Last month I paid a visit to the Miller graphite project in Canada, under development by Canada Carbon Inc. (TSX.V:CCB) in Grenville Township, Quebec. The Miller property was the home of a historical graphite mine in the latter half of the 19th century.

Grenville is situated 50 miles west of Montreal, approximately half way between that city and Ottawa. The journey from Montreal took about 75 minutes via Highway 50. Grenville is close to the town of Hawkesbury in Ontario, with the two sitting on opposite sides of the Ottawa River, which forms much of the boundary between the two provinces.

Generally I don’t visit a mineral project under development, until it has an associated mineral resource estimate that conforms to guidelines such as NI 43-101 or the JORC code. It’s the same criterion that I use for including projects on the TMR indices for rare earths and for graphite. A mineral resource estimate is a useful initial filter for discerning the evolution of technical knowledge associated with a given project. Miller does not have a mineral resource estimate yet; I had, however, heard about the unusual nature of the Miller project (which we’ll get into later) from a number of sources. I therefore decided to accept an invitation to come visit the property, to see for myself. Canada Carbon published a technical report on Miller in May 2014, which follows the NI 43-101 guidelines, in addition to other data associated with work on the project. This report did not include a mineral resource estimate.

I was hosted on my visit by Bruce Duncan, Executive Chairman and CEO of Canada Carbon. Also joining us were Steven Lauzier, the project geologist, and Rémi Charbonneau, a consulting geologist who is the Independent Qualified Person for the project.

The initial exploration work at the Miller property started in February 2013, with a ground survey to locate the original Miller Mine, and to confirm the presence of graphite veins and pods. Subsequent work consisted of additional ground and airborne prospecting work, identifying a series of anomalies via geophysical techniques such as small-loop frequency-domain electromagnetic (MaxMin), very-low frequency (VLF), induced polarization (IP) and versatile time-domain electromagnetic (VTEM) surveying. Significant anomalies of interest were then targeted for ground trenching, accompanied by core drilling.

The trenching work identified a number of graphite veins and pods throughout the property. The graphite can be found alone or associated with minerals such as wollastonite and pyroxene. It has also been found in disseminated form in marble and sulphide-bearing paragneiss, but the veins and pods are of primary interest because of their high grade and potential purity. Mr. Lauzier indicated that veins with grades of 40-80% carbon as graphite (Cg) and pods with grades of 10-15% Cg are common on the property.

Through the trenching work, the company identified three significant showings, designated VN1, VN2 and VN3, and which we visited in turn. The first of these, VN1, contains an irregular vein of semi-massive, coarse graphite, originally under 1-3 m of glacial till, along with pods of graphite mixed with wollastonite. The rocks here consist of banded paragneiss and marble units. The primary vein is exposed along a strike length of 12.8 m, with widths ranging from 10 cm to 1.7 m. Numerous secondary veins can be seen.

VN2 has a massive graphite vein up to 1.5 m thick, and numerous secondary veins and pods which follow the contact between the local marble and paragneiss rocks. Core drilling at this showing indicates that this contact is at least 39 m deep below the surface. VN3 is another massive graphite vein, some 2 m thick and 5 m long, hosted in unaltered marble. Six shallow cores were drilled at this site and the graphitic horizons were encountered below surface, confirming the initial event of the anomalies. You can see these showings in the images below.

Mr. Lauzier indicated that there are numerous additional graphite-wollastonite pods on the Miller property that have been exposed during trenching. The pods are pegmatitic in nature and generally occur in the contact zone between the paragneiss and marble. Numerous graphite veins have also been discovered as well. Mr. Lauzier commented that the graphite veins are likely the result of the transportation of carbon in hydrothermal fluids, which were channeled up through fractures in the rock over time. As the fluids cooled to 700-800 °C, the graphite was precipitated in large, highly crystalline flakes.

During my visit, on-ground grids for additional IP surveying were being prepared across the property.

So what is the big deal about this type of graphite? The formation of hydrothermal veins leads to the presence of very high-purity graphite and such occurrences are rare. The only current source in commercial quantities is the island of Sri Lanka. Once extracted, the graphite is relatively easy to process. The high degree of crystallinity in vein graphite (as a result of the way that it was formed), leads to thermal and electrical properties that are superior to the more typical natural-flake graphite, which forms from carbonaceous sedimentary deposits under heat and pressure. The most interesting and potentially lucrative applications for hydrothermal graphite materials, however, are in the nuclear industry.

So-called nuclear- or reactor-grade graphite is high-purity graphite that is used as a moderator material in thermal nuclear reactors that utilize uranium. Moderator materials are used to convert so-called fast neutrons into thermal neutrons during the fission process, which leads to a sustained (and controlled) chain reaction, and the liberation of significant quantities of energy. Reactor-grade graphite can also be used as a neutron reflector, which can be used to generate a chain reaction from a mass of fissile material that would normally not ‘go critical’ without the presence of the reactor material. In essence, it reduces the amount of uranium or other fissile material required, to sustain a chain reaction.

Because of the interaction of the graphite with neutrons during the nuclear process, it is vital that the material be free of impurities that will absorb neutrons. Boron is the most problematic impurity in this regard; reactor-grade graphite must have a boron, or equivalent-boron content (EBC), of less than 5 ppm. EBC is a measure of the collective effects that all impurities present have, on neutron absorption.

In June 2014, Canada Carbon announced the completion of purity testing on lump / vein graphite samples taken from the Miller property, indicating that a simple flotation process alone could produce graphite with purities of 99.8-99.9% total carbon (C(t)). With an additional simple thermal process, exceptional purities of 99.98-99.998% C(t) were achieved. Significantly, the EBC of the material after flotation concentration alone was 1-3 ppm, confirming that the material is nuclear-purity graphite, without needing hydrometallurgical treatment of any kind. Such material commands significant price premiums over more conventional natural graphite. Test results showed particularly low levels of sulfur in the graphite. The ease of upgrading via flotation would indicate that the impurities present are found at the surface of the graphite flakes, and not significantly intercalated or embedded in the material as is common with more conventional natural flake graphite. The company has published its assays on its website, so that calculated values such as EBC can be reviewed.

Miller is located on private land, whose owners entered into a surface-access agreement with Canada Carbon. Relations between the company and the land owners are apparently cordial; during the visit we met one of the owners, who is supervising the excavation of bulk sample materials from the site, on behalf of the company. Canada Carbon has permission to remove up to 480 t of materials from the property for processing in a pilot plant, to be built by SGS Canada Lakefield (SGS), and based on the aforementioned initial bench-scale flotation process, previously developed by SGS. The company is in the process of crushing and shipping the first 100 t of material from the site, and has until February 2015 to complete the rest of the sampling.

The property is well serviced logistically; In addition to Highway 50 and a power line which both cross the property, there is a rail line less than half a mile south of the highway and access to water via a river which also passes through the property.

The graphite veins and pods that are present at the Miller property make it highly prospective for the production of nuclear-grade graphite – but they also make it a real challenge to be able to produce a traditional mineral-resource estimate. Such estimates are typically derived from drilled samples taken across a project, with the mineral content found within the cores used to establish a 3D model of the geology of the deposit. This is fine in a deposit where the graphite or mineral of interest is disseminated spatially in the host rock; but when graphite occurs in highly concentrated veins and pods, drill results are likely to be ‘hit or miss’, with mostly ‘miss’.

This is one reason why the identification of graphite occurrences starts with electromagnetic and other geophysical surveying tools, followed by on-the-ground trenching; given the thickness of the initial veins and pods trenched, there should be little trouble in finding significant quantities of graphite on the project. Without a way to properly quantify that graphite however, within the wider project space, how does one move the project forward into a preliminary economic assessment or pre-feasibility study, which will comply with the requirements of NI 43-101? Just as important, how do potential future off-take partners develop a comfort level that the graphite will be there, in the years to come?

I put these questions to Mr. Duncan, who acknowledged the challenges right away. He commented that the unique nature of the deposit has already generated significant interested from end users, who are not only interested in the graphite for its potential nuclear applications, but also for other end uses where very high purity and / or crystallinity is an absolute requirement. He said that such end users are used to acquiring materials from Sri Lanka, where mining is conducting on a rolling basis; resources are identified and then put into a mining campaign with a one-to-two year horizon. As the known occurrences are depleted, new resources are identified by drilling and put into the queue for subsequent mining. Many airborne EM anomalies were found out over the Miller Property. An IP survey on anomaly E1 revealed many different conductive and chargeability anomalies. It appears that the Miller Property could contain sufficient newly discovered graphite occurrences to develop a model based on exploring and mining the discoveries as they are made, without developing a resource model for the property as a whole.

This approach does not necessarily lend itself well to traditional mine financing of course, but Mr. Duncan indicated confidence that the project could be bootstrapped into operation, with a combination of advances on future off-takes from strategic partners, and other non-traditional sources of financing, that do not necessarily require placements in the open market (and which would require greater detail in terms of mineral resource estimates and the like).

While SGS continues to process the initial 480 t of material from the Miller stockpile, Mr. Duncan said that the company will also continue with characterization and purity tests of the graphite material, provide samples for potential end users as well as advancing further exploration of the Miller property. Although he would not comment on capital expenditure estimates – due to regulatory compliance – the cost of mining graphite at the Miller property holds the potential to be comparatively low, versus a conventional open-pit graphite mine in a more remote location. Given the accessibility of the graphite veins, and their apparent thickness and shallow depth (and, in many instances, their location at surface), Canada Carbon’s extraction costs may be particularly low. If the thickness of the initial veins and pods trenched to date, is found elsewhere on the property, then significant quantities of graphite may be present.

Since my visit to the project, Canada Carbon has released additional test results that indicate that certain properties of the Miller lump / vein graphite match or even exceed those found in synthetic graphite. Both tap (bulk / unprocessed) and skeletal (actual) densities were shown to be close to that of synthetic graphite; the specific surface area and porosity levels of the Miller graphite were found to be significantly lower than for synthetic graphite, which is particularly desirable in the production of anodes for lithium-ion batteries. This combination of properties means that once commercially available, graphite produced from the Miller property may be able to command prices as high as $10,000-20,000 / tonne, based on recent cost estimates from the likes of Industrial Minerals and others for synthetic graphite.

The Miller property is clearly an unusual and possibly unique graphite project; and given the indications that lump / vein graphite sources in Sri Lanka are diminishing, a hydrothermal lump / vein deposit in North America would be highly attractive to numerous end users. The key challenge for the project will be to be able to put in place a financing structure that will allow the project to go into commercialization, without the benefit of establishing a minimum level of confidence in the size of the resource present, using the usual means of reporting. Nevertheless, if strategic and other partners can be persuaded to work with Canada Carbon on the basis of the excellent metallurgical results obtained to date, the project has a good chance of going into operation.

My thanks go to Mr. Duncan, Mr. Lauzier and Mr. Charbonneau for hosting my visit, and for numerous useful discussions.

Disclosure: at the time of writing, Gareth Hatch is neither a shareholder of, nor a consultant to, Canada Carbon Inc. He did not receive compensation from Canada Carbon or from anyone else, in return for the writing of this article.

In August I had the chance to join an analysts’ tour of Strange Lake, the rare-earth-element (REE) deposit owned by Quest Rare Minerals Ltd. (TSX.V:QRM, AMEX:QRM) and the company’s flagship project. While there we also had the opportunity to visit Misery Lake, another rare-earths project owned by Quest.

The Strange Lake deposit is located close to Canada’s Quebec / Labrador border region. It is approximately 80 miles west of the Voisey’s Bay nickel-copper-cobalt mine on Labrador’s east coast, and around 135 miles northeast of Schefferville, Quebec. The project site is about 170 miles north of Goose Bay, Labrador, and it was from here the group took off for the flight by Air Labrador Twin Otter charter planes. 90-minutes later we arrived at the exploration camp at Strange Lake, landing on a permanent airstrip built on a glacial esker deposit (a ridge of stratified materials) close to Lac Brisson, not far from the actual Strange Lake.

On the trip were a number of analysts from financial and capital-market institutions in Toronto, New York and elsewhere, as well as Mickey Fulp (the well-known “Mercenary Geologist”) and Steve Zajac, a consulting geologist who is advising Quest on the Strange Lake project. Steve was involved in the original exploration work at Strange Lake in the 1970s, as Chief Geologist of the Iron Ore Company of Canada (IOC). According to Mr. Cashin, Quest’s President & CEO, IOC was not far from a production decision on Strange Lake, but unfortunately the bottom fell out of the iron-ore market around that time. This meant that the steel guys involved with IOC wanted the company to focus its attention on iron ore, not rare earths, and the project became relatively dormant, exchanging hands several times, until Quest came along.

We were hosted on our visit by Pierre Guay and Patrick Collins. Mr. Guay is Quest’s Manager of Exploration, overseeing the day-to-day operations of the camp and its personnel. Patrick Collins is Quest’s Senior Project Geologist for the Strange Lake project. Mr. Collins was present when the first drill hole was made, and will see the exploration program through to its completion.

You can see photographs taken during the visit, in the galleries below (click on each image to enlarge it). On my second full day on-site I had a bit of a camera malfunction, but fortunately one of the analysts on the trip took some good pics of the day’s activities, and kindly allowed me to use some of them for this report. Mr. Collins also provided some additional core-sample photographs, some with labels; I can confirm that these images match the core samples that I saw during the trip.

The Strange Lake Alkalic Complex (SLAC) is part of a post-tectonic, peralkaline granite complex, which has intruded along the contact between older gneisses and monzonite of the Churchill Province of the Canadian Shield. At present, the primary area of interest at Strange Lake is the so-called B Zone, which was discovered during the 2009 exploration program. Quest published an updated 43-101 compliant mineral-resource estimate for the B Zone in April 2011. The deposit contains an estimated 140.3 Mt of rare-earth mineral resources at the Indicated level, with an average grade of 0.93% total rare-earth oxide (TREO), and an estimated 89.6 Mt of resources at the Inferred level, with an average grade of 0.88% TREO. Both of these estimates assume a 0.58% TREO cut-off grade; for the purposes of the pre-feasibility study (discussed below), Quest used a cut-off grade of 0.95% TREO.

In total there are an estimated 2.1 Mt of TREOs in the ground at the B Zone, and with an average heavy REO (HREO) distribution of 39% in the TREOs present, the deposit is one of the largest and richest potential HREO deposits in the world. 67% of its value comes from the presence of critical REOs, as that term was recently defined by the US Department of Defense. In addition to the presence of REEs, the project is of interest for co-products of beryllium (Be), zirconium (Zr), niobium (Nb) and hafnium (Hf), which, according to Mr. Cashin, have the potential for providing strong credits within the overall cost structure of the project. The Be present, for example, may be of interest to Canadian (or other) defense contractors who do not want to be dependent on US sources for this important element.

Recent drilling at the B Zone has led to the discovery of a pegmatite “spine” more than 25 m thick, which trends northwards towards the airstrip and which contains higher grades of TREOs. The pegmatite material has a coarse-grained mineralogy, associated with volatiles and past fluid flow. The pegmatite spine is both sheet-like and finger-like in nature, with and layers of material in the main deposit. The spine appears to go under the lake to the north. Additional drilling is being undertaken to determine the margins of the spine and to better define its edges. So far, the B Zone appears open along strike to the north and south.

The overall deposit contains a wide range of minerals and in places exhibits very significant alteration. The three main aliquots or portions of the B-Zone deposit are the pegmatite spine, alkaline granite and altered granite. Although there are some variations in the TREO content within these aliquots, the mineralogy of each is similar, which will allow them to all be processed using the same methods and flow sheets. There are significant quantities of gittinsite (a calcium zirconium silicate REE-bearing mineral) in the pegmatite spine. Other REE-bearing minerals present in the B Zone are aegirine, gerenite, gadolinite, kainosite, pyrochlore and zircon. Non-REE-bearing minerals commonly found here include amphibole, feldspar, fluorite, pyroxine and quartz.

Quest uses Activation Laboratories for its material testing and analysis. This company has a preparation lab in Goose Bay, where core samples are sent to be crushed, ground and milled, before 20 g pulp samples are bagged and sent to Ancaster, Ontario for testing and analysis. The rest of the material is warehoused in Goose Bay. At a later date, Mr. Cashin said that these surplus materials could be used for metallurgical testing. On occasion, drill holes will be twinned and an entire core sample will be sent for studying the variability of the minerals within the rocks present in the entire deposit.

While in the core shack, I asked Mr. Collins and Mr. Cashin about the reliability and accuracy of the handheld Niton XRF analyzers that they used. Mr. Collins said that a properly calibrated system would be accurate to within 20%, but that a rigorous calibration process was required to achieve that.

The Main Zone of the Strange Lake project (2 miles southeast of the B Zone) was the starting point for Quest’s exploration at Strange Lake. During our visit to this area of the project, Mr. Guay commented that it is not as altered as the B Zone. In the summer of 2010, Quest decided to remap the whole area in order to update the original data that had been produced by IOC. 30 holes were drilled to depths of up to 75 m; the results indicated the presence of pegmatites towards the west of the zone. Further exploration may be conducted at a future date.

Quest completed a preliminary economic assessment (PEA) from Wardrop Engineering for the B Zone project, in September 2010*. The PEA looked at an average production of 12.5 ktpa of TREOs over the 25-year projected life of the mine (at a cut-off grade of 0.95% TREO, higher than the cut-off grade used in the mineral-resource estimates). An open-pit production rate of 4 ktpd was proposed, with an initial estimated strip ratio of 0.4:1 (this is the ratio of waste material to ore recovered ). The PEA estimated required capital expenditures of around C$560M, which included a 25% contingency.

The PEA was based only on mineralization estimates within 200 m of the surface; Mr. Cashin estimates that there is mineralization as far down as 300-350 m below the surface. Most of the pegmatite spine, with its higher concentrations of TREOs, is within 125 m of the surface, with little overburden. The B-Zone resource is open in all directions, including at depth and below adjacent Lac Brisson, although the materials below the lake would almost certainly not be considered for future exploitation.

Work on the flow sheet for the production of REOs at Strange Lake continues. Initial work using an acid bake at 220°C for one hour on the REO-bearing granites and pegmatites resulted in the successful production of 77-93% REO slurries. Mr. Cashin said that physical beneficiation would not be required for the minerals, beyond initial crushing and grinding of the feed stocks, thus avoiding potential REO losses via early pre-concentration steps.

Mr. Cashin went on to say that past processing tests on the REE-bearing silicate minerals present at Strange Lake, resulted in the gumming up of the filters with a silica gel, which results from the process. The acid-bake process avoids this problem as the silica gel is desiccated, and falls to the bottom of the reaction vessel. Up to five concentrates will be produced; tailings will be dry stacked, with a process developed to recover water and acid, which could then be recycled for use in the processing facility.

The original processing plan was to send slurry concentrates via pipeline to the Labrador coast for processing, but the permitting process was deemed to be too difficult. Quest is now looking to build concentration and separation facilities close to the proposed Strange Lake mine site in Quebec, in order to simply the process.

Sulphuric acid is the principle initial reagent for processing, Mr. Cashin said that the company was looking at the feasibility of having elemental sulphur (S) shipped to the future processing facility at Strange Lake, in order to produce the acid on-site.

The company is also looking at the development of an access road for shipping materials in and out of the facility once built. Two options are being considered; the first would be a 75 mile-long road east to Voisey’s Bay; the second would be a 135 mile-long road southwest to Schefferville. Estimates indicate that the capital expenditures involved would be approximately $135M and $250M respectively. When factoring in the cost of maintenance over the 25-year mine life, total cost estimates are $600M for a road to the coast, and $2.4B for a road to Schefferville. Obviously for cost reasons, a road to the coast is preferred.

In the meantime, Quest has already begun airborne, topological and environmental studies on the impact of building such a road. There is also the need to avoid aboriginal archeological sites and other sites of importance. The goal is to have the road underway by early 2013 at the latest, so that it can be completed in time.

As part of the pre-feasibility study (PFS) now underway for the B Zone, Quest is looking at the possibility of attaining lower strip ratios, perhaps as low as 0.25:1, by revising the angle of the planned pit wall, which because it is contains particularly robust rock, could be set as steep as 55°. The B Zone has gone from discovery to initiation of a PFS in less than two and a half years – a relatively short period of time for such projects.

The northern edge of the planned open pit will be at least 150 m from the lake and airstrip, to prevent any problems of seepage. The pit has a planned depth of 125 m to start; the first ten years of mining, targeting the pegmatite spine, is estimated to produce higher grades of TREOs than the rest of the B Zone, and will be executed at a high production rate of 18-19 ktpa TREO in the same period. Mr. Collins commented that as additional in-fill drilling results have been analyzed, the company has started to consider altering the original pit design, in order to accommodate additional mineralization that has been found.

Mr Cashin said that Quest hopes to complete the PFS by Q1 2012. The initial proposed flow sheet is slated for completion at any time now, with the information gleaned from the metallurgical testing being used to put together a pilot plant in early 2012. This would be undertaken by Hazen Research at their facilities in Colorado, with a goal of producing end products that could be tested by potential end users for quality and consistency. A bulk sample of 25 t of material will be used to test the run of process in the pilot plant; 15 t of that material has already been excavated, with an addition 10t to be removed in the future.

Quest has recently been engaged in a joint venture with Search Minerals, on part of the Strange Lake Alkali Complex (SLAC). Much of the SLAC was explored by IOC in the past, but only via shallow drilling. IOC had a historical (non-43-101-compliant) resource estimate of 53 Mt @ 1.96% TREO (0.66% Y oxide + 1.3% REOs), along with oxides of Zr, Nb and Be. Search acquired a series of claims in the vicinity, and in June 2010, through its Alterra Resources subsidiary it entered into an agreement with Quest, for the latter company to acquire up to 65% of the interest in 30 mining claims adjacent to Quest’s own claims on the SLAC. This was in return for conducting an exploration program on the claims, in addition to the transfer of Quest shares to Alterra.

The camp at the Strange Lake project is pretty impressive. Located to the west of the active exploration area, next to Lac Brisson, it is very well-provisioned and can accommodate up to 80-90 people at any one time. Mr. Cashin explained that the camp uses a “6 weeks on, 10 days off” rotation, with work conducted during 12-hour shifts. This is the second year that Quest has been based at this camp; it was first established towards the end of the 2009 exploration season, with significant infrastructure first put in place at the beginning of the 2010 season. The company recently tripled the size of the kitchen and canteen; provisions are flown in from Schefferville and Goose Bay. The camp uses a 40 kW generator for electricity, plus a backup. There is a nurse’s station, wireless internet access connected to a satellite uplink and even a makeshift sauna on-site!

Mr. Cashin commented that the turnover of employees at the camp is very low – word gets out concerning the good working conditions at the site, and this means that the project can attract high-quality personnel. Such conditions no doubt contribute the the relatively high productivity of the drilling program, with a single hole being drilled on average every 24 hours. The drilling contractors are paid per meter of core drilled.

Quest’s drilling contractor is Forage Boreal, the contracting division of Versadrill, the manufacturers of the machines being used for the drilling. At the time we visited, the project was using four exploration diamond-drill rigs for in-fill drilling, with a fifth drill rig being used for outside targets and doing condemnation or sterilization drilling (used to make sure that areas around the site to be allocated for tailings, processing facilities etc do not contain valuable minerals). The crews have also twinned 12-16 existing drill holes, to allow for the subsequent completion of location-specific metallurgical testing.

This season will likely be the last for exploration drilling at the B Zone; Mr. Cashin told his geologists that if they had particular targets at which they wanted to take a look, then now was the time to do it. The next phase for the project will be the transition from exploration to engineering, with an associated change in personnel and activities on site. The geologists and other exploration personnel will then turn their attentions to Misery Lake and possibly other targets in the vicinity. In some of the early surveying work, for example, the folks at Quest noted radiometric anomalies associated with a boulder train close to the SLAC; there is some interest in determining the sources of associated mineralization.

Around 20% of the non-Quest-owned portion of the SLAC lies within lands subject to the Labrador Inuit Lands Claims Agreement. This area is now part of the autonomous region of Nunatsiavut on the eastern side of the Quebec / Labrador border. Mr. Cashin indicated that these lands may become available for auction at some point in the future, and that Quest would determine at that time if they would bid on them. One potential challenge of working so close to the border between Quebec and Labrador is that the exact position of the boundary between the two provinces has never really been properly defined. There are a handful of marker posts indicating the boundary, around 100 m away from the pit in the Main Zone that IOC excavated in the 1970s. The boundary between the two provinces was only set in 1927, and there are indications that Quebec never formally recognized the position of the border. Still, the issue is not exactly a flash point at this moment in time.

Quebec has long been known as one of the most mining-friendly jurisdictions in the world. The Quebec government gives a 50% rebate to companies who spend money on eligible mineral-exploration initiatives, upon presentation of audited financial statements. Mr. Cashin said that Quest will soon be in receipt of a $3.35 million rebate from the provincial government, as a result of the companies 2010 exploration activities. He indicated that Strange Lake has been visited by senior officials from the provincial government, and that the Ministry for Natural Resources and Wildlife has designated specific personnel within the ministry to liaise with Quest on this project. Mr. Cashin noted that to date, most mineral projects on Quebec and elsewhere in Canada, were located south of the 49th parallel. Since Strange Lake is located above the 49th parallel, the company is benefiting from the Quebec government’s “Plan Nord”, its long-term economic-development strategy for that region of the province.

The provincial government is interested in the strategic potential of projects such as Strange Lake. Mr. Cashin said that he had been able to discuss Strange Lake with various governmental departments during a recent trade mission to Japan and Korea.He commented that there may be some interest in helping to bring separation facilities and other elements of the supply chain, to the area. Mr. Cashin also said that from his own experience during his time working for the Ontario Ministry of Mines, he estimated that for every $1 that provincial governments put into the development of projects (or into helping conditions conducive to their development), the investment produces $3 in revenues due to subsequent private investment.

In 2007, Quest undertook reconnaissance of a significant ring alkaline intrusion at Misery Lake, some 80 miles south of Strange Lake. Grab samples indicated TREO content of up to 8-9% TREO, with 17-20% HREO content. The government of Quebec subsequently did a detailed magnetic survey of the region, and geochemical samples have also been taken. In 2011 Quest will likely complete 6,000 m of drilling at Misery Lake, out of an initially planned 10,000 m (there were a number of weather-related delays).

The group took the trip to Misery Lake from the Strange Lake camp by float plane and helicopter. The group was accompanied by Mr. Guay and by Laura Petrella, a student from France completing her master’s degree in geology at McGill University, with a thesis focused on the Misery Lake property. Ms. Petrella said that the Misery Lake claims were extensive, and that a significant amount of prospecting and surveying was required to keep them in good standing. The materials at Misery Lake have similarities to those at the Lovozero deposit in Russia’s Kola peninsula, and elsewhere.

There is significant overburden covering much of the deposits of interest (up to 35m thick in some places), so this made it challenging to characterize the area. The short field season at Misery Lake (2-3 months long) also made it very challenging to explore here; there was absolutely no infrastructure in place at the site, and the geologists are shuttled back and forth from a hunting and fishing lodge located around 6 miles away, by helicopter or float plane. Mr. Cashin indicated that they may start to build a permanent camp at Misery Lake next year.

Mr. Guay said that the company was looking to develop enough information from the site at Misery Lake, to interest potential third-party partners to assist in the development of the project, as a way of speeding up the exploration process. There had been some initial interest from JOGMEC, the Japanese government entity, but a joint venture was ultimately not initiated.

A comment that Mr. Cashin made early on in the visit, was that the company was looking to expand its Board of Directors to include additional individuals who have experience with mining development. Just this past week, the company announced the appointment of one such individual, George Potter, to their Board.

Overall, I was very impressed with all aspects of the Strange Lake project, and the management team behind it. The project is clearly well on its way to completing the pre-feasibility study, and determining the flow sheets required to produce end products. Although the project site is pretty remote, the company has not let that stand in the way of making significant progress. On a side note, I was also impressed with the way that the Quest team handled some unexpected logistical challenges before we arrived at Strange Lake, caused by the notoriously unpredictable weather in that part of the world. The little things can make all the difference.

My thanks go to Peter Cashin and his colleagues at Quest Rare Minerals Ltd., for facilitating the visits to Strange Lake and to Misery Lake.

Disclosure: at the time of writing, Gareth Hatch is neither a shareholder of, nor a consultant to, Quest Rare Minerals Ltd. (Quest). He did not receive compensation from Quest or from anyone else, in return for the writing of this article.

Earlier today I had the pleasure of attending a luncheon in New York, given by the Foreign Policy Association (FPA). The FPA hosted the event to honor Jean Charest, the Premier of Quebec, with the Association’s Statesman Award. Premier Charest gave a fascinating keynote address titled “Plan Nord: Building Northern Quebec Together – the Project of a Generation“, in which he laid out his vision for Plan Nord, the recently launched strategic, sustainable development plan for the province.

Plan Nord will unfold over the next 25 years, and when completed will have invested an estimated $80 billion and created an average of 20,000 new jobs per year. As Premier Charest stated, “Plan Nord will be to the coming decades, what the development of La Mancicougan and James Bay were to the 1960s and 1970s”. It could also have a major positive impact on the development of technology metals in Canada, and rare-earth metals in particular.

Premier Charest made the point that Quebec has long recognized that having access to markets around the world is a key to the future success of the province. This was made clear in the significant support from Quebec and Quebecers for the free trade agreement with the US that was put into place in 1988 (before being superseded by the North American Free Trade Agreement (NAFTA). In recent years Quebec has realized just how dependent it has become on the USA for trade, and has made efforts to work with Europe and elsewhere to build new trade opportunities.

Premier Charest said that a few years ago, the province recognized the need to develop the province above the 49th parallel, and north of the St. Lawrence River and the Gulf of St. Lawrence. This is a region that is almost twice the size of France, and 10 times the size of the state of New York. It is a region that accounts for over 75% of Quebec’s installed hydroelectricity generation capacity but accounts for less than 2% of Quebec’s total population (around 120,000 people live in this region, including 33,000 First Nations and Inuit people).

The team behind Plan Nord believe that there will be strong demand for the natural resources in Quebec for many years to come – and this includes rare-earth elements, which are very much on the radar for the province. Not many people know that of the approximately 360 different rare-earth exploration and development projects that TMR tracks outside of China, almost 20% of those projects are located in the province of Quebec alone, making it the single-most important jurisdiction for ongoing rare-earths exploration and development in the world. Premier Charest acknowledged that the development of these and other resources in northern Quebec will require the development of infrastructure to enable these projects to happen. The development of roads and related infrastructure would be part of Plan Nord.

Premier Charest insisted that this development will be conducted with the environment in mind. He stated that 50% of the area covered by Plan Nord will be reserved for non-industrial uses, such as the promotion of biodiversity. A network of specifically protected areas will be developed by the Quebec government, covering at least 12% of the Plan Nord area by 2015.

Of the $80 billion slated for investment in the 25 years that the plan will run, $47 billion will be used to invest in new energy projects, with a view to adding 3.5 GW of renewable power capacity, including 3GW of hydro, 300 MW of wind energy and 200 MW of other energy production. Premier Charest commented that the production of this energy will be a key element of the sustainable development of the territory, but that the ability to produce energy was a critical component in the trade relationship between Quebec and the USA – Quebec could be a significant partner for its southern neighbor in this regard. Premier Charest gave the example of a recent 26-year agreement with the state of Vermont – Quebec provides 30% of Vermont’s energy needs, and it is no coincidence that Quebec and Vermont have the lowest carbon footprint of any jurisdictions in their respective countries.

Most interesting to me, was the Premier’s pragmatic comment that in the next 20-30 years, all indications are that a new maritime route will open up above the northern shore of Quebec, as a result of the lack of sea ice because of climate change. If such a route comes into existence it could shave three days off the time that it takes to ship goods by sea from Europe to Asia, and would rival the new canal being built in parallel to the existing Panama Canal, to accommodate ever-larger vessels. Premier Charest pointedly noted that Canada’s claim over the seas through which such a route would pass, is not presently recognized by the USA and Europe, and so the coming years will see significant political and strategic discussions among various nations, as the issues are resolved. A key concern of the Federal government of Canada, and the provincial government of Quebec, is the fragile nature of the environment in the north of Quebec, and how future shipping routes and the associated infrastructure with that, could affect the province in the North.

Plan Nord could have a significantly positive effect on the development of rare-earth and other rare-metal projects in Quebec, and indirectly in Labrador as well, since Labrador shares a border with Quebec to the latter province’s east. It’s an interesting example of a jurisdiction putting together an integrated, coordinated effort to develop its resources, one that could have far-reaching consequences for Canada, North America and the rest of the developed world.

My thanks go to Investissement Quebec, for the invitation to today’s event. We’ll keep an eye on the Plan Nord story, as it relates to rare metals and rare earths in particular, and will let you know what unfolds. In the meantime, you can find out more about Plan Nord, at its Web site at: www.plannord.gouv.qc.ca.

On Friday October 29, 2010, Jack Lifton was interviewed by CBC Radio’s Gillian Findlay on “The Current”.

The subject was the rare earths and an extract can be played below:

By Luann Lasalle – The Canadian Press – Published: October 23, 2010

MONTREAL – Flatscreen TVs, laptops and Apple’s iPhones all use rare earth metals, critical to tech devices but largely controlled and produced by China.

It’s a market that a number of Canadian companies are trying to enter with their own mining properties in order to compete with and potentially take away market dominance from China.

“The market is only now catching up to the understanding of the sheer importance of these metals,” said Peter Cashin, president and CEO of Quest Rare Minerals Ltd. (TSXV:QRM).

Besides TVs, computers and mobile phones, rare earth metals are also used in wind turbines, in iPod earbuds for sound quality, in hybrid electric cars’ motors and batteries, and in smart bombs and other defence applications.

China controls about 97 per cent of the production of rare earth metals and has cut back on exports to meet domestic demand and help cut pollution. Japan has been already squeezed in its supply of these metals due to a dispute with China and said Friday it plans to mine for them in Vietnam in a bid to reduce its dependence on the economic powerhouse.

Cashin said he expects to have Quest’s Strange Lake property in northeastern Quebec, near the Labrador boundary, in production by 2014 or 2015. He’s also interested in finding a partner to refine the metals.

He said there’s enough rare earth metals, both light and heavy, at the Quebec property for an estimated 65 to 100 years of production.

“That speaks very well to the security of the supply that’s got the United States and other western governments concerned about their ability to obtain those important rare earths,” he said.

Though they’re called rare earth metals and may have been considered so when they were discovered at the end of the 18th century, they’re not actually rare or in short supply.

They’re a group of 17 similar metallic elements whose names aren’t exactly common to everyday vocabularies, such as cerium, terbium, dysprosium and neodymium.

So-called “heavy” rare earth metals are particularly sought after because they’re critical to the production of magnets found in wind turbines, computer hard drives and electric motors, and can tolerate very high temperatures.

Analyst Jack Lifton said the Chinese have cut back on production because they have to meet their own domestic demand and they’re worried they’re going to run out of the metals.

Lifton said Canadian companies could be the closest to producing an alternate supply of “heavy” rare earth metals, citing Saskatchewan-based Great Western Minerals Group Ltd. (TSXV:GWG) as an example.

“The world is waiting for a Canadian company to start producing heavy rare earths,” said Lifton, founding principal of Technology Metals Research in Detroit.

“The heavy rare earths are critical to the production of modern magnets that can operate at high temperatures.”

Great Western has a mine in South Africa that’s expected to be up and running in 2013, said James Engdahl, president and CEO. A separation facility for the metals is also planned, he added.

“By 2013 when we’re in production, we see ourselves growing substantially,” Engdahl said, adding that the company may make an acquisition or two.

“We believe the potential in South Africa to produce maybe as much as 10,000 tonnes a year is very realistic,” he said from Saskatoon.

Engdahl said the mine will be able to produce the in-demand “heavy” rare earth metals.

Great Western, which also processes the metals, has been buying them from China for 18 years. But Engdahl said the company also processes rare earth metals in England and Michigan.

“We are the only ones that make alloys basically outside Asia,” he said.

Lifton said he also likes Avalon Rare Metals (TSX:AVL), but he said it will be financially challenging for the Toronto-headquartered company to get the heavy earth metals out of the ground due to infrastructure costs at its property in the Northwest Territories.

“If they can do that, Avalon will become the world’s premier supplier of the world’s heavy rare earths and the Chinese will buy from them and everybody will be happy.”

Engdahl said rare earth metals have changed everyday life and “miniaturized” devices.

“If you went back to the ’60s and you had a big black-and-white TV, that’s what the world would be like without rare earth magnets in them.”

The television commentator and former Jesuit, John McLaughlin, used to make me laugh when he would tell a panelist of an opposing political view: “Once again you’ve stumbled upon the truth, even though you don’t know how you got there.”

The New York Times recently reported the facts of a story entitled, “China to Invest Billions in Electric and Hybrid Cars,” but failed to stumble upon the truth. So let me do that for the Times and for your benefit, dear readers:

China, as part of its national plan, a goal centrally set by those in overall charge of its economy, announced yesterday that its motor vehicle industry will be required to build one million electric and hybrid motor vehicles in the next few years. I believe that this means that the industry will be required to reach a production rate of one million electrifed motor vehicles, the size of passenger cars, per year.

This is part of an overall plan to marshal and deploy China’s natural resources and its resources of intellectual property for the benefit of its own people, first. How much more logical can it get than that as a reason to conserve precious natural resources such as the rare earths?

The New York Times points out in the above story:

“The announcement, analysts say, is another example of how China seeks to marshal resources and tackle industries and new markets. The plan also underlines what China describes as its growing commitment to combating pollution and reducing carbon emissions.”

When I was in Beijing in the first week of August, three weeks ago, one of the other (I was a speaker at the plenary session) speakers at the Chinese Society for Rare Earths 6th Annual Rare Earths’ Summit, stated that a goal of the next two five-year plans, to be completed in 2020, was to have 330 GW of wind-turbine-generated electricity installed by that time. The speaker pointed out that this would take 59,000 metric tonnes of neodymium, calculated as 28% of the rare earth permanent magnet alloy, neodymium-iron-boron, since each 1.5 MW wind turbine generator will require one tonne of rare earth permanent magnet alloy.

The same speaker who was from the Chinese rare earth permanent magnet manufacturing industry didn’t mention how much of the heavy rare earths would be required for the project. I will estimate that at most it would be one thousand tons of terbium and three thousand tons of dysprosium.

In any case the total requirements for these new (not replacement) uses for neodymium, would be the total production for three years at the most recently achieved high production rate of neodymium, and as much as five years of terbium and two to three years of dysprosium.

If the neodymium demand is to be met, and this means that China, AS THE SPEAKER SAID, decides to use only rare earth permanent magnets for its wind turbine electric generator program, then it would require that three years’ production of the contained neodymium, at the rate it was mined in China in 2008, among all the rare earths mines there, be reserved for Chinese domestic magnet and wind equipment manufacturers and be targeted for the Chinese domestic market!

I think that it is crystal clear, that China is not reducing the production of rare earths on a long term basis and is not reducing their export on a short term basis. It is in fact pausing to:

• physically clean up the rare earth mining sector;
• eliminate illegal mining and smuggling of this precious green resource;
• consolidate the rare earth mining industry under the largest state-owned base metal producers of iron, copper, and aluminum, to prepare to ramp up the Chinese domestic production of rare earths both to meet and to guarantee the success of its long-term green strategy.

This is called long term strategic planning for those in Washington and on Wall Street who don’t understand why the Chinese are ‘depriving us’ of this vital resource. This process is also called ‘conservation of domestic resources’, by the way.

As to electric and hybrid cars, they require neodymium, dysprosium, and terbium for the magnets in the rare earth permanent magnet electric motors – both that drive them and that power their accessories. Some or all may also use lanthanum in nickel metal hydride batteries, as all hybrids made today currently do. A. In any case, whether or not the Chinese electrified cars use NiMH batteries, they are being designed to use rare earth permanent magnet electric motors. A million such vehicles will probably require just one million kg (1,000 metric tonnes) a year. Oh, did I mention that they will need also 10-20 tonnes of terbium and up to 50 tonnes of dysprosium. All of this new demand will be added demand not replacement demand, by the way.

I have no doubt that China will remain the world’s largest producer of the rare earths indefinitely. In the near term, perhaps over the next 5-10 years, China will need to import the ‘light’ rare earths lanthanum and neodymium, to make up any shortfalls created by its proposed quantum leap in demand in the face of the temporary reduction of production, for environmental and reorganization reasons. If the non-Chinese light rare earth miners get their acts together in time so that they can produce light rare earths at a lower cost than their Chinese competitors are able to do, then both Molycorp and Lynas have a good chance of success even in the long term.

The real issue for the future of rare earth utilization and therefore of mining, is the continued growth of the use and need for the heavy rare earths, terbium and dysprosium.

These ‘heavy rare earths’ are believed by the Chinese to be in short supply domestically. China today is the world’s only producer of heavy rare earths, mostly from southern Chinese deposits known as ‘ionic clays’, although significant quantities are also produced from the Bayanobo region (even though they report in Bayanobo only in small quantities) due to the overall massive amounts of rare earths mined there. Nonetheless, China believes that its own domestic supply of the heavy rare earths has between 5 and 30 years remaining at present levels of use.

This means that the real supply opportunity in the non-Chinese rare earth mining sector, is for those deposits that have above average proportions of heavy rare earths, to be brought into production as quickly as possible.

It is a horse race among those non-Chinese juniors with commercially (i.e. economically) recoverable heavy rare earths.

They are:

Canada

1. Great Western Minerals Group
2. Avalon Rare Metals
3. Quest Rare Minerals

(Note: some of my colleagues have urged me to add other Canadian juniors to this list, such as Matamec Exploration, but I know little about that company and will reserve my judgement on them for a future time, when I have had time to study Matamec Exploration and to visit its site.)

USA

1. Ucore Rare Metals
2. Rare Element Resources (a light rare earth deposit but with significant europium only)

Republic of South Africa

1. Rareco (in conjunction with Great Western Minerals Group)
2. Frontier Rare Earths (private at this time)

The success or failure of any of the above, will depend on the quality of their deposits, the efficiency of their extractive metallurgy, the ability of the global rare earth refining industry to service them, and the growth of the Chinese, Japanese, Korean, and Indian domestic markets.

Disclosure: I own shares in Great Western Minerals Group, and I am a paid consultant in business development to Ucore Rare Metals and to Frontier Rare Earths.

Last week TransCanada Corp responded to criticism from US environmentalists of its efforts to ship crude made from Canadian oil sands to the US.

American exceptionalism has added the dimension of exceptional stupidity with regard to our securing of future energy supplies.

TransCanada has responded as a rational entity to the confused hypocrisy now dominating the American government about economics in general, and energy efficiency and self-sufficiency in particular.

The clock is running on the bureaucratized mess that Washington’s self serving politicians have made of the US economy.

Fantasizing a green future without reinforcing the infrastructure to create it, or to even look at what is actually do-able, has now become the religion of American politicians of all stripes. Politicians, as ignorant of the infrastructure issues as they are of engineering, throw taxpayer IOUs at politically correct soothsayers to waste on beating dead horses, or guessing about technologies in which the USA is now several generations behind!

Washington’s IQ-challenged elites in their plush sandboxes, still believe that America is the world’s only possible engine of growth. This was made obvious in the last election primary cycle when clueless or worse (suborned) Hilary Clinton said she would reopen NAFTA if elected.

The Canadians said then, as TransCanada says now, if you don’t want our oil, gas, metals, minerals, and food products we’ll sell them to the Asians, mainly Chinese, so don’t worry about us.

America’s green future is looking more and more colorless as economic ignorance reigns in Washington’s elitist, statist, cultural cocoon.

by Brian Sylvester & Karen Roche – The Gold Report – Published: June 21, 2010

Everybody’s talking about rare earth elements (REEs), but does anyone truly understand them? With nearly 50 years in the industry, independent metals consultant Jack Lifton sure does. The educational powerhouse in this burgeoning space returns to The Gold Report with a look toward future trends and a plan to emancipate North America from China’s REE monopoly.

The Gold Report: Jack, since our first interview over a year ago, the rare earth space has received a lot of ink. You were one of the first to talk about these minor metals and their strategic importance to manufacturing and electronics. Could you give our readers a little refresher about some of these metals and their uses?

Jack Lifton: I define a rare metal by its production rate, because it doesn’t matter how much of a metal there is in the earth’s crust—or even how much of it is concentrated enough in accessible ore deposits to be, theoretically, recoverable. The only thing that matters is the amount of metal that is produced each year, because that’s all we have available to us use now, period. That production rate depends, of course, on a combination of economics and technology.

The cost of producing the metal from any particular source must be less than its selling price, and the technology must exist before the extraction project (mining) to produce the metal from that particular ore deposit.

The following chart singles out the rare earth metals in red (the lanthanides, plus scandium and yttrium) from all other metals and rare metals by their 2009 production rate. It also identifies the 2010 rare metals as those beginning with, and including, silver, as well as all of those produced at a rate less than that of silver in 2009.

As of today, June 16, 2010, I think the future-use trends for those rare metals critical for mass-produced, consumer-use technology must be differentiated from future-use trends for the rare metals critical for military technology. These future-use trends may be qualitatively alike. For example, they may require small, powerful, permanent magnets; but their quantitative requirements for each category—civilian and military—–are different by orders of magnitude.

Forging technologies for the military, which began in World War II, created a supply chain for the rarest metals critical for military applications. But, once military demand was understood—and, thus, limited—there came into existence a surplus of metals that had never before been available to civilian scientists and engineers. This resulted in a revolution in the creation and miniaturization of technologies for mass-produced civilian (i.e., consumer, markets, etc.).

Today, the quantitative demand for rare metals by the military and civilian sectors of the economy has inverted. The civilian sector dominates the demand for rare metals critical for use in technologies; I call this subset of rare metals technology metals. For now, I’ll concentrate on just those selected metals because increasing production from existing mines—or developing new ones—is so extremely capital-intensive and time-consuming, the probability of doing that declines rapidly as costs and expensive-to-fix technological issues mount. In fact, the stock market pundits like to gloss over technological impediments to increasing the supply of technology metals. And the stock market is woefully ignorant of the economic obstacles—from lack of mine profitability to increasing the production of almost any metal other than iron.

You may note from the previous chart that no tantalum was produced in 2009 even though tantalum is a critical technology metal for all electronics. This was an issue of economics and politics largely ignored by the world’s stock markets.

The world’s largest producer, Australia’s Talison Tantalum (private company), shut down production in late 2008 because the selling price for its mine concentrates was below its costs. Unethical trading companies covered the shortfalls—demand in excess of inventory—by procuring tantalum ore concentrates from places like the Democratic Republic of the Congo where illegal mining using child, and even slave, labor is rampant. Such ores were ‘baptized’ as being of ethical origin or disguised as previous inventory to circumvent UN, U.S., European and Chinese laws against the use of materials of such heinous origin.

The total volume of the tantalum trade worldwide is tiny compared to any base metal, such as iron, aluminum, copper, zinc or lead; so markets have generally ignored this issue, but I think it is a major issue. There is a good opportunity here for investing in North American domestic junior tantalum opportunities, such as Commerce Resources Corp. (TSX.V:CCE; Fkft:D7H; PK SHEETS:CMRZF), because the American government is realizing that the only way to ensure the survival of its high-tech industry is to ensure there is a domestic natural-resources supply chain that begins in every instance at the mine. I use tantalum as an example to emphasize that rare earths aren’t the only technology metals for which self-sufficiency is important.

Alternate energies for a green future are impossible to build and operate without rare metals. These include cadmium, tellurium, selenium, indium, gallium and germanium for solar; rare earths for wind power and electric cars; and uranium and thorium for nuclear generation of electricity.

Looking at the chart, you can see the total amounts of most of these critical technology metals are small, and some are even so small they’re unknown. We need to listen carefully to those miners who tell us they can produce any or all of the technology metals for us domestically (or under the control of friendly nations). Otherwise, the age of technology will stall or go into decline—and the green world will not come about.

TGR: Could you explain to our readers the difference between heavy and light rare earth elements (REEs)?

JL: The rare earth elements, known chemically as the lanthanides, are defined simply as those chemical elements beginning at number 57, lanthanum, on the periodic table, and running consecutively through, and including, number 71, lutetium. The atomic numbers 57–71 are the measurement by which true chemical elements are differentiated from each other. Technically, these numbers represent the quantity of electric charge of the nucleus of each atom; and this number dictates the chemical properties the atom will have.

The rare earths are called “rare” for the historical reason that their chemical properties are so similar, they could not be completely separated and identified individually until the 20th century’s rapid growth of chemical separation and identification technology. The commercial separation of the rare earths into individual, high-purity metals is still an expensive, and not always successful, undertaking. In fact, this separation and purification on a commercial basis is the great impediment to increasing rare earth production even today.

Such chemical operations are very expensive and time-consuming, so they restrict new entrants into the field to the well-financed, highly skilled. . .and those lucky enough to have an ore body (always a mixture of ores each with its own problems of concentration and extraction) that can be processed successfully on an economic basis.

All rare earth ores contain all of the rare earths, but in varying proportions. If the contained rare earths are primarily those with an atomic number at or below that of samarium, number 62, the ores are traditionally said to be those of the “light rare earths.”

The rare earths known traditionally as the “heavy rare earths” begin with europium, number 63, so anything at or above 63 is considered a heavy REE. Although the “heavies” are found in some proportion in all rare earth deposits, those ores with a significant proportion of the heavies, which are still very small numbers, are known as “heavy rare earth deposits.” This confusing terminology has now become fixed in stock-market talk.

Why is this important? Because the most important of all the rare earths are the magnet metals—the big four: neodymium and praseodymium (light REEs) and dysprosium and terbium (heavy REEs). These four metals, in varying proportions, make up the critical materials in 90% of rare earth permanent magnets made and used today. And these will continue to be critical to manufacture the rapidly increasing number of permanent magnets required by today’s and tomorrow’s technologies.

There is one other magnet metal of somewhat lesser importance—samarium; but, today it is used mostly in military applications or those requiring magnets capable of operating under extreme environmental conditions of radiation or temperature.

Lanthanum is critical for nickel metal hydride-storage batteries, which is the type of storage battery used universally for hybrid vehicle power trains. Lanthanum is also critical for the oil industry, as a component of fluid-cracking catalysts for modifying heavy crude into usable fractions. Some add lanthanum to their list of important rare earth metals to create a list of the rare earth “big five.” I reserve judgment on whether lanthanum should be in the same category of importance as neodymium.

TGR: You mentioned earlier that most of the world’s supply of these minor metals now comes from unreliable jurisdictions. Besides Commerce Resources, are there other producers or explorers in more politically safe locations?

JL: At this time, all of the rare earth metals are mined, refined and purified in Asia or Eastern Europe. More than 95% of this is done within the People’s Republic of China, with the balance is done in India, Malaysia, Russia and Estonia. None of these areas is politically reliable in terms putting the needs of the U.S. or the global community on an even par with their own domestic needs.

My view is that narrow-minded politicians in the West have sacrificed our economic and military security on the altar of their own short-term needs—to be re-elected. The U.S. was self-sufficient in REEs and had a complete supply chain for them as recently as 2002. At that time, global economics made Chinese ores cheaper than those produced in the U.S.

After Molycorp Minerals, a private company in California, shut down operations for economic reasons (i.e., inability to compete with low-priced Chinese supply), the rest of the supply chain—purification, metal and alloy production and magnet and battery production—simply moved to China for access to supplies of the rare earths.

Besides the huge deposit of high-grade light rare earth ore (with some europium) at Mountain Pass, North America also has significant REE deposits in Alaska, Idaho, Wyoming and Canada’s Northwest Territories, Saskatchewan and Quebec. The Canadian deposits and those in Alaska contain very significant quantities of the heavy REEs.

North America could be completely independent of China—and could, in fact, be a supplier to China—if just a few of North America’s deposits were developed.

TGR: A number of companies appear to be popping up that suddenly have REE deposits. Can you share with our readers some of your favorite REE names with real mineable assets?

JL: I’d be glad to list those companies with mineable deposits in North America, so long as you understand that a mineable deposit is just one of the requirements for a successful REE-mining business. It is a necessary, but insufficient, requirement.

The mineable deposits of rare earths in North America are owned by:

• Molycorp Minerals (private company in Mountain Pass, California)
• Avalon Rare Metals Inc. (TSX:AVL;OTCQX:AVARF) (NW Territories, Canada)
• Rare Element Resources Ltd. (TSX.V:RES) (Wyoming)
• U.S. Rare Earths (a private company in Idaho)
• Quest Rare Minerals Ltd. (TSX.V:QRM) (Quebec, Canada)
• Great Western Minerals Group Ltd. (TSX.V:GWG) (Saskatchewan, Nova Scotia)
• Ucore Uranium (TSX.V:UCU) (Alaska)

All of the above are North American resources. There are also significant, undeveloped resources of REEs in Australia, South Africa and Greenland.

In order for the U.S. to be self-sufficient and become a net exporter of REEs, some of the above-listed companies must be developed now. Other countries, domestically, and China and Japan, globally, are racing to acquire and develop REE resources outside of North America. It is a global competition, and the other entrants are already well under way.

TGR: Do you see demand for these REEs expanding dramatically in the future?

JL: Demand for rare earths, and particularly for the big-four magnet metals, is growing at a rate that is unsustainable unless new heavy REE production is brought online in the next five years at the most. Due to the nature of REE deposits, this requires that the production of light REEs increase significantly also. Therefore, I believe there is now a window of opportunity for one or two light REE producers and several heavy REE producers to enter the market over the next five years. Anyone whose timeline is beyond that will not likely be successful in this run up of rare earth demand.

TGR: This has been a real education, Jack. Thanks so much for your time today.

Copyright © 2010 Streetwise Reports LLC.

Elected politicians in Washington, D.C. have historically and traditionally given very little thought to Canada, except when they were forced to give Canadians a voice in a decision, either because of American politics or a foreign war or the threat of war. One of the very few times for example, that Canada was mentioned in the American 2008 presidential campaign, was early on when a clueless primary candidate said that she would reopen NAFTA if chosen by her party and elected. The candidate even frightened her own supporters with her ignorance of modern North American trade dynamics, and she was saved from this gaffe only when her handlers managed to spin the story to be about a Canadian diplomat who had apparently commented after hearing the remark that Canada could easily find other buyers for its resources if the US wished to terminate the NAFTA agreement. The story incredibly became “those Canadians are threatening us with a trade war.”

American environmentalists who have disproportionate power to their numbers, due to selective investments in elected politicians, regularly whine about the evils of extracting oil from shale (USA) or from tar sands (Canada), but this never prevents them from driving their Canadian-fueled and often -manufactured vehicles to rallies against such production.

My uncle Yale died on the beach at Anzio while disarming a German mine, so that Canadian and US forces could land. He and his brother were transported to the Anzio beach along with their fellow Canadian Rangers in a landing vessel made in the USA and under cover of US Naval aviators and US battleship artillery. But that was then. I have heard since that day that Canadians can always be counted upon to do the right thing – i.e., to do whatever is best for the USA.

Today however, with regard to the rare metals that form the brain and nerves of our technological civilization, Canada is perhaps ready to negotiate with Washington as a more than equal trading partner. America’s version of a permanent civil service, the hired employees of the various cabinet offices, which are, in particular, Defense, Interior, and Commerce, tell me that they are aware of the critical importance of Canada’s natural resources to the American way of life, and that they have always been aware. Unfortunately, as I am told over and over again, the politicians are in charge but on natural resource supply issues, other than oil, they are clueless.

Last year, there began to be a sea change in Washington with regard to at least one category of non-oil resources, the rare earth metals. Bureaucrats first at the US Department of Defense, and then at the Departments of Commerce and Interior, began to study the market fundamentals and both the military an industrial uses of the rare earth metals. I was asked to participate in roundtable discussions about rare earth metals at the Pentagon, and I was able to invite and get acceptances from Washington officials to speak at conferences, of which I was an organizer.

In late 2009, I was asked  to comment on legislative additions to the US National Defense Appropriations Act for Fiscal Year 2010 (FY210 NDAA), which required the Secretary of Defense to initiate a study of the rare earths market to be made and delivered to Congress by April 1, 2010. Warp speed for such a study in Washington time. The mandate for the study became law when President Obama signed the FY2010 NDAA. It is underway at the Government Accountability Office (GAO) with data collection being supervised by the Department of the Interior, which is in charge of both actual mining and resource data collection in the USA. I have also participated in the drafting of an Act known as RESTART that would fund the restarting of the rare earth supply chain into the USA. This is the most rare earth metals activity I have ever seen by the US Federal Government, but it still has a long way to go before it is enacted or funded. But it is actually underway.

The rare earth supply “crisis” that came to public attention last year when China hinted it might further restrict the export of rare earths and even stop completely the export of the higher atomic numbered, “heavy,” rare earths, brought Canada onto the radar screen in Washington. Canada has two rare earth mining ventures well on the way to production, Great Western Minerals Group (GWMG) and Avalon Rare Metals, as well as a myriad of others in process, all financed in Toronto or Vancouver. Canada also now has the first funded ETF venture for rare metals, including the rare earths, which will create in part an essentially private strategic stockpiling venture. I told a conference that I chaired in Washington, D.C., last October, that America’s future is dominated by the two “Cs,” China and Canada. I said that unless the US immediately recognizes that its resource base must be North American not just American, then Canada and China would become larger and larger natural trading partners in natural resources.

I believe more than ever, that unless Washington and Wall Street recognize the critical importance of developing natural resource production in Canada, there will sooner or later be a reckoning. The reckoning will be that the American standard of living declines from one generation to the next for the first time, even as that of Canada and China grows.