Flash News – Update on previous entries

31 10 2010

This week there were significant developments on issues dealt with in previous entries. Here’s the week in review.

China. In response to the production cuts of metal producers due to restricted power supplies, China’s State Reserve Bureau will be selling some of its inventory to appease the markets. Steel Guru

Labour conflict. After failing to reach an agreement, Newfoundland and Labrador has established an industrial inquiry commission to investigate and make recommendations towards ending the 15-month long labour conflict between Vale and the Voisey’s Bay workers. The Commission is tasked to examine the positions of the parties, the factors influencing the relationship climate, external factors contributing to the dispute , impacts on other labour relations as well as disputes, costs to stakeholders and options to resolve the dispute. The Packet

Potash Corp & BHP Billiton: the politics. Saskatchewan is against the acquisition period. It’s not trying to gain further concessions from BHP Billiton. The New Democratic Party is trying to get the Canadian parliament to adopt a non-binding motion in opposition to the bid. Reuters

Potash Corp & BHP Billiton: the lawsuit. Potash Corp alleges that unsealed internal documents of BHP have shown it was questioning the viability of its Jensen Project but kept telling investors otherwise to reduce Potash Corp’s share price (as an eight-million tonne a year mine Jensen could only flood the market). Potash’s interpretation is based on a briefing saying: it “‘was agreed that the primary objective for Jansen was to reduce the execution risk by ensuring phase one for Jansen had the lowest possible capital number’ and to limit the capital expenditure for that first phase.'” Is that enough of a case? Windsor Star

Hilary Clinton has commented China’s trade restrictions over rare earths in the context of the last ASEAN meeting. Commentary & Analysis


The European Union acting on Rare Earths too

10 05 2010

On April 30th, the EU’s commissioner for industry, Antonio Tajani, has announced that the EU will be putting more pressure on China and Africa to access rare earth supply. Earlier this year, worries of China imposing trade restrictions on rare earths to secure access to supply for its domestic industries have prompted many initiatives to increase the supply of rare earths from outside of China. I have recently reported on the United States’ RESTART Act.

Unlike the United States which has rare earth deposits on its territory, the EU has little or no deposits. As is the case with other minerals whose sourcing has become problematic for industries, the EU is envisioning a strategy for rare earths which it will draw up in the form of an upcoming Communication of the Commission to the Council and the Parliament.

The Commissioner has already mentioned that the intent of the document will be to list the sensitive rare materials in light of industries’ needs, pledge to work with China on easing its exports quotas (which are in breach of WTO rules), increasing recycling capacity within the EU and to cooperate with African countries to gain a foothold on the extraction of rare earth deposits in Africa. At present many deposits are exploited by Chinese company.

Raw material supply has been an ongoing issue affecting the competitiveness of EU-based metal industries (an in-depth discussion of the issue can be found here). In response to this, the EU launched in 2008 the Raw Materials Initiative- meeting our critical needs for jobs and growth in Europe, on which it should report on the implementation this year.

Flash News on Rare Earths

22 03 2010

Rare Earths are becoming a politically salient issue in the U.S. House Representative Mike Coffman introduced the RESTART Act, a legislation aimed at developing a domestic supply of rare earths. The Act contemplates measures to increase domestic exploration, secure new overseas supplies (supply chain development),reduce the amount of rare earths needed through research, increase recycling of REE materials and even stockpiling. In light of China’s resource hoarding of rare earths elements, the evaluation of international trade practice is also considered.

The article on this topic can be found on Mineweb. For the courageous, more details on the RESTART Act can be found on the US Congress website.

Knowledge Infrastructure Lacking in the U.S. Representatives of academia met by the House Committee on Science and Technology in the context of the RESTART Act have emphasized the need for the US to re-build its knowledge infrastructure in the area of rare earths. Industrial capacities in the field have declined with the emergence of China has the only remaining market player in the rare earths market in the 1990s. Scientists present have called for the establishment of National Research Center on Rare Earths and Energy and the National Research Center for Magnetic Cooling. Scientists have indicated that China and even Mongolia had such research centers for rare earths.

New Rare Earths Plays Outside of China

Just as we expect Chinese domestic demand to outpace supply by 2012, massive projects are coming on stream. Here’s a few who have made headlines lately.

Arafura Resources’ (ASX:ARU) Nolan’s phosphate uranium project is expected to be in production by 2013. Feasibility and project optimisation are still being assessed. Arafura has a resource from the measured to inferred categories of 30.3 million tonnes that contains 850,000 tonnes of rare earths (REO). The project would include a processing plant.

U.S. Rare Earths has a USGS validated deposit of rare earths in Diamond Creek, Idaho and in the Lehmi Pass in Montana. These are significant deposits of heavy rare earths. Edward Cowle, President and CEO of the company lately stated that; “according to the USGS report, the company’s ore bodies contain enough accessible and minable lanthanum, neodymium, dysprosium, terbium, and europium to make the United States independent from reliance on foreign suppliers.

Another deposit has the potential of becoming one of the largest rare earth mines. Greenland Minerals and Energy’s (ASX:GGG) Kvanefjeld project could produce rare-earth concentrate and uranium oxide for roughly 20 years. The deposit’s is JORC-Compliant and contains 4,79 million tons of rare earths oxides. Production would be commencing in 2015 according to its pre-feasibility study. In the meantime the work programme for this project focuses on social and environmental impact studies, beneficiation studies, improvement of recoveries and improving mine schedule. Via Mining Weekly

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

The Geopolitics of Rare Earths

9 12 2009

Rare earths elements are used in electronics, in renewable energy infrastructure as well as high-tech military materials. In a way, rare earths are the pillars of next generation technologies. The demand for these metals is expected to grow at such a pace in coming years that obtaining a secure supply could become critical.

Rare earths are a tiny industry. Global demand is of about 125,000 tonnes a year. In the last 10 years, China which currently produces 95 per cent of rare earths increased production from 40,000 to about 125,000 tonne per year. Demand is predicted to rise to 200,000 tonnes per year in 2014.

With China setting up policies to restrict the exports of rare earths to benefit from the comparative advantage that they provide for its domestic industries; importers, such as Japan are worried that the supply available will not be sufficient to meet their needs. The U.S. Geological Survey has however iterated that the long-term outlook for rare earth elements “appears to be for an increasingly competitive and diverse group of rare-earth suppliers”. If all the rare earths projects currently envisioned were coming on steam shortage scenarios could be avoided.

As a result of expected demand many new source of supplies are being considered (I plan on briefing you on new plays in an upcoming entry). In addition, countries such as the United States, Japan, Australia and South Africa that used to have a production capacity until operations became uneconomic as a result of competition from China could be resuming their operations.