?

Making the magnets is a trivial task once that’s sorted out.

It is easy to get all cynical, watching all this hapless ruddering of the EU.

We, however, disagree on the triviality of the task, unless one wants to break the Holy Grail of global IP protection, that even Donald Trump did not dare to touch.


Meanwhile, magnets in India:

IREL and BARC signed a Tripartite Agreement with Ashvini Rare Earth Pvt. Ltd

In order to facilitate the indigenous Nd-Fe-B permanent magnet production – a critical product required for clean & green energy and electric vehicles which would reduce the country’s carbon footprint, IREL and BARC have collaborated for developing technology for the production of Nd-Pr metal from Nd-Pr oxide being produced by IREL. Through an elaborate selection process, a consortium of M/s Ashvini Rare Earth Pvt. Ltd. (AREPL) and M/s Ashvini Magnets Pvt. Ltd. has been chosen for the transfer of technology under incubation mode.  

Though India produces Nd-Pr oxide required for the production of Nd-Fe-B permanent magnets, and the production facility for making magnets and the end-use market of windmills, EVs, etc., the intermediate supply chain of production of metal and alloy is absent.

Ashvini are a bonded permanent magnet manufacturer in the automotive city of Pune, India, aspiring to become something like Neo Performance Materials one day.

We heard, currently India could put out ca. 600 mt of NdPr/year.


If you are into EV, you really want to have seen this webinar:


Neo Comments

Regarding our recent publication, Neo Performance Materials provided the following comment:

In fact, the rare earth feed material that we procure from our Russian supplier has most of its naturally occurring radioactive materials (“NORM”) removed prior to shipment to our Silmet rare earth processing facility in Sillamäe, Estonia.

The NORM residue that is currently stored on site at Silmet is the result of past processing of NORM-containing tantalum ores that we procure from a variety of sources.

Upon obtaining approval from European regulators, we plan to recycle the NORM residue by shipping it to Energy Fuels’ facility in Utah for processing to extract its uranium content.

The NORM residue is regarded as a resource, not a waste, and this is consistent with the International Atomic Energy Agency’s guidelines on handling of NORM residue.

We also intend to resume processing of tantalum ores after the existing NORM residue has been shipped to Energy Fuels for recycling.

Neo’s Silmet need additional Th/U waste as much as they would need a third shoulder.


Tantalum and radioactive waste brings us to straight to Australian Strategic Metals (ASM), who in late July announced this:

ASM signs $US250m framework agreement with South Korean consortium for 20% in Dubbo Project and offtake from Korean Metals Plant

Australian Strategic Materials Ltd (ASX: ASM or the Company) has entered into a conditional exclusive framework agreement (Agreement) with a consortium of South Korean Investors to subscribe for a 20% equity interest in Australian Strategic Materials (Holdings) Ltd (ASMH) for a subscription price of US$250m (equivalent to AU$340m based on current exchange rates) (Proposed Transaction). ASMH is a wholly owned subsidiary of ASM and is the holding company for ASM’s Dubbo Project.

The Agreement includes provision for a ten-year offtake agreement for up to 2,800tpa of NdFeB (neodymium-iron-boron) alloy from ASM’s Korean Metals Plant (KMP), which is currently under construction in Ochang, South Korea (Proposed Offtake Agreement). The volumes outlined in the Proposed Offtake Agreement anticipate 100% of the neodymium oxide planned to be produced at the Dubbo Project being the primary source of feed to the KMP post the completion of construction.

Concept

According to our 2015 data, the proportional distribution of REE in the Dubbo Zirconia reserve should look like this:

In order to feed 2,800 mt per year of NdFeB alloy, assuming that we are talking about high working temperature NdFeB, not considering recovery and processing losses, Dubbo Zirconia Project processing per year should be at least 500,000 t of Dubbo ore.

Source: ASM company presentation, May 2021

This rough calcluation shows, what should be the thoughput of Dubbo, if 500,000 t of ore would be mined and processed, purely conceptional, as mining and recovery losses are not considered (some elements may not be recoverable at all):

Including mining and recovery losses, ore requirements would be ~45% higher.

However, this was the original plan:

Source: Alkane Resources Ltd. - DZP Summary October 2009

In case of 500,000 t throughput, this would mean 63 t of uranium per year. If that should still be illegal, how to mine and process Dubbo Zirconia Project value-carrying items?

In terms of saleability of the big items:

Zirconium output as above would be about 1% of world total output, should be workable. (We are not sure, if ASM want to separate zirconium and hafnium, which seems to be very difficult).

The total output of CBMM ferro-niobium was 68,800 t in 2020, containing max 70% of Nb oxide (48,160 t), whereas Dubbo output as above would be 2,200 t, roughly 5% of CBMM’s.

No issue.

Disconnected: Korea Metal Project and Dubbo Zirconia Project

In SCOPING STUDY DEMONSTRATES FEASIBILITY OF ASM KOREAN METALS PLANT ASM announced a metal powder production in Korea.

But where does the raw material for the metals come from, the metal compounds/oxides?

If for feasibility considerations the current oxides were the base, can ASM produce the oxides profitably at current market prices? After all, Dubbo sports less than 1% TREO.

The Korea metal powder scoping study announcement answers the questions:

and:

Consequently, Dubbo and the Korea project are disconnected.

Concept for Dubbo Zirconia Project

In terms of rare earths, Alkane Resources’ concept for the Dubbo Zirconia Project used to be to turn out a lanthanum/cerium depleted concentrate and ship that to a partner for toll-processing, with the idea to receive rare earth oxides of commercial quality for re-sale.

Regarding partners, Alkane’s policy has always been “No China.” That was wise, as in 2016 China banned export processing of rare earth raw materials to oxides (MP Materials and USA Rare Earth still keep peddling the myth that his was possible - it isn’t).

Source: Vietnam Rare Earth Co., Ltd. website

In spite of Alkane’s No China policy, there had been agreement for processing Dubbo Zirconia Project’s rare earth concentrate between Alkane Reources and Vietnam Rare Earth Co., Ltd. (est. 2007), a company 90% owned by China’s Shenghe Resources.

In terms of the quantities we calculated above, according to our findings, Vietnam Rare Earth may not have enough capacity to process this volume.

So the Achilles Heel of ASM is that its main asset, the Dubbo Zirconia Project, has yet to be plugged-in to the Korean initiative, by mining and processing rare earths to rare earth oxides, and all that competitively against supplies from China.


Rare earth processing brings us to Iluka, who seem to be steeming ahead, according to this publication:

Iluka setting up WA for self-sufficient rare earths

At the Eneabba development, 275 kilometres north of Perth, construction has begun on the phase two development with completion due in the first half of 2022.

Eneabba is already the world’s highest grade rare earths operation and Iluka will look to begin processing its own product once the phase three feasibility study has been completed.

“Iluka’s feasibility study for phase three – a fully integrated rare earths refinery – is progressing in parallel, with most work scheduled for completion by the end of 2021, in advance of finalisation of the feasibility study in early 2022,” O’Leary said.

The company received a letter of support from the Australian Government earlier in 2021, which outlined the risks and rewards of progressing Australia’s standing in rare earths mining and processing.


Modi joins Putin’s dream project to develop Russia’s Far East

Envisaging an energy and trade bridge in the coming times, India is also exploring new opportunities in agro industry, ceramics, strategic and rare earth minerals, diamonds timber and long term supply of coking coal to the Indian steel industry.

PM Modi’s call for greater economic and commercial engagement between the two sides is in line with the further development of the India-Russia relations of the special and privileged strategic partnership.

Does he mean Tomtor?


DOE Awards $30M to Secure Domestic Supply Chain of Critical Materials

The U.S. Department of Energy (DOE) today announced $30 million in funding for 13 national lab and university-led research projects to develop new technologies that will help secure the supply of critical materials that build clean energy technologies. The selected research projects aim to diversify the supply of, develop substitutes for, and improve the reuse and recycling of rare earth and platinum group elements that are critical for many clean energy and high-tech applications. 

Too late. Results may not be in time for fighting global warming, but may become available upon the onset of the next ice-age.


New Jersey Mining Company Seeking Shareholder Approval for Name Change and Reverse Stock Split to Qualify for NYSE American Exchange

The assemblage of our extensive gold holdings, growing gold production profile and nationally recognized rare earth element projects is by design - and all of us stakeholders deserve the flexibility and exposure a higher exchange listing can bring.

And while ‘New Jersey Mining Company' has served us well, if we are to be honest that name is not the best representation of our Company, people or assets. Therefore, to more accurately reflect our Company as well as the proposed NYSE/Amex listing, we are also seeking shareholder approval to change the name of the Company to ‘Idaho Strategic Resources, Inc.'

Expect more hot air and bovine brown matter from Wall Street on rare earths, a tsunami of it.


The Tiring Pensana

Pensana suggested ill intent on our part and that we would be investing against them.

Baring relevant disclosure from the company, whether it concerns feasibility, ESG planning, resource data, or anything else for that matter, the company must accept scrutiny and that public available open-source data form the narrative about Pensana.

And based on that narrative, as far as we are concerned, there is no single aspect to suggest that Pensana should be an investment case.

Consequently, we never have considered and never will consider an investment in Pensana, long or short.

Pensana’s ESG Take Backseat?

That is not to say, that Pensana don’t have an ESG policy anymore

The link to Pensana’s actual ESG policy contents, before and after, remains at a less prominent location of the company’s web presence.

Pensana Bond Financing

Now Pensana target bond financing for US$250 mio over 5 years:

Update on site development, Financing and Investor Webinar

Pensana has engaged ABG Sundal Collier (ABGSC), a leading Nordic investment bank headquartered in Oslo, Norway, to progress the debt financing.

The envisaged senior debt facilities under discussion comprise a senior secured first lien facility amount of up to US$250 million over a five-year term.

ABGSC will be initiating their detailed due diligence review shortly and will look to be in a position to target a bond issuance during Q4 2021 once FEED and site preparation is complete.

A reader and valuable contributor of our humble blog, who has knowledge of this particular market, comments:

The Norwegian bond market is for cowboys, anything goes.

It is tiring, but lets sum it up:

  • Pensana’s Longonjo project is located in Angola;

  • Angola is No. 142 on Transparency International’s 2020 Corruption Perception Index of 180 countries, an improvement of 4 over 2019, nonetheless, somewhat closer to the bottom than to the top;

  • The main shareholder of Pensana is “ASF Africa Mining LLP”, the wealth management fund of the national Fundo Soberano de Angola (FSDEA). As we reported on October 20, 2020, ASF was previously known as “Quantum Global”, allegedly the money laundering machine of Angola’s previous president Dos Santos;

  • There is no indication, that Angola so far has lived up to its commitments under the Protocol Additional to the Agreement between the Republic of Angola and the International Atomic Energy Agency for the Application of Safeguards in Connection with the Treaty on the Non-Proliferation of Nuclear Weapons;

  • This is relevant, because Pensana’s Longonjo, as per public available data, could be a “hot deposit” with high levels of radioactive thorium;

  • In its former incarnation “Rift Valley Resources” Pensana released some preliminary data on the thorium and uranium contents of Longonjo, which indicate that the quantity limits for thorium under a.m. IAEA protocol could be exceeded by as much as 50 times each year, should Longonjo ever go into production in accordance with the quantities Pensana plan;

  • Pensana steadfastly ignore repeated requests to release relevant thorium and uranium data from the analysis of the Longonjo drill core samples, all of which have been tested for thorium and uranium contents;

  • Pensana are adament, that they will ship only raw material to the Yorkshire refinery, that will contain no radionuclides, refering to technology developed by Wood Group. This suggests, that the thorium concentrate should remain in Angola;

  • That could be a problem, as in terms of nuclear proliferation a large stock of thorium concentrate is just that, a problem; (Up until the early 1960s the USSR based its nuclear weapons technology on thorium. Nowadays the relevant know-how is available on the internet. That is, why IAEA are to police such materials);

  • Pensana ignore requests to disclose, how Wood Group would achieve the 100% removal of radionuclides from the Longonjo resource and what the impact of that process could be on the rare earth content;

  • Relevant reseach suggests, that agressive removal of thorium from a rare earth resource, broadly similar and within the range of Longonjo’s, may lower TREO content by ~80%, while removing ~90% of thorium, not 100%;

  • The feasibility study is kept under lock, contents of which could give an indication, what should be the solution to the radioactive waste problem, what it costs and what is the ESG planning under Pensana’s uncompromising ESG policy;

  • Instead of contents of the feasibility study, Pensana offered investors a “financial summary”, which does not hold water, when compared to the published data of Pensana’s preliminary feasibility study, while certainly more concrete contents of the bankable feasibility study remain unreleased;

  • The commercial impact of the Angolan 25% tax on revenue as well as royalty of 2% kicking in after year 2 of operation on Pensana’s feasibility has also not been discussed or disclosed separately, but is surely contained in the undisclosed details of the bankable feasibility study.

So, where does the Norwegian “cowboy market” come in?

EU Regulation

By law, EU Regulation 2019/2088, applicable since March 10, 2021, the EU compels professional investors and financial advisors to disclose, in quite some detail, how the risks of negative environmental, social and governance (ESG) impacts may affect the value of the investment.

Suppose an entirely fictional someone would want to avoid such scrutiny, he would probably look for financing from “cowboy markets”, as long as EU-affiliated nations governing such markets haven’t adopted contents the EU Regulation 2019/2088 for their own regulations.

Of course, Pensana’s post-EU regulation announced bond finance intention in the Norwegian market is purely coincidental and serves exclusively to take advantage of a particularly vibrant bond market outside EU jurisdiction.


China Stocks Nosedive

Principal China rare earth share prices nose-dived during the past week. China stock analysts quote valuation concerns, which at P/E rates of 73 to 155 is somewhat comprehensible.

But since when has valuation become a matter of concern in China?

This stinks, we’ll dig deeper in the coming week:


Prices

Rare earth oxide prices trended a bit lower, NdPr down 1% since Sept 1, gadolinium oxide down 2% and rare earth carbonate 44% down 1.3% in RMB terms.

As ever, these are ex works China prices incl. 13% VAT for the most common qualities of rare earth oxides/metals, converted at the official onshore RMB/USD exchange rate. Actual offer prices will differ.


Thank you for reading! Have a healthy and successful week ahead!