China RE Imports from Myanmar; Jr Miner Challenges Sovereign Government; Pensana Beat Around The Bush; James Kennedy Lobbs Another Bombshell; Hastings Can Save CAPEX; Softer Prices; Shenghe Forecast;
2021 Rare Earth April 25
Today it is a long one and may be trunkated in your e-mail. Better read online.
According to a CNA report linked below, all kinds of metal-related imports from Myanmar to China are affected by the crisis in Myanmar, but not rare earth. On the one hand there are the reports in China, usually vetted by censors, also picked up by Asia Times, on the other hand are the China trade statistics, which are by and large trustworthy.
The trade statistics Reuters refer to are for Jan-Mar, 2021. Complaints about disruptions surfaced only in the second half of March, the latest complaint alleging even a complete export stoppage looming dates April 12, 2021 (could be a ploy to talk up rare earth prices).
Theoretically disruptions could go both ways: Shipments of rare earth production consumables from China to Myanmar as well as rare earth intermediate products from Myanmar to China (which trucker in his right mind enters a civil war zone without protection? Even on the Karakoram Highway from China deep into tribal areas of Pakistan Chinese trucks form guarded convoys and enter Pakistan via the Khunerjab Pass).
Mission to the China-Pakistan frontier at Khunerjab Pass, 4,600 m above sea levels
Greenland Minerals insist on getting permitted to continue their Kvanefjeld project in Greenland with a mix of sweet talk and legal threats against the newly elected Greenland government, who is determined to stop the project for good.
While GGG are certainly aware of the historic futility of a junior rare earth miner challenging a sovereign government, GGG simply must go through the exercise for its shareholders and for corporate survival - and perhaps with a sliver of hope.
While GGG have done everything entirely by the book, done everything right and currently undergo the public consultation process, the odds are stacked against GGG:
The new Greenland government was elected on the promise to stop Kvanefjeld from happening. That was a focal point of the election;
Unfortunately for GGG, the resistence extends to other possible contaminants, , too;
China’s state-owned holding Shenghe Resources are the largest shareholder and they also happen to be the sole and single prospective customer of GGG, which - given China’s largely self-inflicted popularity nowadays - is not ideal for GGG;
In spite of outlandishly high taxation in Greenland, given the current concept of GGG, the lion’s share of added value would occur in a third country, namely China, as GGG would ship rare earth concentrate to Shenghe in China, who will then separate the REO in China and sell them China-domestic (no matter what certain junior RE miner executives spin over and over again: Import of RE-ores for processing and subsequent export of the finished rare earth products is illegal in China).
While GGG’s concept should be the natural default mode of operation of any junior RE miner today, it simply does not fit in the - on all sides - currently derationalised political landscape.
The only game changer that we could possibly see would be, if Shenghe Resources would commit to take also all the uranium and thorium from Greenland to China.
Last, but not least, Greenland, even without mining at Kvanefjeld, is by far not as green as it would like to be:
Greenland thorium and wishful thinking takes us straight Angola’s thorium and to Pensana, who released this paper:
Establishing a World-Class Sustainable Supply of critical Rare Earths for the Green economy, being the announcement of a business plan.
What the publication does not contain is the eagerly awaited feasibility study, that was to be completed in January 2021.
The publications instead contains this “financial summary”:
Important are the foot notes, pointing at content of all the partners who were each supposed to deliver their share of the much touted feasibility study:
What one can see here in general is the lower capex, compared to any mine somewhere in a large void, bare of infrastructure. A definite advantage for Pensana to have pre-existing infrastructure at both ends.
Commercials leave us bewildered
On the commercial side, this is the proportional composition of Longonjo:
As we can see, Nd and Pr (NdPr) is 22.1% of proportional content, however, in Pensana’s management calculation it is 4,500 t out of a total of 12,500 t, so NdPr 36%.
We can’t quite follow how they get from 22.1% to 36% of NdPr.
The secret might be a depletion of Ce at source, something that MP Materials (Stage II optimization plan) want to do - even through Ce and La are about half of the US “China dependence”, that MP propose to break.
However, there is nothing in Pensana’s publications to support that.
Bottom-line killer? Angola’s 25% tax on revenue
This minor tax burden of 25% of revenue from Year 3 may not have entered the above business plan, as there is only EBITDA considered (earnings before interest, taxes, depreciation and amortisation):
This leaves a bit of explanation potential.
Radioactive waste materials
More importantly, Pensana’s publication again does not answer the burning question regarding solution of the radioactive contents issue:
For better visibility:
Baring any company information to the contrary, current data in hand strongly suggest that Pensana’s output of thorium relative to NdPr could be around 1:3 (comparison Lynas Mt Weld <1:30). Based on the planned output of 4,500 t/year of NdPr, it could mean that up to
1,500 t per year of radioactive thorium would need to be disposed of by Pensana
To put this into perspective: If the a.m. is correct, after only 6 years Pensana will have turned out more thorium than Rhodia’s facility in La Rochelle, France, turned out during the entire ~40 year history of operation.
Relevant data of Longonjo should be known to Pensana, as per the preliminary feasibility study tests were run also on thorium and uranium assays:
Source for above: Pensana Preliminary Feasibility Study dated November 15, 2019, page 26
Source for above: Pensana Preliminary Feasibility Study dated November 15, 2019, page 61
Even more explanation potential: We reiterate, this is not a casual affair. The silence of the company on this subject is rather discomforting.
It would be highly recommendable for company to clarify on this issue:
Disclosure of test data and anticipated output of thorium and uranium;
Alround population and worker protection plus workplace safety measures;
Permanent, safe and compliant disposal of radioactive material, how and where, who and how much.
In our opinion, even though the “business plan” attracts closest scrutiny, nothing else with regard to Pensana matters or needs to be discussed and evaluated, as long as this mission-critical issue has not been addressed.
Thorium also takes us then to James Kennedy, member of the Thorium Energy Alliance, tireless and selfless campaigner for a resurrection of US-based rare earth business for more than a decade and a formidable expert on the subject plus controversies surrounding it.
The phyrric victory of USA, Japan and the EU at the WTO over China’s WTO-incompatible export quota’s for rare earth in 2014 basically ended official initiatives for rare earth and James Kennedy may certainly not have been amused.
We can’t even begin to grasp the level of James’ frustration about meetings with congressional assistants over many years, often facing people with the attention span of a toddler, his valid case being blocked out for political convenience and unwillingness to act on uncomfortable truths.
However, we respectfully wish to disagree with the way hard facts are intermingled with assumptions, that are not marked as such.
TK is a part of the ailing German steel conglomerate, which has been subject to permanent restructuring and lay offs for years. 2 months ago talks to sell TK’s steel business to steel raider Liberty Steel failed.
TK will of course need to sell Hastings mixed rare earth carbonate product from its 14 mostly smallish deposits distributed over the vast Yangibana area to China (or China owned-entities elsewhere in Asia).
Mixed rare earth carbonates under HS-code 28469048 are subject to 5% import duty in China, whereas a concentrate of 30% under HS-code 28469019 would likely be duty free (for safety, better have China Customs issue a binding customs tariff information based on advance sample). If so, Hastings could save quite a bit of capex and increase margin by doing away with some expensive processing. Perhaps rather add another one or two excavators on top of the 2 excavators planned for in the executive summary of the feasibility study.
The Damocles Sword dangling over any exports to China, be it from Australia, Canada, New Zealand, UK or the US, is the ever deteriorating political situation, with also Australia being part of the much despised Five Eyes Alliance. Five Eyes, originally designed for consensually spying on each others citizens - including others like the German prime minister - by cirumventing all applicable laws and constitutions, evolved to an anti-communist bulwark.
Current punitive duty China imposes on US origin rare earth carbonate (if there was any) is 25%.
Prices were softer across the board:
Note: These are median ex works China prices incl. 13% VAT for China standard quality product, converted into US$ at the daily median exchange rate.
Permanent magnet materials charts:
So far a mild correction.
Thanks for reading and have a great week ahead!
Imports of rare earth oxides rose 55.7 per cent month-on-month to 2,414 tonnes but were down about 3 per cent year-on-year.
A Global Times report last month said shipments from Myanmar, which supplies around half of China's heavy rare earths feedstock, were being affected by logistical issues, although analysts told Reuters this was not the case.
Comment: The “analysts told Reuters” are very likely Adamas, who follow import/export numbers of China RE very closely and occasionally feed one Reuters writer.
At the same time, a mining company made a new discovery in Norway, which is of great help in reducing Europe’s dependence on China. The phosphate rock discovered by the Norwegian mining company in southwestern Norway may be the world’s largest reserves of phosphate rock. It not only contains phosphate (the EU’s key material list includes phosphate), but also contains vanadium and titanium necessary for batteries.
Here the article refers to Norge Mining’s rock phosphate deposit, which is not new at all, as it actually already has a 20 year history, originally explored by Norsk Hydro Agri for rock phosphate, ilmenite and vanadium.
However, they think the problem of rare earths is even greater: because China may simply decide to stop exporting rare earths. In contrast, the threat of Russia’s shutdown of natural gas supplies is only a minor inconvenience, especially for a continent that relies more on wind and solar power than natural gas.
Comment: The USSR and later Russia have been supplying the EU, foremostly Germany, with natural gas since autumn 1973, that is 47 ½ years and counting. There were crisis situations during the Cold War and during the 2005-2010 Ukraine crisis (among other irregularities like non-payments, Ukrainians had diverted gas they didn’t own and “forgotten” to inform their partners), however, Russian gas never stopped flowing to the EU.
As the world begins to move away from petrol and diesel-power cars, there are questions over how the metals needed for batteries in electric vehicles will be sourced.
One possibility is to mine the deep ocean floor. A number of companies are lining up to exploit the minerals found there, but campaigners warn it could have a disastrous impact on the marine environment.
Wind and solar energy are both essentially obsolete technologies. There is a reason why only the very rich or the very adventurous sail across oceans: the wind is unreliable, and at best produces relatively little energy. Nevertheless, liberals have concocted fantasies whereby all of our electricity, or perhaps our entire economy, will be powered by those fickle sources.
Because wind and solar produce so little energy per square mile, an enormous amount of land would have to be devoted to panels and turbines if we seriously tried to get all of our present electricity needs from those weak sources:
Miller and Keith determined that “meeting present-day U.S. electricity consumption, for example, would require 12 percent of the continental U.S. land area for wind.” A bit of math reveals what that 12 percent figure means. The land area of the continental U.S. is about 2.9 million square miles, or 7.6 million square kilometers. Twelve percent of that area would be about 350,000 square miles or 912,000 square kilometers. Therefore, merely meeting America’s current electricity needs with wind energy would require a territory more than two times the size of California.
Comment: Deserves a second look.
The fantasy is the year-on-year (YoY) comparison to the first quarter of last year, when much of China was shuttered in response to COVID-19. The weak base results in figures such as a 33.9% YoY rise in real (inflation-adjusted) retail sales, because those sales declined 22% in the first quarter of last year. Similarly, industrial value-added rose 24.5% YoY in 1Q21, following an 8.4% decline a year ago. The base effect also generated a fantastical 1Q21 GDP growth rate of 18.3%, as GDP fell 6.8% YoY in 1Q20.
Comment: A scathing review of China growth numbers, however, even discounting the low base of comparison, we think the growth numbers are still fabulous.
Georgia’s central geographic location is one of the state’s main strengths, according to Site Selection magazine. EV suppliers can open facilities in Georgia and be conveniently located near Mercedes-Benz in Alabama, BMW in South Carolina and Volkswagen in Tennessee. All are expected to eventually convert at least a portion of their factories to EVs.
Georgia has shown it’s willing to provide rich economic incentive packages in recruiting wars. The state gave SK about $300 million in grants, tax breaks and free land. Some have criticized Georgia’s incentives as too generous for corporations. But they’re essential if the state wants to win new projects, Harrold said.
Even so, other states are likely to submit aggressive bids, too, and may outbid Georgia to win projects, according to Site Selection. Alabama, South Carolina and Tennessee already have large automotive industries. Midwestern states like Michigan and Ohio will want to maintain their historic roles in the auto sector. And the biggest EV company, Tesla, is headquartered in California.
This award follows the DOE providing Energy Fuels a $150,000 contract in 2020 for the successful completion of a conceptual design for the same initiative, resulting in a total award of $1.9 million to the company.
The feasibility study is intended to support a cost estimate for the production of individually separated rare earth oxides and rare earth metals and alloys from coal-based resources or other resources, including monazite, within the US, with a focus on REEs for the production of commodity and defense-related products.
Comment: Medallion may have, what Energy Fuels may need. Medallion are quietly expanding their basic monazite-to-concentrate process to downstream rare earth compounds.
Texas Mineral Resources Consortium Awarded Second Phase of U.S. Department of Energy (DOE) Contract Targeting Production of Mixed Rare Earth Oxides From Pennsylvania Coal-Based Resources
TMRC’s project partners include Penn State, Jeddo Coal Company and McCarl’s. The Texas Mineral Resources consortium objective is to ultimately install a self-contained, modular and portable pilot plant at a Jeddo Coal Pennsylvania site, capable of producing 1-3 metric tons of rare earth oxides derived from coal waste material from Pennsylvania anthracite coal. The project commenced October 1, 2020 and resulted in the TMRC consortium successfully concluding a three-month conceptual design phase.
Comment: So Round Top is off the menu?
“If Lynas’ waste is as safe as claimed, then why the need to spend such a huge amount of money to bury it? Why the need to put it under institutional control for 300 years? Why don’t they just dump it into the South China Sea, which is just next to Lynas?”
Comment: In the past Lynas had made a commitment, that the management at that time probably knew full well was impossible. That is the origin of the current troubles, whatever Lynas do is wrong.
In 2021, Q1 will benefit from the downstream demand boom, and profits will increase. In Q1 2021 rare earth main downstream industries continued booming, in March 2021 China’s total output of new energy vehicles was up 313% year-on-year; the output of inverter air conditioners, refrigerators and washing machines increased by 118%, 92% and 52% year-on-year. Therefore, the company expanded its sales scale and revenue increased by 32.3% year-on-year;
Comment: This is the share price development