Jon hwkawy: Stormcrow newsletter Feb 21 "there are plenty of other people who should be able to look at a rotten fish of a company and say Man, that thing stinks. Which brings me to the point of this rant, a company called USA Rare Earth. News about the company always says something like USA Rare Earth LLC is developing the Round Top rare earth deposit in Texas. It sounds very impressive. A recent article by Reuters asserts that the company has hired Goldman Sachs and Bank of Montreal to assist them with a public listing, either via IPO or SPAC, that might value the company at over USD$1 billion. Also impressive. But what is absolutely most impressive to me is that no one in those very impressive banking groups is standing up to point out that this company is probably worthless. Thats not impressive, thats just shameful. Before US Rare Earth LLC wrapped themselves in the Star-Spangled Banner they were wrapping themselves in the Texas state flag as Texas Rare Earths. The company has been around for a long while. Indeed, I remember Round Top from back in 2010. In 11 years, the project has advanced remarkably little. When it was first introduced to me, I asked an executive from the company what their in situ grade was. He smiled and answered in a bit of a Texas drawl that our grade isnt high, but weve got a lot of it! I replied that where I come from, we call that dirt. My analysis stands. Round Top is one of many projects that are uneconomic unless they produce a stream of products that resembles the entire periodic table. From the companys PEA issued in We know that if you pour enough acid on rock, you will dissolve many of the metals within it. That isnt in question. What is in question is whether you can eventually and cost-effectively extract materials that are pure enough to sell at market prices. If people wanted to buy impure mixtures of chemicals, you could just sell them the dirt. WITH NO EVIDENCE, this PEA suggests that the following (partial, we believe) list of products can be sold by the company from a Round Top Mine: Exhibit 6 Base-Case Price Assumptions, Round Tap PEA Source: TMRC NI 43-101 PEA Study, 2019 Most of these base-case prices are not outlandish compared to long-term price averages. Many of the markers for these materials wouldnt be overly impacted by the hypothetical annual production levels from a developed Round Top, in the unlikely event this ever happens. Some, like the markets for yttrium, scandium, lutetium amongst them, definitely would. The question is whether, at $3.96 a tonne of dirt, the company has a chance of making a pure enough product to sell to anyone. For example, the purity of neodymium oxide required to achieve anything like the base case price of USD$44.00 per kg listed above is a minimum 99%. But this grade also assumes that most of the remaining 1% of material in the neodymium oxide is rare earth oxides of similar mass, like praseodymium oxide, and not potassium or iron. As another example, battery-grade lithium carbonate does, occasionally, sell for prices as high as USD$13,750 per tonne. But it is a 99.5% pure chemical, with very strict limitations on content of contaminants like aluminum and iron and magnesium. Ask companies like Orocobre Limited how simple it is to make acceptable battery-grade lithium carbonate even from high-grade brines that dont contain substantial amounts of dissolved aluminum or thorium. It isnt simple, and with no proof of any kind that something like this can be done against all evidence collected in mining over hundreds of years (You dont believe that a huge, high-volume copper mine might not have a little beryllium or uranium or even rare earth in there that could be pulled out of solution to easily make a few million dollars more per year? Why arent all mining companies doing such things?) it is not something that should even remotely be taken for granted. Regarding the rare earths in Round Top, alone, we have some skepticism. The PEA tells us that the minerals in the dirt from Round Top (I cant bring myself to call it ore or to call Round Top a deposit because there is no evidence this thing will be economic in any way) that contain rare earths are most likely bastnasite, the same mineral found in the California Rare Earth Mine, and an unidentified yttrofluorite (Quick, what do you make when you mix fluorites with acid? Hint: Dont drink it, pour any of it on your skin or allow it to be in constant contact with most metals used to build a hydrometallurgical plant, because it will slowly but surely eat its way through just about anything). Rare earths all come from the same places and the ratios of their creation are pretty constant across rare earths of similar mass. Yet, at Round Top, the amount of lutetium in the samples is anomalously high compared to levels of yttrium. The ratio between dysprosium and terbium is also anomalously high. We note that the rare earths are notoriously difficult to measure properly, especially at low levels in the presence of multiple contaminants. We would view even the amounts of rare earths measured in these samples with a great degree of caution until much larger samples are processed and measured. What all this screams at me is caveat emptor. Every junior mining project comes with risk, weve noted that. But just because every project comes with risk does not mean we abandon all logic and run, screaming, over a cliff. There are very good reasons to be highly skeptical of the prospects for Round Top to become a working mine, and there are a host of other far better development-stage rare earth projects in the United States, never mind North America. I can understand the greed driving a company like USA Rare Earth to try to take advantage of a strong market to get their one and only project publicly listed and sell some shares at a high price. And I can understand if an investor wants to treat putting some money into something like USA Rare Earth as a trade. All that is normal for our industry. What I cant understand, apart from simple financial gain, is real investment banks with real reputations rushing to help separate investors from their money to enrich a junior mining company with essentially no commercial prospects. The involvement of firms of the scale of Goldman Sachs being involved will help convince investors that a project like Round Top is real. That is, simply, shameful."