The Anchor House, Inc.

By Clint Cox

As announced by The Wall Street Journal in an article entitled, “Lynas Turns to Market for Funds After China Deal Sours”, Lynas has found alternative funding for their Mt. Weld project:

The miner’s fully underwritten raising is pitched at 45 Australian cents a share and comprises a A$88 million placement to institutional investors, a A$295 million one-for-one entitlement offer to existing shareholders and a A$67 million underwritten conditional placement.

The offer price is a steep discount to Lynas’ last traded share price of 90 Australian cents.

This certainly doesn’t help their share structure, but it does help satisfy their immediate needs.  We will look next for their timeline on restarting construction in Malaysia and the building of the concentrator in Australia.

By Clint Cox

The Lynas Corporation deal with China Nonferrous Metal Mining (Group) Co., Ltd. (CNMC) is dead.

CNMC  pulled out of the deal after the Australian Foreign Investment Review Board (FIRB) requested that the CNMC stake be pushed below 50% and that they would have less than half of the seats on the board.

This deal was worth hundreds of millions to Lynas — CNMC was going to assist in financing the completion of the Mt. Weld project. Now Lynas will have to go back to the well and look for more money.

Nick Curtis has proven to be extremely resourceful when looking for money — so don’t count them out. The rare earths have experienced quite a run lately, especially in North America, but it is unclear if there will be an appetite for a project that requires this much capital. The world economy is still sputtering, but there may be interest in a project such as this.

We will follow the story.

By Clint Cox

The sheer volume of stories being published about rare earths lately has been staggering. I have wanted to include a number of links to these stories, but I realize that it might be frustrating because a number of the sources require subscription.  Many of the stories have had a distinctly Western slant on the recent issues, but several stories that have come from The New York Times, Science, and Metal-Pages.com have begun to reflect the Chinese thought behind the issues as well.

I would like to quote from a recent New York Times article entitled, “Backpedaling, China Eases Proposal to Ban Exports of Some Vital Minerals”,  because I believe it gives excellent insight into the current Chinese view on the recent MIIT draft:

Wang Caifang, deputy director general of China’s Ministry of Industry and Information Technology, tried on Thursday to allay concerns that the draft rules would become the final policy, saying the regulatory review was still under way.

“China is very responsible. We will not take arbitrary decisions. All our decisions will be consistent with scientific development,” she said in a speech at the Minor Metals and Rare Earths 2009 conference in Beijing. “China will not close its doors.”

During an interview after her speech, Ms. Wang said that China would continue to set an annual quota for the export of each mineral, adding, “I don’t think it will be zero.”

So there you have it, “I don’t think it will be zero.” Perhaps some of the hooplah will die down for a bit as we await the final REE policy from the Chinese.

And now for a video in which it becomes clear that the Chinese view resources from the standpoint of reserves, not just production. Thus, this video suggests a mindset that is very different from the Western approach of looking at production as the primary way to view rare earths. In other words, the Chinese recognize that they have the largest reserves in the world, but others have reserves as well — it’s just that they have chosen not to produce from these reserves for one reason or another (mostly pricing).

It is true that the United States does have vast reserves of rare earths, but are not currently producing from these reserves, although there is some production from above-ground stocks. Of course, this is a vast oversimplification of the issue.  For example, the United States does not have great reserves of the heavy rare earths, and each country has its own unique set of mining laws and restrictions. So reserve numbers, in and of themselves, do not tell the whole story, but it provides another frame of reference.

Also, in the video, we meet a gentleman who is directly involved in the production of rare earths, and he explains the problem of rare earth pricing with so much internal competition in China. This is part of what China is currently addressing — they wish to consolidate rare earth operations into fewer companies to create more efficient use of resources and provide better environmental controls. Of course, with fewer competitors, it will also help to better control the pricing.

Keep in mind that the Chinese will most probably not ban export of any of the REEs, but the commentator speaks of restriction in the piece.

And now, the video:

China to restrict exports of strategic rare earth metals – CCTV 090509

By Clint Cox

The controversy surrounding the recently released Chinese rare earth policy DRAFT by the Ministry of Industry and Information Technology (MIIT) has grown considerably, and I wanted to address some of the issues in a little more detail.

Please keep in mind that the document in question is a DRAFT, and it will undergo thorough review and revisions. When referenced below, “are being considered” means just that – we have to see the FINAL policy before we draw final conclusions.

Now some facts from the DRAFT:

• Yttrium (Y) is NOT being considered for prohibition from export. Many reports have stated that yttrium would be prohibited, but it is ytterbium (Yb) that is being considered for export prohibition – not yttrium. This is key, as Y plays a much more important role in the world REE market than Yb (which is almost negligible).

• All forms of europium (Eu), dysprosium (Dy), and terbium (Tb) are NOT being considered for prohibition from export. Co-precipitates containing Y/Eu and La/Ce/Tb ARE BEING CONSIDERED TO BE PERMITTED (for use in phosphors), as will certain compounds and metals containing specific percentages of Tb and Dy. Some forms of Eu, Dy, and Tb are being considered for the export ban, but there are important forms that will be allowed.

• Ytterbium (Yb), thulium (Tm), and lutetium (Lu), are being considered for the export ban. These elements have exceedingly small sales and are currently marginal in the rare earth market.

• Consolidation and Centralization is being considered to continue. By cutting producers and consolidating operations, the Chinese hope to create better efficiencies in handling waste and preserving their assets.

The point is, we just don’t know yet. Many articles and press releases have treated this DRAFT as if it were final policy – tiptoeing along the boundary of available facts and favoring what is presently fiction. The storyline of China banning export of HREEs makes for good copy and great stock prices, but it ignores both the facts above as well as the integrity of the Chinese political process for creating FINAL policy from a DRAFT.

To be clear – this is not to say that much of the DRAFT won’t become policy – but premature speculation has taken the coverage of this industry down a dangerously speculative path.

I have to remind myself again and again (with varying degrees of success): Beware of over-simplification and easy answers with the rare earth elements.

By Clint Cox

It’s late at night and you’re sitting in front of your computer wondering what you can do to expand your brain.  Go to the US Patent Office and look up really cool inventions! Search by keyword. A friend of mine got me started on this.  Of course, I chose keywords related to rare earth and found some pretty cool stuff:

Super Shiny Stripes on the Street

Marvelous Microspheres! Rare earths are really coming to light — and reflecting it back to you! Courtesy of 3M, we have reflective pavement marking from Patent #5,853,851:

Another desirable component of the glass compositions of the present invention is a rare-earth metal oxide, such as La.sub.2 O.sub.3. Lanthanum oxide (La.sub.2 O.sub.3), for example, promotes glass formation, aids in melting, and helps raise the refractive index while not deleteriously affecting the acid resistance or crush strength.

Tiny lanthanum microspheres — coming to brighten a street near you?

Goodbye Kidney Stones?

I have heard that kidney stones are excruciatingly painful.  I am a big fan of relieving pain, so I bring you Patent #7,192,609:

This invention relates to a method of preventing or treating urolithiasis (kidney stone disease) by administering rare earth salts, e.g., Lanthanum salts, to bind dietary oxalate and preventing its absorption into the gastrointestinal tract.

Rare earths are known to have a variety of medical uses, but this is the first time I had seen a description of this patent.

Go-go Golf Balls

The merits of neodymium for use in magnets is well known, but who knew that we could smack the neo down the fairway? The Callaway Golf Company is employing the merits of rare earths in Patent #6,739,985:

Golf ball cores formed from blends of neodymium and cobalt synthesized high molecular weight butadiene rubber

I am under no illusions that rare earths will provide the solution to my hideous golf game, but I am glad to know that golfers may be getting better with a little help from neodymium!

By Clint Cox

It’s a draft.

I feel the need to say this because there are a lot of people saying that the Chinese will prohibit export of certain HREEs as if it is a certainty — but it is not a certainty at all.  From the recent press release (from www.chinamining.org) regarding the the Development Plan:

China’s Ministry of Industry and Information Technology (MIIT) has drafted a plan and related policies for development of the rare earth industry in 2009-2015 and is now soliciting opinions from the related authorities, said Miao Wei, vice minister of MIIT.

Here’s the key — it is a process.  Note the part where it reads, “…is now soliciting opinions from the related authorities”.  This is not the final policy.  Let us wait and see the final policy before drawing conclusions.

By Clint Cox

China is the undisputed champion of the rare earth market, but it isn’t sitting on its laurels! Instead, it is steadily trying to streamline and remake its industry from within.

Two stories out of China last week indicated that China is in the midst of an industry-wide reorganization. The first story is from Chinamining.org and is entitled “China has drafted development plan for rare earth industry in 2009-2015, official”.

A quote:

China’s Ministry of Industry and Information Technology (MIIT) has drafted a plan and related policies for development of the rare earth industry in 2009-2015 and is now soliciting opinions from the related authorities, said Miao Wei, vice minister of MIIT.

Mining rights for large rare earth mines will be transferred to strong enterprises via tender in the future, Miao added.

Two things are clear from this. First, this is a process. Opinions must be solicited, and much must be sorted out. Second, a few big players within China will win. The mom-and-pop operations will be pushed out of the market in favor of fewer consolidated players. In fact, a later article entitled “China to support three domestic enterprises for rare earth development” published on steelguru.com narrows this list to three.

The quote:

The three enterprises are Inner Mongolia Baotou Steel Rare-earth Hi tech Co, China Minmetals Corporation and Jiangxi Copper Corporation. However the stockpiling policy for rare earth products can hardly be formulated.

The hope may be that the consolidation will allow for streamlined operations and greater control during the ebb and flow of the market.

We will follow the story as more details are released.

By Clint Cox

How well do we truly understand risk in the rare earth market? Most people who invest in the mining sector understand that there are risks inherent with mining operations.  These risks include (but are not limited to):

•    country—will that dictator really allow you to take all those diamonds out of his country?
•    pricing—will rhodium be $10,000 or $500 when that mine gets to production?
•    environmental—will the mess the last company left be the new company’s responsibility?
•    management—is the management really hoping to find gold bricks while sitting on the beach in Tahiti?

Mining is extremely risky, and for junior exploration companies to find “the next big one” is like looking for a sweetpea painted silver in a ball bearing shop.  As risky as mining is, in general, I would like to argue that the Rare Earth sector has its own special set of risks.

The risks are not confined to this list, but these provide a starting point:

1.    Competition. The Chinese are blessed with great resources and focus. The market tends to look at the junior exploration companies listed in Australia and Canada as the great hope for REEs outside of China. But don’t forget the big players that aren’t junior exploration companies.  There are private companies and interested parties from the top to the bottom of the supply chain. For example, recent press releases have shown that the Japanese (such as Toyota, Mitsubishi, JOGMEC and others) are looking for resources. These are players that intimately understand the market and its future requirements.

2.    The Numbers. Rare earths are quantified in a variety of ways: %REO, ppm, element distribution, % Heavies versus Lights, % recoveries, $ of rock in the ground, etc.  Some of these numbers are important, and some mislead. Some of the most important numbers are rarely available to investors! It is difficult to understand the absolute truth about what the numbers tell us. Just when I think I comprehend an answer – another snafu appears. Don’t be complacent with the numbers. Know that you know that you know.

3.    Experts. There are a lot of new “experts” emerging in the rare earth industry! The number of qualified experts in this field is small. There are some great geologists out there – but just a very small handful that have the expertise to claim that they specialize in this. Be sure that the expert whom you are banking on has the proper credentials and context necessary to speak the truth about rare earths. Remember – assay results alone don’t make experts!

4.    Whiplash. The day the NdFeB magnet was revealed, the market was rocked dramatically. The South China ion adsorption clays stunned the geos who thought you had to have significant %REO. The United States used to dominate this market.  Buckle your 5-point harness and put on your helmet! This market can be reshaped so fast that the cutting edge becomes dull and obsolete almost overnight. (If I’m mixing my metaphors, it’s only because this market is so perplexing!) What we think about the realities of this complex market today will undoubtedly be transformed by tomorrow.

The picture of the week: Rare earth metals oxidizing for your viewing pleasure:

By Clint Cox

There are a LOT of companies coming out with rare earth assay results now.  REEs have become a hot topic, and many companies are now throwing their assay results into the ring — hoping to become the next contender in the rare earth sector.

Assay results are often what companies use to project their legitimacy in the marketplace, and therefore it is critical to understand what these tests are really telling us.  According to the US Bureau of Mines (as provided by EduMine here) “assay” is defined as following:

Definition: assay
To analyze the proportions of metals in an ore; to test an ore or mineral for composition, purity, weight, or other properties of commercial interest.

So what do assay results tell us?
1.    How much rare earth is in that particular sample. Usually expressed in parts per million (ppm), assay results show the composition of a given sample of ore (or potential ore).  This gives a sense, in general terms, of what elements are found in the sample.  It is often converted to a percentage as well. They often don’t test for all of the REEs or show “trace” for the amounts.

2.    The comparative percentage of one element to another. This can show if the rare earth content of the sample skews towards the light rare earths (LREEs) or the heavies (HREEs).  Also, certain values of elements other than the REEs can provide clues as to the environment in which the REEs are found.

What rare earths found within?

It is also important to know what assay results DO NOT tell us:
1.    What is the rare earth mineral (or minerals)? Sometimes it is assumed that you may have a particular mineral when you have a given set of assay results — I have made this assumption in the past myself. It is true that certain minerals may have a typical distribution of rare earths, but there may be other rare earth minerals involved.  A good example of this would be Thor Lake, which can have a number of rare earth-bearing minerals in a given sample. Other testing methods must be used to ensure that the rare earth minerals are properly identified. After all, it is critical to correctly identify the mineral that hosts the rare earths.

2.    Is the assayed sample representative? Beware of the infamous “grab sample”.  Many companies take special care to take samples only from what they believe to be the prospective ore body. However, it is often difficult to resist assaying the fantastic grab sample – perhaps that one sample found 40 meters up the cliff face that has that giant perfect crystal of bigdollarite!  Just make sure that the results that you are looking at come from samples that are taken from areas that are representative of the potential ore body.

3.    Metallurgy. You can receive fabulous assay results from complex mineralogy.  However, it may not ever be economic to get the REEs out the minerals. It takes lots of time, effort, and money to properly determine a process to create a saleable concentrate of rare earths.  Many companies are taking the proper steps to establish the processing needed to pull out the REEs, but beware of the assumption that the REEs can be easily pulled out of the ground.  If a company has $500 rock in the ground, but it takes you $2500 to pull out the rare earths – that project may not be feasible.

By Clint Cox

1.  Rare Earth Elements (REE) come as a by-product from Bayan Obo iron ore operations. The rare earths are so plentiful at Bayan Obo, that until recently, they only recovered a fraction of the REEs.  This makes mining the REEs relatively cheap — as long as they mine iron ore, they will have REEs. Approximately 50% of the world’s total rare earth production comes from Bayan Obo. Also key is that bastnaesite is a rare earth mineral with a high theoretical 75% REO.

Bayan Obo Bastnaesite

2.  The South China Clays are unique. These clays have fantastic rare earth distributions that are intensely skewed toward the heavy rare earths (HREEs), and are the main supplier of HREEs to the world market.  They have a very low REO% but they are able to be processed very cheaply with a relatively low degree of technology.  They are, however, faced with the challenge of preserving these resources while providing needed material to the marketplace — these are not limitless resources by any means.

3.  The Chinese are focused. Baotou alone has over 20,000 workers dedicated to the rare earth industry in one form or another.  Regional government agencies, as well as Beijing, are well aware of REEs as a strategic resource.  Research takes place in a methodical manner, and rare earth resources are managed on multiple levels.  The Chinese have specific, long-range plans to develop their rare earth sector, and there is a system of licenses, tariffs and export quotas in place to help protect the Chinese REE industry.  They have implemented a number of incentives to attract foreign investment.  In addition, the Chinese are very aware of developments outside China and have proven willing to participate beyond their borders.

Small portion of scale model of Rare Earth Development Zone in Baotou