RE Concentrate Price Up 28% in One Day; NdPr Makers At Half Capacity; China Energy Plan Boosts RE Demand; Myanmar-China Border to Open; Recycling To Grow NdPr Output; Some Annual Reports
Rare Earths 2021 November 26
Rare Earth Concentrate Price Jumps
After finishing this issue, we were alarmed to China Rare Earth Concentrate >70% TREO price having increased by
→ 28% ←
during the market morning session today.
It trades now at at an average of RMB 62,500/t incl. 13% VAT (~US$ 9,780/t), the peak being RMB 70,000/kg incl. 13% VAT (~US$10,954/t).
Imports of rare earth concentrate are import duty free in China. The resource tax does not apply, giving imported rare earth concentrate a competitive advantage over China domestic concentrate.
Where are the venture capital companies backing up junior rare earth miners?
Need advice? Contact us treo@giti.sg
Feeding Rare Earths to Pigs
The Swiss company Zehentmayer uses the slogan “Formulas that work” offers Sanocer® pig feed additive, containing “Lanthanoids, 200000 mg”:
Source: Zehentmayer website
Zehentmayer used to have another rare earth based feed additive called Lancer®, which we can’t find on their website anymore.
Running at half capacity
China’s NdPr makers were running at 52.99% of capacity in October, 1.29% up month-on-month and up 4.29% year on year, according to China’s STCN.
There is enough capacity to accommodate any additional source of raw material supply.
In magnets China already now has the capacity to fill projected world demand of NdFeB permanent magnets 2025-2030.
State Grid and China Southern Power Grid announced that the power crisis is over, which removes an impediment to production for many rare earth companies.
Rare Earth Drama Unfolding
With the demand for some core NdFeB applications plateauing for a variety of reasons, incl. high cost and substitution, there seemed to be only two big potential growth drivers for NdFeB permanent magnets left: Electric vehicle motors and offshore wind turbines.
But now China has been implementing the GB 18613-2020 standard Minimum allowable values of energy efficiency and values of efficiency grades for motors and announced the Electrical Energy Efficiency Improvement Plan (2021-2023):
On November 22, the Ministry of Industry and Information Technology and the State Administration of Market Supervision issued a notice on the "Electrical Energy Efficiency Improvement Plan (2021-2023)", proposing that by 2023, the annual output of high-efficiency and energy-saving motors will reach 170 million kilowatts, and the proportion of high-efficiency and energy-saving motors in service will reach 20 % , achieving annual electricity saving of 49 billion kWh, equivalent to annual saving of 15 million tons of standard coal, reducing carbon dioxide emissions by 28 million tons, and speeding up the elimination of outdated and low-efficiency motors that do not meet the current national energy efficiency standards.
80-90% of China domestic electricity use is for electric motors, whether in household appliances, factory automation, robotics and so on.
Whatever is installed in industry must be successively upgraded to meet the standard of Level 3 by 2023.
The market share of NdFeB motors in industry is still relatively low, but with the above plan implemented, NdFeB demand in this sector alone is estimated to zoom up to 20,000 t per year and is expected to significantly drive the overall demand growth rate for magnetic rare earth materials to 20% year-on-year until end of 2023.
We gather, that also SmCo magnets will play a significant role in this, which would explain the sudden jump of usually anaemic samarium oxide prices:
Dramatic shortages loom. China rare earth concentrate prices shot up by 28% (twenty eight percent) on November 26.
Chinese rare earth permanent magnet makers share prices rallied:
Myanmar-China Border to Open from January
According to this announcement of the Myanmar Ministry of Information
Minister of Information Mr Maung Maung Ohn said travel restrictions will be eased by January 2022 at Muse which borders Ruili city in China’s Yunnan Province and at the three Myanmar towns of Tachileik, Kawthaung and Htee Kee which border Thailand. Travel at border crossings with Laos, India and Bangladesh are currently permitted due to lower incidences of infection.
Now where Muse and Ruili are:
Source: Google Maps
A border transit point between Muse (Myanmar) and Riuli River Port (China) late June, 2021:
Source: Google
The impact of the closure on imports of rare earths from Myanmar:
Source: China Customs
Apparently, a couple of trucks per month make it through border since the “closure” in July.
The numbers that Reuters reported on September 20 were wrong, because they only checked one product (one import tariff number) for July and August 2021. Pie in the face.
However, as one can see from the chart, the rare earth product mix imported to China from Myanmar changes.
China’s import of low added value rare earth carbonate ≧30% TREO in 2018 was 29,158,591 kgs and by 2020 it had fallen to 8,714,078 kgs with imports of this carbonate down to a trickle in 1H 2021, while comparatively high added value rare earth oxides ≧30% TREO imports almost doubled from 10,080,827 kgs in 2018 to 19,384,310 kgs in 2020.
Other rare earth compounds ≧30% TREO import from Myanmar to China also increased, from 133,432 kgs in 2018 to 12,609,314 kgs in 2020.
The bulk of the import quantities is custom-cleared upon entry from Myanmar in Yunnan, but part quantities are custom-cleared in Jiangxi, Jiangsu (Chinalco) and Fujian (Xiamen Tungsten).
Scrap Recycling Likely to be the New Growth Engine of PrNd Market in 2021-2025
The supply of PrNd oxide from scraps accounted for about 30% of the total market. In the first three quarters of 2021, around 17,000 mt of PrNd oxide came from neodymium iron boron (NdFeB) scrap. The production capacity of some large domestic recycling companies will stand at 15,000 mt by 2025, and the average annual growth rate is expected to be 44% in the next five years. It will take up around one-third of the entire scrap market, and the average growth rate of the scrap recycling industry will reach 14.6%. In other words, the supply of PrNd oxide from scraps will total 31,000 mt by 2025.
Apart from Japanese and Chinese recyclers in certain third countries, there are Hypromag (where Mkango participate), Geomega Resources and Urban Mining in the rare earth recycling space outside China.
Given the not-in-my-backyard (“NIMBY”) attitude of US, EU and Japan regarding rare earth mining and processing, recycling may become an important supply line of permanent magnets to these markets.
China Rare Earth Export Statistics
In rare earth many of the numbers are in tons of Total Rare Earth Oxide (TREO) content, for example the China rare earth production quota is in tons of TREO, i.e. 100% rare earth oxide content.
The production numbers and statistics, however, are in metric tons of whatever product, no matter if the rare earth content of the product is 10%, 80% or 99%.
The same goes for the trade statistics.
It is important to understand this difference, metric tons on TREO base and metric tons of diluted rare earth product.
The total export quantity of rare earth compounds we compiled were 20,214 t in 2020 (including preparations with as little as 30% rare earth contents) as per China Custom’s individual tariff listings:
Data source: China Customs
Exports of rare earth metals and alloys were 7,418 t, according to our count (this includes alloys with as little as 10% rare earth contents):
Data source: China Customs
The total rare earth exports, compounds, metals and rare earth alloys in 2020 were 27,632 t out of 35,447 t that were publicised by China Rare Earth Industry Association for 2020.
China’s 2020 production volume of finished rare earth products looks as follows:
For good measure, here the China export numbers for rare earth magnets:
Source: China Customs
Please mind the gap: Statistics are in tons of product, not in tons of rare earth contents (TREO).
Nonferrous drama
The latest metal to join the club of scarce and expensive materials is magnesium. Marino Pieterse did a comprehensive write-up on magnesium in his October Strategic Metals & Rare Earth Letter.
Supply Chain Security for Critical Minerals - Export Finance Australia, PURE AM, Lithium Australia
The Assay webinar puts the finger on all the issues surrounding junior mining, a touch of reality.
//Companies
Less Common Metals - UK RE Magnet Feasibility Study
LCM is a rare earth metals producer in the UK. It sources its rare earth materials in China.
LCM participate in a number of supply chain projects in UK/EU, one of which is UK Rare Earth Magnet Base by Innovate UK, and LCM published a feasibility study sponsored by the Advanced Propulsion Center of the Automotive Transformation Fund.
Dr. Ian Higgins, a 28 year veteran of rare earth metal making and a formidable expert, published a “UK Rare Earth Magnet Base Feasibility Study”. The publication itself is not a really a feasibility study, but rather a conceptual paper:
While overall the insights are correct and valuable, this here is a bit controversial:
(1) is unrealistic. Even if the resource itself was “free of charge”, e.g. tailings, it costs a lot of investment to get a mine/resource up and running and to turn out usable concentrate. There must be income. Also the study-envisioned resource, monazite from heavy mineral sand processing, costs real money to produce and has a ready and able buyer on standby: China;
(2) handing down product “at cost”, along what usually is a distributed value chain of separate entities, in order to subsidise a profit at the end of the chain, is not economical. When putting mine-to-magnet under one roof, working capital requirements would be excessive;
(3) agreed.
If one wants to compare to the world’s largest rare earth company, China Northern Rare Earth (Group) High-Tech Co., Ltd.: It houses 48 subsidiaries and participations, each of which are a step in the value chain of rare earths, albeit in a variety of directions, not only magnets, and each of the them is responsible for its own profit and loss.
China subsidies
In terms of subsidies, China Northern’s received in 2020 RMB147,215,930.87 (~US$22.5 mio) after 2019 RMB170,071,078.89 (~US$24.3 mio) in varying amounts for ca. 220 projects in total. To put this into perspective: In 2020 China Northern Rare Earth Group’s pre-tax profit was RMB 832,623,455.18, so subsidies were ~18% of that.
Automotive focus
Generally, we would be apprehensive to focus solely on supplying the automotive industry, an industry of ingrates that is notorious for squeezing its dedicated suppliers dry.
Mind you, carbon neutral and sustainability actually put the automotive industry as such in question. Germany in 2020 had 48,249,000 cars on the road, on a population of 83.1 million. Germany’s cities are stuffed with cars, so are the much famed Autobahns. If one talks about sustainability, such primitive, yet powerful basics are worth a second, third and fourth look.
But don’t worry, even if partly green, the new German coalition government won’t go after the holy cow.
LCM History
The company was established in 1992. In 2008 the company was sold to Canada-listed junior rare earth miner Great Western Minerals:
Mine to metal
The plan of Great Western Minerals was to build a rare earth mine to metal supply chain based on the monazite from Steenkampskraal monazite mine, separation of rare earth compounds by Great Western GQD in South Africa (a JV of Great Western with China’s Ganzhou Qiandong Rare Earth Group) and subsequently shipping the compounds to LCM for producing the relevant metals.
Great Western invested substantially in LCM’s facilities.
In 2011 Dr. Ian Higgins, who joined LCM in 2000, became managing director of LCM, just when rare earth prices had peaked and began heading south.
Great Western bankruptcy and LCM sale
In April 2015 Great Western Minerals filed for bankruptcy and its assets, incl. LCM were put on the block.
In November 2015 LCM were acquired by Indian Ocean Rare Metals Pte. Ltd., Singapore.
The company Indian Ocean Rare Metals Pte. Ltd. is 34% held by Australasian Minerals & Trading Pte Ltd., Singapore (ultimately controlled by LCM chairman Mr. GH Smith through Australasian Minerals & Trading Pty Ltd., Australia) and 33% each are held by Mr. Subramanian Vaikundarajan (owner of V.V. Mineral) and Mr. Mutherajan Jegadeesan (director at V.V. Titanium Pigments, V.V. Renewable Energy, V.V.-Indbarath Infrastructure and and many others, as well as managing partner at MCS Resources) and their family members.
A company called Everitt International in Dubai, which since seems to have been dissolved, said to having been owned by aforementioned investors, acquired the ￡12 mio debt of LCM towards Great Western at an unknown discount at the same time.
Buyer’s concept
At the time of acquisition, Indian Ocean Rare Metals’ owners seem to have believed, that they would be able to arrange the rare earth supply to LCM. Perhaps from India?
Mr. Subramanian Vaikundarajan’s company VV Mineral, est 2002, is a heavy mineral sand miner and exporter from Tamil Nadu State in India.
In 2016, after the acquisition of LCM, VV Mineral was accused to have participated in the mining, concentration and export of monazite (to China), in violation of India’s 2013 ban. VV Minerals maintained it was only victim of a smear campaign by a disgruntled competitor, who himself had been caught red-handed in the monazite smuggling case.
State-owned IREL is the only official monazite supplier in India. In 2020 IREL could barely provide 1,600 t TREO mixed rare earth chloride to India-based rare earth separation company TREI (daughter of Japan’s Toyota Tsusho), resulting in TREI only running at ~⅓ of capacity.
Either way, things didn’t seem to have worked out as envisioned and LCM remained dependent on China’s rare earths, which is continuously unsatisfactory, because LCM pay substantially more for their raw materials than their China competitors:
There is no VAT refund upon export for rare earths from China, whereas for China domestic users VAT is a cost-neutral in/out tax;
This results in LCM having 13% higher cost for raw material, plus ocean freight, plus inflated working capital. This, given sufficient credit lines at near zero interest, may not be of big concern, but with “one-off inflation” theory heading for the bin, will become a major concern;
Considering all that, Dr. Higgins certainly does not exaggerate, if he states that LCM’s material cost are 20% higher than their competitors’ in China.
Even in a specialty product niche business, a raw material cost disadvantage of 20% is impossible to swallow.
Hence the wish for cheaper raw materials in the conceptual feasibility study.
Hudson Resources to focus on REE project following Greenland uranium ban
Greenland’s new mining legislation, which was passed by a narrow majority last week, bans the development of mineral projects with a uranium content greater than 100 parts per million (ppm).
The ban, however, does not apply to prospecting, exploration and exploitation directed at non-uranium resources, if the average uranium content is less than 100 ppm.
This is good news for the company’s advanced Sarfartoq REE project, as it contains low levels of uranium (10 ppm) and high levels of REEs neodymium oxide (Nd2O3) and praseodymium oxide (Pr6O11), both key elements needed for permanent magnets used in wind turbines and motors in electric and hybrid vehicles.
Vital Metals Annual Report
Sloppy mistakes like this one must not happen in an junior miner annual report:
Source: Vital Metals Annual Report for the year ended 30. June 20021
Percent would be absurd. Is “94,735” the mineral resource in tons? Or is it thousands of tons? Or apples? Tomatoes?
Then, regarding the newly acquired Kipawa deposit, there is no mention in the annual report of the Kipawa First Nation opposing the project. This, however, seems to have been a major stumbling block of Kipawa Lake projects in the past.
Last, but not least, Wigu Hills. Vital acquired the Tanzanian project from Montero, subject to a Wigu Hills mining license being granted.
As Montero have gone legal against the Tanzania government over the non-issuance of a mining license, the chances of the license being granted seem rather remote.
According to the wording on Montero’s website it rather looks, as if Montero are pursuing compensation, not necessarily the grant of a Wigu Hills mining license anymore.
In view of the above, we don’t think it is reasonable to present Wigu Hills as an asset of either Cheetah or Vital Metals in Vital’s annual report.
Luxor Capital ceased being a substantial shareholder of Vital and we ceased being an unsubstantial shareholder.
Rainbow put out a new corporate presentation:
A STRATEGIC SOURCE OF NdPr FOR A GROWING MARKET
An avid reader and contributor pointed us to the Investor Intel write-up about Rainbow, based on Rainbow’s latest corporate presentation.
It will be very interesting to see, if K-Tech’s process will work for the phosphogypsum in South Africa, both technically and commercially. If so, it may be useful for other similar projects, such as Ceritech’s project with China Moly in Brazil.
In line with investors recent preference for sustainability, several pages in the presentation refer to ESG relevant matters.
Rainbow’s corporate presentation contains an interesting comparison, result of great sleuth work:
Source: Rainbow’s corporate presentation November 2021
If one extrapolates the data, the Naturally Occurring Radioactive Material relative to NdPr ranking would look like this:
With such comparison Rainbow have thrown down the gauntlet vis-a-vis potential competitors, even though some of them are dead in the water for lack of feasibility anyway.
Which brings us straight to
Pensana’s Annual Report
The annual report evidences a notable, seemingly serious effort in the direction of establishing an ESG evaluation, ESG planning and policy, while it tiptoes around the known issues:
Contents of the Bankable Feasibility Study (BFS), much touted for arrival Q1 2021 throughout the second half of 2020, now not mentioned anymore and nowhere to be found;
Instead of the buried BFS, the company wants to offer shareholders a Front End Engineering & Design (FEED) study (if contents should commensurate with the management’s hopes and wishes. Else: See fate of the BFS);
The potentially feasibility-crippling impact of the Angolan 25% tax on revenue plus 2% royalty, agreed to by Pensana;
This tax and royalty would be particularly damaging, as extensive local processing, at much detriment to the quantity of REO recovered, and subsequent value addition will be necessary , in order to get rid of the entire content of radioactive elements, so to ship only “clean” Mixed Rare Earth Sulphate to the UK, as per Pensana’s written commitment to the Yorkshire Council.
In case there should still be residual doubts:
The International Atomic Energy Agency writes in her 2019 TECDOC series about Pensana’s Longonjo and Coola:
Source: IAEA-TECDOC-1877 - World Thorium Occurrences, Deposits and Resources
According to the Pensana annual report, happily for shareholders and wisely for the management, no investment decision has yet been made regarding the Longonjo site.
But do they really a choice, in view of the Angolan government’s substantial shareholding in Pensana?
Delinquent investor?
After the capital raise in June 2021 for ca. US$21.1 mio, while the shares had already been issued, one investor didn’t pay up, according to Pensana’s annual report, page 83.
Of dues of ca. US$4.9 mio (~23% of the total capital raise) only US$2,983,280 could be collected after financial year end. The balance the company hopes to collect during this financial year.
~42% of Pensana’s shares are held by insiders (Refinitiv via Yahoo).
Deadline for public feedback on Lynas PDF extended to Nov 30
The Department of Environment (DOE) has extended the deadline for public feedback on Lynas’ plan to construct a permanent disposal facility (PDF) in the Gebeng Industrial Estate in Kuantan, Pahang.
Rare Earths Company Lists on US Stock Exchange
American Rare Earths Limited announces that it has successfully applied for its common shares to be trading on the OTC Markets
As American Rare Earths continues to have its primary listing on the Australian Securities Exchange, streamlined market standards enable the Company to utilise its ASX reporting and make its information available in the US. The Company confirms that admission to the OTCQB is non-dilutive because no additional capital is required to be raised and no new shares will be issued in conjunction with inclusion on the OTCQB.
La Paz has 66,000 t of TREO, recovery losses not considered. Sub 100,000 t TREO projects can’t fly, in our opinion.
Defense Metals shares positive PEA for Wicheeda REE project in British Columbia
Revenues are estimated to be C$397 million ($313m) per year from the sale of REE concentrate in years one through four and the sale of mixed REE hydrometallurgical precipitates in years five through 16. The flotation concentrate sold in the initial production period will average 43% total rare earth oxides (TREO).
The PEA suggests annual production would be 25,423 tonnes of rare earth oxide from an open pit mine and 1.8 million t/y processing plant.
The company calculated the Wicheeda base case economics using a price of $5.76/kg TREO and $14.04/kg TREO in REE carbonate precipitates.
The updated Wicheeda resource estimate includes 5 million indicated tonnes at 2.95% TREO and 29.5 million inferred tonnes at 1.83% TREO.
This gibberish looks a bit more comprehensible on Defense Metals’ website:
Production of a saleable high-grade flotation-concentrate, with average 43% total rare earth oxide (TREO) for the life of the mine. It will be sold to market directly for years 1-4 and will then feed a project hydrometallurgical plant starting in year 5.
43% is too low for external sales! Freight rates are to stay high, and 100% of the freight apply to 43% of value carrying content. On top of that, this specification is below Chinese standard of TREO 70% and will therefore will fetch only below China standard prices.
Base case economics were calculated using rare earth oxide (REO) prices of US$5.76/kg TREO in flotation concentrate and US$14.04/kg TREO in mixed REE carbonate precipitates.
KG TREO? The day of the night of the night of the day of the return of the return of the much hyped basket price, part 14?
This is the proportional content of REO in Wicheeda according to the data from the PEA:
The remaining REO contents of 0.022% (proportional <1%) are too small for relevance. The specification China standard GB/T 16974-2008 for RE carbonate looks like this:
So Wicheeda carbonate would be somewhat within the ballpark, comparable price-wise. Chinese RE carbonate price chart looks like this:
The current market price in China for rare earth carbonate 44% TREO is ~US$10/kg incl. 13% VAT and 5% import duty, that is roughly US$8/kg CIF China.
According to our calculation, Defense Metals could probably meet this price, if it was not for excruciatingly high shipping cost from Canada to China.
//Prices
Rare earth concentrate prices from Nov. 25 to Nov. 26 shot up by 27%.
During the past 2 weeks rare earth carbonate prices have increased another 8%, pushing up NdPr oxide/metal prices by 7% as well and samarium oxide gained 8%, all in RMB terms.
Not all is sunshine.
On the heavy rare earth side of things terbium oxide gave up 9%, dysprosium oxide lost 4% in RMB terms, both still comfortably up over November 1. Gadolinium oxide is up 5%.
Yttrium oxide gained another 8%, while scandium oxide dropped 11% in RMB terms.
Prices today:
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.
What that means in terms of NdFeB cost:
However, the large magnet makers have raw material cost pass through clauses in their sales contracts, so the a.m. graph does not really concern them.
Thanks for reading! Have a rare earthy weekend ahead.
