Rick Mills: Juniors Plan Today for Tomorrow's REE
Source: Sally Lowder of
The Critical Metals Report
The West isn't ready for an avalanche of rare earth
elements-yet. But when the time comes, the junior miners that
have mastered the art of location, mineralogy and metallurgy will
be there to fill the demand gap. In this exclusive interview
The Critical Metals Report,
Ahead of the Herd
Editor Rick Mills points to some promising players in the
light and heavy rare earth space.
CANADIAN INTERNATIONAL MINERALS
COMMERCE RESOURCES CORP.
- HECLA MINING CO. - HUDSON RESOURCES INC. - LYNAS
CORPORATION - MATAMEC EXPLORATIONS INC. - MOLYCORP MINERALS
The Critical Metals Report:
When it comes to the rare earth elements (
) space, people always seem to zero in on a supply gap. Is that
really a problem?
There is no shortage of rare earths in the West. I say that
because 90% of the demand comes from Asia. Contrary to what a lot
of people say, China never cut off deliveries to the West; it
just raised prices to more accurately reflect the true worth of
the product in the market. The West will face a supply gap when
it actually has the technical knowledge and operational expertise
to make the higher-value products that use these materials.
We can make concentrates out of light or heavy rare earth
elements (LREEs and HREEs, respectively) from many deposits in
Canada and the U.S., as well as Europe; but very few companies in
the West can actually make a 98% pure oxide, let alone anything
further up the value added chain. That processing capability is
mostly in China. What happened was that China produced REEs so
cheaply it basically kicked the rest of the world out of the
sector. That left the West 20 years behind China in developing a
rare earth industry.
The supply gap will emerge when we decide to build a rare
earth industry in the West that truly goes from mine to magnet.
Then we'll need product, and we'll have to get more end users and
companies that make the metals, the powders and the alloys to
come into the West to use their proprietary knowledge and start
to put together an REE industry. Until then, we don't have a
shortage because we can't do anything with the stuff we produce
now except ship it overseas.
But aren't companies now in a race to produce product in
Several companies in the West produce magnets and powders,
but they get their product from China.
Molycorp Minerals (
produces a concentrate, which it turns into oxides. In the
first quarter of 2011, Molycorp received an average of $38/kg.
for its products, much of which goes to the catalyst cracking
Won't Molycorp also have a rare earth production facility
in production in 2012 at Mountain Pass, California?
The company says it is going to produce 10 different rare
earth oxides (REOs) in late 2012; but when I talked to
management, the team was still basically pouring footers for the
plant. I'm not saying Molycorp can't get into production with
Phase 1 of its Phoenix project next year; but even if it does, it
won't have anywhere near enough production to fill what the West
will need to replace Chinese supply.
You've also expressed skepticism about the handling of
thorium and other associated radioactive waste that will be
byproducts of the Mountain Pass facility.
Molycorp has all the necessary mining permits for handling
radioactive waste, but that doesn't mean it won't face opposition
from the extremely strong green movement in California.
Lynas Corporation (ASX:LYC)
I'm not sure that Lynas is going to be a producer in the
time that people have predicted. Right now, it's producing a
concentrate and it seems likely the company is mining with no
revenue stream-the concentrate was to be sent to its plant in
Malaysia, but its construction is on hold for at least a year due
to environmental concerns. Malaysians are even protesting at the
Lynas office in Australia.
Let's assume that, at some point, the West will have its
own rare earth production capability. Several companies have seen
huge increases in share price, but that doesn't necessarily mean
they'll ever be able to get into production. Which ones have the
right mineralogy, easy metallurgy, location, management and
financial ability to actually do something significant in the
A lot of deposits were considered 20 years ago. The
Japanese using Sumitomo scoured the earth looking at REE
deposits. Others, including Hecla Mining Co. (
), did the same. But the metallurgy didn't work then and still
doesn't today. It wasn't a matter of price; it was simply too
complicated, too time-consuming and way too expensive to remove
the rare earths.
When you add that to a lack of infrastructure at many of these
deposits, I just don't see how these companies are going to be
competitive in the marketplace. I look for mineralogy, metallurgy
and location, location, location. To compete, you need all
A lot of deposits will be culled as people realize how much
work it will take for a junior to move forward and fill that
coming supply gap.
What are some of these deposits?
We probably have more rare earth deposits in Canada, or
controlled by Canadian-listed juniors, than anywhere in the
world. But the one I want to cover first is Spectrum, a private
company that controls the Wicheeda Lake claims north of Prince
George, BC. This is a very attractive light rare earth deposit,
as it has excellent mineralogy. Most of the rare earths are held
in one specific ore, bastnäsite. There's very little monzonite
and no high thorium levels, so no radioactivity problems with
this one. The extraction will be very easy. Bench-scale tests
have been done, and the company is looking at possibly up to 60%
concentrate. That's really important.
High concentrate levels make it easier for a junior to get
above a 98% REO. A 98% oxide might pull $38/kg., but a 98.9% or a
99% concentrate is worth $80-$100/kg. It is very difficult to
make a 98% oxide out of a 40%-45% concentrate source and even
more time consuming and costly to make a 98% oxide. The higher
you start, the easier it is to finish higher than the normal 98%
Spectrum could possibly make three oxides- neodymium,
praseodymium and samarium oxides, a lanthanum and cerium oxide
and a cerium oxide. Is that right?
Yes. You have to work with what a deposit is giving you and
what's easy to get out of it. Geological Consultant Tony Mariano
did the metallurgy on this. It's very simple mineralogy and very
easy extraction. This deposit is less than a two-hour drive down
major roads from Prince George, BC, a major logistics center.
Roads run right to the deposit. It has power, water and a rail
yard. It also has access to workers who are experienced miners
and others experienced in chemical handling, which is very
important. Prince George has three pulp mills, an oil refinery
and a Methanex Corporation (NASDAQ:MEOH; TSX:MX) plant.
A caustic soda train comes in once a week; Spectrum could use
that for extraction. If it has to use hydrochloric acid, that's
not a problem either. Local workers are used to handling it. This
is pretty much a perfect deposit. It has exceptional mineralogy,
easy metallurgy and location, location, location. It has all the
infrastructure necessary for a very low capex (capital
expenditure). The company can take the concentrate to Prince
George, set up a processing center and make an oxide.
But it's pretty much inaccessible to investors.
Canadian International Minerals (TSX.V:CIN)
is in a 75% joint venture (JV) with
Commerce Resources Corp. (TSX.V:CCE; Fkft:D7H; OTCQX:CMRZF)
, which owns 25% of the Carbo Project claims in the area. Those
claims surround Spectrum's Wicheeda Lake claims. These companies
drilled nine holes in the Carbo last year, highlights were 2
meters at just over 4% total REO, 37m of 1.43% total rare earth
oxides (TREO) and 3% TREO over 3m in a northern part of a 5
km.-long carbonatite syenite
complex. The company has identified more targets and is going
back in to drill this year.
So, these deposits essentially have the same features you
see with Spectrum Mining?
We really hope so. There may also be some synergy with the
two companies coming together.
What else is there to the Commerce Resources story?
If its Eldor Property in Northern Quebec had a road into
it, I firmly believe that it would be the only deposit a person
would need to consider. It must be on every investor's radar
screen because of its size. The property is 17 km. east to west
and 24 km. north to south.
It covers a whole carbonatite complex, which is host to a
newly discovered zone, the Ashram Rare Earth Zone. The property
also has tantalum, niobium and phosphate in other areas, as well,
so it does have quite a mix.
What's the Ashram?
In my opinion, smaller is usually better in the rare earth
space-but this is the exception to the rule. The Ashram really
has me intrigued. This thing is a monster. It's in the center of
the carbonatite complex, coincident with a magnetic low
approximately 1x.8 km. Commerce Resources has an
NI-43-101-compliant resource estimate of 117 million tons (Mt.)
averaging 1.74% TREO. That's an inferred resource. The company
has drill-tested it to 600m deep, and it's still open in all
directions and has a fair mix of HREE.
So, assuming the mineralogy looks right and the management
looks right, what about that infrastructure issue? Do you see
Quebec helping the company develop that?
Absolutely. A road that heads up into Northern Quebec stops
just short of the massive iron ore belt there and plans are to
extend that road. This Eldor is so large that, in my opinion, it
can support the Quebec government installing roads, power and
rail to run further north. Water won't be a problem. Commerce
Resources just needs to make a deal with one of the end users or
maybe a refinery for this deposit. Somebody might buy it just to
do that and Quebec could become the West's premier rare earth
producer. It's that nice. This looks like an exceptional find by
Commerce. There won't be a problem with the mineralogy. Judging
from some preliminary tests, it looks good. We'll have more news
later this year.
What other companies would you like to talk about?
Another one I really like is
Matamec Explorations Inc. (TSX.V:MAT)
, which is developing the Kipawa deposit on its Zeus property in
Quebec. It's a eudialyte (HREE) deposit and the company has
cracked it. There is also high-grade yttrium and zirconium,
niobium and tantalum. What I like about this one is that the
heavy rare earths average 36% of the total rare earth content,
and it has a lot of dysprosium.
Matamec has an ongoing preliminary economic assessment (PEA).
The U.S. recently issued its critical metals strategy, and four
of the five most critical elements required in the next 15 years
And what are those five?
Dysprosium, terbium, yttrium and europium are the heavies.
The light rare earth is neodymium. Matamec's deposit seems to be
enriched in these. When you look at dysprosium, Matamec has 2.3
million kg. (Mkg.) in the indicated resource category. It has
14.3 Mkg. indicated in yttrium, which is used for making
phosphors that give the red color to TV screens and is also an
important ingredient in energy-efficient, solid-state lighting.
The deposit has 8.5 Mkg. indicated of neodymium.
We haven't heard much about Matamec before.
We're talking about companies that are under most people's
radar screens. These deposits actually have a chance of filling
the upcoming supply gap.
Are they also compelling values for investors?
This could be a good time to look at them. If you check the
charts, I believe they've all been much higher. They're down and
ready to start an uptrend when people come back to the market and
realize a new crop of REE deposits are necessary.
What are some of the other names you like?
Hudson Resources Inc. (TSX.V:HUD)
is one. It's working on its Sarfartoq REE project, an 11x9
km. carbonatite complex in Greenland with 10,000 meters of
drilling planned for this year. This project is located within 20
km. of tidewater and is also 15 km. from a proposed hydroelectric
plant site. Hudson just awarded its environmental impact and
socioeconomic impact assessments to Environmental Resources
Management (ERM). ERM did the same studies for Alcoa Inc. (
) to build a hydroelectric project and aluminum smelter-and these
two project areas actually overlap.
Greenland isn't your typical mining address.
No, it isn't. But this deposit has been compared to China's
Bayan Obo deposit; it's right next door to power and a 10-minute
flight from the capital. This is very interesting, too, in that,
right now Greenland has a moratorium on uranium exploration but
Hudson won't have that problem. Its deposit has very low
This deposit's mix in the TREOs is also interesting. Rare
earths are always found together, but in varying proportions.
This one has 19% neodymium oxide, which is an important component
in the high-powered magnets for small motors. It has an
unbelievably rich neodymium content-40 Mkg. of neodymium oxide.
Hudson's deposit has one of the industry's highest ratios of
neodymium and praseodymium TREO at 25% average. So, this is a
very exciting project. It's well run and has an
NI-43-101-compliant resource of 14 Mt. using a cutoff of .8%.
Any others companies to watch?
Wealth Minerals Ltd. (TSX.V:WML; OTCQX: WMLLF)
is exploring for rare earths at Rodeo de los Molles in
Argentina. This deposit has a historical resource of 5.6 Mt. at
2.1% TREO based on 6,000m of drilling. This is another very
attractive light rare earth deposit and is high in neodymium and
praseodymium. It appears that those two account for about 24% of
the total rare earth concentrate. This concentration of key
materials is required in the magnet industry. So, if this company
can produce an oxide, it's going to be a very saleable
And talk about a high-powered management team-Henk Van Alphen,
Scott Heffernan, Paul Matysek, Maurice Strong-all names with
impressive pedigrees. Those people aren't there for a $0.50
stock. They must have something that they think is very special.
Plus, the top three rare earth people in the world today serve on
Wealth Minerals' advisory board-Tony Mariano, Alastair Neill and
It'll also be interesting to see what happens with Wealth
Minerals as the company moves forward because Argentina is
another new rare earth address.
It's quite a ways off people's radar screens.
Any parting thoughts you'd like to leave with our
Yes. At the present time, North America desperately needs a
rare earth industry; we absolutely have to have it. We cannot
depend on just China for our supply. We're going to see upstream
investments by end users, as well as the high-purity oxide
refiners and makers of alloys, the powders, the metals and the
magnets. It won't look like an investment into traditional mining
companies; a lot will be based on security of supply and mining
profits will not figure into the equation.
Are you saying that the North American entities relying on
these rare earths to produce their products will invest in these
I believe the few that exist will-and not only North
American ones. No one wants to be held hostage to a Chinese
supplier. They will buy the deposits outright, which is why I
generally think that smaller is better in the REE space. These
entities will look at a deposit that can produce the specific
concentrates they need, find a company to mine the REEs and ship
it to their own labs and processing plants.
But in the meantime, investors have options in the
Yes. Investors should look for simple mineralogy that makes
for easy extraction and in-place infrastructure. They should also
do their homework by reading people like
and, of course, become a member of
Ahead of the Herd
Thank you, Rick, for your time.
Richard (Rick) Mills
is host of
and invests in the junior resource sector. His articles have
been published on more than 300 websites, including:
The Wall Street Journal,
SafeHaven, Market Oracle
, USA Today, National Post,
Stockhouse, Lewrockwell, Uranium Miner, Casey Research
, 24hgold, Vancouver Sun,
, Huffington Post,
Mineweb, 321gold, Kitco, Gold-Eagle
, The Gold/Energy Reports, Calgary Herald,
Resource Investor, Mining.com
FNArena, UraniumSeek and
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1) Sally Lowder of
The Critical Metals Report
conducted this interview. She personally and/or her family
own shares of the following companies mentioned in this
2) The following companies mentioned in the interview are
The Critical Metals Report:
Canadian International Minerals, Commerce Resources and Wealth
3) Rick Mills: I personally and/or my family own shares of the
following companies mentioned in this interview: None. The
following companies mentioned in this interview are advertisers
on aheadoftheherd.com: Canadian International Minerals.
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