The IMC Consortium Eliminating the Rare Earth Industry...

Bringing innovation and transparency

to the world of critical metals

www.innovationmetals.com

The IMC Consortium

Eliminating the Rare Earth Industry Bottleneck

November 2012

Disclaimer & Cautionary Statement

This presentation contains projections and statements that may constitute "forward-looking statements" within

the meaning of applicable Canadian and United States laws. Forward-looking statements herein may include,

among others, statements regarding the future plans, costs, objectives or performance of Innovation Metals

Corp. ("IMC"), or the assumptions underlying any of the foregoing. In this presentation, words such as "may",

"could", "would", "will", "likely", "believe", "expect", "anticipate", "intend", "plan", “goal”, "estimate" and similar

words and the negative forms thereof are used to identify forward-looking statements. Forward-looking

statements are subject to known and unknown risks, uncertainties and other factors that are beyond IMC's

control, and which may cause the actual results, level of activity, performance or achievements of IMC to be

materially different from those expressed or implied by such forward-looking statements. Such risks and

uncertainties could cause actual results and IMC’s plans and objectives to differ materially from those expressed

in the forward-looking information. IMC can offer no assurance that its plans will be completed. These and all

subsequent written and oral forward-looking information are based on estimates and opinions of management on

the dates they are made and expressly qualified in their entirety by this notice. Except as required by law, IMC

assumes no obligation to update forward-looking information should circumstances or management’s estimates

or opinions change.

Certain information herein is based on third-party sources that are believed to be reliable, but whose accuracy is

not guaranteed. This presentation is provided on an “as is” basis, and IMC makes no representations or

warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability

with respect to the third-party information, data or charts contained herein, for any purpose. Use of all

information herein is voluntary, and reliance on it should only be undertaken after an independent review of its

accuracy, completeness, efficacy and timeliness. Any reliance placed on such information is therefore strictly at

the risk of the user.

In no event will IMC be held liable for any loss or damage including without limitation, indirect or consequential

loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in

connection with, the use of this presentation or the information contained within it.

2

The Largest Arbitrage in Human History 3

The Rare-Earth Industrial Sector

Henry Hub Natural Gas Spot

WTI Spot Crude

Changing Transportation Fuels 4


•Typical gas combustion engine is very inefficient

•Electric engines are much more efficient on a BTU basis

(refer to Appendix)

Potential critical REE supply crunch 5


Projected future shortfall of critical REEs

“Rest of the World” supply chain is vulnerable

Diversity of supply is required

CeO2 Nd2O3 Eu2O3 Tb4O7 Dy2O3 Y2O3

Demand @

150-170 kt/yr TREO 60-70 kt 25-30 kt 625-725 t 450-550 t 1.5-1.8 kt 12-14 kt

Supply @

180-210 kt/yr TREO 75-85 kt 30-35 kt 450-550 t 300-400 t 1.3-1.6 kt 9-11 kt

Forecast for global supply and demand for select rare earths in 2016

Source: IMCOA

Potential new sources of rare earths 6


Source: Technology Metals Research

The rare-earth industry bottleneck 7


The good news: plenty of potential new sources

• 440+ REE projects in 37 countries outside of China (Sep 2012)

• 45+ REE projects with mineral-resource estimates (Sep 2012)

The bad news: complete lack of processing facilities

• Separation of REEs requires complex processing routes

Many companies plan to sell mixed HREE precipitates

BUT - end users can’t use mixed HREE precipitates!

Poor alternative: sell precipitates to the Chinese?

A better solution: the IMC Consortium

The Rare Earth Industry at a Crossroads 8


What many in the Industry are currently proposing

The Rare Earth Industry at a Crossroads 9


Centralized

Quality

Control

Transparent,

Anonymous

Auction

The Centralized Approach

3 Major Industry Issues 10

Industry Issues

1. Security of Supply vs. Sourcing Risk • Buying a mine does not eliminate risk; it can add risk (lack of expertise, single source

dependency etc.). For many End Users who only use a few RE’s, it is an inefficient use of capital given the elements produced. Offtakes may be a better method

• Securing sources of CRM (ex. Dy) is a huge Competitive Advantage and lack of supply can lead to disastrous results

• Be very careful about finding substitutes; you can substitute yourself right out of the market

• A Centralized Refinery approach eliminates single mine risk by diversifying feedstock sources

2. Quality Control • Many examples of poor quality control and difficulty in receiving compensation • Very few mining companies have the expertise in separating individual elements and

recognize the important quality control issues • A Centralized Refinery approach to Quality Control is best for End Users where high

standards can be met and monitored

3 Major Industry Issues 11

Industry Issues

3. Pricing • Pricing has always been an issue with no transparency • At times, buyers have pricing power, at other times, sellers have pricing power

however in either case, price transparency is important. Without it, no liquid spot market will develop nor any futures market

• Innovation Metals Corp will use a transparent auction system that will ensure fair pricing and give participants auction data

There is an opportunity for End Users to gain back some control and own a part of the supply chain that was previously never

offered to them

The solution: the IMC Consortium 12

The IMC Consortium

A group of rare-earth producers and consumers

• Consumers include end users, traders and government stockpile

programs

Producers avoid additional & risky capital expenditure

Consumers gain access to multiple sources of supply

Centered on an independent REE separation facility

• To be located in Bécancour, Quebec

• To produce 15,000 t / year separated REE products

• Primary focus: critical REEs (Nd, Eu, Tb, Dy & Y)

IMC will receive mixed REE precipitates 13

The IMC Consortium

Source: Innovation Metals Corp.

Schematic overview of rare-earth production within the IMC Consortium

Producers in the Consortium 14

The IMC Consortium

Charged a low-cost tolling fee for processing • Proportional to operating costs & determined by REE content

• Almost certainly less than cost of capital to do it themselves

Producers retain title to their material throughout

Producers not required to fund capital costs

Initial commitment: non-binding Letter of Intent (LOI)

Producers are invited to acquire equity

Equity holders will have priority in event of over-capacity

Producer LOI status: • 1 LOI signed

• 3 LOIs in progress

• In initial discussions with a number of other potential producers

Consumers in the Consortium 15

The IMC Consortium

Consumers share in cost to build refinery

• Cost proportional to unit costs of specific REE production

Gives them guaranteed access to specific REEs

Gives them exclusive access to product auction

Can be serviced by specific producers in Consortium

• Producer facilitates off-take agreement via separation plant

• Prices agreed between consumer and producer

Consumer discussions status:

• Numerous potential participants have been approached

• Includes end users, OEMs, traders & government entities

• Active discussions will begin once pilot plant begins operation

The IMC auction process 16

The IMC Consortium

Finished products go into innovative auction system

• Hybrid second-item / Vickery auction model

• Similar to the way electricity is auctioned

Will result in fair prices for producers and consumers

Auctions might fail, in the absence of clearing price

• Maximum of two failed auctions for batches of material

• Unsold product returned to producer or stored for future sales

All data shared with all Consortium participants

• Identities remain anonymous

• Allows for true price discovery

Bécancour, Quebec selected for facility site 17

The IMC Consortium

Located within Bécancour Waterfront Industrial Park

• Direct access to multiple hydroelectricity sources

• Full year-round access to deep-water port facilities

• Bulk-liquid terminal & railway line connected to CN network

• Home of leading industrial producer of HCl and NaOH

Source: Société du parc industriel et portuaire de Bécancour

Bécancour, Quebec selected for facility site 18

The IMC Consortium

IMC currently has an option on 23 hectares (57 acres)

Exempted from Environmental Impact Assessment

Strong enthusiasm in Quebec for the project

Source: Société du parc industriel et portuaire de Bécancour

Bécancour project specifications 19

The IMC Consortium

Target capacity: 15,000 tpa REOs

• To be built out in two 7,500 tpa stages

Focusing on production of critical REOs

Working towards Certification of Authorization

Main current focus: pre-feasibility study (PFS)

Projected timeline:

• Completion of PFS: Q2 2013

• Acquisition of Certification of Authorization: Q3 2013

• Begin construction: Q2 2014

• Begin operation: Q4 2015

The IMC Rare-Earth Exchange (RE-X) 20

IMC Services

Development of live, two-sided spot market for REEs

All transactions for physical delivery

Quality control & verification protocols in place

Low (2%) transaction fees

Programming work currently in beta testing

Source: Innovation Metals Corp.

Summary 21

Summary

Why does the IMC Centralized Approach make sense for Consumers?

• Consumers get access to the specific rare metals they

require

• Shared capital cost approach maximizes efficient use of

capital

• One centralized refinery can maintain high Quality Control

standards

• Capability of structuring fixed price offtake contracts if

desired

• Own refining capacity where mines come to you rather than

you going to the mine

Summary 22

Summary

What IMC is looking for from Consumers

• A non-binding LOI is all we need to reserve your desired

quantity of oxide/metal with specifications on purity/impurity

tolerances

• We do NOT require any capital up front

• We do NOT require any exclusive commitment

• Q4 2013, a full review will be made to decide whether to

build the refinery or not depending on status of Producer

Consortium and Consumer feedback. We will then be

transforming the LOI’s into binding contracts and a

Construction Escrow Fund will be established.

IMC Management 23

The IMC Team

Patrick Wong HBA - Chief Executive Officer & Director Pat is a seasoned hedge-fund manager, with over 15 years of experience in various trading strategies, including capital-structure

arbitrage. He was co-founder and Chief Investment Officer of Dacha Strategic Metals Inc. (TSX.V:DSM), a unique investment

vehicle that invests in physical rare earths. Prior to Dacha, Pat was President of a natural-gas trading company that created

models to trade physical gas. More recently he has traded rare earths and other rare metals.

Gareth Hatch PhD CEng FIMMM FIET - President & Director Gareth is a Founding Principal of Technology Metals Research LLC, a provider of market intelligence & analysis on the rare-

metals sector. He was previously Director of Technology at Dexter Magnetic Technologies Inc., leading a team focused on the

design & application of innovative permanent-magnet devices & systems. As a materials scientist, Gareth previously conducted

research work on new rare-earth permanent-magnet alloys. He holds five US patents on a variety of magnetic devices.

Furkhat Faizulla MBA - Director Furkhat is a founding partner and Deputy Director of Advanced Material Japan Corporation (AMJC), one of the largest traders of

rare earths in the world. He is currently head of AMJC’s overseas trading department, and specializes in trading rare earths as

well as other critical metals such as tungsten. Furkhat brings over 30 years of trading experience and contacts to IMC and is fluent

in Japanese, Mandarin Chinese, English, and Uzbek.

John Veltheer PhD - Director John is a chemist and professional public-company director, who is singularly focused on building and protecting stakeholder

value. He currently sits on the Board of Directors of a number of public and private companies including Rara Terra Minerals Corp.

(TSX-V:RTX), Black Sea Metals Inc. (OTCBB: BLAK), Orange Minerals Corp. (a private exploration company) and Critical

Minerals Inc. (a private exploration asset accumulator).

Appendix 24

Nat Gas Power 1 million BTUs Oil/Gasoline 1 million BTUs

Energy left after generation (58%

efficiency) 580,000 BTUs

Energy left after refining (92%


Energy left after charging losses (88%

efficiency) >510,000 BTUs

Energy left after transport (95%


BTUs per kilowatt-hour

3412 BTUs BTUs per gallon of

gasoline 115,400 BTUs

Electricity available 149 kWhr Gallons available 7.6 gallons

Energy efficiency 0.19 kWhr/mile Fuel economy> 24 mpg

Miles per million BTUs 787 miles Miles per million BTUs 183 miles

IMC Technical Advisory Board 25

The IMC Team

IMC is in the process of forming a Technical Advisory Board. Its first three members:

George Demopoulos PhD - Professor of Mining and Materials Engineering, McGill University, Canada George leads an active research group focused on a variety of projects relating to hydrometallurgy, aqueous processing,

precipitation & crystallization, electrochemical deposition & corrosion, and the preparation of particulate materials & mesoporous

films. George is a Gerald Hatch Faculty Fellow.

Jack Lifton PhB - Founding Principal, Technology Metals Research LLC, USA Educated as a physical chemist, specializing in high-temperature metallurgy, Jack was first a researcher before becoming a

marketing and manufacturing executive and later a metal trader, specializing in rare metals. Today, after 50 years of industry

involvement, he advises OEM high-tech industry players and the global institutional-investment community, on rare metals.

Technology Metals Research LLC is a provider of market intelligence & analysis on the rare-metals sector. Andries Meijerink PhD - Professor of Solid-State Chemistry, University of Utrecht, The Netherlands Based at Utrecht’s Debye Institute for Nanomaterials, Andries leads an active research group focused on the optical spectroscopy

of rare-earth ions and of semiconductor quantum dots. Recent work on rare earths includes spectral conversion for solar cells,

LEDs and scintillators. Andries is a past awardee of the Gold Metal of the Royal Dutch Chemical Society, and was recently elected

to the Royal Dutch Academy of Sciences.

IMC contact details 26

Patrick Wong – CEO & Director or

Gareth Hatch – President & Director

Office: +1-416-477-2412

Email: [email protected]

Web: www.innovationmetals.com

The IMC Consortium Eliminating the Rare Earth Industry...

Documents

Transcript of The IMC Consortium Eliminating the Rare Earth Industry...