Shrugging off slumping prices, Great Western Minerals (TSX: V.GWG, Stock Forum) is working on a plan to become one of the first fully-integrated producers of rare earths outside of China.
The Saskatoon-based company plans to be fully integrated towards the end of 2013 or the beginning of 2014, said Jim Engdahl, Great Western President and CEO, during an interview with Stockhouse.
Currently, China accounts for 90% of the global supply of rare earths, a suite of chemical elements with tongue twisting names such as lanthanides, scandium and yttrium.
However, controversy over Chinese export quotas led many end users to stockpile supplies last year, causing prices to drop, Engdahl said.
Rare earths are used in a multitude of products, everything from aerospace components, to rechargeable batteries and magnets.
“The end users got very afraid of not having products, so they ended up stockpiling a significant amount. What happened this year is that those stockpiles are now being used,” he said. “That’s the reason why the rare earth prices have softened so dramatically from their highs a year ago.”
Like other companies in the rare earth sector, Great Western is setting itself up to supply end users who are seeking an alternative source outside of China, which is expected to export 30,184 tonnes of rare earth elements in 2012, an increase of 2.7% from last year.
Great Western’s flagship asset is the formerly-producing Steenkampskraal mine. Located in the Western Cape Province of South Africa, it has produced grades of rare earths as high as 40% with an average grade of 17.3%.
The company says it wants to bring the mine back into production as part of an overall plan to become a fully-integrated producer. In keeping with that goal, it says a preliminary economic assessment report on the mine will be released in the next 30 to 45 days.
Once Steenkampskraal is in production, Great Western Minerals will be mining lanthanum, cerium, praseodymium, neodymium, samarium, dysprosium and yttrium, the rare earths that create magnets.
Rare earth producers outside of China include Lynas Corp. (OTO: LYSCF), Molycorp (NYSE: MCP) and Great Western Minerals.
Lynas currently holds a temporary operating license for a processing plant in Malaysia. The company is not yet fully integrated, but has set out to achieve that goal in 2013.
Molycorp is a fully-integrated producer. Much like Great Western Minerals, Molycorp is focused on rare earth elements that are used in the production of magnets.
“We’re going to stay with just taking it to the alloy stage,” Engdahl said. “If we went further downstream and started making magnets we would be competing with our own customers.”
As a fully-integrated producer, Great Western will be exploring and mining in South Africa. Ore produced in South Africa will be sent to the company’s manufacturing facility in England where it will be processed to create concentrate and mixed rare earth chlorides. The next step involves solvent extraction separation, whereby the individual rare earth elements are separated. Finally metal making and alloy production result in high purity rare earth metals, magnet alloys and super-alloys.
On Friday, Great Western’s stock was up 3.5% and was trading at $0.295 a share. The company has a market cap of $122.9 million, based on 416.7 million shares outstanding. The 52-week high and low was$0.93 and $0.27 respectively.