RE-Institutional Investors; COP26: China and US Agree; Greenland culls GGG, Hudson; Update to Limits to Growth; Prices go Galactic;
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RE-Institutional Investors; COP26: China and US Agree; Greenland culls GGG, Hudson; Update to Limits to Growth; Prices go Galactic;
Rare Earth 2021 November 14, 2021
If you have read the 86 issues of The Rare Earth Observer before this one, you may already have an idea, which listed rare earth companies may not be ideal investments.
Who is in rare earth and is listed on a stock exchange?
We have compiled a list of listed rare earth hopefuls, ranked according to the total amount supposedly held by institutional investors, who are usually slightly better equipped than mere mortals.
Unsurprisingly, the Top 5 based on this ranking turn out to be rare earth household names. However, the question always remains, if it is a good time/price for entry and if the general risks associated with the industry are worth it.
Generally, in terms of risk mitigation, we recommend to stick with companies listed in Australia and Canada, for strict reporting requirements enforced on junior rare earth mining companies listed there.
All this leaves us on course for warming of 1.8 degrees Celsius, if all the pledges come to pass, according to the IEA, and it’s a big if. That’s much better than where we were on the way into COP, but still way above what’s safe.
The pledges are problematic, as there are not enough materials available in time to allow implementation of ambitious plans. They count the chicken before they are hatched.
Our friends at Hallgarten issued a scathing comment on COP26 (and, for good measure, steamroll the entire junior rare earth miner space as well).
Our take: The current EU Commissioners will retire on fat pensions by the end of 2024 and they will not bear any individual responsibility whatsoever for the complete pigs breakfast that they are serving up.
By the way: Also at the European Central Bank a nice mess is in the making. Roughly about the same time as the current EU Commissioners, the current president of the ECB, Mrs Lagarde, will retire, while she continues engaging in inflation denialism in order to carry through cheap financing of certain deeply indebted EU member states.
The two sides intend to establish a “Working Group on Enhancing Climate Action in the 2020s,” which will meet regularly to address the climate crisis and advance the multilateral process, focusing on enhancing concrete actions in this decade. This may include, inter alia, continued policy and technical exchanges, identification of programs and projects in areas of mutual interest, meetings of governmental and non-governmental experts, facilitating participation by local governments, enterprises, think tanks, academics, and other experts, exchanging updates on their respective national efforts, considering the need for additional efforts, and reviewing the implementation of the Joint Statement and this Joint Declaration.
Is this a glimmer of hope for coop in the rare earth sector?
The LtG [Limits to Growth, Meadows et al., 1972] team generated different World3 scenarios by varying assumptions about technological development, amounts of non-renewable resources, and societal priorities. The few comparisons of empirical data with the scenarios since then, most recently from 2014, indicated that the world was still following the “business as usual” (BAU) scenario. BAU showed a halt in the hitherto continuous increase in welfare indicators around the present day, and a sharp decline starting around 2030.
There were eleven other scenarios in the first book, including “comprehensive technology” (CT) and “stabilized world” (SW).
CT assumes a range of technological solutions, including reductions in pollution generation, increases in agricultural land yields, and resource efficiency improvements that are significantly above historic averages (Meadows et al., 1972, p. 147).
The SW scenario assumes that in addition to the technological solutions, global societal priorities changed from a certain year onwards (Meadows et al., 1972). A change in values and policies translates into, amongst other things, low desired family size, perfect birth control availability, and a deliberate choice to limit industrial output and prioritize health and education services. SW was the only scenario in which declines were avoided.
If we were on the Business As Usual trajectory, no prayer would spare us and our children from the environmental consequences.
We think, however optimistically, that quite possibly Comprehensive Technology may be the trajectory we zeroing in on right now, albeit at a much, much slower speed than desirable.
With technology playing an ever more important role in dealing with the substantially man-made decline of our human life support system, the projected increasing scarcity of technology metals coincides with an ever growing consumption by a (so far) growing world population - until the uppermost point of affordability is being passed.
Which brings us to China and rare earths. China’s population may have peaked:
Current China policies to increase the GDP’s share of domestic consumption in order to reduce export dependency run contrary to the population trend, while at the same time the necessity arises to increase the overall quality of the GDP components, in order to escape the middle income trap.
Double digit millions of apartments idling empty in satellite cities also don’t bode well for one of the main drivers of China GDP growth.
In our view, China’s export dependency is covered up, just like in other Asian countries, by counting dedicated export supply chains as domestic. As Korea, Japan and Germany proved before, there is no easy way out of export dependency.
China has the capacities to satisfy world demand in many products. China’s domestic demand can not fill these capacities. Consequently, exports are here to stay and China really needs open markets abroad.
That particularly applies to rare earth magnets, which, however, is closely related to China’s access to raw materials abroad.
Currently there is no mutual dependency as deep as the US-China one, specifically with regard to carbon reduction items like batteries, battery materials, rare earth magnets and rare earths.
There is no realistic hope on either side to wrestle free from that dependency.
Any threat to supplies of metals used to churn out everything from batteries for electric vehicles to electricity poles could stall the drive for a greener society in Japan and other places such as Europe and the U.S.
That comes as Australia, Chile and China account for nearly 90% of the world's lithium output, while the Democratic Republic of the Congo [DRC], Russia and Australia excavate some 80% of its cobalt.
Wood Mackenzie expects demand for lithium to surge over twelvefold by 2040 from 2020 levels, with appetite for cobalt jumping nearly sixfold. That will be underpinned by the greening of the energy supply network, according to Eleni Joannides, a principal analyst at the British research firm.
The new plan, jointly released by the National Development and Reform Commission, the Ministry of Finance and the Ministry of Natural Resources, requires pushing forward the high-quality development of resource-rich regions while stimulating innovation potential, improving systems and mechanisms, and enhancing weak links in people's well-being.
Under the plan, the nation will make a big push to arrange a number of energy resource bases and planned national mining areas, implement the mineral resource reserve project, build a strategic mineral reserve system and strengthen the exploration of strategic mineral resources such as oil, natural gas, copper, chromium, tungsten, rare earths and crystalline graphite.
Sentence building blocks devoid of any meaning. If someone would want to enlighten us, if there is any substance inside, as we can’t find any in this “implementation plan.”
//Market
Adamas put the recordings of the Rare Earth Day online. Adamas had launched a firework of presentations. It was a fabulously organised event, highly relevant and it went without a glitch. A great success.
Certain corporate presentations unwittingly revealed complete stillstand and unworkable concepts.
Related to that we hear from fellow participants, that the Q&A were perhaps a bit too moderate. However, steamrolling gravity denialism is not what one may expect at such events. It is about exchange of niceties.
A must-see is the interview with Neo’s Constantine Karayannopolous, among the most seasoned battle horses in the rare earth space.
Exports of the group of 17 minerals from the world’s biggest producer of rare earths were 4,330.4 tonnes last month, up from 3,920.2 tonnes in September.
The figure was also an increase of 89% from October 2020, when overseas demand was still subdued amid the COVID-19 pandemic.
Concretely, it looks like this:
However, we are a bit apprehensive to put out these numbers, as we can’t establish, what the a.m. numbers should consist of.
For example, on checking China’s 2020 rare export statistics in detail, we were unable to match the above numbers China publishes and Reuters amplify.
We arrive at significantly lower numbers based on rare earth compounds and rare earth metals export numbers. What else should count towards rare earth exports?
In terms of rare earth compounds and metals, ~70% of China’s export volume consists of dirt-cheap lanthanum and cerium products.
As an example of tight supply, the Global Times referred to Australia's Lynas, which accounts for 10 percent of the global light rare earth output, and which has reported a decrease of 10 percent on the output of neodymium praseodymium oxide in Q3 from the previous quarter and a year-on-year decrease of 6 percent.
“Moreover, Myanmar's rare earth exports have reportedly shrunk due to the global pandemic,” the author of the report added.
At the same time, China's rare earth export has continued to remain at a high level. In October, the export volume of rare earths reached 4,330.4 tons, a surge of 89.27 percent year-on-year, according to data from the General Administration of Customs, the Global Times noted.
Importantly, driven by the strong demand and tight supplies, the export price of the rare earth produced in China also increased to 3.44 billion yuan, a year-on-year growth of 78.5 percent.
Daniel Clarke, Thematic analyst at GlobalData, commented: “You can’t just click your fingers and make a fully working lithium-ion battery supply chain appear – it takes time. The recent decision by Johnson Mathey to withdraw from UK battery manufacturing demonstrates just how hard building a supply chain can be. Western economies are quite far behind China already, with the country having held an 80.5% share of lithium-ion battery capacity in 2020.
Even with the US and EU’s best efforts, China will still dominate by 2026, with an expected 61.4% share.
Further, China is strikingly dominant in both chemical refining and the production of cathodes and anodes – all critical parts of the supply chain. In the meantime, the US and EU remain vulnerable in this important future market.”
Clarke continued: “Batteries are already the most expensive part of an EV. Cell costs would need to be notably below $100 per kilowatt hour for mainstream production to take off, but this isn’t looking likely. Any increases in cost will be a blow to the decarbonization agenda of advanced economies, as well as lead to a deceleration in the decarbonization of the automotive industry.
“To reduce future bottlenecks, governments at COP26 need to incentivize investment into new mines for raw materials needed in EV production, as well further develop sustainable lithium-ion battery supply chains. Unfortunately, mines can take up to seven years to build, and demand for EVs is increasing by the day.”
The International Energy Agency (IEA) has estimated that the growth in EVs could see lithium demand increase by over 40 times by 2030, according to the International Lithium Association (ILiA) . Last year lithium demand was about 320,000 tonnes and is expected to hit 1 million by 2025 and 3 million by 2030, according to Reuters.
The Madras High Court has directed the State government and private beach sand mineral exporters to respond to a claim made by an amicus curiae that 37,024 tonnes of monazite, a radioactive atomic mineral used for production of thorium, can be extracted from several lakh tonnes of raw/processed/semi-processed sand now lying in the sealed godowns, stockyards and factories in Thoothukudi, Tirunelveli and Kanniyakumari districts.
The amicus curiae also told the court that over 88.40 lakh tonnes of raw sand appeared to have been mined illegally by some of the mining companies from the year 2000 till 2013 when the State government imposed a complete ban on beach sand mining activity in the three districts. He claimed that the illegality continued even thereafter and came to a grinding halt only when the court ordered strict enforcement of the ban in November 2016.
India’s state-owned monazite monopolist IREL still supply much less monazite than contracted to Toyotsu’s rare earth separation facility in India, probably related with the heavy minerals sand processing in Kerala.
In a remarkable vote which will hamstring economic progress in Greenland for some time, that country’s parliament on November 10 passed a bill to ban uranium mining and exploration in the Danish territory. The major thrust of the legislation is to block the Kvanefjeld rare earth and uranium open pit mining project which could contain the largest deposit of rare earth minerals outside China.
A byproduct of rare earth mining is a small amount of radioactive uranium. Specifically, the bill bans exploration of deposits with a uranium concentration of 100 parts per million or more. A deposit with such a threshold is considered very low grade.
Kvanefjeld’s owner, Greenland Minerals Limited (ASX: GGG), has been trying for more than 10 years to bring it back into full operation. Shenghe Resources, a large Chinese rare earths company, owns about 10% of Greenland Minerals.
A company with existing Greenland mining operations likeHudson Resources Inc. (TSXV: HUD) could be negatively affected, as investor confidence in the government’s ongoing treatment of the mining industry has to be shaken. A pre-revenue mining and exploration company with a sole focus on Greenland, Hudson Resources owns 33% of the White Mountain anorthosite (calcium feldspar) mine. Hudson also owns 100% of the Sarfartoq carbonatite exploration project which contains Nd and a high-grade niobium project.
Of course, this issue came to a head in Greenland because of the Kvanefjeld REE project, which Australian company Greenland Minerals (ASX:GGG) was developing, and which looked likely to be permitted by the previous government. In addition to REEs, Kvanefjeld contains significant uranium; hence the opposition. By no means am I dismissing environmental concerns associated with mining uranium-rich deposits; naturally, the costs and benefits of such mining must be carefully considered. But due to decades of experience and technological innovation, it is perfectly possible these days to mine such deposits with little environmental fallout, and instead of mandating environmental best practice, which would allow the mine to go ahead with all the economic benefits it could bring to the island, while posing a very low risk to Greenland’s indisputably priceless natural setting, Ataqatigiit decided to put the kibosh on the project altogether. Greenland Minerals put its shares on a trading halt on Wednesday, and today released a statement saying that it believed it could modify the Kvanefjeld project so as not to produce any uranium. We’ll have to see if that’s good enough for the new Greenland parliament, who seem to have it out for this project no matter what.
GGG can modify Kvanefjeld’s development strategy including scenarios where uranium is not produced.
GGG’s 100%-owned Kvanefjeld rare earth project is underpinned by a JORC code compliant ore reserve estimate that contains 108 million tonnes at 1.43% rare earth oxide, 0.26% zinc, and 0.036% uranium oxide. Under the currently proposed development strategy for Kvanefjeld, uranium oxide, if recovered as a by-product of rare earth production, would contribute approximately 5% of project revenues.
The Company is not aware of any technical, radiological, or health and safety reasons why the Greenland Government has selected a threshold level of 100ppm uranium for the legislation.
Hudson’s 2012 NI43-101 for the Sarfartoq deposit indicates high uranium, but offers no concrete data (thorium content were indicated 400-500 ppm).
There is still Greg Barnes’ Tanbreez eudialyte deposit in Greenland, which may not be affected by this law. However, this deposit has only been explored about 10%, which is the outcrop.
China Minmetals Rare Earth will disclose its three quarterly report on October 29, 2021. In the first three quarters of 2021, the company achieved total operating income of 2 billion yuan, a year-on-year increase of 107.7%; realized net profit attributable to the parent of 200 million yuan, a year-on-year increase of 47%; earnings per share was 0.2 yuan.
uring the period, the expense ratio increased by 1.9%, operating costs increased by 104.6%, and operating cash flow decreased by 466.6%.
The company's operating costs in the third quarter of 2021 were 1.67 billion, a year-on-year increase of 104.6%, which was lower than the operating income growth rate of 107.7%, resulting in a 1.3% increase in gross profit margin. The period expense ratio was 3.6%, an increase of 1.9% over the previous year. Operating cash flow decreased from 46.219 million to -170 million, a year-on-year decrease of 466.6%.
On October 29, Shenghe Resources released the 2021 third quarter report. During the reporting period, it achieved operating income of 2.928 billion yuan, a year-on-year increase of 48.55%; net profit attributable to shareholders of listed companies was 289 million yuan, a year-on-year increase of 174.92%; net profit attributable to shareholders of listed companies deducting non-recurring gains and losses was 272 million yuan , A year-on-year increase of 272.05%; basic earnings per share of 0.1646 yuan.
The 2021 third quarter report of Shenghe Resources showed that the company's main operating income was 7.791 billion yuan, an increase of 41.18% year-on-year; net profit attributable to the parent was 831 million yuan, an increase of 466.16% year-on-year; gross profit was 803 million yuan, an increase of 694.53% year-on-year; of which 2021 In the third quarter, the company's single-quarter main operating income was 2.928 billion yuan, a year-on-year increase of 48.55%; single-quarter net profit attributable to the parent was 289 million yuan, a year-on-year increase of 174.92%; single-quarter deducted non-net profit was 272 million yuan, a year-on-year increase of 272.05%; liabilities The rate is 34.45%, the investment income is 33.946 million yuan, the financial expenses are 67.726 million yuan, and the gross profit margin is 19.04%.
On an investor Q&A platform, Shenghe allowed a peek into their raw material supply:
(1) The trustee mines are self-produced, and the company will provide the owner in accordance with the trusteeship agreement. The unit retains the agreed net profit as a custody fee, and the net profit exceeding the contract is used as the company’s custody income after deducting the corresponding costs and expenses;
(2) Underwriting the US rare earth concentrate, purchasing and selling according to the market price of similar products, the company charges the corresponding The US mine is partly used by the company and partly sold abroad;
(3) Monazite produced by the company’s zirconium-titanium beneficiation business is also an important rare earth resource;
(4) Ionic clay raw material and rare earth waste are purchased from outside at market prices.
This is weird, why was there ever a need for reconfirmation? However, we were always wondering, if Lynas USA activities in heavy rare earths, products much sought after by Lynas’ masters at JOGMEC, found resounding approval in Tokyo.
Noteworthy also, that apparently holding on to US$ 11.5 mio between now and March 2022 is deemed mission-critical.
The organization NioCorp will have a little more time to get things underway in their search for rare earths and niobium.
The southeast Nebraska town of Elk Creek, about 10 miles from Tecumseh, has a 230 acre area of land in which niobium, scandium, titanium, and rare earths can be found. The Nebraska Department of Environment and Energy (“NDEE”) is now extending the current construction air permit to April 4, 2022. That means the organization has until that date to initiate construction at the site.
New German subsidiary, HyProMag GmbH, is 80% owned by HyProMag Limited and 20% owned by Professor Carlo Burkhardt of Pforzheim University in Germany, co-ordinator of the €14m EU funded SusMagPro project (www.susmagpro.eu) focused on rare earth magnet recycling with 19 partners across the European supply chain
Germany is a major producer and market for rare earth magnets in Europe, and the establishment of HyProMag GmbH provides a strong platform to grow the business in the region. Germany has no domestic sources of primary rare earths. Development of domestic sources of recycled rare earths via the patented HPMS is a significant opportunity to diversify and strengthen development of a more resilient rare earths supply chain in Europe.
We suspect that post-Brexit Hypromag’s gravy train from Brussels was interrupted, so in order to continue getting subsidies from the EU, Hypromag had to open on the continent.
Prof. Burkhardt was a panel guest at the recent Rare Earth Industry Association event. He described the issues to overcome in permanent magnet recycling as:
the non-standardized coating of sintered NdFeB magnets (corrosion is a mortal threat to NdFeB magnets), each batch is coated differently, and
since magnets are bought for their physical properties and not for their chemical composition, for each batch of magnet chemical compositions are different.
These are common, core problems for all permanent magnet recyclers out there, also for those, who choose to live in denial.
At the time of the panel Prof. Burkhardt had not touched base with the main suppliers of permanent magnets or his science peers in China to address the issues, which may not be new to China, which has the largest recyclers of permanent magnet scrap on the planet.
Like everybody else in EU rare earth related business, the professor lobbies for regulation from Brussels.
The company has received the first batch of analytical results from resampling of historical drilling at the Ethiopia Prospect, which have confirmed iTech’s view of the dual potential for high purity kaolin and coincident ion adsorption clay (IAC) rare earth element (REE) mineralisation.
There are several IAC deposits on several continents out there, all with the same big feasibility problem.
//Prices
SMM remarked in their article on November 4, that raw material prices drive rare earth prices:
The supply of raw ore continues to be tight, and the ore prices trended upward along with the rising prices of auxiliary materials like hydrochloric acid, iron, fluoride, etc. As such, the production costs of PrNd alloy moved up, and its prices are still correcting upside this week. Meanwhile, some large rare earth enterprises in north China will be shut down for maintenance in November, and the import of heavy rare earth ore from Myanmar was still blocked, coupled with the price hike of raw ore to different degrees. Imports of light rare earth ore from US rose to 60,000 yuan,mt, and domestic light and heavy rare earth ore have rose to 50,000 yuan/mt and 330,000-340,000 yuan/mt, respectively.
On the upstream supply side, some separation companies are affected by power restrictions and reduce the output of lanthanum and cerium products to maintain the output of praseodymium and neodymium products. In addition, a small number of medium and heavy rare earth separation plants in southern China report that the impact of limited electricity has reduced production by about 30%. The domestic situation in Myanmar is still tense, coupled with the repeated new crown epidemic, foreign ore imports cannot be resumed in the short term. The production of waste recycling companies has remained stable, but due to the insufficient operating rate of small and medium-sized NdFeB companies, the difficulty of recycling waste materials and the high purchase price have greatly affected the production capacity of oxides. Metal factories mostly deliver long-term orders. Due to the impact of power curtailment, output has declined.
It looks like this:
It is not so hard to imagine what happens, if Bayan Obo should open the floodgates and Tengchong Customs should open for Myanmar traffic.
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 this means to NdFeB magnet makers, if they can’t pass the raw material cost increase to the users:
This is a quick and dirty, very general chart, with no claim to 100% correctness.
