Myanmar Exports Slow As People Are Shot - Massive Rare Earth Shortage Looms; Baotou's Resources; JL Mag's Numbers; Rainbow Put Stakes Up High; Queensland's New Economy Minerals

2021 Rare Earth March 28

Myanmar RE concentrate exports to China are slowing down, owing to the Myanmar situation, according to this article on Sina.com:

According to reports, relevant companies have complained about delays in the transportation of rare earths since mid-March, allegedly because of the deteriorating political and economic situation in Myanmar. The media reported that these factors had an impact on logistics.

The report pointed out that the obstruction of the supply of rare earths in Myanmar is the latest signal that the nationwide chaos in Myanmar has begun to seriously disrupt the economy and enterprises.

Related here another “we told you so” rare earth piece from Reuters, which may already be outdated in terms of Myanmar deliveries, but gives you a good idea how important these imports are.

On a side note, you will remember the two 2019 export stops of RE raw materials from Myanmar’s Pang War district to China. Actually, at the time China responded in kind and stopped the export of processing materials, e.g. ammonium sulfate to Pang War.

On Saturday alone at least 80 people lost their lives in Myanmar while demonstrating for reinstatement of the elected government, for freedom and democracy. The soldiers and policmen had been ordered to aim for the heads of demonstrators and shoot. The military coup plotters call it “fighting terrorism”, a convenient one-fits-all label also used elsewhere for civil rights violations and atrocities.


Baotou Iron and Steel Co., Ltd., the owners of Bayan Obo, listed on the Shanghai Stock Exchange, recently answered investor questions:

  • How much is the annual output of rare earth concentrates?

  • What are the reserves of rare earth resources?

The answers of Baotou Iron and Steel Co., Ltd.:

  • The company owns about 200 million tons of tailing pond resources, with an average rare earth grade of 7.01%, and rare earth reserves equivalent to 13.82 million tons of oxides.

  •  The assets related to the rare earth and niobium separation production line of the Baiyun Obo resource comprehensive utilization project acquired by the company in 2017 have a rare earth concentrate production capacity of 250,000 tons.

  • The rare earth-related rare earth beneficiation assets of China Northern Rare Earth Group acquired in 2018 have a rare earth concentrate production capacity of 200,000 tons

  • The company exclusively supplies rare earth concentrates to Northern Rare Earth, and the quantity supplied is determined annually according to the actual demand of Northern Rare Earth.

End answers.

Neither Baotou Steel nor China Northern were only established yesterday. The shifting of assets is part of the ongoing reform efforts to create arms-length relations between two self-sustainable state-owned companies.

However, as long as the very same persons continue to sit on both sides of the negotiation table in Baotou, “arms length” will remain a farce .


JL Mag released their annual report 2020 and this article on China Securities Network spared us from having to weed through it ourselves. It is a habit in China to describe in words what is better expressed in a spreadsheet and that leads to painfully long and hard to read reports, particularly government ones. We reversed the process:

JL Mag invest in a 8,000 t magnet site in Baotou and will invest further in Ningbo and in Ganzhou to reach a high-end permanent magnet capacity of 23,000 t by 2022 and 40,000 t by 2025.

On the raw material side they say to have signed long term agreements with China Northern and China Southern.

JL Mag want to become a mass producer of “3C” products. 3C stands for China Compulsory Certification, a certification system designed for compliance with protection of consumers, animals and plants, environmental protection, and, of course, just how could it be missing in China, protection of national security.

The company also promises to create a 2021-2025 plan to achieve carbon neutrality.

In other words, while increasing capacity, JL Mag also expand downstream, probably in recognition of the fact that other permanent magnet makers also want to be the biggest.


Meanwhile, Toyota decided to produce their fuel cell components in China:

“The move was made in response to a request from China that Toyota manufacture the key components in the country in exchange for support from Beijing.

China aims to put as many as 1 million fuel cell vehicles on the road by 2035 in an aggressive campaign to promote clean vehicles.”

There is not the very remotest doubt, that all significant users of rare earth continue receiving the same request, notably the catalyst companies.

Toyota are neither timid or powerless and they are certainly not stupid. They simply realise projected reduced availability and pricing of key raw materials outside China and consequently do the needful.


Which brings us to the question, what happens to ex-China rare earth and permanent magnets?

On our quest for answers we attended the much advertised New Economy Minerals Roadshow – Germany, sponsored by Australia’s Queensland, the German Federal Raw Materials Agency “DERA” and the German-Australian Industry of Commerce “AHK”.

What we learned:

  • Nationally, Australia wants to be more than just a basic materials exporter, in future it wants to be part of the relevant value chains and build up related industries

  • Queensland has a New Economy Minerals strategy, lending even more support to miners than ever

  • In terms of junior miners, Queensland suggests junior miners in the state form consortiums for gaining critical mass

  • The German side suggested that German companies may take rare earths from Australia, regardless of price, only in order to replace China in the supply chain

While we recognize that it is good and important to have such events, we sensed a certain disconnect.

Most certainly the EU Commission will be more than delighted to hear that German industry representatives are of the opinion cost don’t matter in rare earth and that Germany will pay for everything, so whatever EU rare earth project makes it off the floor would not need subsidies.

The inconvenient truth here is, that the EU - already having thrown EUR 400 mio at the problem to show serious activism - will not be able to solve the rare earth puzzle, if it does not want to wake-up its citizens from its sweet sustainability dream.

There is nothing sustainable about mining, as mines are self-depleting assets. On the side there will be, among others, thorium waste, which, given Th stocks in France and some external supply, it could be used for cheap, zero-carbon emission energy for a century or so of EU power demand, but the simplistic mindset in the EU and particularly in Germany is that all things nuclear must be bad.

Felling of trees is also not wanted, as Tesla had to find out.

Essentially Europeans don’t want the mines and they don’t want the waste, but the governments want the sustainability feelgood for the voting-age citizen, which can only be created by outsourcing the inevitably unsustainable.

The further away from the homeland, the longer the sustainability dream may last, guaranteeing re-election of sustainability preaching, purposefully unrealistic politicians.


However, the world may actually really sail into a situation, when prices don’t matter, as long as there are molecules to be had.

Argus held another one of their excellent webinars, down to earth as usual, in which they show in a most compelling but completely undramatised way the continuous opening of the gap between supply and demand in lithium, cobalt, nickel and rare earth (we may want to add a bit of copper here).

Argus’ concluding thoughts are:

“Significant supply will be needed from new projects in all of the sectors (REEs, lithium, cobalt and nickel). Recycling/secondary material will be needed to plug the gap.”

Someone accused us of being biased towards recycling. Since you don’t like to hear it from us, so hear it from Argus. The a.m. is exactly, why we have been biased towards recycling for years. There will be no mining project fast enough on stream to address the immediate rare earth shortage. Only recycling or divine intervention can. Over time recycling may be good enough to plug 25% of the demand, just like in China.

N.B. diverting Lynas or MP Materials product is plugging one hole while opening another. However, it may dawn on MP sooner or later, that, instead of molycorping themselves, they could invest in another junior RE company.

Since China will self-consume more and more rare earth and export ever less, the hopes of western industries for rare earth and also permanent magnets rest on companies like Lynas, Neo, HyProMag, Urban Mining, Geomega, REEtec, Less Common Metals, Vacuumschmelze.

They’d better walk the talk and while they do, they could do with some support.

Perhaps the chip sector - with semiconductors having turned into “weapons-grade unobtainium” - is an example how things may play out during an upcoming rare earth shortage.


For junior RE miner hopefuls, it would not be unreasonable to revisit their feasibility studies and assumptions in view of the evident scenario unfolding.

An evolutionary development should be perfectly possible for the one or the other junior RE miner, as China provides a ready outlet for RE concentrate or carbonate mixes, so that further downstream development could at least partly be financed from the cash flow of the junior miner.

Junior RE miners could act according to Nike’s motto: Just do it.

But hold on for a moment, talking about Nike, they are getting Huawei-ed right now and anyway after the Anchorage meeting starting any form of long term cooperation has become politically impossible. So de-globalisation continues, which is a political objective, not necessarily a matter that ultimately makes economic sense.

By the way, the Suez Canal drama is yet another nail in the coffin of globalisation, as the risks of long distance transportation become evident.


Who are the (junior) rare earth miners?

There are interested people out there who don’t know where to start. We compiled The Rare Earth Observer’s Watch List for interested parties, as a starting point.

Do tell us, if you feel the list is missing something.


These are the banks who currently engage in fossil fuels and who may want to look at alternative investments:

However, rare earth may be a difficult alternative investment for them from a risk and collateral perspective.

Fossil fuels are by and large commodities, traded along internationally recognised standards the world over; they are used universally and are essential to any industrial nation’s economy. 

The same can’t be said about rare earth, also dependence and markets have long moved down the value chain to the products made from or containing rare earth.

Crude oil is an exchange-traded commodity. Apart from anaemic exchanges in China, rare earth aren’t exchange traded. There once was an international rare earth exchange planned in Xiamen’s free trade zone by the rare metal Fanya Exchange, whose Ponzi-scheme collapsed before the project in Xiamen could be implemented.

As a resource investment rare earths may be laden with comparatively more risk and uncertainty than traditional resources.

But if we see who else banks throw good money at, and compare their current commodity investments to the rare earth outlook, a junior rare earth miner may well be a safter bet.


Prices:

Note that since the diplomatic clash between China and the US the RMB trends weaker:

This way, NdPr 75/25 stays just a tad below US$90/kg ex works China incl. 13% VAT.


Thanks for reading and have a rare-earthy week ahead!


//Science

European First-line Scientific Research Institutions Provide a New Method of Recovering Magnetic Grains From Rare Earth Magnets

The Slovenian Research Institute has developed a novel method to recover NdFeB magnet grains from bulk sintered NdFeB magnets and magnet waste by electrochemical etching.
Currently, the research team can use this procedure to produce tens of grams of NdFeB magnet grains. 

//Politics

Opinion: How China’s Rare Earths Monopoly Controls Our Destiny

David Zaikin, a Ukrainian-born Canadian citizen working in London, knows as much about the world resource line-up and China’s influence as anyone. He is the CEO of Key Elements Group, and an alumnus and founder of the Mining Club at the London Business School.

“China is out there and is trying to win every race globally. The West must do everything it can to subvert its efforts and find alternative nations to work with,” Zaikin says.

The Mountain Pass mine, which lies in the Mojave Desert in California, is in production after a hiatus. But that doesn’t mean much in terms of our Chinese dependence. The production from California is shipped to China for processing and then shipped back to the United States [factually wrong. Export processing of rare earth is illegal in China]. The mine has also been financed by the Chinese.

The inhibition to mining for rare earths, as John Kutsch, executive director of the Thorium Energy Alliance, explains, is thorium, which isn’t a rare earth element, but which is found in conjunction with rare earths, especially in the United States [and particularly everywhere].

Thorium is a fertile nuclear material and is classified as such by the Nuclear Regulatory Commission and the International Atomic Energy Agency, so miners have to account for it, and it has to be stored and disposed of as nuclear waste.

Until a national thorium bank is established, as supported by Kutsch and his group, we will be looking elsewhere.

//Companies

Rare earths miner Vital Metals start operations at Nechalacho project in Canada’s Northwest Territories

All plant and equipment, including a TOMRA COM Tertiary XRT 1220/B ore sorter and associated infrastructure, will arrive at site by the end of March in preparation for rare earth production at Nechalacho. 

Vital’s strategy is to develop Nechalacho in two stages. Stage 1 of the operations focuses on the North T Zone resource and Stage2 will involve the development of the much larger Tardiff deposit. Det’on Cho Nahanni Construction will mine the North T Zone as a small open pit, with material transported to Vital’s ore sorter on site at Nechalacho for sorting. This will create a product suitable for further processing offsite at Vital’s rare earth extraction plant, to be constructed in Saskatoon, which will produce a mixed rare earth carbonate product for sale to separation facilities.

Comment: Surprised to read, that Vital will have their own rare earth extraction….

Rainbow Rare Earths CEO expects Gokara break even next quarter, strongly cash positive by year-end

The CEO says he expects the Burundi Gakara trial mine to break even after the first quarter, as the business continues to mechanise the operation and focuses on growing the output. "By the year-end the business will be strongly cash-flow positive at current pricing."

"Pricing had been circa $50,000 per tonne in December, and now is $88,000 per tonne currently, and we are targeting between 180 and 200 tonnes per month of Rare Earth concentrate by the end of the year." said George.

Comment: Come again? Rainbow used to sell their concentrate between US$2,000-3,000/t (at historic cost of US$ 4,000/t), how come now price should be up 30 to 40 times?

Burundi to break-even 2nd quarter, he says. Scandalous, but he may well be right.

According to our Rainbow Gakara basket price (not based on absurd 100% recovery) at the much bemoaned 70% discount to market prices, a.k.a. conversion fee, they should be able fetch US$4,200/mt FOB Dar Es Salam, cash. If they can squeeze ThyssenKrupp’s discount (Gakara TREO contains >75% La and Ce), pump up quantity and the weather plays along (usually Burundi dry season is from May to September), then yes, it looks promising.

But it comes even better: Rainbow the only London listed rare earth producer….? Rainbow a NdPr producer…? That is pretty borderline. Perhaps Rainbow should ask their promoter to tone it down.

It will be interesting to see, if Rainbow get anywhere with the phosphogypsum in South Africa. After enjoying Phosphatic waste clay: Origin, composition, physicochemical properties, challenges, values and possible remedies – A review one can see from it, that what Rainbow plan is anything else than a stroll in the park.

We’ll look forward to the South Africa phosphogypsum PEA advertised for July together with the quarterly reporting, looking for the break-even in Burundi.

Australian Strategic Minerals (ASX:ASM) sets sights on $106M

The company has received firm commitments from sophisticated, professional and institutional investors to raise $65 million through a placement at $4.80 per share.

ASM will also launch a one-for-14 entitlement offer at the same issue price to raise up to $41 million. The offer price represents a 10 per cent discount to the company's 10-day volume-weighted average price.

Energy Fuels’ Initiatives In Rare Earth Industry Could Translate To Higher Valuation

The key aspect of Energy Fuels’ initiatives is that investors are richly rewarding companies which plan to become important players in the production of rare earth carbonates and ultimately rare earth oxides. For example, MP Materials Cop. (NYSE: MP) owns the Mountain Pass rare earth deposit in the U.S. state of California. MP Materials currently produces a rare earth carbonate (which Energy Fuels plans to begin doing shortly) and expects to commence producing Nd and Pr oxides in 2022. Energy Fuels hopes to begin producing such products in 2023 or 2024.