There are many aspects to the success of a rare earth element (REE) deposit being developed into a mine. Yet the question arises: Why are so many REE projects not put into production while standing still with “robust” economic studies?
John Kaiser of Kaiser Research Online argues that there are 3 deal breakers when assessing the quality of a REE deposit: 1) rock value; 2) tonnage footprint; 3) distribution of metals. Does any of that include cutting the wheat from the chaff a.k.a. metallurgy?
Chinese refineries process mineral concentrate feeds of +30% TREO with +60% recoveries, and so this is what they are looking for. Consider that!
With REE deposits, it all comes down to acid consumption; typically the largest cost. Less material means less acid, which means less deleterious elements into solution, which means less cost to deal with that solution, and less complications throughout the process. The ability to produce a saleable mineral concentrate is paramount for REE companies aiming at developing their deposit into a mine.
However, finding public disclosure details on mineral concentrates is difficult or impossible in the REE sector as most tip toe around it. An obvious reason for this is the complexities in making a concentrate which meets the criteria of a refinery. It is often the case that only part of the information is disclosed, so that the reader cannot fully assess its significance.
In April 2013, Avalon Rare Metals Inc. (TSX: AVL) published a “positive” feasibility study on its Nechalacho Deposit in Canada’s Northwest Territories. A few days ago, Avalon announced that it is yielding improved recoveries for both the concentrator and hydrometallurgical plant at around 80% compared to 42% in the April 2013 FS. However, the feed grade and final mineral concentrate grade has never been disclosed, and the mass pull reported is unclear whether it is design criteria or actual test result. The silver bullet question: Why?
The costs of the Nechalacho Project stand at $1.5 billion. Avalon’s CEO, Don Bubar, recently moaned: “Raising capital is the biggest challenge. We need to find customers and have them enter into off take agreements before we can secure project financing.” Jay Currie, who interviewed Don, explains one side: “Part of that challenge is that none of the 15 rare earths have ready markets in the same way as iron or coal do.“ The other part of that challenge must be that Avalon produces such a low quality concentrate that it does not disclose a word on it?
Back in 2009, John Kaiser’s evaluations of Quest Rare Minerals Ltd.’s (TSX: QRM) Strange Lake Deposit helped to put the company on many investors’ radar; for example: “An astonishing rock value of US$304/ton for those samples Quest plucked from the main outcrop of the Strange Lake Deposit.”
Since then, the company “successfully” defined Strange Lake as “the world’s largest HREE resource” (according to the company) with 4.4 million tons of rare earth oxides out of which 1.6 million tons are HREE (Heavy Rare Earth Elements are the rarest form of rare earth oxides). Strange Lake's HREE, as a percentage of total rare earth is also one of the industry highest at 40%. The 2013 pre-feasibility study (PFS) shows “robust” economics, such as an IRR of 26% and a NPV of $1.9 billion (both pre-tax; unlevered with a 10% discount rate).
So what happened despite such “fantastic” fundamentals?