Happy Birthday, TREO!; Rare Earth: White House Takes Fire; Zerohedge Nail It; Ionic's Antics; New RE Listing; Windturbine Price Drop; Magnet Materials Prices Up;

2021 Rare Earths May 30

We did it: The Rare Earth Observer’s first birthday! 1 year with nearly 900 A4 pages of content and a readership that one could have never dreamed of.

Thanks to our readers and to our tireless, highly valued contributors!

Disconnected: CO2 reduction, environmental protection and sustainability

We may have reached the limits of growth, as forecast by the Club of Rome nearly 50 years ago. Which brings us straight to everything “new energy.”

“Sustainability” and “green” of electric mobility is almost a bad joke, wind-energy, considering what the windtowers are made of, too.

So why pursue?

Because the immediate impact sought by the Paris Climate Agreement is limiting global warming to 1.5-2°C by reduction of greenhouse gases output, most of which is CO2.

Source: US Environmental Protection Agency

The Paris Climate Agreement greenhouse gases reduction campaign actually is designed to keep - in our view - unsustainable levels of consumption up and enable continued economic growth. That made it easy for countries to sign, who otherwise wouldn’t.

Reduction of greenhouse gases output, particularly CO2, is a singluar objective, and even though the word ‘sustainable’ appears 17 times in the Paris Climate Agreement, achieving the objective is somewhat disconnected from what one would consider generally “green” and undefined “sustainable.”

Required for the reduction of greenhouse gases are technology metals, including rare earths, mining and production of which arguably is and will always be neither sustainable, nor environmentally benign.

Fighting CO2 output creates enormous demand for technology metals that we have no way of matching, unless we open additional mines and substantially enhance recycling.

The supply from China will be more and more absorbed by China itself, so that particular route of supply is closing and new routes of supply must open.

The misconception that we can have everything at once, greenhouse gases reduction, green development and sustainability all around, causes the stalling of policies in terms of mining and production of technology metals.

Things have to get worse first, before we can make them better.

Because there are environmental issues with RE mining, we can’t allow some lowly white-collar criminals cooperate with rotten-to-the-core governments of some remote, failing state to organise the supply of technology metals and hide the consequences such as ‘cancer villages’, just in order to make the average spoiled consumer feel cushy green and sustainable.

The time has come for policy makers to make sure, that we can produce the materials needed where we are in control: Right here at home.

Continued political inertia, for whatever reason, may eventually cause serious shortages of technology metals, driving up prices so high, that they will render envisioned greenhouse gases reduction measures non-feasible and subsequently the Paris Climate Agreement targets will get out of reach.

Alternatively we could start practising real sustainability, commonly known as thrift, at the expense of economic growth.

This week we also saw Washington stumble over rare earth and the a.m. issue, when President Biden was said to have conceeded defeat in terms of US-domestic rare earth mining and processing:

Exclusive: Biden looks abroad for electric vehicle metals, in blow to U.S. miners

U.S. President Joe Biden will rely on ally countries to supply the bulk of the metals needed to build electric vehicles and focus on processing them domestically into battery parts, part of a strategy designed to placate environmentalists, two administration officials with direct knowledge told Reuters.

If that was fact and not just some lobbyist ploy to guide presidential policy onto a certain path, then this would be the end of the line for all US-based rare earth hopefuls.

The reaction to this “exclusive” was swift and hard:

Industrial Policy, Same Old Politics

The China challenge requires a better response than the U.S. has mustered to date. But the industrial policy of this bill will waste taxpayer money and divert private capital to less efficient purposes. America can’t out-compete China by imitating it.

Also Jack Lifton couldn’t sit by and watch the Washington hypocricy surrounding domestic production of rare earths:

Hegemony, Globalization, and all that

There is today no commercial rare earth separation, metal making, alloy making, or rare earth permanent magnet manufacturing in the USA. The combined annual demand of the military and consumer industries in the USA for rare earth permanent magnets is between 10,000 and 15,000 tons per year. Never in American history has so much of any of these forms of rare earths been produced in a single year.

Yet Washington believes that the annual processing into fine chemicals and metallurgical forms of 170,000 tons each of lithium and cobalt (the amount required annually for 17 million BEVs if each has a 60 kWh battery [the smallest battery now offered by Tesla]) and of 50,000 tons per year of rare earth permanent magnets (the amount required by 17 million EVs annually if each uses one rare earth permanent magnet motor) could be accomplished by 2030.

We didn’t need to wait long for a denial from the White House:

White House Denies Report That Biden Looks Overseas for Electric Vehicle Metals

The White House stated that the Reuters report “incorrectly” characterized the administration’s approach to building domestic manufacturing, which comprises “responsibly developing mineral sources” in the United States.

But why in the Epoch Times, a publication carried by the Falungong cult, the Chinese version of Scientology Church?

If you ever wondered, what is the rational is behind the US-government’s actions regarding technology metals, having a look at the research that entities like Department of Energy (DOE) include in their decision making helps (click to download):

This report includes companies that went out of business many years ago, lists NdFeB magnet makers who don’t produce NdFeB magnets, names pure trading copanies as manufacturers, and so on.

That is the type of rigid assessment, that US-taxpayer dollars are spent on. And that is, how ill-fated policies will be conceived.

Thanks to one of our avid readers for poiting us to this report.

Lithium, Cobalt, & Rare Earths: The Post-Petroleum Resource Race

To put the matter simply, there is no way the United States or other countries can undertake a massive transition from fossil fuels to a renewables-based economy without engaging economically with China. Undoubtedly, efforts will be made to reduce the degree of that reliance, but there’s no realistic prospect of eliminating dependence on China for rare earths, lithium, and other key materials in the foreseeable future. If, in other words, the U.S. were to move from a modestly Cold-War-like stance toward Beijing to an even more hostile one, and if it were to engage in further Trumpian-style attempts to “decouple” its economy from that of the People’s Republic, as advocated by many “China hawks” in Congress, there’s no question about it: the Biden administration would have to abandon its plans for a green-energy future.

Comment: Zerohedge nailed it. Roskill forecast opitimistically, “Though the supply of rare earths is expected to become less centred within China, the production of rare earth metals/alloys and subsequent manufacturing of downstream applications, such as permanent magnets, is likely to remain China centred.”

This week we joined the “APPG Critical Minerals: Canada's Critical Mineral Approach” webinar, where Canada’s Associate Deputy Minister of Natural Resources Shawn Tupper presented Canada’s opportunities in critical minerals and other Canadian strengths.

British High Commissioner to Canada Susan leJeune d'Allegeershecque was also in attendance, as well as the Assistant Deputy Minister Natural Resources Canada Jeff Labonté.

For the Q&A session we submitted the following question:

In terms of rare earth, an obscure corner of minerals, investor enthusiasm seems rather limited, also because the capital required for bringing a rare earth production up to speed is disproportional to the size of the market. This is a persistent issue affecting all Canadian rare earth hopefuls.

How will the Canadian government increase support for rare earth mining and processing?

Obviously this was not the first time they were confronted with such question, but the answer was still elusive.

We can see Canada’s government supporting projects like Geomega, building the rare earths facility at Saskachewan Research Center (SRC), the yearly updated pan-Canadian Minerals and Metals Plan, et al, but a few milions here and a few millions there are drops in the ocean, they do not pack a punch.

Windpower: Cost up, revenue down

According to China’s Polaris Windpower Network, wind turbine makers raw materials prices such as steel, copper, rare earths, blade materials, epoxy resins and balsa wood have all risen sharply. Steel product prices are up 80%, blade materials and expoxy resin prices have risen 75% this year.

The price of wind turbines, however, has dropped continuously from RMB 4000/kW to about RMB 2200/kW and is now close to the cost of wind turbine components.

According to Polaris, the only way to reduce cost is to build more powerful, larger units. China domestic onshore wind turbines have a maximum single-unit capacity of 6.25MW, offshore there are 10MW wind turbines. However, internationally the development is already headed for 20MW offshore wind turbines.

If all goes according to plan, China onshore wind turbines may reach 10MW, and the single-unit capacity of offshore wind power may reach 15MW by 2025.


Offshore entity

As we reported in WiC528, Chinese wind farm operators and turbine manufacturers have rushed to get orders completed and capacity installed before the central government’s subsidy scheme comes to a final halt at the end of this year. This has prompted concerns about whether sales and margins will hold up when the scheme comes to a close. For example, there were tenders for 14.1GW of new wind power projects during the first quarter of 2021. They were all for onshore installations but many of the tenders included projects that had not yet been approved by local authorities.

Analysts have also noted a widening gap between the highest and lowest bid prices, suggesting growing competition. Shanghai Electric is set for an increase in competitive pressures too, not only from other state-controlled enterprises like Dongfang Electric and Harbin Electric but also from private sector firms such as Xinjiang Goldwind and Ming Yang Smart Energy.

Last week we were hinted at Ionic Rare Earth. We had a look at their corporate presentation “Makuutu Rare Earths Project Scoping Study.”

The first thing that hits the eye are two pages of small print disclaimer, absolving the company of all and any responsibility for the contents.

“China’s Export Control Ban”: This is hype, the source of alternative fact scare mongering, also inside China, particularly among those, who have not bothered to read the law.

Our explainer of October 20, 2020, result of hard work, was glass clear:

  1. Generally, the Government of the People’s Republic of China has never required a specific law to do anything. They want it, they do it, a law can come later;

  2. This specific law merely folds 9 pre-existing laws in one and has been years in the making, starting long before the Trump years;

  3. The law in question is an export control law, like practically all developed nations have (and that includes Ionic’s very own home country’s export control law);

  4. At no point this law refers to rare earth, except for one 20 years-old export prohibition list, among other items mentioning ionic clay based rare earth processing know-how.

In other words: Nothing has bappened, nothing has changed, and nothing will happen.

Except that it becomes hopefully less likely that Chinese chlorine gas containers show up on Syrian battle fields and Chinese guns and ammo show up among global civil war combatants.

By the way, this law and the export prohibition list from 2001 is the very reason, why Ionic Rare Earths MOU partner China Aluminium can not really help with developing Makutuu ionic clay and stay legally compliant. Also the Chinese company has recently been rapped for its dismal environmental record.

And since we are at it, Ionic bless us with more important information like this one:

There is absolutely no reluctance at all, it is simply that “single elment” monazite mining has been forbidden in China for many years.

Then the idea of rare earth oxide basket price is simply not correct.

Why: Ionic Rare Earth are planning to sell all their output to China in the form of a mixed rare earth carbonate, “MREC”, not in the form of separated rare earth oxides, which Ionic don’t plan to produce (yet).

Therefore Ionic are certainly not a “one stop REO [rare earth oxide] shop”.

Much rather it is MP Materials concept: One product - one customer - one destination. It doesn’t need to be bad, but it is the way it is.

These are the numbers Ionic suggest to us:

Regarding “basket price”, one can save the effort of calculating and simply look at published prices of comparable South China middle yttrium-rich europium material:

Source: Rare EarthsVol 32. No. 4, August 2011, “New technology of three grouping of middle yttrium rich europium rare earth”

Last week’s quotes:

  • 92% TREO: RMB equivalent to US$35/kg ex works, incl. 13% VAT;

  • 30% TREO: RMB equivalent US$20.60/kg ex works, incl. 13% VAT.

Since Ionic’s product is imported to China, the following deductibles apply:

  • 13% China VAT payable upon import

  • 5% Import duty calculated on the CIF China price, before VAT is applied

  • Freight cost from either Mombasa or Daressalam to China (currently US$2,000/FCL of 20,000 kgs each)

On a zero discount/no margin for import material, for TREO 92% the current “basket price” should be US$26/kg and TREO 30% should be US$17/kg, both FOB container-stowed Mombasa or Daressalam.

Anyway, according to the small print in Ionic’s disclaimer, a feasibility study won’t come out for another 2 years, everything can change - only the Africa Risk won’t go away.

Geomega announced, that its environmentally benign process for recycling rare earths from spent permanent magnets could probably also be used for processing and extracting value-carrying metals from bauxite residue, i.e. the waste material after alumina has been extracted from bauxite, also known as red mud.

We wonder, if this know-how may actually also help in high yield recovery of RE from ionic clay, perhaps even superior to China’s ionic clay extraction methods.

Geomega own Montviel, one of the world’s 10 largest rare earth deposits by TREO, which is also the largest 43-101 bastnaesite resource in Canada.

Disclosure: Since April 2021 we have been holding shares of Geomega.

A new kid on the block:

Australian Rare Earth Limited are exploring a ionic clay deposit named Koppamurra in South Australia, an inferred resource of 39.9 mio t 725ppm (0.0725%) TREO, ~29,000t. Leaching recovery tests using magnesium sulfate yielded 50-70%.

The company currently seeks a listing on the ASX. Chairman is Prof. Dudley Kingsnorth, well known to most of us.

The IPO presentation you can download here:

The prospectus seems to be available only for residents of Australia.

Everything you always wanted to know about permanent magnets but never dared asking:

by authors John Ormerod, Walt Benecki, Steve Constantinides and Stan Trout.

You can order the book here: https://www.magnetreport.com/

NdPr, dysprosium oxide and terbium oxide prices have been rising for the past four trading days. The one or the other product is that short in supply, that there is actually no product behind the price:

This weeks posting is already too long, watch out for more in the coming issue.

Thank you for reading and have a great week ahead!