MP Lose Money in 2020: What happened?; Japan's 2020 RE Consumption; RE Prices Weaken Across The Board; Myanmar Fights Near Rare Earth Mines;
2021 Rare Earth April 1
When we first read the Motley Fool’s “Why MP Materials Stock Fell 13% at the Open Today” we got concerned.
Next stop MP Materials website, the news section. We found the publication of 2020 results:
All good-day-sunshine, but then we stumbled accross this paragraph:
Obviously the US$ 66.6 million one-time-no-cash-charge for the termination of agreement in June last year (before the company was public) seems to be at fault.
Usually, the party who terminates an agreement and incurs such a large charge, equivalent to one-and-a-half quarters of revenue of the best quarter ever or half a year of revenue before that, sees a high potential in an alternative arrangement that more than pays for the termination charges.
Now we got really curious.
So we stopped reading this abbreviated publication and proceded straight to EDGAR for MP’s Form 10K original filing.
In the Form 10K MP lay out the strategy and the underlying assumption:
We have substantially completed our process redesign and engineering for Stage II and we hold all intellectual property and expertise necessary to operate independently of our relationship with Shenghe. We believe that our Stage II optimization project will enable us to materially increase the recovery of NdPr from our concentrate, increase NdPr production and dramatically lower the cost of production, in each case, as compared to the prior owner’s operations.
and here the mission statement:
Our mission is to maximize shareholder returns over the long-term by executing a disciplined business strategy to re-establish a secure and sustainable domestic supply chain for critical sectors of the modern global economy. We believe we can generate positive outcomes for U.S. national security and industry, the U.S. workforce, and the environment.
Regarding the Shenghe agreements we recommend reading pages 74 - 78 for getting a mild idea what was going on there. The negotiations must have been good for causing an ulcer.
Long story short, it is evident MP are trying to struggle free from Shenghe, Singapore and China, and MP place an all-out bet on NdPr.
For that to work, MP must also make a market for substantial quantities of NdPr sooner or later. As GITI, mother of this blog, laid out in this presentation in minute detail, it will be challenging to create a market for NdPr outside China, owing to China’s tariff and taxation system, keeping permanent magnet exports cheap and rare earth exports expensive vis-a-vis China domestic.
Also China has preempted all growth forecasts in NdFeB magnets by building up capacity that already now is good enough for covering world demand expected in 2025. And, as we reported, the capacity build-up continues.
Selling NdPr from the US to China is currently impossible (trade-war tariffs) and going into head-to-head competition with Lynas in Japan is obviously not preferable, MP may actually have to sell NdPr at lower than China prices to any nascent US or existing EU user, for as long as China still exports some NdPr.
Regarding cerium, which is potentially about 49% of Mountain Pass TREO volumes, according to the Form-10K MP seem to have found a solution how to exclude it from the process, so that it becomes less of a burden. Hopefully it works in practise on industrial scale.
While we remain of the opinion, that to continue supplying bastnaesite to China with good profit is the way of least resistance, with lots of luck and good timing, MP’s all-out bet on NdPr may just work, however, profitability is uncertain.
Expect strategic moves from China, such as continuing to build up the western dependence even further downstream from NdFeB magnets, keeping NdFeB oversupplied and therefore cheap, while bidding up prices for bastnaesite and perhaps even opening its NdPr market for US-product by canceling tariffs, subsequently outbidding nascent western buyers of NdPr.
Suspense is in the air.
Japan’s demand for rare earth. We were waiting for it and were not disappointed. This is a translation of the Japan New Metals Association publication:
Lanthan and cerium numbers include low purity product
Mischmetal numbers include battery grades
Other rare earths include RE fluorides, praseodymium oxide, gadolinium oxide, dysprosium oxide, terbium oxide and others
Japan’s output of NdFeB permanent magnets decreased 8% to 12,400 mt in 2020, which means it’s overall output share of NdFeB was 6%.
Thanks to contributions from attentive readers, we could update our list of rare earth mines/deposits, that are or have been active at some time during the past 10 years.
Prices of REO trend weaker across the hot items, amplified by a weakening RMB exhange rate:
The fighting within 100 km of the mines is the regular army versus the Kachin Independence Organisation’s armed wing.
We speculate it is quite possible, that the mining operations are severely affected.
China’s exports of rare earths in February 2021 were 6,666 tons, a massive increase over February last year.
China’s press carried some articles recently refuting the allegations that China was about to stop exporting rare earth and starting an embargo.
Nothing in China is a constant as change (of mind?).
Pre-Easter we keep it shorter than usual today.
Have a wonderful, healthy happy Easter!
The miner, which aims to start production of REEs in 2027, has taken the step following exploration results that showed the company's total mineral resources amount to 2.3 million tonnes.
"The exploration results confirm that while LKAB mines iron ore, there is a potential to produce phosphorus from the ongoing production," said the company. In LKAB's ores the REE's and phosphorous are bound to the apatite. The company has developed a process that recycles mine waste to produce an apatite concentrate.
When Greenland Minerals embarked on public consultations this year, protests erupted. At one meeting in Narsaq on Feb. 10, locals both inside and outside the hall banged windows and played loud music to disrupt presentations.
As opposition mounted, a small pro-mining party, Demokraatit, triggered a general election by pulling out of Greenland’s coalition in early February.
Polls suggest Greenland’s main opposition party, Inuit Ataqatigiit (IA), which has a zero-tolerance policy for uranium, will become the biggest in parliament, so would be first to try to form a new coalition.
GGG share price development:
Greenland holds an election next week that could decide the fate of vast deposits of rare earth metals which international companies want to exploit and are vital to the Arctic island’s hopes of economic recovery and independence.
Altona (AQSE: ANR.PL), has signed an Option Deed to acquire a 70% legal and beneficial interest in Leadway Group Ltd, a Ugandan registered company, which is the owner of the Nankoma Rare Earths Project (“Nankoma Project”), in Uganda.
The Nankoma Project is held under Exploration Licence EL00115 and covers an area of 67.5 km2 and is located approx. 50 km east of Jinja, which lies 130 km east of Kampala in Eastern Uganda.
As mentioned in the RNS of 21 September 2021 [back to the future?], the rationale for the acquisition of the Nankoma Project is based, at this time, on the close proximity of the tenement to Australian Stock Exchange listed Ionic Rare Earth Limited’s (“IonicRE” – ASX: IXR) rare earths exploration project, which lies immediately from the north-west to the east of the Nankoma tenement and has a similar geology and geomorphology.