Defining and Winning the HREE Horse Race

Last weekend I was in San Francisco, speaking at the Hard Assets Investment Conference. My topic was the production of heavy rare earth elements (HREEs).  The title of my main presentation was “Who will win the race to be the first to produce HREEs outside of China in the 21st century?” My specific answer to that question comes later in this article, but first, I am going to re-post here an article by Gareth Hatch, first posted at RareMetalBlog, which I believe is of relevance to the discussion:

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Rare Earths Nomenclature: Time to Standardize?
by Gareth Hatch

Let me ask what should be a pretty straightforward question:

“How many rare earth elements are there in the Periodic Table?”

Hmmm – apparently this question is not quite as simple to answer as we might think. Depending on who you ask these days, you could hear a number of different answers, each of them based on not unreasonable assumptions.

Okay – having thrown that first question out there, let me ask a second, which in theory should be just as straightforward to answer:

“Which are the so-called heavy rare earth elements?”

Uh-oh – now we’ve veered into what appears to be even trickier territory, judging by the wide range of answers that are out there. And yet, given the significant difference in monetary values of the various rare earths elements [REEs], shouldn’t there really be a single, consistent definition for the constituent REEs, as well as those that make up the heavy REEs [HREEs]?

Okay – so let’s take a crack at the first of these definitions. Here are the most common numbers that I’ve heard people use, and the reasons why they use them:

a) 15: refers to the number of lanthanide elements sitting in a row towards the bottom of the Periodic Table. This group includes La-Ce-Pr-Nd-Pm-Sm-Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu;

b) 16: refers to the lanthanide series, with the addition of yttrium [Y];

c) 17: refers to the lanthanide series + Y, and the addition of scandium [Sc];

d) 30: refers to the lanthanide series with the addition of the actinide series, which sits below the lanthanides in the Periodic Table. The actinide group includes Ac-Th-Pa-U-Np-Pu-Am-Cu-Bk-Cf-Es-Fm-Md-No-Lr.

My non-scientific survey of usage online by rare earth exploration and mining companies, indicates that option b) 16 above appears to be the most commonly used definition. However, with that said, things get somewhat muddied when companies use the term “TREO + Y” [i.e. total rare earth oxide plus yttrium] when providing quantitative data on their deposits. Does this mean that they don’t actually consider Y to be a rare earth, but, thinking that some folks do, they include it anyway?

In giving this issue some thought, I wondered where we might be able to find some sort of definitive answer to this quandry. Since we’re talking about elements of the Periodic Table, it makes sense to me to see what the International Union of Pure and Applied Chemistry [IUPAC] has to say on the matter. IUPAC is the international body that ultimately decides, among other things, what newly discovered elements should be called, and the standard symbols for existing ones. So, what do they have to say on the matter?

In its 2005 “Nomenclature of Inorganic Chemistry”, IUPAC defines the rare earth metals as “Sc, Y and the lanthanoids”. So by this definition, IUPAC considers there to be 17 rare earth elements. Thus, it makes sense to me that in the interests of standardization, those of us that are involved with the rare earths, should start using this definition also.

An aside: note here, that IUPAC refers to the lanthanOIDs, and not the lanthanIDEs. Per IUPAC:

Although lanthanoid means ‘like lanthanum’ and so should not include lanthanum, lanthanum has become included by common usage. Similarly, actinoid. The ending ‘ide’ normally indicates a negative ion, and therefore lanthanoid and actinoid are preferred to lanthanide and actinide.

Okay, so that deals with the number of REEs overall. Now, what about the HREEs? Which elements are they? Again, I’ve heard and read a variety of definitions, including:

a) Gd-Tb-Dy;

b) Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu;

c) Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu + Y;

d) Sm-Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu;

There are numerous other additional variations too – probably even more numerous than the definitions of number of rare earth elements as a whole. Unfortunately, IUPAC or a similarly-august body does not appear to have an opinion on this one. However, I will note that in the world of magnetics, from which I hail, it is generally definition c) Eu-Gd-Tb-Dy-Ho-Er-Tm-Yb-Lu + Y that is used for the HREEs, because of certain magnetic characteristics that they have in common, in comparison to the other REEs

Since a number of the elements included in the various definitions of the HREEs above, sell at very significant unit prices when compared to the other REEs, I would argue that it is really important that all rare earth exploration and mining companies get on the same page with their definition of HREEs. This is even more important when the term HREE or heavy rare earth oxide [HREO] is used without definition. Reviewing the usage online by these companies, it seems that most [but not all] of them are using the same definition that the magnetics community uses. Consequently, I would propose that this definition be used across the board within the industry. I was chatting with Jack Lifton earlier this week on this subject, and we were in agreement on this point. Going forward, Jack will continue to use this definition when discussing HREEs, and I will be doing the same.

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This is the first coherent discussion of “heavy rare earth” nomenclature that I have ever seen. I could not have said it better myself. Why do I include it here today, in this article?

After speaking on the “race” to be the first to produce “heavy rare earths” outside of China last weekend, I noted from the comments I got both during my presentations and afterwards by email, that there is still a great deal of misunderstanding by the investment community on just what the term, “heavy rare earths” actually means. I hope that the above article provides some illumination of this topic.

Now, to the horse race itself. In my opinion, the winner of the Heavy Rare Earths Derby, the HRED, will be Great Western Minerals Group (GWMG), which, I predict, will begin to produce commercial quantities of HREEs at its Steenkampskraal project in Cape Province, Republic of South Africa, in the fourth quarter of 2011. This is providing that GWMG gets the project’s operating permit renewed by December 31, 2009, and is able to raise the funding for the project and finalize the metallurgy. I believe that all three goals are on target to be met. Avalon Rare Metals will follow GWMG as a producer of commercial quantities of HREEs outside of China sometime in 2012-13.

GWMG is a vertically integrated REEs company; its HREE and light REE production from Steenkampskraal will, after separating and refining, go to its wholly owned subsidiary, Less Common Metals (LCM), in the UK. Here, the REEs in metallic form will be alloyed to produce REE permanent magnet alloys for customers to use to fabricate magnet forms, for end uses.

There will be a period during 2012-2015 during which GWMG/LCM will be the non Chinese world’s only vertically integrated producer of such permanent magnet alloys

When Avalon Rare Metals production begins in 2012-13 I think that its initial total REE production may be sold into the Chinese refining market, which I think by then, may be seriously short of HREEs and may even be short of all REEs.

Avalon’s immense resource at Thor Lake in the Northwest Territories, will ultimately be Canada’s major producer of REEs; but I think that for most of the next decade, it will be a horse race between GWMG and Avalon for the title of top producer, by volume, of HREEs.

This horse race will, I now believe, insure Canadian dominance of the non-Chinese REE production market.

I think it is much more likely now that a Canadian REE producer will be in a position to buy an American or Australian REE producer by 2014-15 than the other way around.

I think that my colleagues and associates in Washington, D.C., are beginning to think the same way as I do. I’m already beginning to hear the phrase strategic and critical “North American” resources in place of S & A “American” resources. Soon I’ll be hearing about reliable allies and ultimately some procurement bureaucrat will say that he never met a Canadian that he didn’t like. Imagine that?

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Disclosure: I do not own, nor have I ever owned any shares of either GWMG or Avalon, nor have I ever been paid a fee by either company. Both have paid my expenses for travel to and from their offices or project locations. I don’t own shares directly or indirectly at the present time in any company upon which I comment. I wish all of the potential REE producers, and in fact all of the rare metal projects everywhere, the best of luck, but I don’t want to be beholden to any of them. My opinions are formed by my own research, and I always welcome new or better information.