Comparative Value Metrics For 13 Advanced Rare-Earth Projects

by Gareth Hatch on November 11, 2010 · 31 comments

in Rare Earths, Tools & Metrics

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Updated January 18, 2011: I have now set up a new permanent Web page for the Index described below, accessible from the menu bar above, via Metrics & Indices >> TMR Advanced Rare-Earth Projects Index or directly from here.

As of the beginning of November 2010, there are 251 individual active rare-earth projects in the TMR database, being run by 165 companies in 24 different countries outside of China. It will be no surprise that these projects are in a wide variety of development stages, ranging from being prospective for rare earths on the basis of a grab sample or two, to full-blown mining operations.

When working with clients to analyze the sector from a strategic point of view, I generally filter this list of projects and focus much of my attention on what I call advanced rare-earth projects – those that meet one or both of the following criteria:

  1. The deposit associated with the rare-earth project has been formally defined as a mineral resource or reserve under the guidelines of a relevant scheme such as NI 43-101 or the JORC code;
  2. The deposit has been subject to past mining campaigns for rare earths, for which reliable historical data is available, even if the data is currently not compliant with a relevant scheme in terms of a resource of reserve definition.

Based on these criteria, at this time the TMR Advanced Rare-Earth Projects Index comprises 13 projects, being run by 12 companies in 6 different countries.  These projects, in alphabetical order, are:

  • Bear Lodge (Bull Hill Zone) – Wyoming, USA : operated by Rare Element Resources Ltd. (TSX.V:RES, AMEX:REE);
  • Dubbo – New South Wales, Australia : operated by Alkane Resources Ltd. (ASX:ALK, PK:ALKEF);
  • Hoidas Lake – Saskatchewan, Canada : operated by Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF);
  • Kutessay II – Chui, Kyrgyzstan : operated by Stans Energy Corp. (TSX.V:RUU);
  • Kvanefjeld – Kujalleq, Greenland : operated by Greenland Minerals and Energy Ltd. (ASX:GGG, PK:GDLNF);
  • Mount Weld – Western Australia, Australia : operated by Lynas Corporation Ltd. (ASX:LYC, PK:LYSCF);
  • Mountain Pass – California, USA : operated by Molycorp Inc. (NYSE:MCP);
  • Nechalacho (Thor Lake Basal Zone) – Northwest Territories, Canada : operated by Avalon Rare Metals Inc. (TSX:AVL; OTCQX:AVARF);
  • Nolans Bore – Northern Territory, Australia : operated by Arafura Resources Ltd. (ASX:ARU, PK:ARAFF);
  • Steenkampskraal – Western Cape, South Africa : operated by Great Western Minerals Group Ltd. (TSX.V:GWG, OTCBB:GWMGF) in association with Rare Earth Extraction Company ;
  • Strange Lake (B Zone) – Quebec, Canada : operated by Quest Rare Minerals Ltd. (TSX.V:QRM);
  • Zandkopsdrift – Northern Cape, South Africa : operated by Frontier Rare Earths Ltd. (TSX:FRO from 11/17/10 onwards);
  • Zeus (Kipawa) – Quebec, Canada : operated by Matamec Explorations Inc. (TSC.V:MAT, PK:MTCEF).

There are a number of ways to compare the technical merits of rare-earth projects; we covered just one potential metric recently in the review of Dr. Seredin’s outlook coefficient for rare-earth deposits. Whatever we choose, at some point these have to be translated into economic merits, on the basis of the material grade, distribution of specific elements, and the prevailing market conditions at a point or range of points in time of particular interest – past, present or future. We also of course have to consider the merits of the individual companies that own or operate the projects, as well as the infrastructure, mineralogy and subsequent processing costs for exploiting the deposit and other parameters.

Two common metrics used to give a quick snapshot of the potential value of a deposit are:

  1. The unit basket price (in US$/kg) : this is the theoretical price that could be obtained for 1 kg of fully separated rare-earth oxides, containing rare-earth oxides in the same proportions as found in-situ within the deposit (e.g. if the proportion of neodymium oxide in the total rare-earth-oxide material grade was 10%, then the unit basket price would include the market price for 100 g of neodymium oxide);
  2. The value per unit mass of mineral deposit (in US$/t) : also known as the rock value, this is the theoretical value of each tonne of material in the deposit, on the basis of the market value of the rare-earth content present (assuming 100% efficiency of extraction and separation).

There are obvious limitations to these two metrics. Most notably, they do not account for the costs associated with extracting and processing the minerals into separated oxides, and they do not account for the level of difficulty associated with the specific mineralogy of a deposit. They also do not account for the actual efficiency of extraction at each stage, and the associated losses of material that are inevitable at each step.

However, these metrics do provide some basic value to anyone doing their due diligence on a deposit; even more so with a deposit that has a defined mineral resource (such as the 13 deposits listed on the TMR Rare-Earth Projects Index), since there is a reasonably significant degree of confidence in the data that one needs to use, to do the calculations.

The following chart is a comparison of these two metrics for each of the 13 projects named above, based on the average market price for separated rare-earth oxides (excluding oxides of Ho-Er-Tm-Yb-Lu) in October 2010, FOB China published at (click the image to enlarge):

This second chart consists of the same comparison of metrics, but based on the average prices in 2009. Note the significant differences in scales for these two charts (click the image to enlarge):

There is additional nuance to these metrics that comes out when you start to look at a breakdown of the individual rare earths present in each deposit; but we can quickly see that for the most advanced projects in the rare-earths sector, there is a very general inverse relationship between the unit basket price for each mineral resource or reserve, and their associated rock values. What the charts tell us is that rare-earth mineral resources with high rock values, generally have such values on the basis of a high material grade (i.e. a significant quantity of total rare-earth oxides present, as a fraction of the overall resource); it also tell us that generally, mineral resources with high unit basket prices, have such high values on the basis of a distribution of individual rare earths that skews towards the more-valuable rare-earth elements present, rather than a high overall material grade..

In the future, as current projects in development publish technical reports defining mineral resources that meet the appropriate guidelines, we’ll update the TMR Advanced Rare-Earth Projects Index accordingly. We’ll also look to update the above charts on a reasonably regular basis too.

Disclosure: the author is neither a shareholder of, nor a consultant to, any of the companies mentioned in this article.

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1 Casual Observer November 12, 2010 at 1:49 AM

Hi Gareth,

This is interesting but I am not sure it does give the clearest picture possible of the economic merits of any given project as the by product
metrics are not included.

As has been discussed previously, for a small REE project to be viable/successful it will most likely need distributed economics across a product suite.

Perhaps you could include the by product economics in the metrics. All REE projects have by product economics associated with them. Focussing purely on rare earth oxides perhaps distorts the true of viability / industrial utility (which I think is a far better measure).

Viability/ industrial utility is what investors need to know.

2 Gareth Hatch November 12, 2010 at 2:07 AM

Casual Observer: you raise a valid point in that a number of these deposits will have associated “credits” as a result of the presence of other metals [such as uranium, niobium, tantalum thorium, and yes, zirconium ;-) ], depending on the deposit. I’ll look into what it would take to pull those numbers together.

That said, with one or two exceptions, the credit is not particularly large, when compared to the value of the rare earths, and in most cases it is the presence of the rare earths that is driving development, regardless of the other products present – they would generally not be produced without the exploitation of the rare earths.

Also – when we consider the capital costs associated with processing the ores once mined, the required cracking and separation steps to produce rare earths will require the lion’s share of the associated capital expenditure [and ongoing consumables costs].

So, “credits” from the presence of other metals are generally viewed as just that – credits against the cost of producing the rare earths in the first place.

As such, I do believe that these metrics have significant utility, so long as one is aware of the previously discussed limitations.

Thanks for the comment.

3 Jim Bond November 12, 2010 at 6:54 AM

Hi Gareth:
A very obvious comment any value metric needs to look at plain and simple mining economics and infrastructure as well as gross grade and tonnage. As you point out mineralogy and recovery will be a major factor in the economics. Location of deposit will play a factor. The mining cost issue again. Political risk taxation and royalties will also be factors. I am nitpicking a very nice presentation.

4 Jesse November 12, 2010 at 9:26 AM

Once again, thanks Gareth for an informative article.

One thing I want to point out that readers may consider is that the price of FOB REOs today will be different from the price tomorrow. Speaking with people who attended the Roskill conference, the general consensus was that the FOB price for La and Ce oxide of $40/kg cannot be sustainable, especially if Lynas, Molycorp, and Great Wetern’s LREE mines come online. Hykawy did a stress test in his models, removing La and Ce from the equation to see what happened to the valuation. I found that very helpful.

Also, the less-used HREEs are not included, yet I’ve been told that there is a market for these products in China. Is this true or not?

5 Gareth Hatch November 12, 2010 at 10:07 AM

Jim: Absolutely. I plucked two out of probably a dozen different metrics that we look at for each deposit, for the purposes of this exercise.

Jesse: it certainly makes sense that once the supply needs of the market are met for any of the specific rare earths, the price for those rare earths will come down. As you might already know, most if not all of the companies working on these projects do not use the most recent pricing in the calculations that they use to determine business viability, instead typically using anything from two to four year averages, as I recall.

The less-used HREEs are not included because to date it has been difficult to get reliable regular pricing data for those rare earths, in particular FOB China pricing. There is certain some usage for such materials, and many companies do assign a price value to them when doing their preliminary economic assessments and feasibility studies. How reliable those numbers are, I don’t know. It’s something I have been looking into recently and certainly if confidence in the pricing data increases, we’ll look to include it in the metrics.

6 Casual Observer November 12, 2010 at 12:29 PM


Hmm, in the case of my pet project RE’s only constitute 46% of total revenues so “credits” become a very significant consideration.

But yes, I agree that in general “by product” credits may be secondary however in light of the “Goldilocks Principle” the projects that have significant credits for these by products have the distributed economics
that can perhaps make the projects that much more viable and less prone to extreme risk resulting from swings in REE prices.
This (The Goldilocks Principle) is not a minor consideration as it may make the difference between viability and non viability in a number of cases. The GP may not just be about right sizing but also about right mixing HREE’s LREE’s and by products and the relevance and marketability of any given mix ( the industrial utility).

I think the direction that you are going is good, the work is needed,
but perhaps the parameters can be expanded to give a much broader picture, including Vladimir’s concept of “industrial utility” which I think is a key concept as it relates to the practical situation in the market — what is required — what is useful now.

I know that other criteria such as sovereign risk, ratios of capex / shareholder equity required to realize the project are harder to quantify and may be to some extent subjective, but perhaps thinking about adding such criteria may be useful.

So adding project “credits”, industrial utility, sovereign and regulatory risk, risk/reward on capex/equity ( in the context of the Goldilocks Principle) may round out the index and give investors a broader picture of any given project.

7 Casual Observer November 12, 2010 at 3:07 PM


I sort of felt that Alkane was finally getting some traction in the media with the report by Forbes that I sent you yesterday.
I just searched “Alkane News” and there right below the positive article by Forbes was your new metrics for 13 companies !!
Gee, it sort of rained on the parade a little because it makes Alkane look like a low value project. This is how the average member of the public will read it. I could not see the metrics on the news sites of any other REE companies.

I do think you need to update the Comparative Value Metrics to include
the concept of industrial utility at any given time,ideally including real time pricing and the other metrics I mentioned previously – but most importantly industrial utility. As mentioned in the other comments value per ton in the ground / concentration per ton is a very limited measure. The economics of extraction for any given project, once known will immediately skew this data whereas a broader measure such as industrial utility is far more durable.

8 Gareth Hatch November 12, 2010 at 4:17 PM

Casual Observer: the implication of your last comment, concerning members of the public, is that there is a fundamental error or inaccuracy in the charts presented because they do not explicitly reference other metals present. I disagree with this assertion, given the provisos included with the charts.

You appear to be missing the key point: most, if not all of these deposits [even probably Dubbo] are of primary interest because of the rare earths present – the rare earths are the driving force for their development at the present time.

This is an interesting inversion of the norm, since technology metals are usually the secondary byproducts of other primary metals and mineral of interest, and are produced only if the primary metal is produced (e.g. tellurium in relation to copper, zinc or lead, or indium in relation to zinc, or gallium in relation to aluminum, and so on). The values of these technology metals are “credited” as offset to the costs of production of the primary metals. In the case of rare earths, usually the primary product of interest is itself a collection of technology metals.

The concept of “crediting” the production costs of a primary mineral of interest, with revenues generated by the other metals present, is therefore nothing new; it’s frequently used in the rare-earths industry, reflecting the primacy of the rare earths as the reason for mining in the first place.

Therefore I do think it is appropriate to focus on the theoretical values of the rare earths present, under the provisos already stated, and to attempt to compare those values, while acknowledging that such metrics do not account for the costs of production, or the benefits of the presence of other minerals and metals. On this basis, I believe the charts to be valid tools.

That said, it is interesting how certain projects have morphed into becoming “rare-earth” projects in the present day. Kvanefjeld, for example, was seen as a uranium project for a long time; now it is viewed and promoted as a rare-earth project – because the rare-earths are now of primary interest. Steenkampskraal started off as a thorium mine. The same goes for Alkane’s Dubbo project; these days it is often referred to just as “Dubbo”, but for many years it was known as the DZP – the Dubbo Zirconia Project (one could make the argument of course, that if zirconia is actually the primary mineral of interest, than perhaps we should just be rolling in the rare earths present as a credit to the zirconium production, and removing it from the chart altogether?).

Times change and interest in certain resources change with them. These changes are reflections of which minerals are of primary interest.

There are of course lots of other metrics of interest in the rare-earths sector, which could be plotted and presented – whether it’s rock, value, industrial utility, efficiency of processing, infrastructure issues – or any of the dozen other factors that TMR does look at. No-one is saying that approach above is the “be all and end all” on this matter. Obviously this is not the case. The above charts simply reflect just two of the commonly used metrics, and should be considered on that basis alone.

9 Andrei November 12, 2010 at 5:51 PM

Hi Gareth,

Your article denotes both professionalism and impartiality. I really enjoyed it. My two favorite projects are Bokan and Zeus, presently developed by Ucore and Matamec, respectively. Even though Bokan is not included in your analysis, I hope once an NI 43-101 resource estimate comes out, you will place it in your graph.
Looking at the graph, the most striking observation is that the more a deposit is skewed towards the more sought-after HREE (i.e. the higher it is placed on the graph), the less economical it gets (i.e. the more to the left it is positioned on the graph, denoting lower rock value). Since the need for materials ultimately dictates the economics of a project, this situation will certainly change shortly.
My prediction is that China will enforce different export quotas for the different individual REE’s, resulting in a shortage of supply for the heavies. This will bring the LREE prices down and push the HREE prices up, completely changing the economics of various projects. The Chinese are now realizing that having export quotas that do not differentiate between various REE’s was a mistake that resulted in the preferential export of the more expensive HREE, of which they are running out themselves. This becomes apparent if you compare the prices of individual REE inside and outside China (Metal Pages). The HREE prices have gone up both inside and outside China whereas the LREE prices are skyrocketing only outside, because of a temporary short supply resulting from the undiscriminating export quotas.

Thanks again!

10 Gareth Hatch November 12, 2010 at 6:30 PM

Andrei: thank you for your comments. Indeed – as soon as Ucore releases a Technical Report containing a 43-101-compliant mineral-resource definition, I’ll definitely be adding it to the Index. The same goes for any other company that does so, and I would imagine that there will be at least a handful that release such reports in 2011.

The position of the HREE-rich deposits on the charts is probably more of a reflection of the fact that the material grade for most HREE-rich deposits tends to be a lot lower than for LREE-rich deposits, due to the differences in mineralogy.

As alluded to by Casual Observer, both the rock value and basket price are obviously only best-case scenarios for any deposit, and should be looked at in the context of other metrics too. The rock value tells us the maximum possible starting value that the resource could have from the REEs present, on a unit basis, and the basket price tells us the maximum possible finished REO price that could be obtained from the resource. Real world costs and processing efficiencies will eat away at the margins of each of those numbers, but I think that it is certainly possible that a HREE-rich deposit could be profitable, given the right set of circumstances. I suppose this rather vague statement on my part actually applies to any REE deposit, right? :-)

One last point – I too believe that there is the possibility of “granularity” being added to the quotas from China at some point in the future, wither by dividing the quota on the basis of heavy vs lights, or even on individual rare earths. I also agree that such a scenario would change the present dynamics considerably.

11 Casual Observer November 13, 2010 at 11:21 AM

Hi Gareth,

Thanks for your comments.
In reply ; No I certainly do not suggest that there is any inaccuracy in the charts, merely that the concept could be more fully developed to give the general public a more comprehensive picture of the viability of any given mine that is producing rare earths (as a primary or secondary product from the mine). I am suggesting that you take the work further.

I don’t think I am missing the point that the driver is rare earths at the moment; it is obvious from the coverage in the press that this is the major driver.

In regard to projects “morphing” from one metal to rare earths projects, I think that this is simply because the promoters have jumped on the “rare earths” bandwagon and are happy to use the term to get attention.
Happily I can say that the management at Alkane have avoided the temptation and remained true to the facts. The DZP – Dubbo Zirconia Project (and it is still called this in all the company literature) will derive 46% of its income from REE’s so it would be easy to promote it as “rare earth project” – but currently that is not being done. It remains, the DZP.

In regard to removing it from the chart altogether, well that would be silly as it is obviously the primary source of HREE’s over the next five to ten years to is arguably the most strategic rare earth project on the planet.

I encourage you to take this work further Gareth as it is needed.
Again I suggest that a dynamic, (perhaps with a real time link to prices)
index of industrial utility – mapping supply demand in real time – with reference to which mines will be producing and when would be of great value as it would allow us to see which elements were most needed, were they were and when the next supply might arrive. This would be good.

Finally in regard to Dubbo, Jack has stated that there is no way a mine can be profitable just producing concentrates. Well perhaps Dubbo will prove to be the exception – the Goldilocks mine of the rare earth space.
I leave you with this from the Australian investment site “Hot Copper”

“Read the article linked by Maplelegion for the reasons why Alkane is the Goldilocks of rare earths. There is an additional observation which I believe is relevant which might even persuade Jack Lifton of the merits of Alkane. The DZP is a monster polymetallic resource. Alkane has an inbuilt “distributed-overheads scheme” through the processing of zirconium, niobium and rare earths including a high proportion of heavy rare earths. Mining overheads will be distributed between products. Chalmers has not yet revealed cash costs, keeping costing close to his chest as he negotiates off take agreements for the various products.

The cash cost of producing rare earths from the DZP may be a stunning surprise after credits for zirconium and niobium”.

12 Gareth Hatch November 13, 2010 at 11:44 AM

Casual Observer: Thank you for the additional comments. I do believe that each and every one of the projects on the Index list above stands at least some fighting chance of making a significant contribution to rare-earth supplies in the future, simply by virtue of having come this far along in the development process.

The devil of course is in the detail. That goes for each and every one of these projects, without exception, and the inherent advantages and disadvantages of each of them.

13 Kyle Mohamed November 13, 2010 at 11:44 AM


Many thanks for the insightful article. I would like to ask yourself and all commentors here your views on viability of mines where LREEs are the primary focus- Ignoring the question of who will be in production first and whether this will drive down the prices, I think Jack Lifton said that for a mine to truly be viable it would need a mix of LREEs and HREEs. And I thought that HREEs would, in the end, become the more valuable of the two, though as you state they are hard to price.

In regard to Greenland Minerals and Energy (I hold shares here), I understood that without being able to mine uranium as a by-product, the Kravnefjeld REE project would not be economically viable, and that is why the share price rose significantly following the Greenland government allowing full feasibility studies, even though they haven’t yet reversed the law banning uranium mining?

Sorry if this is a stupid questione, but can I ask why Commerce Resources and Tantalus Rare Earths aren’t on the above list?


14 Gareth Hatch November 13, 2010 at 12:04 PM

Kyle: Thanks for the comments. I think that the key is to move beyond the characterization of specific deposits as being “LREE” or “HREE” and instead to see the deposit as a whole, in terms of its potential value, due to the makeup of the rare earths present (both LREE and HREE). There are some HREEs that are difficult to price, but that difficulty is an artifact of the low usage and demand for those particular HREEs, so I am not unduly worried about that.

The rock value metric brings this into stark relief; mineral resources such as Steenkampskraal, Mount Weld and Mountain Pass may have rare-earth compositions that are skewed towards the LREEs and are thus frequently characterized as LREE deposits; however, these deposits have rich material grades, and appreciable quantities of neodymium, a particularly valuable LREE. The actual in-situ quantity of some of the HREEs too, despite being a small proportion of overall total REEs present, can become significant in such circumstances, again because of the rich material grade.

(Again – I’m not suggesting that rock value is a comprehensive value metric – but it does allow us to do initial comparisons of projects, before delving deeper into their individual characteristics).

The Kvanefjeld project is indeed tied to associated uranium production, and not just because of the local laws pertaining to the extraction and mining of uranium. The cutoff grade used to define the indicated and inferred mineral resources present, is based on a weight percentage value of uranium oxide, not total REOs present, as part of those definitions. So the overall viability of the project is indeed intimately related to the production of uranium.

There are no stupid questions :-) As you probably know, Commerce Resources is running the Eldor project in Quebec and the Carbo project in British Columbia (the latter as a joint venture with Canadian International Minerals), and Tantalus Rare Earths has its Tantalus project in Madagascar. To my knowledge, none of these three projects has an associated defined mineral resource, under the guidelines of NI 43-101, JORC or similar. This latter criteria is the basis on which particular projects are added to the Index, and to subsequent charts showing details of such projects.

15 fran November 14, 2010 at 10:46 PM


looking upwards in the supply chain, do we understand what priorities and values an asian trading company would utilize in the assessment process? after all, that might be the MR. $BIG BUCKS WHO DECIDES THE ULTIMATE FATE.

the procurer is oft a large trading conglomerate with multiple clients to satisfy. such trading co. is apt to buy in/buy out/contract off take[ asian smelter eg].

what of their model/technique etc?

16 Kris November 15, 2010 at 2:32 AM

I only have one simple question to all serious people: Why are Japanese trading houses all over Vietnam, Mongolia, Kazachstan, etc and NOT all over these wonderful N-A deposits?? Why is Neo Material the only serious TSX player who has a serious joint venture with Mitsubishi Corporation to develop a TIN MINE to get HREE???

I don’t get it? Why should I invest my money in companies who won’t have a mine before 2015 when the serious Japanese trading houses aren’t doing it either?

The developments in Asia are neglected by many TSX investors. Today I read in NYT even Japan has had strong economic growth the past quarter! The world is changing and Asia is leading. It wouldn’t be smart to focus on N-A, especially when investing in REE business.


17 Don Ellwood November 17, 2010 at 4:16 PM

As always I find your objective approach informative. However, as an investor ( I’m certainly not a geoolgist) I’m more interested in the value per share of a project, not its absolute value. Wouldn’t the differing share structures of the companies developing these projects significantly affect their relative values to an investor?

My apologies if I’ve misunderstood your presentation. I’m still feeling my way in this sector.


18 Jack Lifton November 17, 2010 at 11:58 PM

Fran & Kris,

Japanese trading houses are doing some investing in North American REE deposits, but just not in the ones that have developed as financial nightmares, from the point of view of institutional strategic-long term-investors, and already consist of hodgepodges of differently valued and timed securities issued in truly staggering numbers mainly to entice “private placements.” In Canada in particular the tax treatment of investments in junior mining ventures makes them much more attractive to those paying Canadian taxes than to anyone not doing so.

In the USA it really wouldn’t matter what the tax situation was so long as American environmental activism gives individual luddites the power to shut down a mining venture at any point in its development or operation in order to save some species of plant or animal from presumed harm-only homo economicus (all of us poor saps) is exempt from this “protection against the extinction of our way of life and standard of living. Japanese trading houses as well as those from Korea are reluctant to tie up their capital in USA exploration when the chance of political interference is so high, and so much power to destroy wealth is given to the economically illiterate and suicidal.

My point of view is that the Chinese are just now becoming aware that the political impediments here are not just hostility by the American government to Chinese ownership of American resources-that is now a given by the way- but more importantly they are reflected in the battle among American factions to destroy the productive economy in the name of some pathological form of progressivism.

I still think there are some good North American REE opportunities however. The issue is when will Americans understand that by developing natural resource production such as REEs they create wealth and improve the economy. There is no downside to the development of REE resources in North America.

19 Jack Lifton November 18, 2010 at 12:01 AM


can you explain, quantitatively, what you mean by “value by share?” I’d like to address your question(s), but I need to know exactly what you mean by your choice of terms, so that we’re (literally) on the same page.

Jack Lifton

20 Don Ellwood November 18, 2010 at 11:51 AM

If I understood the presentation (not necessarily a valid assumption), it didn’t differentiate between the value to an investor of a project like Lynas with over 1.6 billon shares outstanding, and other projects by companies with less than 50 million or so shares outstanding. Lynas certainly has more absolute value, but I’m more interested in contrasting potential value per share with the current share price.

21 Kris November 18, 2010 at 1:23 PM

Jack, thank you for your reply. I fully understand the point you make about financial nightmares. Still that doesn’t change anything about my point-of-view: I think it’s dangerous for retail investors to focus on TSX/ASX-ventures, while Japan, Germany and South-Korea are initiating their own joint-ventures which WILL have an impact on the supply side in the future.

We all know the world needs terbium, dysprosium and neodymium. We know the demand side. But I’m not sure at all about what’s happening at the supply side.

Neo/Mitsubishi doing a TIN mine in BRAZIL, South Korea all over IRON to get HREE. I simply have no clue at all about the supply side in South America/Asia to be honest. Japan/South Korea actions make me feel uncertain about the long-term when investing in REE business.

It would be very helpful if serious people could tell us more about these Asian joint-venture stories, cause that’s the black swan IMHO. Nowadays the discussions on the internet seems to be about Western venture A vs Western venture B (TSX/AMEX/ASX) and which is the better one, but quite frankly I think that’s not really relevant when you don’t understand what’s going on in Asia.

Black Swan.


22 Henk Mol November 18, 2010 at 4:17 PM

Gareth, mining is one thing, separating and refining is another part. I recently learned about Silmet ( producing 3000 metric tons of rare earth metals, I. So, not all refining is in China. But, where do they get there input material from? From scrap or by-products in other mining?
Regards Henk

23 Gareth Hatch November 18, 2010 at 4:48 PM

Henk: yes indeed – Silmet is a small but important player in this sector. As I understand it they process materials from the Lovozero deposit in the Kola peninsula, and possibly elsewhere in the former Soviet Union. Clint Cox did a really nice write up on Silmet which you might consider checking out

24 Henk Mol November 19, 2010 at 4:57 AM

Hello Gareth
Thanks for answering so personally. I was by the way on the EVS25 conference a week ago, and the subject of material scarcity was not debated very much but I had the feeling it was ignored rather than taken seriously. If your’e interested I can give some more findings of that event. Best regards Henk

25 Gareth Hatch November 19, 2010 at 9:17 AM

Henk: I did see your earlier excellent summary of the EVS25 event. I’m always interested to learn more about this subject. In the meantime – check out something new, relating to electric vehicles, that we’re working on at TMR – – might be of interest to you.

26 Don Ellwood November 19, 2010 at 4:03 PM

My earlier question was pretty muddled. Here is another try. As an investor I would like some method to view the technical merits of various projects (as in your above study) in combination with the market caps of the companies behind the projects. Knowing that a particular project is “better” than another project based on some particular technical metric is interesting, but I still need a method to gauge whether the market (as measured by the current market cap of the company) has already taken this value difference into account (or perhaps overestimated it). The bottom line is that I am an investor with enough knowledge to realize that your technical approaches are probably very useful, but I don’t know ebough to be able to use them effectively. Any help would be appreciated.

27 Gareth Hatch November 20, 2010 at 3:52 PM

Don: thanks for the additional remarks.

The issue that you raise here perhaps pertains to the schools of thought among stock analysts concerning fundamental vs. technical analysis. Although I am not a stock analyst, I have never really bought into the argument of technical stock chart analysts that a company’s stock price captures all of the important details of a particular company, and that the price of a stock reflects those details – thus “allowing” analysts to use such charts and accompanying concepts such as “support” and “resistance” and so on, as the sole means of determining value and future stock behavior. If you subscribe to this school of thought, then it is unlikely that the metrics I described above, are of going to be much use to you. They are aimed at folks wanting to go the fundamentals route.

These metrics are just some of the many facets of the fundamentals of the particular projects mentioned, and the companies that are operating them. I see them as helping to inform observers on the issues of consistency and risk for a given project, and to rate accordingly. I’m talking in the sense of comparing what a company says about a project, to the “reality” of a given project in terms of objective public-domain descriptors. When combined with all of the other public-domain metrics out there (including those that account for the costs and likelihood of technical / metallurgical success), they can also help observers get a sense of which projects are more likely to succeed than others.

One might hope that market cap (and value per share) would reflect the “assigned” value and risk of a company’s portfolio of company, but in this sector especially, analysts and commentators are quick to point out that the general competence of the management team, and the share structure of the company they are managing, are also big factors, and I would agree with them.

Metrics such as those above are independent of these latter two factors, and can be helpful, I think, in trying determine the overall potential value of a project (and thus the risk / reward profile) without a company’s PR fluff , before then going on to look at management and share structure.

28 Kyle M November 21, 2010 at 2:19 PM


In relation to your above comment regarding technichal analysis, would just like to say that whilst I do use TA for larger companies, I do not think it can be accurately applied to small-cap junior miners.

However, I think technical analysis can sometimes be useful at looking at short-term patterns, for example looking at moving averages for an entry price

I think that share prices in the junior REEs are shaped by newsflow, and the inferred value in their projects (which, as you say, can be somewhat deduced) by the metrics above. I say ‘decuded’ in the previous sentence as I feel that the junior miners are very open to speculation at this stage – indeed I have read more than once in the last month that REEs are in a bubble- and the share prices of the individual companies are being affected by general market sentiment.

In fact I think it is very hard to value any of these companies at this stage, other than to say most are still quite speculative, as there are so many variables: Will China change there export quotas; how long will it actually take to bring these mines on-line; what will be the effect on the supply and demand dynamic when companies begin producing?

Just like to take the opportunity to say that it is a nice community on here, I like the intelligent debates and the chance to speak with experts like Gareth and Jack – thanks for taking the time to reply


29 Don Ellwood November 21, 2010 at 7:49 PM


Thanks for responding. I still haven’t managed to explain myself very well. I’m not talking about technical chart analyses (which I have very limited faith in). I’m just talking about the difficulty (at least for me) of taking companies widely different share structures into account when trying to evaluate fundamental analyses such as the one that started this thread. Company A may have a project that has fundamental qualities that are twice as good as Company B’s project, but if Company A has 10 times the number of shares outstanding as B, it would seem the fundamental advantage has been rendered meaningless. The REE sector in particular seems to have widely varying share structures, from Lynas’ 1.6 billion shares outstanding to juniors with 50 million shares or less.

30 Neale Monte December 29, 2010 at 7:15 PM

Great article and helps in my “just beginning” research into the world of Rare Earth Oxides. Are there any Chinese companies specializing in Rare Earths that are publicly traded on any American Exchanges?
Thanks in advance.

31 Online GED February 22, 2011 at 1:19 AM

Very informative. This is an alternative to a GED online.

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