Those who have worked in the business as long as I have will easily
remember the rare earth mania of 2008–11. For about three years following
China's export restrictions on rare earth elements, which hiked the prices of
REEs to record highs, the junior resource market was awash with new rare
earth explorers.
These tiny companies fanned out across (mostly) Canada, the U.S. and
Australia in search of the next rare earths motherlode that would break the
world's dependence on China, which then and now has a monopoly—the country
either mines or processes something like 95% of the 17 rare earth elements
(REEs) and turns them into oxides, then continues the process of making
high-purity metals, alloys and powders that are used in everything from cell
phones, flat-screen TVs, permanent magnets and lasers, to wind turbines,
nuclear reactors and missile guidance systems. Click here for a more comprehensive list.
They mostly failed. Not one of those highly touted junior held rare earth
deposits outside China has been turned into a mine. The hype dissipated and
resource investors moved on to other metals.
Arguably though, the importance of rare earth elements has never gone
away; in fact they are more crucial than ever, as trade tensions between the
U.S. and China and the markets for REEs grow—such as for neodymium,
praseodymium and dysprosium used in permanent magnets placed in electric
vehicles.
For more read our Rare earths in cross-hairs of new arms race.
This article will look back at the rare earth mania, describe why none of
these companies have made it past the feasibility stage, and present a
roadmap for how to build a rare earths mine, one step at a time, that is both
feasible and cost-effective.
Rare earth mania
Today, the only significant non-Chinese firms currently producing rare
earth elements are Molycorp, whose Mountain Pass mine in California mines the
REEs and ships them to China for processing, and Lynas, whose Mt. Weld mine
in Western Australia produces a concentrate that is processed in Malaysia. A few other countries produce a handful, tonnage-wise, of
REEs but they are very small compared to China—just 1,600 to 3,000 tonnes
annually compared to China's 105,000 tonnes.
For a time though, rare earths were on the lips of every mining investment
house and resource junior. To not have a rare earths play meant missing out
on the party. The chart below courtesy of Avista Group shows the bubble inflating then the pop. For
instance, dysprosium prices rocketed from $118 a kilogram in 2008 to an
insane $2,262/kg in 2011. Europium ran up from around $600/kg in 2010 to
$3,000/kg the following year.
While the spike in rare earths prices was good for Molycorp and all the
exploration companies that sprang up in search of them, buyers of products
made from rare earths balked and pressured governments to do something about
it. The U.S., European Union and Japan brought a case to the World Trade
Organization to try and settle the dispute and get China to lift the
restrictions.
In 2015 it did, resulting in a torrent of Chinese rare earth exports into
the market and the inevitable collapse in prices. The move caught Molycorp
off-guard. The company had just spent over a billion dollars on another
upgrade at Mountain Pass but within months, Molycorp fell deeply in debt and
went bankrupt.
Most of the rare earth juniors withered and died too. For a more detailed
history read our How the US lost the plot on rare earths.
Separation anxiety
Mining rare earth elements is fairly straightforward: if found close
enough to surface they can be scooped up in open pits, crushed and
gravity-separated from the host minerals, but separating and extracting a
single REE takes a great deal of time, effort and expertise.
The ore is ground using crushers and rotating grinding mills, magnetic separation
(bastnasite and monazite are highly magnetic, they can be separated from
non-magnetic impurities in the ore through repeated electromagnetic
separation) and flotation gives you the lowest value sellable product in the
rare earth supply chain—the concentrated ore. The milling equipment,
including crushers; grinding mills; flotation devices; and magnetic, gravity,
and electrostatic separators, all have to be configured in a way that suits
the type of ore being mined—no two ores respond the same way.
The major value in REE processing lies in the production of high-purity
rare earth oxides (REOs) and metals—but it isn't easy. A REE refinery uses
ion exchange and/or multi-stage solvent extraction technology to separate and
purify the REEs. Solvent-extraction processes involve re-immersing processed
ore into different chemical solutions in order to separate individual
elements. The elements are so close to each other in terms of atomic weight
that each of these processes involves multiple stages to complete the
separation process. In some cases it requires several hundred tanks of
different solutions to separate one rare earth element. Heavy rare earth
elements are the hardest, most time-consuming to separate.
The composition of REOs can also vary greatly; they can and often are
designed to meet the specifications laid out by the end-product users. An REO
that suits one manufacturer's needs may not suit another's.
For more on mining and processing REEs, read our Mine to Magnet.
Doing it wrong
The challenges of producing anything more then a rare earth concentrate
has always been several fold for junior resource companies—complicated
mineralogy means complicated expensive metallurgy, a lack of infrastructure
and a lack of technical knowledge of the extraction process.
The disbursement of the REEs in a typical deposit is not uniform and they
are often contained in different ores—as high as 5. The more complicated the
minerology the more complicated, expensive and time consuming metallurgy will
be. A lack of infrastructure doubles down on your problems. This includes
easily accessible power, water, NG, roads and railways. Many rare earth
properties are far from any infrastructure, minimizing the prospect of
advancement.
Even more challenging is developing a hydrometallurgical plant to produce
the separate high purity rare earth oxides.
One of the world's foremost REE geologists and mineralogists, Tony
Mariano, says each REE deposit, assuming a favorable political climate and
good logistics, will need certain conditions present:
- Favorable mineralogy and lanthanide distribution
- Necessary grade and tonnage
- Mining and mineral processing at low costs
- Successful chemical cracking of the individual
lanthanides for their isolation and eventual recovery
- Low values of thorium, uranium and other deleterious
impurities
- Minimum environmental impact
Dudley Kingsnorth of Industrial Minerals Company of Australia outlines the
necessary steps to take a REE deposit all the way to production:
- Prove resource: grade, distribution and understand
mineralogy
- Define process and bench scale—each ore-body is unique.
Because of this uniqueness a new separation process has to be developed
for each individual deposit
- Conduct pre-feasibility study
- Demonstrate technical and commercial viability of the
process
- Obtain environmental approval
- Publish Letters of Intent—marketing is customer
specific. The main value-added from rare earths is not in the mining and
extraction, so it is necessary to either develop your own supply chain
or gain access to an existing supply chain
- Complete a bankable feasibility study
- Effect construction and start-up
There are significant barriers to entry into the rare earths market:
- Developing a rare earth mine and processing plant is
capital intensive. Capacity costs are high—US$30,000+ per tonne of
annual separated capacity versus less than US$3500 for an open pit mine
in the U.S. history shows that the development time can be very long at
10-15 years
- Operational expertise on mining, cracking and separating
is very limited outside of China
- Major mining companies and institutions are put off by
high capex investments in such a tightly focused market. This leaves
juniors with potential development issues
Back in 2008–11, all these challenges didn't dissuade hundreds of juniors,
whose booths lined the aisles of PDAC, from grabbing the opportunity to cash
in on rare earth mania. Until prices crashed in 2012 and the hype was over. A
few are still around, but most perished in the cold winter of investor
disenchantment that descended on the rare earths sector post-2012. The phrase
"over-promised and under-delivered" comes to mind.
The strategy of most of these companies went something like this: identify
a rare earth deposit, then hone in on the most valuable REEs—typically heavy
rare earth elements like dysprosium, europium, terbium, gadolinium,
etc.—which at the time were commanding record-high prices.
The plan was to mine the most lucrative rare earths, produce a
concentrate, and then build a refinery, at great expense, for converting the
rare earth concentrate into individual 99.5% oxides, powders, metals and
alloys for each desired REE for sale to end-users.
The problem was that most of these companies either didn't understand the
complicated process involved in mining/ processing rare earths, or did know,
and hid the truth from investors.
A couple of examples—no names will be mentioned.
- The rare earths deposit is located in a remote region
with no infrastructure. According to a prefeasibility study, the
open-pit operation would target the highest-grade REE mineralization.
The project has a capex (capital expenditures) budget of $2.6 billion,
including a hydrometallurgical facility that would produce four
products: one heavy and one light REE concentrate, one oxide and one
by-product mineral. The ore would be crushed at the mine site, trucked
to a port, and then shipped along a canal to the hydro-met facility for
further processing. Annual revenues would average north of a billion
dollars.
- Another project is also on the middle of nowhere with no
towns, roads or power nearby. Total capex including a mine, mill and
hydrometallurgical complex is just over $500 million. Ore from the
underground mine would be mined and processed into a concentrate, then
barged approximately 200 kilometers to the rare earths refinery, where
there is energy and transportation infrastructure.
Both of these projects have no infrastructure, exorbitant capex that would
scare off any institutional investor, and complicated mine plans, both in
terms of logistics and processing. We could've chosen many other ill-fated
examples.
Even if a junior miner was able to produce an oxide, that's not the end of
the road. From an initial 98% purity, the oxide must be further refined to
99.5% purity required by most end-users. The cost to increase the purity to
99.5%, and the technical know-how/ operational expertise, is well beyond the
capabilities of almost every junior miner for the several reasons listed
above.
Very few REE miners will ever get paid for producing a 98% oxide let alone
a 99.5% pure oxide.
It's far more likely that most REE juniors will end up selling a mixed
rare earth concentrate comparable to what a junior copper miner would sell.
Others further up the REE value-added supply chain (i.e., end-users who
have a proprietary process) will turn the concentrate into rare earth oxides
and continue the process of making the high-purity metals, alloys and
powders.
Doing it right
Fortunately there is an easier way to mine rare earths without getting
into the inordinately high capital expenditures and processing complexity.
The answer? Keep it simple and small, take what mother nature easily gives
you.
At Ahead of the Herd we've identified a project in northern British
Columbia that has all the elements in place for a successful, small-scale
rare earth operation: Defense Metals Corp.'s (DEFN:TSX.V; DFMTF:OTCQB) Wicheeda
Project.
Located close to a major population center, Prince George, Wicheeda has no
uranium, low thorium values, all the necessary infrastructure, the deposit
has simple mineralogy, and the metallurgy has already been demonstrated through
bench-scale testing.
Enough historical drilling has been done to compile an historical
non-43-101 compliant resource estimate of 11.2 million tonnes grading 1.95%
Light Rare Earth Elements at a 1% cut-off (LREE = Ce + La + Nd).
A 2009 study was designed to discover the ease of making a rare earth
concentrate from a composite rock sample taken from Wicheeda carbonatite,
based on three assay samples.
Bench-scale testing yielded more potentially recoverable rare earth
elements than the resource estimate's current REEs (lanthanum, cerium,
neodymium and samarium) such as dysprosium, europium and praseodymium.
The study author, Tony Mariano cited above, noted he's only seen a
high-grade REE concentrate similar to the Wicheeda composite in China, the
center of global rare earths processing.
Bench-scale flotation and hydrometallurgical testwork was done on Wicheeda
drill cores at a SGS Lakefield lab during 2010–11. SGS successfully developed
a flotation flow sheet that recovered 83% of the rare earth oxide (REO) and
produced a concentrate grading 42% REO.
Subsequent hydrometallurgical testing in 2012 on a two-kilogram sample of
the concentrate grading 39.7% TREO (total REO) produced an upgraded and
purified precipitate that contained 71% TREO through a process of
pre-leaching and roasting.
For more read our Defense Metals has sights set on rare earths, uranium.
This isn't just another rare earths story pump, like dozens of others told
during rare earth mania. This project differs significantly from others that
have tried, and failed, before it. Here's how:
- Infrastructure in place. At 80 km northwest of
Prince George, Wicheeda isn't remote. The deposit is situated alongside
a major forestry service road that is connected to Highway 97, the main
artery running through northern BC. Prince George has many industries
currently using chemicals such as caustic soda and hydrochloric acid,
and by-products of operations range from white/black liquor to lime and
others. There is a trained workforce already very familiar with the
shipping/receiving, use of, and proper disposal of chemicals, being home
to a methanex plant and three pulp mills.
A planned 200-tonne-per-day pilot plant on a
dormant sawmill site at Bear Lake is a short 40-minute drive north of Prince
George on Hwy 97. A CN rail line runs past the old sawmill site and there is
a siding running into the site. The Bear Lake site has adequate power, water,
a railway siding and a nearby natural gas pipeline—all the elements needed
for rare earth processing and shipping.
- Uncomplicated mining. The rare earth minerals
bastnasite and monazite, containing the REEs, are disseminated fairly
uniformly throughout the property. Mining would be an open-pit scenario,
which is basically just an earth-moving operation. The raw ore would be
run through a magnetic separator—bastnasite and monazite are
magnetic—with the resulting early-stage concentrate trucked to DEFN's
pilot plant in Bear lake for further processing.
- Work with Mother Nature. Unlike other rare earth
juniors, Defense Metals isn't promising the moon and delivering an
asteroid. The company's plan is to use whatever elements are in the rare
earth minerals to produce a mixed rare earth concentrate that would be
sold, likely on long-term contracts, to end-users.
- Scale up slowly. Production, under a BC Small
Mine Permit, would gradually be scaled up, from a 30-tonne bulk sample
to a 200-tonne per day pilot plant that proves the ability to produce a
mixed rare earth concentrate for commercial production. Defense Metals
could also use its scaled-up processing plant to "contract
process" other companies' rare earths into a concentrate. There are
three stages to the ramp-up:
- Step 1: Bulk sample metallurgical testing/
re-assaying the pulps. Defense Metals has sent a 30-tonne bulk
sample from the deposit to SGS Canada's Lakefield, Ont. metallurgical
facility. "Building on the successful bench scale flotation
testwork conducted in 2012 by SGS on a 100 kg composite sample of
Wicheeda drill core, the goal of the Phase 1A testwork is to develop a
robust flow sheet for producing high-grade REE flotation concentrates
from a 200-kg sample of the 30-tonne Wicheeda REE deposit bulk sample.
It is anticipated that 20 kg of REE concentrate will be produced by
Phase 1A," said Chris Graf, DEFN's technical advisor.
After the 20-kg sample of flotation concentrate
has been produced, hydrometallugical testwork on the sample is expected to
start at the end of May, to produce a purified, mixed REE concentrate and
provide data for the design of a 200 tonne-per-day pilot plant at Bear Lake.
- Step 2: Pilot plant. The concentrate pilot plant
will take the entire 30-tonne Wicheeda Lake bulk sample and process it,
with the goal of demonstrating that the Phase 1 A flowsheet is capable
of producing a high-grade REE concentrate at an industrial scale.
- Step 3: Hydrometallurgical test plant. The last
step, and Defense Metals' ultimate goal, is to build a
hydrometallurgical plant at Bear Lake that would convert the rare earth
concentrate into individual rare earth oxides, for sale to specific
end-users. It's expected that the Phase 2 pilot plant metallurgical
testwork will produce about three tonnes of REE concentrate that can be
tested by a Phase 3 hydrometallurgical pilot plant.
Click on the Feb 25 operational update for more details
Once the plant enters commercial production, customers could include
military defense contractors, considering the high concentration of metals used
for defense purposes, and companies in the magnet manufacturing sector, which
require combinations of neodymium, praseodymium and dysprosium or samarium
and cobalt. Like the concentration processing plant plant, the hydro-met
plant could also do "contract processing" of other REEs from
companies that ship their rare earth concentrates, by rail, directly to
DEFN's Bear Lake facility.
Conclusion
Sometimes less is more, especially when "more" comes at great
expense and investor risk. Defense Metals has come up with a very manageable
plan to cost-effectively put an extremely prospective rare earths deposit
into production.
Unlike many juniors before it, the plan doesn't involve a billion-dollar
capex that includes a mine, mill and processing plant. Instead, DEFN is
piggy-backing on previous bench-scale testing to slowly prove the metallurgy
and then scale up—first developing a flow sheet from a 200-kg sample, to get
20kg of REE concentrate. Then a pilot plant to test whether the original
30-tonne bulk sample can produce a concentrate at industrial scale. And
finally, a hydrometallurgical test plant that can produce three tonnes of REE
concentrate—enough for commercial use.
Each step that is successfully completed will provide more confidence for
investors, and further de-risk the project. If all these steps are completed,
we see there being no shortage of customers wanting to purchase DEFN's
high-purity REE concentrate. At this stage we would also see Defense Metals
as a high-priority takeout candidate by a magnet manufacturer, for example,
wanting to lock up a reliable supply of rare earth concentrate, outside of
China.
I'm looking forward to the successful completion of Phase 1A, a 20-kg
concentrate.
Richard (Rick) Mills
aheadoftheherd.com
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Richard (Rick) Mills, AheadoftheHerd.com,
lives on a 160-acre farm in northern British Columbia. Richard's articles
have been published on over 400 websites, including: WallStreetJournal,
USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews,
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Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes,
Businessweek, HongKongHerald, Moneytalks, SeekingAlpha, BusinessInsider,
Investing.com, MSN.com and the Association of Mining Analysts.
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