Rare Earth Plays outside China.

23 12 2009

I recently tipped you on the importance that rare earths elements (REE) would have in the coming years. I had then promised that I would follow up with a list of the up and comers of rare earths outside of China. I recently attended an investment salon focused on mining projects and was able to gather information on rare earth plays in Canada and elsewhere. I have selected a few companies that came across as interesting stock picks. All of these companies are definitely juniors are varying stages of resource development.

Avalon Rare Metals

Avalon Rare Metals is one of the most prominent new players in the field of rare earths. The company is the only TSX-listed company entirely focused on rare earths. 4 out of 5 of the companies projects currently at an advanced development stage. Its flagship property, the Nechalacho REE Deposit, located in Canada’s Northwest Territories, “is a very large, very rich deposit”. What makes this deposit more appealing than the companies other properties is the ratio of heavy rare earths of 25.4%. Heavy rare earths are generally more valuable as they are much less readily available. REEs found at this property include yttrium, tantalum, niobium, gallium and zirconium.

Commerce Resource Corp.

Another company called Commerce Resource Corp. also came across as especially appealing. This company focuses on tantalum and niobium. Tantalum is usually in demand for high-tech goods used in aerospace, life science industries while niobium is used in the composition of super alloys for steel structures. With the inclusion of 2 per cent niobium to steel, the PSI (pounds per square inch) capacity can be increased from 40,000 for standard steel to 120,000.

The company “hopes to become a large and profitable low-cost producer of niobium and tantalum for the global market”. At present the company is still essentially focused on the exploration and development of the Blue River project in BC and the Eldor Carbonatite project in Québec. The BC property consists of three deposits one of which, Upper Fir, could be brought into commercial production of tantalum and niobium eventually. This Eldor Carbonative project is in earlier development stage and focuses essentially on exploration at the moment.

MDN Inc.

MDN Inc is a company focused on the exploration and development of gold and rare earths. It draws cash flow from its 30 per cent stake in the exploitation of the Tulawaka gold mine with Barrick Gold while undertaking gold exploration in Québec and Tanzania. With regards to rare earths, the company has acquired a 28,75% stake in MCI in which IAMGold also holds a 37,5% stake). MCI which hold the Anita project, a niobium and tantalum play located in Québec’s Lac-St-Jean region. MDN could take a stake of up to 75 per cent of MCI in the coming three years.

Talison Tantalum

I know that I have been presenting you fairly junior companies. However, if you are looking for a company that has production up and running, Talison Tantalum can be of interest. This company was born from a split of Talison Minerals into two separate companies, one that would focus on lithium and the other on tantalum (no kidding eh?!). Anyhow, this company is producing about a third of the world’s tantalum supply and could produce up to 50 per cent of the global demand. The company holds the two largest tantalum mines as well as processing facilities. The company is already positioned as a dependable long-term source of tantalum worldwide. Overall production capacity is in excess of 2.3 million pounds of tantalum per annum.

It seems that even the most juniors of these companies have reasonable chance of succeeding. In light of the high economic priority that some governments have made of securing supply, pricing has been of little relevance to many users of REEs. As part of a ‘growth blueprint’ the Japanese government, taking note from the Chinese’s handbook on snatching resources, was planning on a state-backed resource acquisition for rare technology metals up for sales around the world. I’d love to see those two countries bidding on the same company

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