Happy New Year, prosperity and health to our readers!

We are late, as we have been pondering if or not to publish our views on a certain company’s somewhat clandestine release of stock market and share-price relevant information, analysis of contents seems to confirm what a whistleblower confided to us a short while ago.

We decided to hold off for the moment, pending external expertise and relevant legal advice.

While the media likes to jump at every opportunity for China rare earth scare mongering, including China’s very own prime warmonger Global Times, they chose to ignore the biggest real rare earth news in recent memory coming out of China.

China has a so-called “negative list” for foreign investment, which is subject to constant changes along China’s reform progress. Rare earth mining and processing have been on the list since its inception.

China’s almighty National Development & Reform Commission (we prefer its previous name for more accuracy of its role: State Planning Commission) published a decision to allow foreign investment in rare earth and rare earth processing in its southernmost province, Hainan, from February 1, 2021.

At the time of this writing, no western news agency had picked it up, except Reuters on their Chinese language news service. It does not fit the fear-mongering agenda, like the China export control law, implemented on December 1, 2020. Some much-quoted “experts” said it might be followed by a nonsensical rare earth export ban. Of course exactly nothing happened, along the lines of our analysis of the law and our predicted the outcome.

Anyway, what could be the reason for this decision to permit foreign direct investment in rare earth, why the change of heart?

First of all, we previously mentioned to the readers of this humble publication that, when discussing its own rare earth resources, China keeps referring to the data of the US Geological Service, which is extremely odd. Also we note, that recently concerned Chinese experts have urged a realistic re-assessment of domestic rare earth resources.

Then there are the national policies of resource preservation and environmental protection, resulting in extremely slow approvals for new mining operations.

Add to that the China monazite mining ban since 2016, and you look at a severe shortage of RE raw materials in China. We reported, that China’s Big 6 did not even have enough domestic raw material to produce REO according to MIIT’s quota.

Witness the quest by China’s RE enterprises to source raw material from abroad: Myanmar, Malaysia, Indonesia, India, USA, Nigeria, Madagascar, Brazil, Australia, Burundi, Vietnam, South Africa, Russia, Philippines, plus the traditional imports from North Korea, one can see it happen everywhere.

In combination with the newly established higher price levels, China’s imports present an attractive opportunity, that no junior rare earth miner can ignore.

The admission of foreign direct RE investment in Hainan potentially means free access to China’s much more than half of the world’s rare earth market without potential tariffal or non-tariff trade barriers (RE tariffs remain suspended at the time of this writing, however, can be re-activated at the stroke of a pen).

China has it all, the market, the technology, the expertise, a sane regulatory framework for the industry, the infrastructure plus industrial standards and the expert human resources, there would next to nothing that foreign RE companies stand to lose (except China independence fantasies) and everything to gain, when investing for downstream facilities of imported RE raw material in Hainan.

Nascent concepts for processing of RE in US and EU pale before this opportunity, and exactly that we suspect is the very purpose of this exercise, to pull the carpet under the feet of EU and US initiatives.

Hainan itself has some beach sand and placer deposits, however, mining of these would need to be vetted against the single-element monazite mining ban of 2016, if or not the exception of Bayan Obo (for its iron ore by-product mix of bastnaesite and monazite not being “single elment”) may also apply to Hainan. Probably not. On top of that, the export ban on RE compounds made from imported RE raw materials would need to be revisited.

And more from China: Part of the coming 5-year plan seems to be, to fully digitize the rare earth industry. This would open opportunities for increase of industrial efficiency, more balanced output as well as remote supervision and control. And by hoping to establish full traceability, it would potentially do away with all the uncertainties about numbers and cater to the EU bureaucrats desire for sustainable and transparent sourcing.

In our insginificant experience, however, outsmarting computer system controls is a national pasttime in China.

See article below.

The Diplomat carried an article (see below) about Indonesia being keen on using thorium as a power source, turning it into one of the few countries along with China and India, who actually pay an interest in the thorium molten salt reactor (TMSR) for its all its advantages. This has been cooking for about a year already.

60 years ago the US and the USSR had originally thorium in mind for nuclear weapons, but the fast breeder technology turned out to be the most effective way of generating weapon grade material.

Thorium is the biggest disposal problem for junior RE miners, followed by uranium. It has a half-life of ca. 14 billion years, which is about as long as the universe has been in existence.

Indonesia actually would not need to dig out its own thorium. China, France, Russia and India would certainly be delighted to get rid of part of their stockpile. But don’t hold your breath, the earliest TMSR anywhere is due to start no earlier than 2030 in China.

If Indonesia would really go for thorium, it would be good news for RE mining & processing there. Monetising thorium oxide is every junior RE miner’s wet dream.

Resource business in Indonesia has its fair share of fraud and corruption. There are numerous laws and rules in place that make mining business a quite a bit tricky in Indonesia. Mining licenses, for example, can be granted centrally or locally, “it depends”, they are not transferable among private companies and licensed companies with often worthless deposits are peddled for JV or sale by people who don’t own those companies, not even partly.

Hallgarten & Co. came up with an interesting paper on Hochschild Mining. Hochschild had acquired junior RE miner Biolantanidos and with it the Penco project for ca. US$59 mio in 2019. It is an ion adsorption clay deposit with ca. 13,000 t TREO (0.06%), really small, that is scheduled to ship 1,700 t of RE mixed concentrate per year and is supposed to live.

Hallgarten complain:

“We took the opportunity during the month to add a LONG position in Hochschild Mining to the Model Resources Portfolio after its price was brutalized due to a substantial disposal by an insider. This only went to shows that all the self-styled sophisticates in the precious metals space don’t amount to more than a hill of beans.“

Now for Hochschild RE is a sideline activity, but Hallgarten describe accurately the state of affairs in RE.

Even though Canada and Australia have reporting standards to make mining companies technical reports somewhat comprehensible to mere mortals, few individual investors ever take the time to read and understand the NI43-101 or JORC standard reports of the RE companies they hand their money to, or try to understand the added complications and pitfalls of RE downstream.

They might find reasons for concern like this one: “…it is evident that the mineralisation has not been demonstrated to be amenable to concentration prior to chemical processing. Tests carried out so far have indicated that, although a concentrate can be produced, the grade and recoveries are not acceptable….”

Since there are also no public independent sources of information on the sector, by and large RE investors take what perspires from stock promoters and PR companies, go by gutt feeling and market sentiment.

And right they are. 2020 top performing rare earth stocks included companies, who offer absolutely nothing in terms of substance, hammer the market with vapour announcements or make a press release every time the CEO opens a new spreadsheet.

Here you can find a spreadsheet with the 2020 performance of rare earth related stocks, all translated into US$ for better comparison.

There may be errors and ommissions contained, therefore use at your own risk, as we lay no claim to perfection:

We also did a per deposit calculation of the TREO value of the infered/indicated/measured resources, based on the per rare earth oxide current market prices, disregarding potential value of by-products, if open pit or underground mining, even if the deposit can/will be mined at all, also unrelated to the existence of a NI43-101, JORC, PEA or any other 3rd party report, feasible or not, disregarding also the concept being ore to oxide or only ore to concentrate, and even neither.

We used per rare earth oxide recovery rates, that were vetted by renowned experts, who described the recovery rates per elment as very optimistic. The chart also assumes, that a fraction of each rare earth element can be recovered, which may not always be the case.

This simply serves to get a feel:

The value distance from the last to the first is 40 times. All of them have in common potentially >1 mio t TREO.

You will note, that among the potential top 5 three are private and one is not attended to at all.

Nechalacho is a bit twisted, as this is shared between Avalon and Vital. Vital’s share isn’t that big, but if it wasn’t for Vital, there wouldn’t be any hope that this deposit would ever be mined, as it has already successfully been navigated through the previous rare earth boom without any progress whatsoever.

If you are looking for a seismic event in rare earth, mark March 12, 2021 in your calendar. That is, when the public consultation period for Greenland Minerals Kvanefjeld ends, potentially moving approval of this gigantic deposit a giant step closer.

But don’t hold your breath, the entire output of Kvanefjeld has been signed over to Shenghe Resources (China Aluminium), who are the sole customer and also substantial shareholder of GGG.

Should Kvanefjeld ever start producing, Shenghe Resources will play MP Materials and Greenland Minerals like a piano.

Perhaps MP Materials should consider rather soon what to do with its pile of cash, other than repeating the failed marriage with Neo Performance Materials.

If you are looking for less than seismic but still significant events, look for junior RE miners and other companies, who possibly will start break-through production in 2021, however small: Energy Fuels, Vital Metals (along with them REEtec) and Geomega (recycling).

If Rainbow can solve their cost-inflation problem, they might come back.

Mkango’s feasibility study is due soon.

Thanks for reading and have a splendid year of 2021!

//Politics

Indonesia’s Nuclear Dream, Revived?

In June 2020, Defense Minister Prabowo Subianto held meetings with the governor of the Banka Belitung Islands and it is known that they discussed setting up a ministerial regional office there. Just off the east coast of Sumatra, the islands are estimated to hold 95 percent of Indonesia’s thorium. Thorium itself cannot be used in traditional thermal neutron reactors but upon absorbing a neutron will transmute to uranium-233, an excellent fissile fuel material especially for (advanced) molten salt reactors. In July 2020, a meeting between Luhut and Prabowo was reported for their discussions on the use of tin and rare earth elements. 

The sensitivity lies in that thorium and uranium can be extracted from unconventional sources, particularly monazite, which is often co-located with Indonesia’s abundant tin mineral resources. The Defense Ministry appears interested in building a thorium molten salt reactor of a small size – with an electricity generation capacity of 50 megawatts – by 2025 for particular national security purposes like power generation for marine vehicles. 

Comment: We reported on the monazite smuggle from Banka Belitung last year. Apart from that, there are other nascent RE activities elsewhere in Indonesia.

Government Spending Package Includes $800 Million To Fund Rare Earths and Strategic Minerals Research

The pandemic aid and spending package signed by U.S. President Donald Trump last Sunday includes more than $800 million to fund rare earths and strategic minerals research, spending that mining companies say will help counteract China’s dominance over the sector.

The $2.3 trillion, 5,593-page bill essentially codifies Trump’s executive orders on rare earths, a group of 17 minerals used to make magnets for electric vehicles, other green technologies and weapons.

The bill requires better geological studies of federal lands, funds studies into the processing and recycling of rare earths, and supports improvements to mining education programs.

Vigorously promote the transformation of rare earth digital industrialization

Guide rare earth enterprises to accelerate the digital upgrade of production equipment, deepen the digital application of rare earth manufacturing, operation management, and market services, and accelerate the integration and sharing of business data. 

At the same time, accelerate the digital upgrade of the industry, formulate a roadmap for the digital transformation of the rare earth industry, and form a batch of reproducible and scalable solutions for the digital transformation of the rare earth industry.

Third, improve the modernization level of the rare earth industry chain. Support the digital integration of upstream and downstream enterprises in the rare earth industry chain, adhere to application traction and system advancement, accelerate breakthroughs in core and key technologies in the information field of the rare earth industry, and improve the supply capacity and engineering level of digital technology. More importantly, it is necessary to promote the leading role of the digitalization of the six rare earth group industries, to be a pioneer in the digitalization of the rare earth industry, and to shift to small and medium rare earth enterprises in an orderly manner.

Comment: We have repeatedly highlighted, that the central government is not as much in control of what happens on the ground as it would like the world to believe, with regulation evaporating on Beijing city limits, apart from more or less open resistance from among the Big 6. MIIT may be viewing digitisation as a way to enforce control. After all, it is in charge of both, industry management and IT.

Government offers more mining incentives

The 2020-2021 corporate incentive grants went to BNT Gold Resources Ltd. (gold – C$37,123), Cheetah Resources Corp. (rare earth elements – C$180,000), Fortune Minerals Ltd. (base metals – C$144,000), Gold Terra Resources Corp. (gold – C$86,148), North Arrow Minerals Inc. (diamonds – C$130,000), Pine Point Mining Ltd. (lead, zinc – C$47,082) and StrategX Elements Corp. (cobalt – $120,000).

The new NWT funding is consistent with a commitment by the territorial government to increase mining incentive programs by 50% over the next four years in order to attract and support both early-stage and advanced exploration projects in the territory, its officials say.

Comment: Cheetah Resources are the operating daughter of Vital Metals.

California Mine Becomes Key Part of Push to Revive US Rare Earths Processing

"We can mine, but we cannot process it because there are several problems, one of which is the problem of toxic waste," Saxton told VOA in a telephone interview. He said hundreds of thousands of acres of federal land were withdrawn from exploration, and increased regulations caused the granting of multiple permits to take from seven to 10 years.

Improving on that timetable, he said, will require overcoming objections from environmental organizations and government agencies.

Comment: In a nutshell.

//Companies

Pensana appoints new CFO

Robert Kaplan has been appointed CFO and company secretary of ASX-listed Pensana Rare Earths ahead of its planned listing on the main board of the LSE next month.

A preliminary feasibility study into the Longonjo project, published in November, showed potential for the project to produce about 56 000 t/y of concentrate over a nine-year mine life. 

Comment: The Pensana preliminary feasibility study you can find here.

Major Mkango shareholder agrees to cashless exercise of warrant

Following the issuance of the shares to Talaxis, its ownership will increase from about 14.2-million shares to 15.2-million shares, representing an increase from 10.7% ownership to 11.3% ownership.

The project for the extraction of “rare earths” that concerns Penco suffered setbacks in its processing

He Environmental Assessment Service (SEA) of the Biobío Region ordered that the controversial rare earth mining project that the Biolantánidos company intends to install in the district of Penco carry out the citizen participation process again, after new data alerted a possible impact on the terrestrial fauna of the place.

Comment: Typical for such deposits is the low 0.06% TREO content. It may require in-situ leaching, which has led to substantial environmental degradation in South China.

Energy Fuels Renews Its ATM Program

Energy Fuels Inc., a leading producer of uranium in the United States is pleased to announce that today the Company has filed a prospectus supplement to its effective U.S. registration statement on Form S-3 in order to renew its ‘at-the-market’ (“ATM”) program. Under the renewed ATM program the Company may, at its discretion from time to time, sell up to an additional US$35.0 million of common shares, with sales only being made on the NYSE American at then-prevailing market prices, or any other existing trading market of the common shares in the United States .

Greenland Minerals chair’s SPP participation further validates rare earth strategy

Greenland Minerals Ltd non-executive chairman Anthony Ho has shown his support for the company and its rare earth strategy by participating in a share purchase plan (SPP).

On December 30 Ho acquired 57,188 shares valued at A$13,725.12 in direct and indirect interests and now holds almost 4.033 million shares.

Comment: The privilege of serving on junior miners boards comes along with the duty to buy the respective company’s shares, every time with much fanfare. Anthony Ho used to chair Hastings, before Charles Lew muscled in and took over ca. 2013.

NWT’s first rare earths mine one step closer

“The board met this morning and approved an assignment of existing land use permits and a water licence from Avalon Advanced Materials to NWT Rare Earths Ltd,” she stated. NWT Rare Earths Ltd. is a joined company that will hold land use permits and water license for Cheetah and Avalon.

“Our understanding now is that NWT Rare Earths is working on amendment applications to be submitted to us for the work they would like to do at the Nechalacho site. So, at this time there is no application before the board and as such I can’t give any estimate of timing.”

Comment: Cheetah Resources are the operating daughter company of Vital Metals.

Mkango Announces Appointment of Interim CFO

Mkango Resources Ltd. is pleased to announce the appointment of Mr Tim Slater as Interim Chief Financial Officer (“CFO”) of the Company.

Mr Slater is currently Managing Director of Harmer Slater which provides CFO, accounting and regulatory compliance to AIM- and Toronto Stock Exchange- listed companies.