Metal Mess; Toothless Attack on MP; Ideology and RE; Recovery Rates; China Data Blackout Looming; Rush for ESG; RE Society Annual Meeting; Erbium Price Jumps on Application in NdFeB;
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Metal Mess; Toothless Attack on MP; Ideology and RE; Recovery Rates; China Data Blackout Looming; Rush for ESG; RE Society Annual Meeting; Erbium Price Jumps on Application in NdFeB;
2021 Rare Earths October 31
It has been a while, however, real work for real revenue takes precedence. Our apologies.
The Canadian start-up went public last month through a special purpose acquisition company but has been left high and dry by one investor who was meant to hand over 60 per cent of $330m it had been counting on to start digging but has now all but disappeared.
Despite projecting that it will have no revenues for at least another three years, the company was valued at almost $3bn.
The International Seabed Authority does not issue mining licenses at this time. There are only exploration licenses. If or not ocean floor mining can be permissible depends on a - literally global - environmental impact assessment.
A statement “to start digging” beyond “at least another three years” is a gross understatement and apparently borders on the totally inconceivable, on even only the most shallow of reviews.
Which then begs the question, what the hundreds of millions to be collected from beyond naive, gullible investor were supposed to be used for.
Citibank will have to reflect on this deeply.
Related, recovery rates, a thorny issue in rare earths as well:
Vulcan also claims to have a recovery rate of 90% for the lithium, while other projects with the same lab performance are estimating with a 70% recovery rate, it adds.
“Realistic assumptions would halve the output of lithium and kill the commercial viability of the project,” J Capital says.
What recovery rate means to rare earths, John P. Sykes of Greenfields Research explained vividly already 9 years ago:
Source: Unanswered Questions about Rare Earth Mine Projects, John P. Sykes, Guangzhou, September 13, 2012
Rare earth mining company MP Materials Corp came public on the NYSE in November 2020 through a SPAC reverse merger backed by “SPAC King” Chamath Palihapitiya.
The company was able to sell itself to investors touting the fact that MP is the biggest rare earth producer in the western world and the only feasible competitor to Chinese producers.
In reality, we believe that this is nothing more than a smoke and mirrors show. We found that Shenghe, a related party that accounts for 99% of MP’s revenue, and a significant shareholder, can be traced back to the Chinese central government [Who of relevance in China’s rare earth isn’t? See EXTRA: RareX And Shenghe Resources (A Non-S.O.E.?)]
Biden’s plan to bring back rare earths theoretically would lead to MP as they are the only American producer. However, our research shows that MP in reality remains under the control of the Chinese government [It was the Trump administration who handed Mountain Pass to China by clearing the acquisition in August 2017, ahead of Trump’s visit to Beijing].
MP is the second iteration of the same mining venture (Molycorp) that previously ended in bankruptcy. [Factually incorrect. Mountain Pass was only one of the assets in an unsustainable business model]. However, Chamath and his friends were able to bring MP public again at a 300x valuation increase in only three years without significant business improvements. [Factually incorrect. The deal with Shenghe Resources, probably induced by the Chinese side, and large Chinese financing of the project through massive advance payments, paired with the subsequent shortage of RE raw materials, formed a very significant improvement]
When comparing MP and Molycorp side by side, it appears that MP’s current plan is almost an identical copy of Molycorp’s failed Project Phoenix from almost 10 years ago.
MP’s mine generates nowhere near the economic essence needed to support the current valuation due to the fact that MP mostly mines less valuable rare earth, namely Cerium and Lanthanum [Incorrect.MP’s lofty concept bases on cerium depleted raw material]. It does not participate in the favorable trend in rare earth prices the same way competitors do. [Factually wrong, just look at the export quantities and revenue per ton]
MP’s stock took a bit of a breather on the news:
The report says:
This lack of experience, and management’s connections to shareholders that have sold $356M tell us these are financial opportunists rather than an experienced management team that will be able to execute their vision.
and it concludes:
We conclude that MP sold a great story of rare earth independence and prosperity to US investors, but upon a deeper look it turns out that there are major fallacies to the business. We are not surprised to see a company like this go public through a Chamath-backed SPAC.
On the one hand Grizzly bemoans the lack of experience of the management, on the other hand it criticises, that MP retained experienced former Molycorp staff for operating the mine.
It appears, the young Mr Eggert does not read The Rare Earth Observer, or, if he does, he reads only superficially. Grizzly’s “China team” apparently also doesn’t know rare earth and China well enough.
We don’t want to suggest purpose, however, significant details may have been overlooked, or their importance was grossly underestimated.
On the whole, Eggert’s somewhat diligent, yet shallow report is merely berating the obvious, based on selective, superficial assessment of publicly accessible sources, which very few people bothered to read up anyway. And now gullible investors, who didn’t bother to get informed, can hire ambulance chasers, in order to recover whatever losses.
However, we share Eggert’s impression, that basically there are Wall Street whizz-kids at work, who primarily want to milk this thing for money and will say whatever pumps the stock price, and that it is China, who keeps the lights on at MP.
Eighteen drill-holes have been sampled to date as part of the program, focussing on drill-holes collared to intercept the SW area which measures 1km in length and is between 150m and 750m wide at surface. The SW area alone hosts 435-530 million tonnes of the total 515-630 million tonne ET, with grades as tabulated in the "Prairie Lake ET" table below.
Circa 0.14% up to 0.17% TREO, that is slightly less than impressive.
The increase in Mineral Resources is a combination of drilling completed during 2020 and application of a cut-off grade at 0.24% TREO following evaluation of processing costs and forward rare earth pricing assumptions, which will be released in the upcoming Ore Reserve statement.
Mineral Resources for Yangibana North West and additional Inferred Mineral Resources from Gossan, Kane’s Gossan, Lion’s Ear and Hook remain unchanged from 2019 and are stated at a 0.20% NdPr cut-off. It is expected that re-stating these resources to a 0.24% TREO cut-off will further increase the total Mineral Resources for the Yangibana project.
The merry-old, time-honoured, but infinitely boring twist to increase resources on paper by simply reducing the cut-off grade.
Hastings have 14 smallish RE deposits strewn over 650 square kilometres called Yangibana, for 2 of which there was a definitive feasibility study, selected contents of which were published in an inconclusive executive summary.
It would be good to do an update in view of the change of overall situation and to get a more realistic picture.
The scope of the BFS Update has been amended to allow for an increase in the Ngualla flotation plant average Life-of-Mine (“LOM”) capacity to 800ktpa. This reflects an approximate 28% increase in capacity over the average LOM capacity of 624ktpa in the BFS published in April 2017 (“April 2017 BFS”) and an approximate 13% increase in the average LOM capacity of 711ktpa that was reflected in an internal optimisation study completed in August 2017 (“August 2017 Optimisation”).
This higher mine-concentrator throughput would increase the average LOM NdPr Oxide production to between 3,000 - 3,500tpa, compared to 2,420tpa reflected in the April 2017 BFS and 2,810tpa in the August 2017 Optimisation.
Let’s wait and see what the final, updated BFS will look like.
Even if Peak get financing and there are no glitches at all, no product to be expected before 2025.
The totals of the minerals resource look very similar to those years ago.
Source: Northern Minerals Annual Report 2021, p. 29
The proportional composition of Browns Range xenotime:
At current prices and TREO quantities potentially US$3 billion in the ground. Not really big, but the composition is quite something, which explains the keen interest of Chinese shareholders/directors.
Preliminary assessment of the new proposed site for the construction of a permanent disposal facility (PDF) of the rare earth processing plant Lynas Malaysia Sdn Bhd in the Gebeng Industrial area, Pahang, found it classified as low-risk flood area.
Dr Adham said at present, the government is of the view that the transfer of accumulated radioactive waste can be expedited on the condition that construction of the PDF is expedited.
However, he said, before approval can be given for the construction of the PDF, two requirements set by AELB have to be met, namely the RIA and Environmental Impact Assessment (EIA).
Speaking in Parliament today, Fuziah Salleh (PH-Kuantan) cited the preliminary environmental impact assessment (EIA) by Lynas in 2018 where it was pointed out that less than one metre below ground of the selected site (Gebeng) is groundwater.
“How can you set up a PDF in that area? If you refer to the EIA report by Lynas in 2018 that area has underground water which is less than one meter deep and this waste is radioactive that has life of 14 billion years,“ she highlighted.
“Bukit Ketam, previously selected for the PDF, was also rejected by the Department of Environment (DOE) because it is a water catchment area,“ she said.
Bentong MP Datuk Seri Liow Tiong Lai then pointed out that more than one million tonnes of radioactive waste has been collected so far.
“With the climate change, we know anything could happen, like a massive flood, especially in the low area near the beach, or a tsunami. So I think radioactive waste management is not child’s play,“ he said.
“Lynas should have identified the location to set up the PDF before extending its license to 2023 as after 10 years of its establishment, Lynas has yet to adhere to the set conditions. I want to ask if AELB [Atomic Energy Licensing Board] is sleeping on this issue or sleeping with the ‘enemy’,“ he questioned.
Politics
Rare earth magnets is not the only supply chain the US wants to restore. Semiconductors is another one:
"If you want to reestablish a complete semiconductor supply chain in the U.S., you will not find it as a possible task," Chang told a tech industry forum in Taipei on Tuesday night. "Even after you spend hundreds of billions of dollars, you will still find the supply chain to be incomplete, and you will find that it will be very high cost, much higher costs than what you currently have."
The U.S. accounted for 37% of global semiconductor manufacturing in the 1990s, but has fallen to 12%, Semiconductor Industry Association data shows.
Washington is campaigning to bring more chip production onto American soil, amid concern about an overreliance on Taiwan. The U.S. Senate this year passed a $52 billion bill to support domestic semiconductor manufacturing and R&D, though the package has yet to become law.
Chang, who retired from TSMC in 2018, claimed that some people arguing for bringing the chip supply chain onshore are driven by self-interest. Intel CEO Pat Gelsinger advocates for more manufacturing in the U.S. as "it is not safe in Taiwan and it is not safe in South Korea," Chang said, while Intel hopes to secure funding from the $52 billion subsidy package.
In a nutshell.
In rare earths US promoters of deposits with glaringly obvious lack of feasibility, lobby their unworkable concepts as the solution to national security concerns. They should be ashamed of themselves, but they aren’t.
In reality, also building a value chain of rare earth and permanent magnets is just another toy of US domestic politics. The massive subsidy proposals originate from Republicans, whereas the Democrat administration is leaning towards budget-friendly, yet equally questionable trade tariffs.
On the whole this is just a race for government handouts by greedy people, enabled by certain people, who couldn’t possibly care less about national security.
While Southern Ionics (now a subsidiary of Chemours) produce monazite as a by-product, which they sell to Energy Fuels, currently the only serious, dedicated, advanced, China-independent rare earth mining project in the US is Rare Earth Element Resources’ Bear Lodge. Listed REEMF are ~48% owned by Synchron, an in-house holding of General Atomics. We hold a small position in REEMF, related to the recent capital raise with 1:1 rights assignment at US$0.24/share.
We have been warning, that such thing could happen to rare earth:
"We stopped reading domestic indexes for a while as they are confusing. We now just call up other traders to get the daily prices," said a Guangxi-based coal trader, who like others interviewed for this story declined to be named because of the sensitivity of the matter.
China began tightening rules for commodity index providers in June to tame red-hot prices of products ranging from copper to iron ore. The recent move on coal intelligence providers was spurred by stubbornly high prices of the key electricity-generating fuel.
Data such as coal consumption at major power plants and stock levels at key ports was once available on providers' websites or shared widely on social media.
That information has for months been either hidden behind paywalls or no longer published, traders said.
Instead, traders and analysts have had to rely on personal communications, or use international prices for a gauge.
We have seen also in rare earth, that the one or the other source of information falls silent.
And if the a.m. was not enough, the Ministry of Industry & Information Technology adds this, for good measure:
If under this proposal rare earth related information should be classified as “core information”, which is possible, then this won’t bode well for rare earth information and data from China.
Another piece of advice, that went almost completely unheeded:
The challenge for us is that Xi’s project of total ideological control does not stop at China’s borders. It is packaged to travel with Chinese students, tourists, migrants and especially money. It flows through the channels of the Chinese language internet, pushes into all the world’s major media and cultural spaces and generally keeps pace with and even anticipates China’s increasingly global interests.
In my opinion, if you’re in the business of intelligence, defence or international relations; or trade, economic policy or market regulation; or arts, higher education or preserving the integrity of our democratic system - in other words, just about any substantial policy question whatsoever - then you will need a working knowledge of Marxism-Leninism Mao Zedong Thought. And maybe, after the 19th Party Congress, you’ll need “Xi Jinping Thought” too.
During the past 30 years, rest-of-the-world politicians have unlearned how to interact with a partner, who acts almost entirely ideology-driven.
What ideology-driven means in terms of rare earth and permanent magnets would be worth an essay. In a world that feeds on headlines and not on contents, it would be as lost as the a.m. article was.
But let us just give one single example, how ideology affects rare earth business.
Ecological Civilisation 生态文明
“Ecological Civilisation” has become a key political objective in China, edged in stone.
From the very beginning in highest office, Xi Jin Ping thought on this:
Protecting the ecological environment means protecting productivity, and improving the ecological environment means developing productivity. Let the green waters and green mountains give full play to the economic and social benefits, not to destroy it, but to protect it better.”
(September 7, 2013 on a visit to Kazakhstan)
and
In the final analysis, ecological and environmental problems are caused by over-exploitation, extensive utilisation, and extravagant consumption of resources. The development and utilisation of resources must not only support the present generation to lead a happy life, but also leave a foundation for survival for future generations.
(May 24, 2013, speech to the Political Bureau of the 18th Central Committee of the Chinese Communist Party)
“Ecological Civilisation” affects both, the production or rare earths and the application of rare earth permanent magnets.
Under this objective, rare earth mining and production is only acceptable, if up to the high environmental standards set by the Chinese government. The impact of this is reduced mining and consequently reduced output of rare earth products.
At the same time, the use of rare earth magnets increases exponentially for generating power sustainably and reduce CO2 output by shifting to e-mobility.
This leads to the situation, which we are facing now, shortage of rare earths. Since the application of rare earths is ~90% centred in China, the rest of the world does not yet really feel the impact directly, but only indirectly.
The age of complacency in the West, starting with the WTO defeat of China rare earth export quotas in 2014.
The flood of Chinese rare earth exports since 2011, originating from unlicensed mines and unlicensed rare earth production at enormous cost to China’s environment, has crippled development potential junior mining of rare earths in the rest of the world.
Now the pendulum is swinging back and the world suddenly has to grapple with a predicted shortage of rare earth.
China was not oblivious to the looming shortage and over the years we have seen numerous attempts of Chinese companies to invest in ex-China rare earth mining and production. With the exception of Mountain Pass and Myanmar, all failed, also for China containment policy reasons.
Too little to live, too much to die.
China will have its way keeping rare earths for own consumption while keeping prices stable for domestic rare earth magnet production:
To cope with the situation, the National Development and Reform Commission said in a series of announcements that it would take necessary measures, including legal intervention in coal prices, to bring the coal market back to rationality and ensure a stable supply of energy.
If necessary, as we said before, they’ll apply this to other basic industries too, also rare earth.
On unchanged conditions, how this plays out is glass-clear: The existing dependence on China’s rare earth magnets will perpetuate (which does not necessarily need to be bad), as there will be no rare earth raw materials for producing rare earth magnets in the rest of the world.
Out of Time
China will likely be able cover projected stellar 2030 demand for rare earth magnets already from 2025, BUT subject to rest of the world’s rare earth raw materials having been made available to China. No rare earth raw material from the rest of the world means no additional, badly needed rare earth magnets.
Baring cooperation with China in rare earth, rare earth raw materials and rare earth magnets, there won’t be enough material for rare earth magnets, which will impact CO2 reduction and we may have to postpone or abandon carbon output reduction measures and deadlines.
However, it does not look like there will be cooperation with China:
But his discussions with Chinese counterpart Xie Zhenhua were lagging as Beijing insisted that cooperation on climate would not commence amid strained relations over human rights, Hong Kong, Taiwan, trade and a range of other issues.
Bump.
Abandoning carbon reduction measures would leave only on path to sustainability: Thrift, instead of growth.
The report[The Heat is On] includes information from all 191 Parties to the Paris Agreement based on their latest NDCs available in the interim NDC registry as at 30 July 2021, including information from 86 updated or new NDCs submitted by 113 Parties. The new or updated NDCs cover about 59% of Parties to the Paris Agreement and account for about 49% of global GHG emissions.
For the group of 113 Parties with new or updated NDCs, greenhouse gas emissions are projected to decrease by 12% in 2030 compared to 2010. This is an important step towards the reductions identified by the Intergovernmental Panel on Climate Change (IPCC), which estimated that limiting global average temperature increases to 1.5C requires a reduction of CO2 emissions of 45% in 2030 or a 25% reduction by 2030 to limit warming to 2C.
2030 Projection -12% for ALL greenhouse gases, whereas only for CO2 the required value is -45%. Brilliant.
Can’t wait to see more of that.
Africa is the continent of the future. And it may always be, if things don’t change.
Africa could be, in mining, the continent of tomorrow. But it always will be just that if governments go about managing mining companies in a predatory fashion. Instead of engaging the sector as a long-term developmental partner, many African governments take a short-term, predatory approach, playing to populist rhetoric.
Same applies to certain junior rare earth miners, who prey on certain corrupt African governments.
Mineral value addition and the capacity to negotiate win-win contracts with the private sector and deal with corruption are key if Africa is set to achieve long-term social and economic transformation from extractives.
Very few African countries export value-added mineral products. The Botswana case of forward integration in the diamond industry value chain by investing in diamond cutting and polishing and the creation of local jobs should serve as a learning experience for other African countries.
The Indonesian approach.
However, adding value to mining products also requires a local backbone. Basic chemicals should not have to be imported from overseas, thousands of miles away, particularly not considering current sky-high transportation cost. Roads, rails, utilities like power, gas and water, need to be put in place. And all that with a regulatory enforcing best practises.
Environment, Society, Governance
Without ESG in line with local aspirations, junior miners are dead in the water:
The Yangibana Project involves developing an operation that will mine a monazite ore containing rare earths at a rate of approximately 1.20 million tonnes per annum (Mtpa). The ore will undergo processing via a beneficiation circuit, which will then be transported ~430km via truck to the Onslow Rare Earths Plant, located at the Ashburton North Strategic Industrial Area, which is 15 km from the town of Onslow.
The Onslow Rare Earths Plant consists of a hydrometallurgy circuit to produce up to 15,000 tonnes per annum (tpa) of mixed rare earths carbonate (MREC) product. The MREC product would then be transported via road to port for export to overseas customers. All tailings generated by the beneficiation and hydrometallurgical process circuits will be stored in approved tailings storage facilities (TSFs) at the Yangibana Project site.
Trucking the concentrate for 430 km is costly, however, the low concentrate with 23% TREO is not saleable as such, it must inevitably be upgraded to a high TREO carbonate in order to be marketable.
The recovery rate of 70% is somewhat unexciting.
In order to reach envisioned output of 13,254 t MREC, Hastings would probably have to ship 70,000 t concentrate per year to Onslow for processing, ca. 200 tons per day, not considering contingency for days/weeks of poor road conditions. Probably continuously keeping a month worth of consumption stocked at Onslow would be prudent:
Source: Hastings Sustainability Report, p. 26
On their return trucks will have to carry the after-production radioactive waste from Onslow back to the mine site:
Source: Hastings Sustainability Report, p. 37
Hastings also filed their radioactive waste management plan:
Baring any tangible company information to the contrary, apart from what it disclosed in its previous incarnation as Rift Valley Resources, at that time listed on the much more strictly regulated ASX, regarding radioactive thorium Pensana continues to look like this:
Angola committed to the International Atomic Energy Agency (IAEA) to report planned output of more than 20 t of thorium per year. Even in the unlikely case, that Longonjo’s planned thorium output should be only a fraction of what we found, there is a substantial compliance issue to be addressed, ESG relevant.
The continued denial of the problematic nature of Longonjo, combined with the continued withholding of the drill core thorium and uranium test results and a total blackout on the previously much-touted bankable feasibility study, continues fuelling serious feasibility concerns.
On October 23-24, 2021, the 2021 Academic Annual Conference hosted by the Chinese Rare Earth Society was successfully held in Chengdu. The meeting was strongly supported by Sichuan Jiangtong Rare Earth Co., Ltd., the Institute of Comprehensive Utilization of Mineral Resources, Chinese Academy of Geological Sciences, and Baotou Rare Earth Research Institute.
Although many online registration representatives (980 people who registered online) were unable to attend the meeting due to the emergencies of the epidemic, the participants of the meeting were still active, which fully demonstrated the increasing importance of rare earths in the high-tech field.
The wide application of degree elements in agriculture, medical treatment, feed, etc. to solve the problem of balanced utilisation of elements, and to promote the future layout and planning of the rare earth industry in the carbon neutral path.
The new effort will surely find more outlets for high-abundance elements and solve the problems of surplus and backlog of some rare earth elements that have plagued the industry for many years.
Affected by changes in international relations, the situation of the foreign rare earth industry has also undergone great changes. In response to international changes, the China Rare Earth Society has done a lot of related research in the past year and actively contributed to our country, including the "Report on the Countermeasures of the United States, Japan, India and Australia", and "Policies for the Development of Rare Earth Resources in Foreign Countries (Reduction of Rare Earths, Focus on China, Recycling) ) Relevant Suggestions for the “Total Control of Rare Earth in China", "Research on Global Rare Earth Breakthrough Technology", etc.
The conference set up a total of 17 sub-venues, the content mainly centred on the green development and utilisation of rare earth resources, rare earth biomedicine, rare earth functional materials and other fields.
They are:
Rare earth resource development and environmental protection, and analysis and testing;
Rare earth magnetic materials and applications Phase change refrigeration, energy storage materials and applications;
Rare earth luminescent materials;
Rare earth crystal materials;
Rare earth molecular materials and supramolecular devices;
Rare earth development and application innovation forum of Jiangxi University of Science and Technology;
Rare earth Polishing materials and surface processing technology;
Rare earth environmental economy and industrial policy;
Industrial application and market of rare earth materials;
Hydrogen storage materials and hydrogen energy applications;
Application of rare earths in steel and non-ferrous alloys;
Casting alloys and wear-resistant materials;
Mineralization of rare earth resources;
The role of the frontier forum;
Interdisciplinary forum of rare earths, energy and environment.
A total of 471 thematic academic exchange oral reports were held in the sub-venues, 33 academic exchange posters were exhibited at the same time, high-level academic and technical exchanges in the field of rare earths were carried out, and the achievements in basic research, applied research and industrialisation innovation and development of rare earths were displayed. Latest progress and results.
The perpetual core problem, featured prominently: What to do with lanthanum and cerium?
Prices
During the second half of October, reported rare earth prices increased substantially, again supported by raw material price increases.
In RMB terms the rare earth carbonate price during the period increased by 16%, and so did neodymium oxide and NdPr oxide prices, adding 16% each.
Already sky-high priced praseodymium oxide only rose only 6%.
Downstream NdPr metal rose by 15%.
Heavy rare earths also rose, but in low single digits, except erbium oxide, with jumped.
The erbium oxide price increase of 35% is unusual. The reason for the increase is, that erbium-iron alloy can now replace gadoliniumandholmium-iron alloys in NdFeB magnets.
Reasons for the general climb in prices:
Raw material shortage, government policies on heavy rare earth continue being implemented strictly, while on the light rare earths it is more relaxed;
Power shortage, some separation factories only operate at 50-60% capacity;
Low downstream inventory on higher magnet production;
Fundamentally increasing demand for rare earth permanent magnets.
We mapped out rare earth magnet material cost to NdFeB prices, very roughly, blanket. Missing is the impact of value of stocks, production periods, detailed composition, etc, so this is really just a flashlight on the overall situation:
Please do remember, that the spot market for rare earth is only a minor part of the story. Most quantities of rare earths for magnets are under long terms contracts, and those magnet manufacturers with critical mass enforce on their customers pass-through clauses for raw material price changes.
This is, what the current price development looks like:
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.
Here some historical price comparisons:
We are far, far away from 2011 peak prices. However, if one blacks out 2011 and bases on pre-embargo prices, the changes are impressive.
