Mickey Fulp in Gold Report
pub/na/9972
The following are selected references to Avalon. See the link for the full report.
MF: The mining and concentrating of the rare earth elements isstraightforward. It's the separating and the processing into useableproducts that is difficult because it requires multi-stage chemicalplants. Because the REEs are so similar in their properties, they arevery difficult to separate into useable pure metals and chemicalcompounds. It's a complicated, iterative process requiring eithersolvent extraction and/or ion exchange to separate them into useableproducts. I recently visited the Silmet operation in Sillamae, Estonia,which was acquired by
Molycorp Inc. (NYSE:MCP)in April. The facility separates the LREEs lanthanum, cerium, neodymiumand praseodymium. It also has the capacity to separate samarium. But,they do not have the ability to separate europium from gadolinium or theHREEs. At this stage, Silmet would have to invest in an ion exchangecircuit to separate europium and gadolinium. But Molycorp's beenseparating and producing europium for 50 years, so there's some synergywith Silmet and they are expanding its capabilities.
Molycorp isthe 800-lb. gorilla on the block. The company owns two of the threeseparation plants outside of China for light rare earths. The third oneis in Kazakhstan and doesn't amount to much. I think an Americas-centriccartel of rare earth companies is forming to create an independentsupply chain outside of China. Junior exploration companies would bewell served to quickly get on board with the major and minor playersinvolved in this group to secure a place where their products can beseparated and processed into usable compounds and metals.
In my opinion this is important for companies like Avalon Rare Metals Inc. (TSX:AVL; NYSE.A:AVL; OTCQX:AVARF), Rare Element Resources Ltd. (TSX:RES; NYSE.A:REE), Quest Rare Minerals Ltd. (TSX.V:QRM; NYSE.A:QRM) and Tasman Metals Ltd. (TSX.V:TSM; OTCPK:TASXF; Fkft:T61),the four companies I consider to be the cream of the crop among juniorexplorers. In my opinion, each must form some kind of a businesscombination, strategic alliance, joint venture or offtake contract inorder to fund the capital expense (capex) to build a mine. Therefore,each needs to find a partner to succeed in the business.
Molycorp currently is missing the heavy rare earth mine supply.
Neo Material Technologies (TSX:NEM)might recover xenotime from tailings from the Pitinga Mine in Brazil,but that will not be enough to satisfy demand. In my opinion, there willbe space for two to four mines in the world outside of China to supplyelements Molycorp doesn't have or doesn't have enough of right now.There is limited space in this sector for companies to be successful.
TCMR:You mentioned that Avalon, Rare Earth, Quest and Tasman need some sortof strategic alliance. Does that mean working with a financial partneror technology firm, building a separation plant, striking an alliancewith a battery company or some other kind of alliance?
MF:Any or all of the above. Everything's in play right now. There's awindow of opportunity that will close sooner than any of these depositswill begin to be mined. Now's the time to get 'er done.
TCMR: So, how did you select these companies as the cream of the crop?
MF:These companies entered the sector early enough and had deposits thatlooked like they were robust enough to be mineable at some point in thefuture. They also had the right people at the helm and tight sharestructures.
MF: I think that is a serious financial consideration.Infrastructure, ability to develop and proximity to tide water could becritical in this sector. The challenge with proximity is that the onlycurrently important separation facilities outside of China are inMountain Pass, California, and Sillamae, Estonia. I've heard a smallLREE separation plant is located in Kazakhstan, and
Rhodia Group (NYSE:RHA)has a small HREE separation facility in France.
Avalon's Thor Lake sitsway up in the Northwest Territories, thousands of kilometers from anopen ocean. Quest's Strange Lake is located in far northern Québec butthe port at Voisey's Bay is close. Rare Elements' Bear Lodge is inWyoming with excellent infrastructure but a light-dominate REE depositso it may not figure into the heavy REE equation.