NdPr Near 'Glass Ceiling' of $70/kg Ex Works; China RE Exports 2020 Down 23% YoY; Trade Manipulation; Resource Estimates; RE Recycler Walks The Talk;

Rare Earth 2021 January 14

Rare earth prices keep climbing for the 3rd month:

Here the permanent magnet materials. Nd at above $85/kg, this is bubble territory. But after sustained increases for 3 months, with Chinese RE companies scrambling for raw materials, the sky seems to be the limit.


Now, you would assume panicky foreign buyers hastily buying into the rising RE prices in November 2020, right?

Not so.

China's rare earth exports in December 2020 are valued at US$39.2 million, a year-on-year decrease of 12.1%! Why? It is cheap lanthanum and cerium, that dominates exports, both with an organic YoY negative price trend.


China keeps putting the bar for rare earth entry higher and higher. Fully automated production lines that turn out 99.999% pure oxides in a continuous process, and the whole thing to be fully digitised during the coming 5 years, while nascent RE efforts in the West continue to wrestle with mundane basics.

While the EU shows small progress, in spite of the expensive, infinite loops of official debating clubs about lofty ideals and the US also make small, uncoordinated advances, in spite of hapless measures, they are no match to what China is doing:

  • Tangible cash rewards for technological advance and cost improvement

  • Tangible financial support for nascent enterprise

  • Structural planning and market creation

  • And now even lure foreign direcct investment in RE

It is possible to let the market rule, let China and junior RE miners do their thing and hope that somehow things will fall into place.

But governments must attack China trade manipulation.

In market economies, VAT is being refunded upon export in full.

China does not do that, it discriminates which products it wants to export and which it doesn’t want to export by offering or withholding VAT refund upon export.

Concretely in rare earth, there is no VAT refund upon export of rare earth compounds, BUT on exports of permanent magnets, made from rare earth compounds, the full VAT of 13% is being refunded upon export.

This system makes permanent magnet raw material cost in China 13% cheaper than abroad.

Now, of course you might think “we’ll produce RE domestic, so we don’t depend on China materials and prices.” May be you produce domestic, but the market price of RE is determined by China’s export prices which include China VAT, so why should an alternative RE maker sell at a lower price than the China-determined market price?

This is not only a matter of rare earth or permanent magnets, it is an overall issue that applies to all China exports: Products that China want to export can obtain VAT refund upon export, while products that China does not want to export receive no VAT refund upon export.

In the course of the forthcoming detente of China trade, the China VAT refund upon export scheme must become a core part of the negotiation agenda. It is trade manipulation on a massive scale, it must end, else we’ll continue running into problems with China.

For western governments finally attending to this is mandatory, a must, a conditione sine qua non.


China Jufeng Finance weekly reports, that Industrial Securities (兴业证券) estimate that by 2025, the demand for neodymium iron boron magnets for new energy vehicles is expected to grow rapidly to 31,500 tons, with a compound annual growth rate of 33.7%.


Montero intend to bring a lawsuit against the Tanzania government for having changed its mining law, which leaves Montero with their Wigu Hill project high and dry.

In June 2019 Vital Metals had signed a letter of intent to acquire Wigu Hill from Montero for a non-refundable C$ 100,000 plus C$1.1 mio and a royalty of 1%, subject to due diligence. That deal will be dead, if Montero can’t obtain a mining license.

Source: Montero MD&A for the period ending June 30, 2020

A lawsuit or arbitration against a government of a sovereign nation for changes in the law of the land is rather ambitious.

Strictly speaking, what developing countries, pardon, emerging nations want is not resource-squatting by some penniless junior miners, they want to see the investment coming and revenue flowing.

Scraping together the money for an ambitious and finally trivial arbitration or law-suit, while being completely unable to finance exploration and mining, is not what these countries want to see.

Remember Stans Energy, who acquired Kutessay II in Kyrgyzstan for measily US$ 1 mio under possibly compliance-technically problematic circumstances and later launched arbitrations and lawsuits for US$ 118 mio - US$ 219 mio?

Such cases only make lawyers rich and serve no other purpose.


Here a comparison, which gives some food for thought:

This is not an exact science, so don’t rely on it.


Thanks for reading and enjoy the rest of the week!


//Market

The Truth About Investing in Rare Earths (China vs USA)

Both of our experts agree that the challenge for an individual private company to enter the Rare Earths processing market is immense. Jack Lifton highlights that the US has not produced Rare Earth metals in over 20 years, citing the significant degradation of domestic expertise and the lack of an existing supply chain. Consequently, any company that intends to enter the market will be forced to start almost from scratch in building the necessary infrastructure to succeed. 

Comment: Also in China it is a distributed value chain. It is evolutionary.

Lifton and Hykawy agree that any new company would be at the mercy of the Chinese state companies who control the market, and therefore the pricing. Fundamentally, profit is not the impetus behind the Chinese industry, which is willing to sell its produce “barely above cost” a tactic that any privately owned venture couldn’t sustain.

Comment: Ignores the fact, that everyone, also in China, likes higher RE prices. See past 3 months price development.

Both of our experts agree that government involvement could radically alter the industry’s prospects. Jon Hykawy posits a governmental stockpile of processed Rare Earth Elements to support new ventures. It is important to note that this stockpile wouldn’t be a static state asset but could be traded on the market, which would provide a price buffer.

Comment: This is exactly the kind of socialist economic interventionism, that we need to avoid, as we have seen it fail over and over again. Regulatory loosening? Very good. Tariffs? If really needed, ok. But no direct interventionism at taxpayer expense.

Perhaps then the solution to the lack of rare earth production in the West is not to increase it but to bypass it entirely.

Comment: Perhaps we try to prevent an event that has only existed as “head-cinema” of certain people since 2016, nicely whipped up by the media? China dominates the market of all nonferrous metals but a handful. If we see an unsustainable risk in rare earth, what about the risk of the remaining non-ferrous metals? Bypass them, too?

Our take: Rare earth development outside China happens either together with China’s rare earth companies and China’s market, or it does not happen at all.

The E-Waste Problem—and Opportunity: Let’s Get Smart About Recycling

The case for recapture and recycling of the raw materials in e-waste can even be understood as a national security issue—as rare earth materials crucial to electronics manufacture is often sourced outside the U. S., including in China, which accounts for 71 percent of the world rare earths market. The military uses for such materials have promoted Pentagon interest in ensuring U.S.-based supplies—and research arm of the Department of Energy, the Advanced Research Project Agency, which has formally solicited ideas “focused on highly energy efficient conversion of e-waste into usable manufacturing material.”

Comment: For commercial quantities of RE you need to recycle at least a billion mobile phones. Lets not be naïv about recycling of electronics. Re-use of components works. Pulverising electronics and then trying to extract each metal? Probably not feasible, until the last mine has closed.

//Policy

Pentagon’s Counter Small Drone Strategy

The exponential growth of small unmanned aircraft systems (sUAS) creates new risks for the Department of Defense (DoD). Technology trends are dramatically transforming legitimate applications of sUAS while simultaneously making them increasingly capable weapons in the hands of state actors, non-state actors, and criminals. 

Comment: With the increased use of drones, also the Pentagon’s demand for RE, permanent magnets and components made thereof will increase.

//Know-How

Grasp the initiative of the industrial value chain

At the beginning of the new year, when I walked into the Xinyuan Rare Earth automatic high-purity rare earth purification workshop, the reporter of Science and Technology Daily saw that the first domestic light rare earth fully separated and purified automatic production line with an annual separation of 3,000 tons is in full production. The enterprise adopts continuous extraction and multi-stage extraction. The extraction process technology converts the mixed rare earth chloride into each single rare earth product. The purity of its single product can reach over 99.999%, and its technical level has reached the international leadership level.

In the past three years, with the strong support of Baotou Municipal Party Committee and Municipal Government, Baotou Rare Earth High-tech Zone has accumulatively cashed-out 370 million yuan in rewards for new rare earth materials, striving for 587 million yuan in the national rare earth industry transformation and upgrading special fund, and Baotou rare earth industry transformation and upgrading investment fund 2.086 billion yuan. It is the integration and amplification of these favorable policies that promote the further expansion of the agglomeration advantages of the rare earth industry in the rare earth high-tech zone.

At present, there are 115 rare earth enterprises in Baotou Rare Earth High-tech Zone, forming a whole industry chain from rare earth raw materials to new materials to end applications. The agglomeration effect of rare earth enterprises is prominent, with the emergence of leading and backbone enterprises in rare earth raw materials, rare earth permanent magnet materials, rare earth polishing materials, rare earth terminal applications, such as Northern Rare Earth, Tianhe Magnetic Materials, Tianjiao Qingmei, and Changan Permanent Magnet.

//Companies

Geomega Successfully Completes Rare Earths Pilot Plant Testing

Four complete rounds of testing covering the entire recycling process were completed to date and these have confirmed the efficacy of the Corporation’s technology to produce rare earths. Pilot Plant testing has also validated and facilitated equipment selection for the demonstration plant. In addition, an important part of the Pilot Plant was to validate process efficiencies:

  • Rare earths recoveries >90%,

  • Main reagent regeneration around 90%

  • Product purities (>99.5% REO)

  • Heating and cooling design update to confirm process schedule (3 batch process per 8-hour shift)

We fully expect 2021 to be a transformational year for Geomega shareholders with the upcoming construction of the demonstration plant and its start of production of rare earth oxide using recycled magnets, a first in the Western world. 

Comment: We look forward to implementation.

Canadian geologist raises questions about controversial Greenland mining project

Greenland Minerals claims that its rare earth recovery technology has been tested at the BTMR laboratories in China in 2020, overseen by rare earth specialists Shenghe Resources Holding Co Ltd., one of the leading rare earth producers in China.

“Steenstrupine has something like two per cent of thorium,” he said, “and thorium is very radioactive.”

There is nothing in the company’s spreadsheets and data sheets about thorium, Chakhmouradian said.

“Yes, uranium is their asset, they’re planning to extract uranium alongside rare earths but there is nothing on thorium and that makes me very-very suspicious,” Chakhmouradian said.

Basic calculations show that for each 25,000 tons of rare earth elements produced annually, the mining company will need to dispose of 3,000 tons of highly radioactive thorium, Chakhmouradian said.

“What are they going to do with this thorium? Where are they going to dump it?”

Based on the company's own figures, he claims the mining company will need to dispose of 3,000 tons of highly radioactive thorium.

Comment: We don’t know, what spreadsheets and data the learned gentleman refers to. Greenland Minerals do mention thorium in its tailings. GGG’s feasibility study says on Page 13:

Residual uranium and thorium remain locked within stable mineral structures in the flotation tailings. The minerals are mostly silicates of the lovozerite groups.

and

Based on the information provided, there is sufficient storage in FTSF for the design life of mine production. These tailings still contain lovozerite group Na-silicate minerals that contain some uranium, thorium, zirconium and rare earths. Future studies will be conducted to investigate the potential recovery and processing of these minerals, which are not targeted by the flotation process. This provides the opportunity to increase uranium and rare earth output.

That does not make radioactive tailings less controversial.

Namibia Critical Metals Heavy Rare Earth Project - New Results Confirm Multiple Dysprosium Zones at Area 2B, Area 4 Drilling Completed and Mining Licence Application Advances

 Lofdal is a joint venture between the Company and Japan Oil, Gas and Metals National Corporation ("JOGMEC") which is operating under a Term 1 budget of CD$4,100,000 (Company press release September 21, 2020). Since the Company's previous update (November 26, 2020) progress highlights are summarized as follows:

  • Additional drill results from Area 2B satellite deposit confirm multiple dysprosium zones to 190 vertical meters

  • Results of 13 additional holes include 3 m @ 0.84% TREO with 450 ppm Dy2O3, 7 m @ 0.58% TREO with 280 ppm Dy2O3, and 7 m @ 0.26% TREO with 226 ppm Dy2O3 (which includes the highest grade 1 m intercept of 1,123 ppm Dy2O3)

  • Area 2B deposit remains open along strike and at depth. Nine drill holes pending analyses

  • Area 4 resource drilling program successfully completed with established strike length of 1,125 meters. Thirty-three drill holes pending analyses

  • Notice of Preparedness to Grant Application for Mining Licence received from Ministry of Mines and Energy