Beginning with the End in Mind: Rare Earths - Sept 2013 - Greenfields Research / Curtin University /...

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Metal Pages La Oxide 99% min FOB China (CN) / tonne

0 2 4 6 8

Mt Weld

Nolans

Delay (years)

“Getting your ducks in a row” – all appears in order

(compliance)

Legs madly working away below the surface

(strategy)

“Taking a Risk

for Rare Earths”

New York Times, Keith Bradsher,

8th Mar 2011

“The Fear of a

Toxic Rerun”

New York Times, Keith Bradsher,

29th Jun 2011

10.000

12.000

14.000

16.000

18.000

Advanced light rare earth deposits

Early stage light rare earth deposits Most advanced rare earth

projects are the highest

grade – early mover

advantage

Examples: Molycorp, Lynas

DOGS/PETS Not profitable. Usually

“pet projects” that

provide a non-financial

benefit i.e. synergies,

labour retention etc

CASH COWS High market share in

slow growth industry –

“milked” to fund other

investments

STARS Leading

assets/products

dominating fast

growing markets, still

requiring investment.

QUESTIONS Also known as

“problem children”.

High growth sector but

large capital investment

required.

Market Share (beating the competition)

PROJECTS Not profitable. Usually

“pet projects” that

provide a non-financial

benefit i.e. synergies,

labour retention etc

CASH COWS High grade, small scale

projects, which are quickly

cash generative, allowing

access to an industry and

providing cash for

investment elsewhere.

STARS World class assets with

high grades and large

scale. Will dominate future

sector and be hugely

profitable.

PROBLEM

CHILD Challenging projects with

scale, that could be stars in

a high growth industry,

assuming some structural

changes.

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

Lofdal

Wolverine

Hastings

Kutessay II

Thor Lake (Basal)

Strange Lake (Enriched)

Kipawa

Norra Karr

Olserum

Buckton South

Buckton

Strange Lake (Granite)

Mt Weld (Duncan)

Foxtrot

Thor Lake (Upper)

Grande-Vallee

Mt Weld (CLD)

Mt Pass

Total Rare Earth Oxide Basket Value (US$/kg)

Heavy rare earth deposits

Early stage light rare earth deposits

Some “heavy” rare earth

projects actually have a very

low heavy rare earth grade

The highest grade

“heavy” rare earth

deposits are actually the

high grade “light”

projects

0.00 1.00 2.00 3.00 4.00 5.00

TREO Ore Value (US$/kg)

Focus should be on these:

mainly advanced “light”

rare earth projects

Focus is on these

projects: mainly “heavy”

rare earth projects

Gold ore equivalent: 23.7g/t 47.3g/t 71.0g/t 94.7g/t 118.3g/t

0.00 1.00 2.00 3.00 4.00 5.00

PROBLEM

CHILDREN

PET PROJECTS CASH COWS

Examples: Northern Minerals, Hastings Rare Metals, Stans Energy, Tasman Metals, Quest Rare Minerals

Likely to be > 10 years for a new material

Off-ta

rmittin

(Extra

Likely to be > 10 years for a new mine

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

Lofdal

Wolverine

Hastings

Kutessay II

Thor Lake (Basal)

Strange Lake (Enriched)

Kipawa

Norra Karr

Olserum

Buckton South

Buckton

Strange Lake (Granite)

Mt Weld (Duncan)

Foxtrot

Thor Lake (Upper)

Grande-Vallee

Mt Weld (CLD)

Mt Pass

Total Rare Earth Oxide Basket Value (US$/kg)

Assumes separated rare earth oxide prices

Assumes 100% recovery of all rare earths

No assessment of resource grade

0.002.004.006.008.00

10.0012.0014.0016.0018.0020.00

Ce (US$/kg) La (US$/kg)

Recoveries range:

6.5% to 41.0% Recoveries range:

65% to 90%

Remember: “basket values” analysis assume even 100% recovery

RARE EARTHS 101

Resources x reserve recovery x mining recovery x

grade x processing recovery x cracking recovery

(x separation recovery) = LOM production

90% recoveries: 90% x 90% x 90% x 90% x 90% = 59%

75% recoveries: 75% x 75% x 75% x 75% x 75% = 24%

50% recoveries: 50% x 50% x 50% x 50% x 50% = 3%

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00

Ore Grade (%)

86.7% 83.3%

80.0% 76.7% 73.3% 70.0% 66.7%

Percentages indicate equivalent mass

loss to take ore to a 30% concentrate

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

LYNAS: Mt Weld (Forecast 12 years from purchase to production)

Project

Farm In

Resource

Drilling

Scoping

Feasibility

Study Peer Review

Project

Funding GFC

Refinancin

g Construction PRODUCTION >>>

ALKANE: Dubbo (Forecast 15 years from purchase to production)

Project

Purchas

e Feasibility Study Financing Definitive Feasibility Study GFC

Definitive

Feasibility Study Expanded

Financing /

Construction PRODUCTION >>>

ARAFURA: Nolans (Forecast 12 years from purchase to production)

Project

Purchas

e Scoping Study

Prefeasibilit

y Study

Feasibilit

y Study GFC Feasibility Study

Expanded

Feasibility

Financing /

Construction PRODUCTION

Second mover rare earth projects • Shorter development time, and lower development cost

• Maturing new market outside of China

Targeting 5-10 years from purchase to production?

COMPARISON OF AUSTRALIAN RARE EARTH PROJECTS

First mover rare earth projects • Delays due to technical problems at feasibility stage

• Faced funding problems throughout due to lack of investor awareness

Typical development timeframe will be 12-15 years

0.0 200.0 400.0 600.0 800.0 1000.0 1200.0

Ore (Mt)

Major early stage light

rare earth projects

Major late stage light

rare earth projects

Heavy rare

earth projects

Early stage light

rare earth projects

1.0 10.0 100.0 1000.0 10000.0

Ore (Mt)

PROBLEM CHILDREN

CASH COWS

PET PROJECTS

Examples: Rare Element Resources,

Arafura Resources, Peak Resources,

Frontier Rare Earths

1.0 10.0 100.0 1000.0 10000.0

Ore (Mt)

PROBLEM CHILDREN

CASH COWS

PET PROJECTS

WHERE ARE ALL

THE STARS?

0.00 1.00 2.00 3.00 4.00 5.00

PROBLEM

CHILDREN

PET PROJECTS CASH COWS

WHERE ARE ALL

THE STARS?

Examples: Tantalus Rare Metals, TUC

Resources, Namibia Rare Earths, Vale

$5 billion

$1 billion

80% $800 million

$1,000 million

$200 million

200 20% 5,000 1,000 80% 1,000

Examples: Greenland Minerals, Pele Mountain Resources, Alkane Resources, CBMM

Kvanefjeld

(Greenland Minerals & Energy)

Mt Weld

(Lynas)

Mountain Pass

(Molycorp)

Zandkopsdrift

(Frontier Rare Earths)

Nolans Bore

(Arafura Resources)

(Alkane Resources)

Strange Lake

(Quest Rare Minerals)

Eco Ridge

(Pele Mountain Resources)

Hastings

(Hastings Rare Metals)

Bear Lodge

(Rare Element

Resources)

Sarfartoq

(Hudson Resources)

Thor Lake

(Avalon Rare Metals)

Kipawa-Zeus

(Matamec Explorations)

Market Capitalisation

(equiv. US$10 million)

Project Capital Cost

(equiv. US$100 million)

Examples: India Rare Earths? Tin

smelter slags?

Examples: Alkane Resources, Kimberley

Rare Earths, Avalon Rare Metals

•–

6) CASH DOG 1) CASH COW

4) FIND A STAR!

2) HEAVY

PROBLEM CHILD

3) LIGHT

PROBLEM CHILD

5) BY-PRODUCT

CASH COW 7) DO

SOMETHING

Beginning with the End in Mind: Rare Earths - Sept 2013 - Greenfields Research / Curtin University /...

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