Trust is no entitlement; Russia, Ukraine and RE; Capex Dumping is out, Recycling is in; Global RE Summit; Neo's Record Results; LKAB, Mkango, Peak, Ionic, and others.
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Trust is no entitlement; Russia, Ukraine and RE; Capex Dumping is out, Recycling is in; Global RE Summit; Neo's Record Results; LKAB, Mkango, Peak, Ionic, and others.
Rare Earths 2022 March 23
Sorry for the long interlude, a lot of work and things requiring attention.
Trust is not an entitlement
Sometimes “fan mail” reaches us full of arrogance, entitlement, accusations, insults and thinly veiled threats.
Obviously, we hit some nerves.
What all these have in common is, that they make all kinds of claims that they refuse to substantiate and demand on top of that, that one should simply believe them.
Trust is no entitlement. It needs to be earned. Period.
This here is a free-of-charge biased and opinionated blog, practising free speech based on nevertheless painstakingly scrutinised publicly available information.
Anyone who only wants to see his propaganda parroted should go to the well-known junior miner foghorns.
Russia, Ukraine and Rare Earth
No matter what mistakes were made by Europe and the US in their relationship with Russia over 32 years, leaving the path of diplomacy and starting a war was uncalled for.
Our favourite US-falcon, Professor John Mearsheimer, famous for his thesis and discussion of Can China rise peacefully? has this to say:
Our take on Mearsheimer’s important contribution: We don’t buy the “mea culpa” approach. How can anyone seriously accept that Ukraine could ever pose an existential threat to Russia? In this day and age few countries need to have a direct border to pose an existential threat to one another.
After +/- 70 years of enjoying the ultimate blessings of Russian-dominated Soviet rule, understandably all former Warsaw Pact countries prioritised to slip under the protective umbrella of NATO, as soon as possible. And most did, long before Russia even mentioned it.
About 20 years ago on board a boat on the river Dniepr, when asked about the difference between Russians and Ukrainians, a Ukrainian trading company executive said:
Russians are always on a mission to prove something to the world. We Ukrainians only want to eat, drink and [insert profanity here].
Impact
In our view the war amplifies pre-existing trends, culminating in strong inflation, in the US near 8%, in the EU ca. 6%. This is structural and could persist as stagflation.
Because of rising prices for consumer staples, energy and fuel, consumers are likely cut discretionary spending.
In China e-commerce company JD.com, China’s Amazon, posted its first annual loss since 2018. The net loss was RMB 3.6 billion in 2021, after a profit of RMB 49 billion in 2020. Alibaba revenue growth also disappointed.
China’s prime minister warned on March 11, that Russia sanctions would hurt global economic recovery.
China and Russia are actually no natural allies, quite the opposite. Russia was as much a part of China’s “century of humiliation” as other colonial power was. Discussing that in more detail would go beyond this humble blog.
Just this much: Even though under Stalin’s successor the USSR did more for China than any country has done for China ever before and ever after, Mao rejected Khrushchev for his criticism of Stalin (the Secret Speech), fearing, apart from Soviet domination, that a dismantlement of Stalin’s legacy would endanger Mao’s own autocratic legitimacy. Are we perhaps observing a certain parallel today, that Xi’s legitimacy may get challenged if Putin should depart?
China’s stance on the Ukraine war continues being ambivalent. China is the one power who can stop the war by peaceful means. But China may make huge gains when dealing with a war- and sanctions-weakened Russia. China can pick up the crown jewels at a discount: Oil, gas, minerals, defense technology, even water, you name it.
And a weak Russia will not be able to oppose China encroaching on, for example, Central Asia and Mongolia, Russian sphere of influence gained during The Great Game. Gently nudged by China, Russia may also stop providing weaponry to India’s armed forces, one of China’s arch rivals, and reduce deliveries of gas to Japan, another arch rival of China.
The US-president’s approach telling the Chinese president “you do as we say, or else” in order to avoid making trade-war concessions in exchange for peace-making services, is probably going down the wrong pipe.
And Rare Earths?
For 50 years gas dependence on the USSR, and later on Russia, has never been a problem for Germany. Now it has become a big problem.
What lesson is there to learn in terms of continuously relying on China’s permanent magnets and rare earths?
Demand
One fundamental driving force behind sky-rocketing rare earth demand are electric vehicles.
Consumers are now facing a cash drain from rising prices of essentials, including electricity and fuel.
When wanting to replace the old, clunky gasoline guzzler in their garage, it puts them in an unenviable position, between rising fuel cost and rising electricity cost. It is quite likely, that the old car simply won’t be replaced.
EV
Global EV production in 2021 was 3.99 million units. China accounted for 57.4% of the total, Europe for 22% and the US for 12%, while Japan was only 0.9%.
Production cost of EV in China are estimated to be about 50% lower than in the rest of the world. So it comes as no surprise that China exported 499,573 electric vehicles in 2021, 2.6 times more than in 2020. About 100,000 of these were Teslas, according to Japan’s Nikkei. These numbers were expected to grow strongly - before the Ukraine war.
Sales of EV stalling would likely have a negative impact on demand of permanent magnets and upstream on rare earths.
China not fully committed to EV
Actually, as China strategy consulting company Asia Waypoint recently published, citing the heavily censored Chinese publication Caijing, in 2035 still 60-80% of China-produced cars would sport an internal combustion engine:
The People's Republic does promote e-mobility. Among other things, the OEMs are prescribed quotas via the "dual credit policy". They have to produce a certain number of "New Energy Vehicles" or face financial disadvantages. In China, the term NEV covers battery-powered e-cars, hybrids and other vehicles with "green drives", for example with fuel cells.
At the same time, however, China remains open to technology, in parallel supporting research and development of less climate-damaging internal combustion engines - such as those that burn hydrogen or methanol. And, this will be even more important for the global auto industry for years to come, the phase-out of the petrol- or diesel-powered internal combustion engine era is progressing much more slowly in China than, for example, in Germany. Chinese companies will be given much more time to complete electrification or other technological transformations.
Fundamentally we also have the question, in view of global warming, if individual motorised transport of the current scale should really be viewed as sustainable, at least in urban settings. We don’t think it should be.
Electric vehicle on Nanchang Road, Shanghai, 1944
One more thing:
We would expect those junior rare earth miners, who announced to deliver their feasibility study results within short, to be extremely conservative regarding “information supplied by management” and rare earth prices. If they are not super-prudent, they’ll end up having spent millions on meaningless feasibility studies, just like their peers did a decade ago, who based their feasibility assumptions on inter-galactic price levels of rare earths around 2010. Prudence rules.
And since we are at it: The Trend of CAPEX Dumping
A couple of years ago a trend of what we would call “CAPEX dumping” started among junior rare earth miners. Announcements to lure investors claimed - occasionally spectacular - reductions in the investment needed to bring a rare earth mine to production and to separate rare earths, showing comparatively cheaper capital expenditure than potential competitors.
In view of the recent market upheavals resulting in large cost increases for literally everything, only the most desperate junior rare earth miners would still claim to be able to optimise capital expenditure.
Recycling is ‘in’
In year 5 after Geomega, several other junior rare earth miners have also tried to add NdFeB recycling to their portfolios.
If you are aiming for 100-200 tons of fully separated rare earth oxides, suitable for applications also outside permanent magnets, it may just work, because you would not necessarily need to export outside your own region (e.g. North America, Europe).
Most recycling hopefuls discover, that literally every single load of permanent magnet scrap is different from the other, a very difficult issue.
The preferred scrap for recycling is cut-off and swarf from the cutting and milling NdFeB magnets to customers shape, creating 15-30% scrap. Since almost 90% of NdFeB magnets are produced and processed in China, it is there, where this preferred scrap occurs. Most of the rest occurs in Japan.
Another important feed is off-grade magnets, that go straight from production to recycling. That obviously is also overwhelmingly in China.
So, for the rest of the world NdFeB recycler hopefuls there is for the time being only end-of-life NdFeB scrap from equipment like offshore wind towers and vehicles.
And that is a problem, not only in availability.
Permanent magnets are bought for their physical properties, the underlying chemical composition does not matter so much for the user (even though l-size users tend to prescribe the composition, often with irrationally high heavy rare earth contents). However, it is a stable, consistent chemical composition of the permanent magnet that matters most, when trying to recycle. If that is different for many batches, it creates problems.
Also the mandatory coating of the permanent magnets differs from manufacturer to manufacturer, even from batch to batch, an added difficulty.
Certain prospective recyclers want to complain to their respective governments that big, bad China does not standardise the chemical composition and the coating of rare earth magnets.
None of them has gone on the record for even trying to talk to peers in China, where close to 90% of world NdFeB magnets are made and where significant NdFeB recycling is already common practise, certainly dealing with the same problems.
The little NdFeB scrap that may occur from end-of-life products outside China during the 2020s already eyed and actively bought by China.
Prying tiny magnets from old headphones, speakers and mobile phones currently is commercial nonsense. Just visualise how many million mobile phones you have to yank open in order to get to a few measly tons of rare earths.
After realising that shredding and pulverising its old iPhones creates an impossible to separate mass of metal and other materials, Apple went for re-using components, instead of recycling.
Global Rare Earths Summit
The upcoming REIA event, a virtual event, must go:
Key themes to be addressed include:
Ensuring security of supply & strategies for meeting anticipated increase in demand
Financing the mining, refining and utilisation of rare earths
Dealing with rare metal and mineral waste
Mitigating the impacts of mining on biodiversity and the environment
Meeting the green transition with constraints on rare metals
In the news, on March 4, the Raw Materials Industry Department of the Ministry of Industry and Information Technology stated that in response to the continued rise and high market prices of rare earth products, the rare earth office interviewed China Rare Earth Group, Northern Rare Earth Group, Shenghe Resources ( 16.93 -5.68% , diagnostic stocks ) and other key rare earth enterprises.
The meeting demanded that relevant enterprises should effectively enhance their awareness of the overall situation and responsibility, correctly grasp the relationship between the current and the long-term, upstream and downstream, and ensure the safety and stability of the industrial chain and supply chain; it is necessary to strengthen industry self-discipline and further regulate the production and operation of enterprises, product transactions and trade circulation. Do not participate in market speculation and hoarding; give full play to the leading role in demonstration, promote and improve the pricing mechanism of rare earth products, jointly guide product prices to return to rationality, and promote the sustainable and healthy development of the rare earth industry.
Last week also the China Nonferrous Metals Industry Association issued an appeal to bring rare earth prices down to reasonable levels, suggesting the “market circulation is not smooth”, to say that some participants my be hoarding inventory to speculate on even higher prices.
The tight supply of rare earths and the rapid price growth have led to an increase in the cost of downstream industries and affected the development of related manufacturing industries. In the context of the transformation and upgrading of our country's manufacturing industry and the entry of economic development into a new era, only by better guaranteeing supply and stabilizing prices can we meet the growing needs of my country's manufacturing industry, especially emerging industries.
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At the same time, relevant government departments at all levels should take a series of effective measures from the macro level, from the level of the rare earth industry structure, from the level of guiding the future development of the industry, and from the perspective of blocking the competition in the rare earth market, insisting that both the government and the market make efforts. , so that the rare earth industry chain supply chain is truly smooth.
Originally, the idea had been that rising prices will drive fringe users out of rare earth into substitution, leaving more product for core applications. This apparently underestimated the supply-demand gap and apparently the opinion has been completely reversed.
Where the wind is blowing from is interesting, because this price problem should be a matter of the Price Bureau, a unit of the National Development & Reform Commission, who is superordinate of MIIT.
Myanmar exported more than 140,000 tons of rare earth deposits to China, worth more than U.S. $1 billion between May 2017 and October 2021, a statement from China’s State Taxation Administration said.
We don’t know what is the point of asking the State Taxation Administration for numbers until October 2021, if the full year detailed import statistics are available from China Customs (who are the actual unit in charge).
We had analysed the China imports from Myanmar 2021 for you previously. One striking element is, that the imports of simply concentrates are dropping and that the numbers of value-added rare earths from Myanmar are strongly increasing.
So in terms of “rare earth deposits” exports to China, that statement is plainly false.
The value of China’s rare earth imports from Myanmar for the full year 2021 alone was US$780 million, quantity 34,700 t.
When the closure was lifted, a manager of a Chinese state-owned mining company based in Guangzhou on Dec 2 said all the ore was trucked to Jiangxi province, China’s Global Times reported.
As described above, we are not talking about ore, as the product exported from Myanmar has moved up the value chain. While the cargo stuck at the order may have been destined for Jiangxi province alone, it is common knowledge that imports from Myanmar actually go to recipients in several other provinces, of which Jiangxi is one.
An environmental activist in Pangwa told RFA unregulated mining in Kachin State has destroyed many local forests and mountains.
That is also evident from Google Earth.
However, we understand from Myanmar sources that operations are guarded by the Tatmadaw, Myanmar’s official armed forces, not by the Kachin Independence Army, as one might have expected.
Since the armed forces are currently the government in Myanmar, one could also reasonably expect them to do the job of a regulating authority.
Local sources told RFA that Myo Ko Ko, a Myanmar medical company, has been awarded a license to set up to mine rare earth minerals in Kachin State, quoting a 2019 report of the Ministry of Natural Resources and Environmental Conservation. The licensed area is 281 acres of land in Chi-pwe Township, equivalent to 159 football fields.
We could trace neither the report, nor the company. Myo Ko Ko is a personal name, Myo Ko Ko Shan is a famous transgender model.
What we could find, however, is the utter helplessness of Myanmar’s Ministry of Natural Resources and Environmental Conservation in view of rampant degradation of Myanmar’s environment, particularly deforestation for rubber plantations, general farming and mining.
Rare earths seem to be only a part of Myanmars massive environmental issues and in RFA’s article a lot seems to be “lost in translation.”
High growth potential: Forecasts suggest the global rare earth elements market could more than double between 2020 and 2028 (from $2.2 billion to $5.5 billion), highlighting one of several growth opportunities among the categories that DMAT invests in.
We don’t know where they get to their numbers. According to our latest count, the value of global rare earth oxides is already well beyond US$12 billion/year.
Source: ETFDB.com
One could view this as a mining ETF with a bit of rare earth sprinkled on top.
After major exploration efforts LKAB can now report a continued increase in mineral reserves and mineral resources and, for the first time, present mineral resources of rare earth metals. Compared to 2020, the reserves have increased by 10 percent and mineral resources have increased by as much as 55 percent. The Per Geijer deposit in Kiruna constitutes a major complement.
The final stage of hydrometallurgical piloting at ANSTO for Mkango’s Songwe Hill Rare Earths Project (“Songwe”) in Malawi has successfully produced rare earth carbonate grading 55% total rare earth oxides (“TREO”) equivalent, enriched in neodymium and praseodymium (“Nd / Pr”) oxides, which together make up 31% of the rare earth oxide content in the carbonate product (i.e. Nd / Pr oxides / TREO = 31%)
This is a very important milestone, carbonate of 55% TREO.
In terms of sustainability we wonder what the carbon footprint should be for shipping 55% concentrate from Malawi via Mozambique to central Poland. 10,000 kilometres door to door?
The MDA confirms the fiscal and legal terms for project development, and is expected to take up to three months from today to finalise, upon which the results of the feasibility study and valuation metrics will be announced
The application of SerenTech patented technology has achieved separated and refined products to high purity with REO grades above 99.9% demonstrated at pilot scale in two key applications;
• Mining ore concentrate: the pilot scale plant has processed concentrate received from supply chain stake holders and achieved separation of REEs; and
• Permanent magnet (Neodymium-Iron-Boron, NdFeB) recycling: the pilot scale plant has processed spent permanent magnets received from supply chain stake holders and achieved extraction of recycled rare earth oxides at purity 99.9% plus.
This technology has the potential to be applied to other critical raw materials.
A very important step for Ionic to have a downstream process., very good.
What should be added now would be the concentration from 0.XX% TREO in the Makutuu clay to a workable concentrate of commercially viable >30% TREO.
We don’t want to be splitting hairs, but the wording “achieved separation of REEs” from mining ore concentrate and “achieved extraction of recycled rare earth oxides at purity 99.9% plus” from NdFeB may somehow suggest, that there might be a limitation of separation of several REE from the mining ore concentrate base, which is the really rather relevant bit for Makutuu, especially when we talk about heavy rare earth elements.
It would not help, if the envisaged process could only separate a part of the rare earth elements from Makutuu.
Thanks, Ali, and good morning everyone. We're proud to report that Neo performed in an outstanding manner in 2021, finishing the year in a very strong position. This performance provides us with the ability to take advantage of a number of opportunities and execute on several strategic growth initiatives. In the fourth quarter, we're reported sales of $153 million and adjusted net income of $16 million, or $0.39 per diluted share. We generated almost $20 million of adjusted EBIDA during the quarter, the fourth consecutive quarter of elevated profitability. On a full year basis, we reported a record $539 million in sale and adjusted net income of $55 million or $1.41 per diluted share with nearly $82 million of adjusted EBITDA generated, this is by far the best year since the companies returned to the Toronto Stock Exchange in 2017.
As we envision a world where Neo helps to accelerate the adoption of a range of sustainable technologies, we focus on four growth pillars: first, protect, strengthen and grow our core business; second, innovate into next generation technologies; third, expand and diversify our geographic footprint in order to capture growing demand for our specialty rare earth products in Europe and North America; and fourth, improve our global sustainability leadership. I am pleased with the significant progress we made in 2021 on all of these fronts.
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Neo is uniquely positioned in the global rare earth industry to capitalize on opportunities across the rare earth supply chain, ensuring a reliable supply of specialized materials to our customers is job number one for us, this reliability is even more important today, given that lingering macroeconomic headwinds.
Plain, straight and simple: Neo is a mature rare earth and permanent magnet company.
Of course there are “construction sites”, problems that require attention.
As laid out in the call, the exploding rare earth prices had a positive impact on the top line and the bottom line, but the prices have also driven working capital requirements up and Neo need to borrow in a rising interest rate environment.
Some relief could come from shortening payment terms to customers and obtaining longer payment terms from suppliers, in combination with inventory optimisation. This usually is much, much easier said than done.
Another construction site is to optimise the raw material supply to Neo Silmet in Estonia.
We also see increased demand for larger magnet sizes and we're developing more complex magnets to meet this demand. This innovation combined with Magnequench’s consistency and quality is helping to unlock significant growth within our magnet business. The know-how to constantly innovate and consistently manufacture these magnetic materials and magnets is an extraordinarily high technical hurdle.
Shareholders of certain junior rare earth miners who envision the full value chain from mine to magnet should perhaps listen up. Think know-how, think availability of expert workforce, think working capital requirements.
Neo’s share price is currently below CAD 17, down ~18% year-to-date, P/E around 16, dividend yield at current share price 1.9%. Analysts set a target in the 25-27 Canadian dollars.
Peak Rare Earths Limited is pleased to re-affirm its commitment to its stated strategy, focused on being an independent producer of rare earth oxide delivered through the development of the integrated Ngualla-Teesside project.
Shenghe Interest
As announced on 14 February 2022, Shenghe Resources Holding Co Ltd (“Shenghe”), a Chinese rare earth company, acquired a 19.9% interest in Peak from Appian Pinnacle Holdco Limited (“Appian”), through its subsidiary, Shenghe Resources (Singapore) Pte Ltd. Whilst Peak was not consulted or involved in any discussions or negotiations between Appian and Shenghe, it does view the investment as a strong endorsement of the worldclass nature and strategic value of the Ngualla-Teesside project.
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Committed to an Integrated, Independent Ngualla-Teesside Project
Peak is aware of certain speculation that it may seek to change its strategy following Shenghe’s investment. Peak confirms it remains committed to the development of an integrated Ngualla-Teesside project and to the production of an NdPr Oxide rather than a concentrate or mixed rare earth carbonate.
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Peak believes its position as an independent source of production is important to offtakers, financiers and other stakeholders. We remain committed to our key stakeholders.
What a lovely welcome to the new 19.9% shareholder!
Peak have no financiers, that is part of the problem. At the last quarterly report in December 2021 the company held AU$ 20,605 in cash.
The stock exchange disclosure of Shenghe Resources about the Appian deal shows a shocking lack of activity on the part of Peak, with the hard fought-for special mining license not yet having been issued, as Peak didn’t undertake the presumably costly steps necessary for obtaining the license, such as negotiating the terms for the mandatory Tanzanian government joint venture and establishing it, quite possibly for lack of funds.
The board of Peak must answer to the other 80.1% of Peak shareholders, who, same as the board of Peak, are in this for money and not for some lofty political ideals:
How is this going to work without significant involvement, finance and the proven rare earth competence of the new major shareholder?
Along with Mkango, also Rainbow has got China’s attention:
Rainbow has determined that high recovery rates are possible through the acid leaching process, which would allow 65 to 70 percent of the rare earths in the Phalaborwa gypsum pile to be recovered in solution.
The company plans to use hydraulic recovery of gypsum piles to eliminate costs traditionally associated with primary mining, crushing and grinding of ore.
Rainbow is studying how to further reduce capital and operating costs and is conducting trade-off studies.
If needed, the company said it could produce first mixed rare earth carbonate at a lower upfront capital cost.
Commerce Resources Corp. is pleased to announce that it has produced a sample of mixed rare earth carbonate (“mixed REC”) that meets typical rare earth element (“REE”) market specifications. The mixed REC sample also demonstrated a strong and consistent recovery of neodymium (Nd) and praseodymium (Pr) throughout the flowsheet, resulting in a final NdPr oxide distribution – i.e. % of Nd+Pr oxide of the total rare earth oxide (“REO”) – of 21.6%, which is significantly higher than several major global producers.
The mixed REC sample (Figure 1) was produced from the Ashram Rare Earth and Fluorspar Deposit using the conventional recovery flowsheet developed at Hazen Research in Colorado, USA, which results in high grade monazite concentrate exceeding 40% rare earth oxide (REO).
In addition to targeting the production of a mixed REC for the initial years of production at Ashram, the Company is currently evaluating moving downstream early in the mine-life through to partial separations, which will be reflected in the Prefeasibility Study (PFS). A partial separation will allow for a marketable NdPr oxide product to be produced, in addition to a Ce-La product and a mixed Sm-Eu-Gd + heavy REE product, thereby unlocking additional value while not adding significant technical risk and capital expenditures to the flowsheet by pursuing full separation of all 15 REOs at initial production.
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The deposit hosts a measured resource of 1.6 million tonnes (Mt) at 1.77% rare earth oxide (REO) and 3.8% F, an indicated resource of 27.7 Mt at 1.90% REO and 2.9% F, and an inferred resource of 219.8 Mt at 1.88% REO and 2.2% F, at a cut-off grade of 1.25% REO (Effective Date July 5th, 2012).
Commerce Resources Ashram has been inching forward since 2007, 15 years and counting.
The 2012 preliminary economic assessment, updated 2015, says:
Northern Rare Earth (600111.SH) issued an announcement, in order to promote the company's rare earth praseodymium and neodymium products to be transformed into terminal high value-added applications, accelerate the company's layout in the rare earth permanent magnet motor industry, extend the company's magnetic material industry chain, improve The added value of products will enhance the market competitiveness of the company's rare earth permanent magnets, and promote the company to become better, stronger and bigger and to develop with high quality. Build a rare earth permanent magnet high-efficiency motor project for the main body. The new company will adopt an asset-light operation model, and will mainly focus on permanent magnet variable frequency speed regulation integrated machines. The registered capital of the new company is 30 million yuan, the company holds 49% of the equity of the new company, and Qingdao Zhongjiat holds 51% of the new company.
The Front-End Engineering Design (FEED) for each of Saltend and Longonjo is now complete. A comprehensive value engineering and optimisation programme is well advanced and is expected to be reported next month and is expected to result in further reduction in the capital costs to the ones reported in this announcement. Working alongside Wood Group’s Perth, Reading and Johannesburg offices, Paradigm Project Management (PPM), a specialist Africa centric project management and engineering company, and Professional Cost Consultants (PCC), with offices in South Africa and the UK, the estimated capex has been reduced from US$525 million to US$494 million (Saltend: US$195 million and Longonjo: US$299 million).
Pensana chose skip the pesky feasibility study and went straight for the FEED, as announced.
Pensana’s announce opex of US$15/kg for making a finished rare earth oxide. That is half of Arafura’s opex. Hastings advertise US$12.80/kg opex for only producing a comparatively primitive mixed carbonate, not a separated oxide.
Sounds very ambitious, but then, what else would one expect from Pensana?
EBITDA
The EBITDA is impressive, however, what is EBITDA: Earnings before interest, taxes, depreciation and amortisation.
Taxation brings us straight to this Pensana announcement:
Source: ASX Announcements https://www.asx.com.au/asxpdf/20200427/pdf/44h84qhsnpc3qr.pdf and https://pensana.co.uk/president-approves-mining-title-for-longonjo-rare-earths-project-2/
Since Pensana are clearly stating EBITDA, i.e. taxes not included, the a.m. may not have been considered in the numbers published.
Given the concept of Pensana to ship a concentrated RE sulphate from Angola to the United Kingdom, entirely depleted of radionuclides, the a.m. extremely high and feasibility-relevant taxes will probably apply to any group-internal transfer price from Pensana’s Ozango Minerals, Angola, to Pensana, UK.
Transfer pricing
Transfer pricing issues arise from the concepts of several junior rare earth miners. Certainly not a Pensana-only thing.
Tax authorities absolutely love to probe internal transfer prices. KPMG in the UK describe transfer pricing as amajor tax risk.
The country of origin typically wants to see a very high transfer price in order to max out tax revenue, while the tax authorities at the country of destination will want to see a minimised transfer price for the very same reason.
This puts the taxpayer between a rock and a hard place.
Angola just recently adjusted its tax code regarding transfer pricing by presidential decree. Such rule by decree can change anything and everything on short notice.
Rainbow Rare Earth experienced what happened, when the overzealous and poorly advised Burundi government suspended Rainbow’s operation on suspicion of profit minimisation through alleged under-invoicing between Rainbow and ThyssenKrupp.
Sustainability
Also here issues that do not exclusively apply to Pensana.
Sustainability-wise the carbon footprint of ferrying some concentrate ~9,000 kilometres from Longonjo to Saltend (only ~7,500 km if air-lifted) may be a bit controversial, along with the permanent disposal of possibly as much as 10,000 t of thorium and uranium radionuclides in Angola over the life of mine.
And then Pensana want to ship 50% of their projected output to an “Asian trading company”, adding even more milage and thereby extend carbon footprint.
Concern
The potential of thorium as a starting material for producing weapons-grade nuclear material is, among others, laid out in the article The Promise and Peril of Thorium.
Thorium was the starting material of choice for producing nuclear weapons grade material during the 1950s.
Source: Mittwelt am Oberrhein https://www.mitwelt.org/north-korea-nuclear-weapon-bomb-power-plant.html
Angola absolutely does not have the know-how to do any of this, but North Korea quite evidently does.
Given the erratic behaviour of North Korea over decades and provision of nuclear know-how to countries like Syria and Iran, there may be a certain concern here, in our opinion.
Angola upgrade
Pensana’s comments about Angola sound upbeat, the upgrade of sovereign debt rating to B- by Standard & Poors and Fitch, B3 by Moody’s are good news, somewhat comparable with but still lower than Nigeria.
B- and B3 rating means “highly speculative” (a.k.a. “junk”) and that there is still a long way to go until reaching Botswana’s BBB+/A3 investment grade.
Also on the Transparency International Corruption Perception Index Angola has climbed two notches in 2021 over 2020 and Angola’s rating is now no. 136 of 180, sharing the rank with Russia, Liberia and Mali.
Talking about carbon footprint and sustainability:
E-Tech Resources Inc. announces the signing of a non-binding Letter of Intent with the Saskatchewan Research Council ("SRC"). The parties intend to cooperate in the sourcing of Monazite Concentrate, test work and pilot scale hydrometallurgy to produce a mixed rare earth carbonate/chloride and rare earth oxide separation, all originating from the Eureka monazite mineral project in Namibia.
The air distance between Walvis Bay in Namibia and Saskatoon in central Canada is ~14,000 km. In terms of carbon foot print and long distance this exceeds even MP Materials’s bastnaesite from California to China of ca. 11,000 km.
But this is not all. The number of endusers for mixed rare earth carbonate in Canada’s Saskatchewan seems to be kind of really rather limited, so what follows the monazite processing is long distance transport to wherever there is someone who can use mixed rare earth carbonate. In case of China that would be another 11,000 km.
In the day and age of sustainability, ESG and such, this really does not look very good.
Here comes the cavalry, jockeying for US subsidies:
Today, the Libra Group, an international business group whose subsidiaries have assets and operations in over 50 countries, announced it has made a strategic investment in green energy company GreenMet, formerly known as Greentech Minerals Holdings. GreenMet is leading the infrastructure development of sustainable supply chains for critical rare earth minerals, such as green steel, to meet U.S. and greater North American green energy and technology needs.
The company was established to address the need for responsibly sourced critical minerals and metals, which are vital to advance uptake of renewable energy, build infrastructure, and compete globally. This investment is a natural next step for the Libra Group and complements its broad renewable energy portfolio that includes solar, wind, and biogas. Greenmet is currently working to develop six major projects that have a combined projected value of over $2 billion and is quickly building unprecedented solutions in the battery and magnet supply chain.
GreenMet was founded by former Green Berets and public servants, including former senior administration and congressional staffers.
After more than a decade of others trying in vain: “quickly building unprecedented solutions in the battery and magnet supply chain….”
//Science
Rare earth is everywhere, even in quantum computing:
Light can be used to distribute quantum information rapidly, efficiently and in a secure, tamper-proof manner. Researchers at the Karlsruhe Institute of Technology (KIT) in Germany, and at Strasbourg University, Chimie ParisTech and the French national research center CNRS, all in France, have now achieved major progress in the development of materials for processing quantum information with light. In a paper in Nature, they present a europium molecule that possesses nuclear spins, allowing the creation of an effective photon-spin interface.
Quantum information will revolutionize not only research and industry, but also our everyday lives. Among other benefits, it promises enormous progress in the simulation of materials and processes, furthering the development of new medical substances and the improvement of batteries, transport planning, and secure information and communication.
"After the paper was published, a number of companies approached us to discuss possible cooperation, including companies such as Microsoft and GM. In order to truly realize industrial application, laboratory research is definitely not enough, and the intervention and continuous investment of the industry are required. " said Deng Bing, who is currently doing postdoctoral research at Rice University in the United States.
This work is based on an electrothermal method previously developed by Deng Bing's research group. In 2020, the team of Professor James Tour from Rice University's Center for Nanoscience and Technology first proposed the method of flashing Joule heat, which can quickly convert almost any carbon-containing precursor into high-quality graphene.
Compared with the traditional heating method, this method uses ultra-short pulse current to directly heat the sample, which requires extremely low energy consumption. Features such as heating and ultra-fast cooling. For example, they have used it in the preparation of related materials.
More evidence of RE development outside China is scrutinised intensely in China.
//Staffing
If you look for experts in IAC rare earths, look no further:
From 1986, Jiangxi University of Science and Technology began to try to train postgraduates in the field of rare earths. In 2002, it established a rare earth engineering undergraduate program covering the fields of rare earth mining, extraction, metallurgy and materials. In 2012, the school was approved to serve the special needs of the country. "Ph.D. Talent Cultivation Project for Development and Utilization of Ionic Rare Earth Resources", since then, the school has started the path of doctoral talent cultivation led by serving the national strategy.
Jiangxi University of Science and Technology has established a complete rare earth talent training system for undergraduates, masters, and doctorates, from the first to open rare earth engineering undergraduate majors in domestic universities to recruiting doctoral students in the field of rare earths. At the same time, the school has also set up a special “special area” in the field of rare earths, and has a special enrollment plan for rare earths in the doctoral programs of mining engineering and metallurgical engineering, and cultivates high-level application-oriented talents in the field of rare earths.
A leading conservation group on Friday sounded the alarm after military-industrial complex giant Lockheed Martin filed an application with the U.S. government to renew licenses allowing deep seabed mining exploration in the Pacific Ocean.
"Mining the deep sea is as destructive as strip mining the mountains of Appalachia, extinguishing whole ecosystems with a single blow," Miyoko Sakashita, oceans program director at the Center for Biological Diversity (CBD), said in a statement. "The federal government shouldn't renew these licenses."
Although there are no current commercial deep seabed mining operations, the International Seabed Authority has issued exploration licenses to state-owned companies and agencies in China, France, Germany, India, Japan, Russia, and South Korea, and to private corporations including U.K. Seabed Resources, a subsidiary of Lockheed Martin.
We would recommend to read before posting if it makes any sense at all, or if it is as contradictory as the above.
That deep sea mining has potential for screwing up a major part of this planet’s food chains, including the human one, is well understood, full-well, one may say.
Lockheed Martin has submitted this request to maintain its interests and rights under these exploration licenses. Lockheed Martin is not currently conducting at-sea activities under DSHMRA exploration licenses USA-1 or USA-4, nor is the company proposing any such activities in this license extension request. Lockheed Martin has stated that at-sea exploration activities have been delayed for several reasons including conditions in the metals markets and the lack of international recognition of the DSHMRA licenses USA-1 and USA-4.
We have news for you: A mine is a self-depleting asset. There is nothing renewable about any mining anywhere at all, ever.
If it it can be mined and it is a metal, then it also can be recycled.
Actually, the entire Global Warming Initiative won’t go anywhere without substantial additional mining. Renewable energy, EV, unthinkable without additional, high intensity mining. That comes with a lot of detriment, well worth lamenting about, but largely unavoidable in order to maintain overall economic growth.
The alternative for achieving sustainability: Thrift, good, old-fashioned, time-honoured thrift. Thrift comes at the expense of consumption and subsequently at the expense of growth, affecting living standards the world over.
The majority of countries who signed up to the Paris Climate Agreement, likely interpreting thespin “sustainable development” - mentioned 17 times in the document - as “sustainable growth”, would be rather disappointed.
//Stock Prices
Some upheaval because of the Ukraine war. Please do observe, that quite a number of the companies listed here are not exclusively rare earth companies and are not necessarily miners either.
January 4 - March 23, 18:00 Singapore time:
//Prices
The government decreed prices must fall, so they fall, preferably marching in goose-step.
Actually, it is not that primitive. Here what happened to prices after above described meeting:
As ever, these are ex works China prices incl. 13% VAT for the most common qualities of rare earth oxides/metals and their raw materials, converted at the official onshore RMB/USD exchange rate. Actual offer prices will differ.
While there have been significant price declines, prices are still above the sky-high levels at the beginning of the year, as you can see in the Year-To-Date column.
How you do that: Traders are typically undercapitalised and require loans to trade. In China, there is principally no loan without collateral. Exchange-listed products qualify as collateral, so based on this traders can get loans. However, if the government suggests to the policy banks not to accept rare earth collateral, either by suggesting excessive risk or simply telling them not to, then trader can’t finance transactions and are forced to liquidate positions.
As yet we have no proof that this has happened yet, perhaps merely threatened, perhaps modified to apply to some products but not others, but the method as such has been part of the playbook of “correcting” unhealthy price developments in other products before.
While such measure does release traders stock to the market, absent fellow traders, it also takes elasticity out of the market and may turn the already anaemic rare earth exchanges into rather sleepy places.
The coming weeks will show, if and what mechanism is at work here. It will be interesting to see, where this bottoms out.
And here the usual view:
As ever, these are ex works China prices incl. 13% VAT for the most common qualities of rare earth oxides/metals and their raw materials, converted at the official onshore RMB/USD exchange rate. Actual offer prices will differ.
There is much more to cover, but we simply don’t have the time to address everything. If you feel that something is missing, do drop us a line.
