BARRIE, Ontario (miningweekly.com) - Vancouver-based Rare Element Resources (RER), which is studying a project in Wyoming, could be producing by 2015 if all goes according to plan, CFO Mark Brown said on Thursday.
The junior company will complete a scoping study on the Bear Lodge project in September, after which it would decide whether to start a prefeasibility study or move directly into a full feasibility study on the property.
The company is then hoping to begin construction in three to four year’s time, when a rare earth element supply shortage is forecast to be well under way.
“The projections we see on supply and demand tie in quite nicely with that,” Brown said in an interview.
News emerged last week that China again cut the amount of rare earth metals producers in that country are allowed to export. China accounts for 97% of global rare earth supplies.
According to Brown, the export quota in 2005 was 65 000 t, but this was cut to 30 000 t for this year, driving up prices. That means rare earth supplies outside China have more than halved in the past five years, and western producers have been slow to respond.
China has restricted exports of the material to ensure it has sufficient supplies for its local industries.
Rare earth elements are used in electric cars, wind turbines, computer hard drives, compact fluorescent light bulbs, military applications, and even iPads.
Brown said the price for carbonates – a mixture of rare earth elements – had nearly tripled in the last three months.
“It’s a bit shocking in some ways. We wish were in production today.”
Last week, Reuters quoted Australian rare earth mining company Arafura Resources as saying there would be a 30 000 to 50 000 t supply shortage by 2012 “unless major new production sources are developed”.
RER said on Wednesday it was progressing with tests to decide how it would process the orebody at Bear Lodge.
The main findings were that it could get 90% recoveries from crushing the rock, scrubbing it with water and screening it.
It further upgrades what is called the pre-concentrate with mechanical processes, the product of which is leached with hydrochloric or sulphuric acid.
“It is not so much new technologies we are looking at, but the matter of getting the right combinations together for the deposits we have,” said Brown.
This creates a saleable rare earth product of around 40% purity in oxalate or carbonate.
The company would then consider the economics of a plant to separate the carbonate into the individual rare earth elements for sale.
This is what Brown described as the “big dollar ticket item”, but said other rare earth miners were considering building one. Canada’s Avalon Rare Metals said on Thursday it might build such a plant, and appointed SNC-Lavalin Group for a scoping study for the construction thereof.
Given the bullish prospects for rare earth elements, and the fact that smaller companies are developing projects, consolidation in the industry is likely.
“It’s very small industry. Demand is going up, particularly in green technologies. At the same time exports from main source is going down,” Brown noted.
Commodity trader Traxys has invested in US-based Molycorp Minerals , owner of the Mountain Pass mine, California.
There is speculation that automotive firms and companies that manufacture wind turbines such as General Electric might invest in rare earth element miners so as to secure supply, given the diminishing amounts that Chinese companies are allowed to export.
TSX-Venture Exchange-listed RER this week listed on the NYSE’s Amex, which Brown said would help broaden the company’s financing base.
It could now tap both Canadian and US investors for future equity capital raisings.
The US Geological Survey has described the Bear Lodge deposit as one of the largest rare earth element resources in North America.
The property also contains gold, which Brown called “a bit of halo of gold around our heart of rare earths”.
He said RER would likely bring in a partner to produce the gold, so his company could focus on rare earth elements.
RER was trading at C$3 a share on the TSX-V on Friday morning, giving it a market capitalisation of C$96-million.