Why Do KKR/Apollo/Carlysle/Bain Bid For Hitachi?; BYD Magnet Patent Published; Disastruous China-US Meeting; Vote Of Confidence For Ionic; Pensana Create Quantum Man;

2021 Rare Earth March 19

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The rise in rare earth materials prices does not directly affect markets outside China and Japan.

Given current overcapacity in permanent magnets and related quest of magnet companies for market share, the ex-China, ex-Japan impact of increased rare earth prices is likely relatively mild.

The ex-China dependency on permanent magnets from China is much more significant than rare earth.

As laid out by John Ormerod, there will be more cheap cerium used to replace >20% of NdPr in permanent magnets for low temperature applications, which frees some NdPr quantities to feed growth in high temperature magnet applications, e.g. hybrid vehicles and EV.

Vis-a-vis the the international market, conditions remain the same, perpetually 13% higher cost of rare earth for foreign hopeful permanent magnet makers vis-a-vis China domestic permanent magnet manufacturers, quantity pressure combined with comparatively low prices and low margins for permanent magnets.

This practically ensures, that ex-China permanent magnet investment is a no-go.

That is, why governments have to talk to China about creating a level playing field in the rare-earth-permanent-magnet space, by equalizing the the VAT refund up export of rare earth, currently zero, and the VAT refund upon export for permanent magnets, currently 13%.

Probably the Chinese side will refuse to granting any VAT refund upon export to rare earth, so the quick fix here must be for China to cancel the VAT refund upon export of permanent magnets. But, again, that is a quick-fix.

While this is no final solution to China’s unfair trade practises by manipulating domestic and export markets for all its products through the discriminatory application of differing rates of VAT refund upon export, rare earth and permanent magnets would at least be a beginning.

China openly uses the VAT refund upon export for trade manipulation (退税 = tax rebate = VAT refund upon export):

Source: Yieh Corporation, Taiwan

Why under current conditions Apollo, Carlyle, Bain and KKR would want to bid for Hitachi Metal’s business is probably Hitachi’s strategic function. Hitachi do hold a significant share in the US permanent magnet market and we assume Lynas is their supplier and further assume that downstream from Hitachi you will certainly find the one or the other defense contractor.

Another bidder for Hitachi may be Beijing Zhongke Sanhuan, a major permanent magnet company from China, licensee and partner of Hitachi in 3 JVs. Beijing Zhongke Sanhuan also have a JV with Vacuumschmelze.

What you always wanted to know about rare earth and didn’t dare asking:

Japan’s NdPr and Nd consumption is somewhere between 4,000 to 5000 mt per year, 75% of NdPr ex Lynas. We are working on updated details of Japan’s RE consumption.

Watch this space for further announcements.

Chinese EV maker BYD (Build Your Dreams) filed a patent for rare earth permanent magnets with a reduced content of expensive Dy and Tb end of August 2019. On March 5, 2020 the patent no. CN112447350A was published.

Source: sina.com

We should like to point you to this thorough analysis of Ionic Rare Earth by Hallgarten & Company Ltd. A laborious job well done, seriously good reading.

Of course it wouldn’t be us, if we were not to bicker about the contents.

All risks of a junior miner apply here, plus the earn-in risk.

Rare earth in Africa has its fair share of problems:

There are more, but we think you get the picture of a certain residual risk involved.

Back to Ionic. Please visualise: 615 ppm TREO doesn’t sound bad, but it is equivalent to 0.0615%, which doesn’t sound that fantastic anymore.

Every time you move product, and be it only one meter, it costs money. In case of Ionic Rare Earth that means, that all cost occuring for 100% of material are to be carried and paid for by 0.0615% of its valuable, saleable contents.

So, if you excavate the clay, put it on a truck and on a conveyor belt to carry it for heap leaching, the cost of doing so applies to 0.0615% of the contents, not all of which can even be recovered.

Lets wait and see the feasibility study of Ionic.

Recently a rumour, that Mombasa port, the one Ionic want to use, would be ceded to China upon a likely Kenya debt-trap default was denied.

The Baotou Rare Earth Exchange reposted on its WeChat website an article from China’s Foreign Affairs blog, advertising to the China domestic reader that there would be a “strategic dialogue” in Anchorage, something that the US had asked China for and China gracefully agreed.

Perhaps chosing this channel shows the emphasis on the path the Chinese Minister of Industry & Information Technology Xiao Yaqing had suggested for rare earth, international cooperation.

However, the US had not planned a “strategic dialogue” with China at all and had also publicly rejected the idea of a strategic dialogue: “This is not the resumption of a particular dialogue mechanism or the beginning of a dialogue process.”

So the meeting in Anchorage already got off on the wrong foot, because of a gap of expectation.

A few words on the gentlemen on the Chinese side of this meeting:

  • Yang Jiechi, born 1950, is a formidable expert on China-US relations and a family friend of the George W. Bush dynasty. He is a graduate of the London School of Economics and the University of Bath. First posting in the US 1983-1987 at the Chinese embassy in Washington, then 1993-1995 advancing to deputy chief of mission. 1995-1998 first assistant foreign minister, then vice foreign minister. From 2000-2004 China’s ambassador to the US. 2005-2007 vice foreign minister and from 2008-2013 foreign minister. He is a member of the Central Committee and of the Central Committee’s Politbureau, where he has been in charge of Hong Kong, Macao and Taiwan affairs since 2017.

  • Wang Yi, born 1953, is the Japan expert. He is a graduate of Beijing International Studies University. 1989-1994 he was posted to the Chinese embassy in Tokyo. After his return he advanced his career to vice foreign minister and was then posted as an ambassador to Japan from 2004 to 2007. Thereafter he became a member of the Central Committee and took charge of Taiwan affairs. In 2013 he succeeded Yang Jiechi as foreign minister and has been serving in this position ever since.

Obviously Yang had been expected by the leadership to guide the meeting in the right direction, less formalist-Japanese-wooden than his junior Wang Yi.

Both Yang and Wang already failed with the Trump administration to improve ties.

Since Yang is associated with the ultra-leftist, officially no-longer-existent “Shanghai Faction” of party elder and former general secretary Jiang Zemin, Xi Jinping may have already gotten a bit suspicious, just like he is with politicians from the more moderate, equally officially no-longer-existent “Youth Leage Faction” of party elder and former general secretary Hu Jintao.

Anyway, when Blinken hit at Hong Kong and Taiwan, the very person directly in charge was sitting right opposite him.

At the time of this writing, in Anchorage they were hurling the verbal equivalents of rotten tomatoes and eggs at each other with lectures about diplomatic manners from the Chinese side and accusations of condescendence.

Where this leaves the rare earth suggestion of Minister of Industry Xiao Yaqing is anybody’s guess, but we’d say its the bin.

After this diplomatic disaster, will China hit back using rare earth or magnets?

We don’t think so. China rare earth companies share prices softened today, REO prices remained unchanged. China would not want the additional embarrassment of having tried to use a potentially blunt weapon.

The path in rare earth has been set anyway and Hitachi’s up-and-running permanent magnet business goes to a US bidder, one way or another.

In the US Lynas Texas and Rare Earth Resources Bear Lodge are proceeding and the ratified Chinese 5-year plan seems to acknowledge an overall re-industrialisation in US and EU, which does not need to be bad news for China, but is probably perceived as such.

Sooner or later the EU will also have some tax-payer-sponsored-for-eternity RE solution.

Talking about the EU and mising the point, it is now in the process of ratifying the EU-China Comprehensive Agreement on Investment, agreed with China after 7 years of negotiation, just before Biden took office. Ratification is expected to be completed in 2022.

Whatever perspires on the content of that agreement is disappointing and not worth a 7 year negotiation effort. If you are interested, find some details here.

Prices: Heavy rare earth, Dy and Tb, kept climbing, while others are largely unchanged. Only the RMB weakened a bit towards the dollar:

Rocky Smith, ex-Molycorp and ex-Peak Resources (whose concept Pensana hope to inherit), left well-deserved retirement and joined Pensana for another rare earth stint. According to Pensana’s website, Rocky Smith joined Pensana already 8 months ago, while still in Australia with Peak. That makes Rocky Smith a quantum man, 1 person in two diametrically opposed stages in two separate locations at the same time:

Of course this news should date of March 8, 2021, not July 16, 2020.

Whoever takes care of the Pensana website has turned the “News” section into a complete pig’s breakfast.

Thank you for reading, have a great weekend ahead!

//Companies

Extraction to begin at N.W.T. rare earths project in April

Next week, Cheetah Resources will send a mining fleet out to its Nechalacho project, marking the first time a rare earth mine is being mobilized in Canada, said David Connelly, the company's vice president of corporate affairs. 

 A fleet of graders, haul trucks, bull dozers and a rock crusher will be sent out to the site, approximately 100 kilometres southeast of Yellowknife, roughly equidistant from Lutselk'e.

Workers will begin to remove shrubs from the site, near Thor Lake, once they arrive, said Connelly. 

Comment: Apparently, Vital are in the midst of a capital raise. It is funny, if not to say weird, that Vital mention funding of Wigu Hill, which is subject to a claim to arbitration with the International Centre for Settlement of Investment Disputes (“ICSID”) by seller Montero. How such claims against the law of the land end, we could see in the Stans Energy case against Kyrgyzstan, absolutely nowhere (but only after shareholders have been milked completely dry for the legal fees). Why would Vital assume, that Montero suing a sovereign country like Tanzania would end any differently? At this time, there is zero chance for Wigu Hill to be passed to Vital, so why apply funding to Wigu Hill?

NioCorp's Scott Honan Discusses the Potential of Adding Rare Earths to the Elk Creek Project's Planned Product Suite

Comment: “Starting to have a look” is not timely enough to become part of the current development.

Imperial Mining Group Awarded $90,000 Federal Grant for Scandium Material Research with McMaster University

The grant was jointly awarded to Imperial in partnership with the W. Booth School of Engineering Practice and Technology at McMaster University, Hamilton, Ontario. The program’s objectives are to develop and collect material engineering data for next-generation scandium-enhanced aluminum alloys. The focus of the research program will be on the alloy’s applicability to AM of metal parts for the aerospace, defense and automotive sectors.

MP Materials quarterly profit jumps on rising rare earths prices

The company posted fourth-quarter net income of $24.1 million, or 20 cents per share, compared to $1 million, or the equivalent of 2 cents per share, in the year-ago quarter when it was a private company.

Comment: If MP continue going with the flow, they will make money.

Related:

Shenghe Resources: The company locked in the underwriting rights of MP rare earth products through prepayment

Every time through the AI ​​Express, investors ask questions on the investor interaction platform: 80% of your rare earth concentrate comes from MP company in the United States, and the United States is trying to reshape the rare earth industry chain, which will affect your company’s raw material safety to some extent. It is also a concern of many investors. If MP breaches the contract, do you have an alternative plan? Should you plan to increase the source of other rare earth concentrates from now on?

Shenghe Resources (600392.SH) stated on the investor interaction platform on March 17 that the company had locked in the underwriting rights of MP rare earth products through advance payment. Currently, all imports of American mines are normal. The company has always attached great importance to rare earth resources. In addition to U.S. mines, the company also has invested and managed rare earth mines in China. Monazite resources (a kind of rare earth raw materials containing light and heavy rare earths) are also produced in the zirconium-titanium beneficiation business, and the company will also Actively carry out other layouts.

Comment: Last time we checked a while ago, the amount of advance payments was US$ 97.5 mio.

‘Nova-Bollinger-style’ at surface: why persistence could pay for Conico in Greenland

A third project, Mestersvig, is the only brownfields mine on the east coast of Greenland. A historic zinc-lead mine, Conico is interested in the project’s rare earths potential.

“We’ll be going in with a field team to assess the rare earths potential, as well as the potential for magmatic sulphides,” Abraham-James said.

That work is expected later in the year, subject to Covid restrictions lifting at a nearby airport.

Comment: Yet another rare-earthling

eMetals Announces Acquisition of Cowalinya Ionic Rare Earth Project

The Cowalinya Project is prospective for Ionic Adsorption Clay (IAC) Type REE deposits. The Project demonstrates the key features associated with ionic clay deposits; deep and intense weathering, and REE-enriched bedrock.

Comment: We had missed that one.

American Resources to begin building its planned mobile earth processing plant

Jensen says the Fishers, Indiana-based company will use previously acquired technology and patents from Ohio University, in addition to its partnership with research programs and Dr Gerardine Botte. The facility is expected to be built over the next six months with the goal of deploying into the field in the third or fourth quarter of 2021.

//Politics

Legal Risks Under FARA for US Companies in China

Is there a De Minimis Threshold to FARA? 

FARA has no de minimis threshold. It can be triggered by even the slightest activity, within the United States, that meets any one of the statutory triggers. For example, a single meeting with a US official within the United States by an executive of a company headquartered outside the United States, or by its US subsidiary on behalf of the foreign parent, could potentially satisfy the “representation” trigger. (The Department of Justice has not publicly addressed the question of whether a meeting at a US Embassy would count as “within the United States,” but in theory, it could.) Additionally, the mere act of hosting a conference, distributing a policy report, requesting a meeting, or reaching out to opinion leaders on behalf of a foreign principal, within the United States, could satisfy the “political activities” trigger. 

How Would One Trigger FARA from China?

FARA applies to activities “within the United States.” The FARA Unit of DOJ recently has taken a broad view of what constitutes activity “within the United States,” suggesting that even a very limited nexus to the United States is enough to trigger the statute’s jurisdiction over related activities outside the United States. The FARA Unit recently stated that it did “not concur” with the assertion that registration for FARA-triggering activities would not be required if those engaging in the activities were “physically outside the US at the time of performance or delivery of the service.” Given the FARA Unit’s current position, it is possible that even an e-mail or phone call from China to the United States, if it otherwise satisfied one of the FARA triggers, could be viewed by DOJ as requiring FARA registration.

Taming the Chinese Rare-Earth Tiger

However, mining is only half the story.  Raw ore is useless.  Our high-tech world depends on processed or refined REEs.  In the realm of refined REEs, China is a vicious tiger, with a market share of nearly 90%.  The only significant REE refining facilities outside China are those in Russia and the controversial Lynas Advanced Materials ("Lynas") plant in Pahang, Malaysia.  This means that, except for Russia and Australia, nearly all REE ore is refined in China, including ores mined in the U.S.  The highly toxic and radioactive wastes produced by refining REEs explain China's disparity between its market shares in mining and processing.  The lack of refining facilities creates a chokepoint that China exploits.  Eliminating the refining bottleneck could cause China's share of refined REEs to mirror its share of mining REE ore — less than 60% and falling.

//Science

There Are Only Two Words To Sum Up These Findings

Those words are:

“Wait: What?”

Related:

Scanning tunneling microscopy reveals the origins of stable skyrmion lattices

RIKEN physicists have discovered how interactions between electrons can stabilize a repeating arrangement of swirling magnetic patterns known as skyrmions, which could help to further exploit these structures.

The spin of an electron causes it to behave like a miniature magnet. In a skyrmion, many of these spins are arranged in a swirling pattern that resembles a tiny tornado. Skyrmions are highly promising as a means of carrying information in a new generation of high-density, low-energy data-storage devices.

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