Got a rare earth deposit? Great. Got a mine? Even better. But do you have a processing plant? No? That could be a problem. The market doesn't understand how complex and expensive solid-phase rare earth extraction can be, but Metals Consultant Jack Lifton is here to put it into layman's terms in this interview with The Critical Metals Report. Lifton discusses processing innovations from North America, Germany and India that are changing the cost picture. He even names some companies that could see huge changes in their bottom lines in the coming years.
The Critical Metals Report: Jack, you have a chart listing 52 advanced rare earths projects. But in your last interview, you said that only five of the new HREE producers could be in production in the next three or four years, processing often being a significant hurdle. What makes HREE processing so difficult?
Jack Lifton: The major difficulty is separation costs for the individual elements. Because HREEs constitute such a small proportion of the rare earth element (REE) distribution in almost any deposit, companies are challenged with the task of separating all of the rare earths from each other to get any one of them in a useful form that can be sold to end users. In any REE deposit, half of it is typically made up of the REE cerium, which carries the least value of the so-called light rare earths (LREEs) because it trends to oversupply, but companies have to remove it anyway, which is an expensive process. On the other hand, dysprosium, a valuable, in-demand element, rarely makes up even 5% of a deposit. What happens in the La-La Land of the markets is that many investors do not understand that 50% of the concentration at your average rare earth deposit is not worth anything. They fail to realize that the composition of the ore matters more than the grade.
A hard rock rare earth ore with significant heavy rare earth content, which is now only found in Sweden, Norway, Finland, Canada and Brazil, first has to be concentrated mechanically, often by density to filter out the denser minerals. Some processes use gravity so the good stuff sinks to the bottom of a container. Flotation processes use chemical tricks so that the lighter materials float to the surface, where they can be skimmed, leaving the heavier stuff. These are well-known processes, but even if you are only interested in the heavy rare earth content, for example, you still must remove as much as 99% of the mass of the deposit to get to the less than 1% you wish to process chemically.
Let's say, in an ideal world, the mechanical concentration processes work. Now, you have the problem of extracting rare earth elements as ions out of those minerals that you've already separated. This is a chemical process. The mining industry has used simple chemistry for this for a long time, and it involves very widely available materials like sulfuric and hydrochloric acid. But what do you do if your mineral does not react to those commonly available solvents? You can always find an acid, a base or a combination of materials that will extract your material, but it's not necessarily economical. It can't be something exotic that's made in a laboratory or something that isn't available in the center of Mozambique, or wherever your mine is. You have to be practical.
Now, let's say you have completed step two and extracted a material. Let's say you even found a way to do it cheaply; maybe you can even recycle the acid. At this point, you have to look at how much you can extract through your chosen method. If you can only extract 10%, it's probably not worth it because even naturally concentrated ores are rather low grade. You have to work out a system to get the maximum yield. A good yield would be 70-90% of all the metallic ions in the ore body. Now you have to leave the laboratory and employ a full-scale leaching process. This will produce, finally, an ionic form of the metallic ions that you want. This mixture of every ion in the ore is called the process leach solution, or the PLS.
But it's still not over. Keep in mind that you have to separate not only all the rare earths from each other, but anything else that came along for the ride. With rare earths, that almost always includes iron, uranium or thorium. The problem is that uranium and thorium are bad actors. Thorium is genuinely the most radioactive element found in nature. Uranium is not as radioactive in nature as thorium is, but it too must be properly disposed of in a safe way. It can't just be removed and tossed aside.
TCMR: How do processors handle thorium and uranium safely?
JL: Traditionally, an operation like Mountain Pass would extract the thorium early on in the process from the PLS. It would extract thorium and LREEs so that they come out together, and then separate the LREEs from the thorium and/or uranium. When the thorium is finally isolated, then it is distributed in the process residue. This involves lowering the concentration as much as possible by dilution and producing a cement out of the thorium-laced mixture. This cement can be buried or put into pits. But when an ore has a lot of this material in it, even if there is a legal way to dispose of it, handling it is dangerous. Furthermore, miners need permits to handle radioactive materials and they need to prove that their process of extracting it, eparating it and mobilizing it all meet the standards. This is a huge expense. But you can't even get to processing rare earth PLS before you handle the thorium/uranium problem.
In Malaysia, Lynas Corp. (LYC:ASX) separates the thorium early in the separation preprocessing and distributes it in the overall residue. At that point, the company processes that residue into a form where the thorium is not water soluble. Then it will legally dispose of it in assigned pits or underground. The company has been under vigorous scrutiny from the Malaysian government for some time now and finally has its temporary operating permits.
Twelve years ago, Mitsubishi left Malaysia with a $100 million ($100M) mess the government had to clean it up. So when Lynas came along, Malaysian leadership knew more than any other government in the world about this problem. It put the company through an extremely rigorous vetting and the Lynas plant has passed that test – it's got its temporary operating permit. I visited that plant as a guest at the behest of the Malaysian government in May and went through it completely with Lynas management and all questions were answered. In our group was a representative from Germany's Karlsruhe Institute of Technology, and he is the man in charge of decommissioning Germany's nuclear plants. He was there to look at radiation safety. And he remarked to me, "I would move my wife and young children to live in that plant because the background radiation is lower than where I live in Germany."
TCMR: Wow. So why did Lynas choose Malaysia?
JL: That's a very good question. It's quite a ways from Australia where the ore is mined. It comes down to processing costs. Just the amount of fresh water you need in this plant is enormous. I believe Lynas uses 50 cubic meters a minute. When you're running a plant 24 hours a day, it's quite a bit. The water wasn't available in Perth, Australia, the company's first choice. Then there are energy costs to consider. The cost of electric power in Malaysia is less than half of what it is in Australia. Lynas also tried to do something in China about three years ago, but it didn't work out. So the company settled on Malaysia.
TCMR: Will the Malaysian plant process ore from only Lynas or from other companies as well?
JL: No, only Lynas and only LREEs. And Lynas does not plan to produce anything but lanthanum, cerium, praseodymium and neodymium carbonates – plus customer-specified blends of those materials.
TCMR: Let's go back to dysprosium, the in-demand, heavy rare earth element (HREE) you call "the problem metal." Who is going to be able to process dysprosium?
JL: I think that the European producer will be Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.A; TASXF:OTCPK; T61:FSE) because it will be able to get its material processed by a specialized strategic ally. I really can't say any more than that because of non-disclosure agreements. Let's say I'm extremely optimistic about Tasman being a major producer of dysprosium by 2016 or '17. And I mean hundreds of tons (100t) a year, perhaps 350t per year.
I am also very optimistic about Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX) in Alaska being able to produce more than 100t of dysprosium a year in the same time period, maybe sooner. Note that Ucore recently announced that it is already able to take the uranium and thorium out of its material at the mine. This is an extremely significant announcement. I am also looking at Rare Element Resources Ltd. (RES:TSX; REE:NYSE.A). It has a large second rare earth deposit near its in-development Bear Lodge property in Wyoming, which has the highest concentration of europium and the largest overall reserve of dysprosium in the Lower 48. I expect RER to be a producer of significant quantities of dysprosium by the middle of the second half of this decade.
Orbite Aluminae Inc. (ORT:TSX; EORBF:OTXQX) in Quebec is constructing a solvent-extraction, ion-exchange (SX/IEX) combination plant in the Gaspé Peninsula of Quebec as an ancillary part of a system to produce high-purity alumina for the electronics industry. The SX/IEX plant and the process were engineered by a German company, and should be finished by Dec. 31 of this year. The company will then have the system capacity to produce up to 1,000 tons of high-purity alumina per year, and it can use the ancillary SX/IEX plant to process the byproducts produced during the processing of its ore to make 99.99% alumina. These byproducts include the full range of rare earths. Orbite will be able to separate all of them from each other and purify them. To prove that, the pilot plant took byproduct containing residues from Orbite's alumina refining operations and produced 200 grams each of 99.99% dysprosium oxide, terbium oxide, erbium oxide, yttrium and cerium. It was amazing, because these are just byproducts of the process Orbite developed for its high-purity alumina. Orbite's ore body contains around 500 parts to 1,000 parts per million of rare earths and associated critical materials like yttrium, gallium, scandium and various rare metals. Orbite should be able to produce tens of tons of dysprosium, terbium and the like. It's all laid out in Orbite's website, which I urge people to read carefully.
I went to Orbite's company headquarters in Quebec about a month ago and the management said to me, "Our SX/IEX plant will be finished in December, but we're not ready to run it at full capacity from our principal ore body for maybe a year or more." They said, "Can you suggest to us anybody who may have a process leach solution that we could run for them to separate rare earths for them at this purity, 99.99%?" And they explained that even at the beginning, this plant will be able to handle quite a bit of capacity. Management plans to ramp up the main plant from one ton a day (1t/d) of high-purity alumina to 3t/d in a year and a half. But they have capacity to do 3t/d as soon as the plant opens. With the open SX/IEX capacity, the company thinks it could use its facilities to process rare earths for outsiders. And quite frankly, although I'm not at liberty to name names here, quite a few people I've talked to have contacted them. Many companies have the ore, but not the capital it takes to build a large processing plant. When this plant is finished, it will be able to process and purify a total spectrum of rare earths.
TCMR: What other full-spectrum processing options are out there for miners?
JL: When it comes to solvent extraction technology, Americans pay too much attention to America. They're too busy looking in the mirror. You've got to look out the window. There's been a solvent extraction plant for rare earths as byproducts built for Alkane Resources Ltd. (ALK:ASX) in Australia. In India, the government announced that it's building a 10,000t-capacity plant to process Indian monazite from mineral sands ore, the same type of rare earth ore that's found in harder formations in Australia. India's also going to build a separation plant and produce individual rare earths from that. But it's not saying that this is for the world market. Chinese costs are going up by the day. Chinese people are fed up with the visibly polluted air and rivers of all sorts of odd colors. The government is being careful not to allow anymore of this happen. Therefore, the cost of environmental remediation and management is going very high in China. As you know, Chinese industry has slowed down because it's restructuring. And in the middle of the restructuring, China's been hit by the world recession, which means demand is decreasing. However, India is like China 10 years ago, which means it is home to thousands of engineering graduates with no jobs. When you want to staff a specialized company, for example, to process rare earths, you can find skilled people in India and they're not horribly expensive. Labor is cheaper overall there than in China today. I think India is going to get into the rare earth processing business and the fluid-cracking catalyst business. I think the Indians are planning to use their rare earths in India to build a domestic competitive industry. There are private as well as state-owned rare earth process technology companies in India.
One more thing – the Chinese government does not look favorably upon the export of Chinese technology, such as rare earth separation technology. The Western companies like Great Western Minerals Group Ltd. (GWG:TSX.V; GWMGF:OTCQX) that have been working with Chinese separation companies have a long-established relationship. They knew the steps you have to take to get a Chinese export license for technology and they worked very hard on that. I suspect that anybody else that wants to get the latest Chinese technology is not going to be very successful.
TCMR: When will Great Western be up and running?
JL: Great Western should be up and running by the end of next year. Its process will produce up to 34t a year of dysprosium. But this supply is already dedicated to existing customer orders for magnet material. The company won't be putting any of that on the market. And Lynas, by the way, has no such intention either with its light rare earths and mixtures of them. I was told that they have been presold on long-term contracts.
TCMR: What is the path to building enough high-quality separation projects to process the ore coming out of the mines on your list to the purity that it would be valuable?
JL: Well, the problem is that experiments in processing technology are very expensive. Governments can afford things like that, but private capital can't do it. There's so much work involved in building these huge solvent extraction plants, which are really just giant-sized laboratories. Typically, you'll have 15-30 stages for the LREE separation plant. And if you want to process all of the 14 rare earths plus yttrium and scandium, you would need up to 88 stages. If processing 30 stages requires an $800M investment – well, do the math. Regardless of the volume of each individual REE element you're producing, you have to have just as much process control for each stage. And with HREEs, available volumes are so low that you're going to have to accumulate material until you have enough to run the plant economically.
In addition to these technical and financial questions, there are political questions. The US EPA just issued a study on rare earth processing and recycling. It shows seven or eight technologies for separating rare earths. Great. But here's the problem – the two large LREE plants we know of (Molycorp Inc.'s (MCP:NYSE) and Lynas' facilities) were each huge investments, close to a billion dollars. Orbite's plant is $32M, but, of course, it doesn't have the same capacity as Lynas' and Molycorp's plants. I think many rare earth projects are way too big. I'm an advocate of what I call "right-sizing." I think Orbite has right-sized its alumina and rare earth byproduct projects perfectly. And the company used investor money; it didn't go deep in debt to build those plants. As an investor or stakeholder, I would want to know when I'm going to get my money back.
The problem I have with spending a billion dollars is I don't think you can get it back. I really wish Lynas all the luck in the world. And I know Lynas has in fact some serious HREE formations at Mount Weld at its Duncan deposit. That's not the one it's mining. That's not the one it's refining in Malaysia. In the next year, I think you're going to see the announcement of some big breakthroughs in some other processing technologies. I sincerely believe that solid-phase extraction, which is mentioned by the EPA's report, is going to make an impact on rare earths processing globally, especially where a commitment to a large-scale solvent extraction plant has not yet been made.
TCMR: Where is this new technology coming from?
JL: America. The solid-phase extraction technology that Ucore is using to separate out the radioactive nuisance elements at the mine is coming from the United States. Typically, if you have a discussion about solid-phase extraction with informed people, they will tell you it's beautiful in the laboratory but it doesn't scale up. Well, I don't doubt that was true when they tried it more than a dozen years ago. But things change. Chemical process engineering is a living, organic process. And the fact is that until 2007, the only people in the world working on improving solvent extraction separation technology were the Chinese and the Indians, as well as the Western companies based in China, like France's Rhodia Group (RHA:NYSE) and Neo Materials technology (now Molycorp Canada). When interest ramped up in separating rare earths and purifying them in the last few years, quite a few serious laboratories looked into it. Rhodia has since reactivated its shut-down solvent extraction plant in LaRochelle, France. Germany has a private pilot solvent extraction plant I will visit next month – it's the one that developed and verified the SX/IEX process now being installed by Orbite in Quebec. The Italian state agency ENEA is working on solvent extraction. In Japan, I know for a fact there are companies that have solvent-extraction plants and they are keeping up with the newest technology. Orbite's plant in Quebec is state-of-the art solvent extraction and represents significant improvements in solvent-extraction capability. There's a private company in the United States, Intellimet, that has really made some major improvements in solid-phase extraction. I expect solid-phase extraction of HREEs will be underway at full scale in the United States no later than 16 months from now. I am not at liberty to say where, but I think you can figure it out just from what I've said today.
TCMR: That is a wonderful prediction to end our processing conversation. Thank you so much for taking the time to chat with us.
JL: It's my pleasure.
Jack Lifton is an independent consultant and commentator focusing on market fundamentals and future end-use trends of the rare metals. He specializes in sourcing nonferrous strategic metals and due diligence studies of businesses in that space. He has more than 50 years of experience in the global OEM automotive, heavy equipment, electrical and electronic, mining, smelting and refining industries.Disclosure: 1) JT Long of The Critical Metals Report conducted this interview. She personally and/or her family own shares of the following companies mentioned in this interview: None. 2) The following companies mentioned in this article are sponsors of The Critical Metals Report: Ucore Rare Metals Inc., Rare Element Resources Ltd. and Tasman Metals Ltd. Interviews are edited for clarity. 3) Jack Lifton: I personally and/or my family own shares of the following companies mentioned in this interview: Great Western Minerals Group. I am a business development, technology, and marketing consultant paid by the following companies mentioned in this interview: Ucore Rare Metals Inc., Tasman Metals Ltd. and Orbite Aluminae Inc. I was not paid by Streetwise Reports for participating in this story. Streetwise - The Gold Report is Copyright © 2012 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part. The Gold Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report. From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported. Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734. Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies. 101 Second St., Suite 110Petaluma, CA 94952 Tel.: (707) 981-8999Fax: (707) 981-8998Email: email@example.com