Replies to post #816 on Great Western Minerals Group Ltd (fka GWG)

[Spartacus77]

posted in Canada Mining, Canadian/International Media Resource Articles, Quebec Mining |
The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The race is on for mining companies vying to become the world’s next big producers of heavy rare-earth minerals, used to manufacture components for everything from vent fans for jet engines to laser-guided systems for smart bombs.

From hundreds of companies actively exploring for rare-earth deposits, only a handful – including a few Canadian – have made discoveries that could establish them as key suppliers in the quickly evolving market.

The 17 so-called rare-earth elements have been mined for half a century – with most of them coming from the Bayan Obo mining district in China. The minerals had been largely ignored until recent years, when they found their way into technological innovations ranging from smartphones to super-magnets used in wind turbines and automobiles.

Prices for the minerals touched all-time highs after No. 1 producer China tightened export restrictions on rare earths by nearly half in 2010 as it sought to guarantee supplies amid booming demand from its own market, which analysts say could consume all it produces within a decade. The caps were highly criticized by governments in Europe and the United States, which have complained to the World Trade Organization.
“People are trying to get to that position where they can produce and take advantage of the marketplace and that then creates sort of an artificial barrier to entry,” said Jim Forbes, global metals leader at PricewaterhouseCoopers.

Rare-earth elements are split roughly in half into light rare earths and heavy rare earths. The heavy rare earths, which get their name from their relatively heavier atomic weight, are most rare and consequently more expensive than the “lights.”

“There is room in the world for three, maybe four light-rare-earth projects,” said Jon Hykawy, an analyst with Byron Capital Markets in Toronto. “There is room for maybe four or five heavy-rare-earth companies out there, producing up to the 5,000 to 10,000 tonnes per year level,” Mr. Hykawy said. “I hope they realize they are in a race.”

Key producers of the “lights” outside of China include Molycorp Inc., Lynas Corp. and Great Western Minerals Group Ltd., essentially controlling the field of non-Chinese producers.

In the heavy rare earths, one Canadian miner appears closer than most to becoming a major player.

Quest Rare Minerals Ltd. (QRM-T2.10-0.04-1.87%)says its Strange Lake Deposit in Northern Quebec could supply as much as 10 per cent of global demand for rare earths once it is up and running, and as much as 30 percent of demand for the more pricey heavy rare earths.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/canadian-miner-vies-to-be-major-rare-earth-supplier/article2405521/

[Spartacus77]

Gold catalyst advance, mining falls, far-reaching rare earths
Text Size By: Martin Creamer
Published on 20th April 2012
Updated 5 hours ago
The long-awaited first semicommercial gold catalyst plant has been developed. After years of research, South Africa’s Project AuTEK is able to supply significant quantities of gold catalysts in a form suitable for use in a range of applications. Read on page 14 of this edition of Mining Weekly of the research and development funding mechanism, which involves State-owned Mintek matching private-sector contributions. The catalyst plant itself has been funded by the Department of Science and Technology, Mintek and mining major AngloGold Ashanti. Gold catalyses carbon monoxide to carbon dioxide at ambient and even subambient temperatures, which makes it the most active known catalyst able to remove carbon monoxide from the air at room temperature. As a result, gold catalysts can be used in air conditioners and gas masks. Carbon monoxide has also been identified as a challenge of the hoped-for hydrogen economy, which expects the widespread use of fuel cells for vehicles. The challenge stems from small amounts of carbon monoxide present in the hydrogen fuel being responsible for the poisoning and subsequent poor performance of fuel cells. Gold offers the ability to oxidise the performance-retarding carbon monoxide and converting it to carbon dioxide, which is inert. Project AuTEK, launched in 2000, identified the opportunity for the development of new industrial uses for gold.

The South African mining industry is simply not exploiting its pre- eminent position. The latest production figures indicate that South Africa’s mining output is again down, with February recording the biggest monthly drop in nearly four years – a 14.5% year-on-year decline. Read on page 16 of this edition of Mining Weekly of platinum-group metals being the largest underperformer, plunging by 47.6% year-on-year in February. South African banking firm Nedbank expects mining production to remain weak in the coming months and says that mining will probably make a negative contribution to the gross domestic product in the first quarter. Although volume was down, value was up, with a 14.1% year-on-year value increase in January to R29.15-billion.

Rare earths continue to attract attention. In South Africa, TSX-listed Great Western Minerals Group is refurbishing the Steenskampskraal rare earths mine in the Western Cape, while in the US, the Pentagon has pronounced on the minerals, saying that a shortage would prompt a US Defence Department intervention. As is reported on page 21 of the latest edition of Mining Weekly, a Pentagon official responsible for industrial policy says a contingency in the case of constrained supply would allow US defence contractors to buy materials on behalf of the Pentagon. The 17 materials include elements such as neodymium, samarium and dysprosium, which also go into commercial products, including hybrid batteries, mobile phones and computer hard drives. In South Africa, Great Western intends using part of the $90- million raised in a convertible bond offering to complete a Canadian National Instrument 43-101-compliant technical report on the Steenkampskraal project, as well as to develop the property, and, in the US, it is calculated that the country’s domestic rare earths supplies will meet defence needs by 2013. Given that rare-earth materials are used to make high-powered magnets for defence electronics and are usually ordered 24 to 36 months in advance of the production of weapons systems, the US Congress requires the Pentagon to assure supplies by 2015. The Defence Department may seek additional Congressional approval to stockpile rare earths if a shortage threatens.

[Spartacus77]

Strategic Metals: Rare earth update
Reports

Publishing Date20 Apr 2012 12:40pm GMTIssue/SupplementMJ 20/04/12AuthorJon Hykawy Given the implementation of Chinese export quotas, a system that did not differentiate between rare earth elements, it was largely inevitable that the price of light rare earths would skyrocket. Buyers of formerly inexpensive light rare earths – such as lanthanum – were put in direct competition with buyers of much more expensive heavy rare earths – such as dysprosium

While the Chinese tried to create an impermeable border between the foreign and domestic markets for rare earth oxides, the fact that many companies sold to both markets allowed higher foreign prices to ‘bleed’ into the Chinese domestic market, and caused domestic prices to rocket higher, as well (not as soon or as high, but the effect was still dramatic).

Almost invariably, high prices manage to cure high prices. In this case, the demand for many rare earths fell dramatically in 2011. Demand for lanthanum and cerium outside China, in particular, collapsed.

Part of this may be due to higher levels of production within China, as some companies moved production to the country or increased subcontracting to procure downstream products that were not subject to the export quota, but the official Chinese figures suggest that only about half the 2011 export quota was used.

It is fairly easy to see the effect of price elasticity in the markets for each of these materials. Lanthanum is relatively simple to substitute in the formulation of catalysts with other metals, the decision on substitution being made on the basis of costs and effectiveness of the metal, and on the reliability of supply.

Neodymium is substituted reluctantly. A rare earth-based permanent magnet is far stronger, smaller and lighter than other magnets, and a motor containing rare earth-based permanent magnets can be substituted with induction motors containing no rare earths, albeit with different (generally inferior) specifications for weight, volume, reliability and efficiency.

Neodymium will be used in many applications even at high prices, providing the reliability of supply is high. However, in their applications, many truly uncommon heavy rare earths are substituted only reluctantly, the most likely solution being increased stinginess of use and a lower, but not plummeting, demand.

Heavy rare earths, such as dysprosium, are rarely purely substituted, they are necessary at some level – almost regardless of price or the reliability of supply.

From the above, it would have been expected that lanthanum and cerium prices would vault most energetically, and for these prices to fall the fastest. Neodymium would rise less dramatically and fall more slowly. Dysprosium should have vaulted the least of all and the price been the most reluctant to fall. And by and large, this is precisely what we have seen.


The market may return

The pit below rare earth oxide prices is not bottomless. In fact, the main stabilising influence on prices will be reliable and consistent production outside China.

The demand for lanthanum has fallen as catalyst manufacturers such as Albemarle and WR Grace have substituted other metals into their formulations. Lanthanum is a good catalyst when its price is low, but a lousy one in terms of its desirability when the price is at US$125/kg. As the price drops and supply becomes more reliable, then demand for its use in catalysts should re-emerge.

Similarly, the demand for neodymium in strong magnets should rebound as manufacturers can become certain of their being able to source the required neodymium oxide. At least for the automotive industry, even the historically high neodymium oxide prices seen in mid-2011 preclude the use of rare earth-based magnets.

However, no auto manufacturer can approve a design and commit manufacturing lines to a model for which a key component such as a rare earth-based, permanent magnet-equipped main electric motor might not be available from week to week.

In the wind industry, neodymium oxide prices must drop below US$85/kg consistently for demand to begin to rebuild, and this is not the case at present. But Byron believes all of this will happen.

Dysprosium demand has not been dramatically curtailed. Given the level of demand and the elasticity of this market, it did not require much more than a willingness to use lower grades of magnet alloys to decrease demand and lower the price to the degree presently observed. Dysprosium prices will continue to fall, but less as a result of demand continuing to slacken and more due to supply increases.


Supply up, demand up

Byron believes light-rare-earth prices will fall, some collapsing even from present levels, and that while heavy-rare-earth prices will decline, they will still maintain high prices compared to historical averages.

The reasoning for this is simple. Only three types of rare-earth deposits have demonstrated that they can be economically mined. Two of these deposit types, those containing the minerals bastnäsite and monazite, will produce predominantly light rare earths such as lanthanum and, without going into specifics, light rare earth deposits contain approximately 80% of their rare-earth oxides in the form of lanthanum and cerium.

In China, production quotas plus some “slack” suggests that annual production is in the order of 100,000t of rare-earth oxides. Of the production quota, 80% is granted to companies in the north of China that produce from light-rare-earth deposits, so 80,000t of light-rare-earth production has been sufficient, when not under the influence of stringent export quotas, to keep the world’s need for light rare earths satisfied.

Between Molycorp Inc, Lynas Corporation Ltd and Great Western Minerals Group Ltd, the three companies have plans that would see them produce a combined 75,000t of light-rare-earth deposit-based rare-earth oxides by 2015. Byron suspects that this 90% increase in light rare earth availability will result in collapsing prices for lanthanum and cerium.

This price drop limits the number of additional light-rare-earth deposits that can enter the market. Byron believes that the number of such bastnäsite/monazite producers outside China can number no more than five, and we would suggest three or four is more likely.

Heavy rare earths are truly rare, and, Byron believes, will maintain high prices relative to their historical averages. However, even here the demand cannot be insatiable.

In China, 20,000t of annual production from the south-China ionic clays has been sufficient to meet both domestic and foreign demand at historical prices. If Avalon Rare Metals Ltd, Quest Rare Minerals Ltd, Tasman Metals Ltd, Matamec Explorations Ltd, Tantalus Rare Earths Ag and perhaps one or two other ionic clays were to enter production, it would be likely that total heavy-rare-earth deposit-based production would be some 60,000t.

It seems unlikely, either on first glance or through detailed element-by-element analysis, that there is sufficient demand for this quantity of material. With generally higher operating costs than light-rare-earth deposits, it is unlikely given only partial sales and declining prices, that all such companies would survive.


Conclusions and directions

Rare earths remain a strong industry, one where Byron believes that the right companies can make investors a lot of money. Making those outsized profits are predicated on a few things:


•Have a strong deposit;
•Have a strong physical concentrate;
•Know how to do solvent extraction;
•Know how to make downstream products; and,
•Find an off-take partner, not just for the good stuff.

Combine all of the above, and you have a winning formula.