Zimtu Capital’s Case for Strategic Partnerships and the Potential for Commerce Resources Corp.
- The United States and Japan still face security of supply concerns for strategic rare earth elements even as prices continue to ease from historic highs reached in 2011.
- The production and processing for REEs is complex. Included with the usual suspects – grade, tonnage, jurisdiction, and infrastructure – are mineralogy, proprietary metallurgy, and environmental issues that are material to any production scenario.
- With the completion of the winter 2014 drill program, Commerce Resources Corp. both moves closer to a pre-feasibility study for the Ashram Rare Earth Deposit and looks toward cementing designs for mine development.
Rare Earth Elements, All Is Not Forgotten: Security of supply should concern developed countries
The mania over rare earth elements (REEs) has calmed considerably from the feverish pace reached following China’s brief blockade of REE exports to Japan in September 2010. Not by happenstance, China’s ability to pursue long-term political and economic policy has resulted in monopoly power for the production and processing of REEs.
In fact, China accounted for an astounding 95% of the total 111,000 tonnes of global mine production in 2011.
REEs are vital for the high technology and renewable energy industries, as well as many industrial catalysts. Therefore, growth in demand should remain healthy. Globally, the greatest proportion of demand is for application in magnets; though in the United States the majority of demand is in catalysts for petroleum refining, chemical processing, and catalytic converters.
The United States re-entered REE production in 2012 when Molycorp (NYSE: MCP) restarted mining operations at Mountain Pass, California, after a 10-year hiatus. However, production at Mountain Pass has lagged behind forecasts as financial losses mount. The operating, or projected operating, results for REE assets are highly individualized due to several complexities encountered during production.
Therefore, investors and analysts should not conclude recent losses incurred by Molycorp, or Australia’s Lynas Corp (US ADR: LYSDY), are synonymous with the entire REE industry.
Source: The Industrial Minerals Company of Australia and the Ministry of Economy Trade and Industry
Instead, care should be taken due to the existing confusion surrounding the REEs. This confusion largely stems from the opaque nature in trading specialty metals, and the proprietary techniques used in separation of REEs from the host mineral(s). I regress, these issues are beyond the scope of an introductory piece; however, investors could look to the breakdown of relevant factors inherent in REE mine development authored by Rockstone Research Ltd, Rare Earth Deposits: A Simple Means of Comparative Evaluation.