Rare Earth News and Rare Earth Metals Prices

What you

Need to Know

A collection of articles from Rare Earth Investing News looking at the companies shaping the investment opportunity

By Teresa Matich

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 1

Table of Contents

Rare Earth Outlook 2017: Another Slow Year Ahead............................................................... 2

Exploration in Seafloor Mining ............................................................................................... 5

Top Rare Earth Producing Countries ....................................................................................... 8

What Would We Do Without Rare Earths? ........................................................................... 11

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 2

Rare Earth Outlook 2017: Another Slow Year Ahead

2016 was a difficult year for the rare earth market, and 2017 is

poised to be much of the same for the sector.

It’s been another challenging year for the rare earth sector; nonetheless, analysts weren’t expecting much from the industry at the end of 2015.

Last year, Jon Hykawy of Stormcrow Capital told the Investing News Network (INN) he wished he was “hopeful” about the market outlook for 2016. He then added, “I don’t see much in the rare earths business to be hopeful about.”

And, Hykaway was right; 2016 wasn’t exactly a booming year for the rare earth sector. Its price remained weak and active rare earth companies outside of China grew smaller, according to Industrial Minerals (subscription).

As such, Chris Berry of House Mountain Partners and the Disruptive Discoveries Journal shared his thoughts with INN on the rare earth market in 2016 and gave his rare earth outlook 2017.

Rare earth themes 2016: low prices, Chinese supply and illegal mining

Looking back to 2016, rare earth prices remained fairly stagnant throughout the year, which wasn’t surprising.

Berry said the industry was overall sleepy, and that low prices “generally curtailed investor interest and investment.”

That said, in the Industrial Minerals report, the Chinese guidance for rare earth prices was pretty grim to start the year, notably in heavy minerals produced in southern provinces.

The prices saw a slight recovery in the spring after China’s top six rare earth mining companies accumulated as a result of a government protection conspiracy.

Overall rare earth prices were “fairly subdued.”

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 3

Berry echoed a similar sentiment in regards to the mineral’s sluggish price.

“Despite steady growth in select rare earths, prices generally have not responded,” he said. “This has only solidified China’s stranglehold on the space.

In terms of supply and demand, the story has been interesting, particularly out of China.

Of course, it’s well known that China is the world leader in rare earth oxide supply, comprising of more than 90 percent of the global market, as noted by Research and Markets.

With that in mind, the Baiyun iron ore mine, located in Baotou, China, continued being shutdown throughout 2016. The mine has typically accounted for a third of global production of rare earth, so the closure has no doubt impacted the supply.

On that note, illegal mining of rare earth was also significant in terms of supply coming out of China.

Earlier in the year, Reuters reported that the Chinese government would be working to put a stop to illegal mining of rare earths by creating a system to clarify the origin of the materials’ supplies.

The illegal mining allegedly accounted for 44,000-46,000 tons, roughly one third of the year’s global production, PR Newswire noted.

As a result of the illegal mining, the prices of rare earth in China dropped to six-year lows. Reuters said it hit “legitimate producers hard inside and outside China, which churns out 90 percent of the world’s supply.”

As such, in October the Ministry of Industry and Information Technology (MITT) announced it would be limiting its annual mining of rare earth to 140,000 tons by 2020. With the announcement, the government also made it known it would keep investigating and apprehending those still involved in illegal mining of rare earths.

In December, Industrial Minerals reported that the Ministry of Industry and Information Technology had announced a plan to tackle illegal rare earth mining from December 2016 through to April 2017. The plan includes entering any illegal operations into the national credit information database, which will allegedly affect abilities to secure loans and listings, the publication noted.

Rare earth outlook 2017: much of the same

Moving into 2017, Berry said 2017 won’t be particularly different for the rare earth sector.

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 4

“I don’t expect much to change,” he said. “Demand for select rare earth elements ought to remain healthy but disconnected from overall price.”

Similarly, Industrial Minerals notes Chinese supply will continue pulling down prices until there’s a firm policy in place to shut down mines, or the emergence of new demand.

Still, the rare earth sector is expected to recover at some point, PR Newswire suggests. The publication says the focus of the rare earth sector in the coming years will “intensify” on neodymium deficit with a rise in prices over the next five years.

“The long-term performance of this sector is threatened by potential substitution of NdFeB technologies in HEVS/EVs and wind turbines,” it says.

Of course, the Chinese government’s plans to regulate rare earth production to 140,000 tons per year, beginning in 2020 will also impact the industry moving forward.

That said, according to Research and Markets, the global permanent rare earth sector looks to reach $41.41 billion by 2022. In terms of rare earth supply, it’s “expected to remain stable after WTO intervention and international agreements providing opportunities for sustainable market growth.”

Investor takeaway

As far as what investors should keep their eyes on, Berry said investors should pay attention to what’s happening in China.

“Watch industrial policy in China, “he said. “Watch overall pricing data as this may crack open the door for financing for western rare earth elements projects to push forward.”

While it seems as though the rare earth market is expected for another slow year, there is plenty for investors to consider in the coming years.

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 5

Exploration in Seafloor Mining

Ocean Minerals, an aspiring seafloor mining company, signed an

agreement in September 2016 for exclusive rights to explore for

rare earth sediments in the Cook Islands. The Investing News

Network had the chance to speak with its CEO, Ron Rose.

Compared to other processes seafloor mining is a relatively new way to retrieve minerals, although its idea stems back to the 1870s. Some companies have recently been given the go-ahead to explore the seabed for rare earth elements.

Ocean Minerals–a newly aspiring seafloor miner–signed an agreement back in September 2016 for exclusive rights to explore for rare earth sediments

in the Cook Islands. The agreement allows Ocean Minerals exclusive rights to explore those areas.

The Investing News Network (INN) had the chance to speak with Ron Rose, director/manager, CEO and president of Ocean Minerals about its exploration opportunities on the Cook Islands and the growing interest in seafloor mining in the rare earths sector. Some key highlights include: what steps the company is taking; if seafloor mining in rare earths is expected to grow; what makes seafloor mining a better alternative; and what investors need to know about seafloor mining.

Below is a transcript of our conversation. It has been edited for clarity and brevity. Read on to see what Rose had to say.

INN: How has the company progressed since the release of the potential new sources of rare earth in September?

RR: We have been trying to line up investors to come in to help us get to our next stage, which is a prospecting stage where we’re putting together our crews that will go out and do some baseline studies.

The next steps that are being taken is the planning of the crews and from that it will be acquiring more bulk samples in the areas that we already reserved, so we’ve got 12,000 square kilometers reserved. We’ve focused in on an area that already has samples that showed very high percentages of scandium and rare earth elements.

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 6

We know we’ve got a good area, so now we’re trying to firm it up and just get some big bulk samples so that we can do a lot of processing and test work. In addition, we’ve got another 48,000 square kilometers that we’ve got right of first refusal on. With that right of first refusal, we will go out there and do some sampling just to see whether we would want to exercise a exploration on that as well.

What this is going to entail is us applying for a prospecting permit from the Cook Islands government to have this under way, but we’ve been in communication with them and it’s about a six-month process to go through. We haven’t initiated it yet, we’re waiting to make sure we have the funds before we actually apply for the permit. We’re shooting for sometime in late summer or fall of 2017.

INN: Did the company always have its sights set on sea floor mining?

RR: No, the genesis of the company actually was born out of a research project initiated for one of the US Department of Defense contracts to look for non-terrestrial based rare earth elements because of their uncertainty of long-term supply out of China. It was more of just a research and development project given to Deep Reach Technology. Deep Reach Technology is our sister company, so when it was going through the study, which started in 2014, they discovered that not only did the Cook Islands have elevated amounts of rare earth elements, but elevated amounts of scandium.

Deep Reach Technology spun off Ocean Minerals to be able to pursue the elements with the Cook Islands government and to be a resource developing company. So, Ocean Minerals has signed an agreement with Deep Reach Technology to have them be the owners/engineers for the project.

INN: Do you think sea floor mining is a method that you expect to grow in the rare earth element sector?

RR: Yes, it’s something that is unlike terrestrial rare earth elements. It’s coming from a whole different suite of minerals associated with it in the sea floor sediments as opposed to land based. There does not appear to be near the environmental issues associated with that. The things that you’ll have to contend with environmentally in the ocean, of course, would be sediment plume when you’re putting tailings back down at the ocean bottom and things of that nature. It could be disruption to some of the fish and mammals, whale species and some of the things of that sort, by noise and lights and things like that. So those are the sort of issues that you need to watch out for.

Now, you know, there will be no discharges into the upper levels of the water, everything would go back down to the ocean bottom. We’re talking five kilometers down so it’s very, very deep. It’s so deep that shells cannot even exist, calcium carbonate shells, anything with a shell, it dissolves at that depth.

INN: What makes seafloor mining a better alternative?

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 7

RR: Well, for one thing, the radioactive elements are not associated with that. Your tailings get placed back down at the ocean bottom, so you don’t have any kind of impact on land or people that are associated with mining that. That’s land based; you know you always have tailings and discharges and potential accidents that happen on land based mining, which you don’t have out at sea.

This will be something that is out of sight of land. It’s basically a ship that sits over a riser pipe that comes up from the sea floor. The ship just moves around over top of where a crawler drags at the very, very bottom. It does the actual mining and then the material is pumped to the surface. The material is processed on the boat and then the tailings get pumped right back down and are discharged at the ocean bottom into the pits that were excavated before. So it’s a continuous operation, if you have storms or large surf or something like that you can detach from the riser pipe and move the ship off into a safe area, come back later on and re-attach the riser pipe and continue your operations.

INN: Is there something specific about seafloor mining that investors should be aware of?

RR: It’s peculiar in that your cost associated with the exploration and development of an ocean bottom mineral is much more costly to do the initial exploration work–having to organize ship crews and the cost of pulling samples up from five kilometers deep.

You do have more of a front end loading of cost associated with just getting yourself to a resource and reserve categorization. So, that is one thing that will actually impact the process. This means we’re sort of shooting for somewhere in the eight to ten-million-dollar range, initially, to get the first couple of cruises under our belt, and confirm our geologic model and get our bulk samples for processing work.

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 8

Top Rare Earth Producing Countries

While China may have a stranglehold on the rare earths market,

it's not the only country responsible for rare earth production.

Here's a look at the six top rare earth-producing countries.

In 2015, most rare earth prices were hit hard. Prices for commonly oversupplied rare earths — such as cerium and lanthanum — were on the downtrend, but the more in-demand phosphor and magnet rare earths were hit hard as well.

That meant a challenging year for rare earth juniors, and for companies targeting rare earth

production outside of China in general. Molycorp (OTCMKTS:MCPIQ), once North America’s only producing rare earths miner, filed for bankruptcy protection last summer and shuttered its Mountain Pass operations later in the year. Meanwhile, China remains the world’s top rare earth producing country, responsible for the vast majority of production worldwide.

Still China isn’t the only country producing rare earth elements (REEs) and given the important role of the metals in all aspects of modern technology, it’s worth taking a look at who else is on the list of top producers.

These are the top six rare earth-producing countries based on rare earth production data from 2015, according to the US Geological Survey (USGS):

1. China

Mine Production: 105,000 tons

China dominates rare earth mineral production to such a degree that its export practices were recently challenged by the US European Union and Japan, resulting in a WTO ruling against the country’s rare earth export quotas in 2014.

In the past, China has only exported 31,000 tons of its rare earth production. While the country claimed that the limitation was aimed at environmental protection, the WTO ruled that it represented an unfair export restriction that allowed China to control global rare earth prices.

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 9

Still, China continues to stockpile the minerals, and the country is expected to continue to be the world’s largest holder of rare earths well into the future. While China was forced to scrap its rare earth export quotas last year, the country kept internal production quotas, revamped its domestic production tax and axed rare earth export tariffs, which helped to bring rare earth prices down.

Looking ahead, China is expected to put an annual limit on its rare earth production beginning in 2020. As the world’s largest supplier of rare earth, this will no doubt significantly impact the industry.

2. Australia

Mine Production: 10,000 tons

Australia boosted its rare earth production to a whopping 10,000 tons last year, up from just 8,000 tons in 2014. The country is sitting on the world’s third-largest known rare earth reserves. Australian rare earth mining has only been underway since 2007, according to Geoscience Australia, and the country is poised to increase output going forward.

Australia based Lynas Corporation (ASX:LYC) is now the only operating rare earth miner outside of China. It operates the Mt Weld mine and concentration plant in Australia, as well as a rare earth refining and processing plant in Malaysia.

3. United States

Mine Production: 4,100 tons

While US rare earth production has increased over the past decade, its output is still dwarfed by China’s. As mentioned above, Molycorp’s Mountain Pass mine was the only producing rare earth mine in the country, and that was put on care and maintenance in 2015 after the company filed for bankruptcy protection. Overall, the US saw its rare earth production drop from 5,400 tons in 2014 to 4,100 tons in 2015.

4. Russia

Mine Production: 2,500 tons

In 2013, Reuters reported a $1 billion investment into rare earth production. Russia’s Rostec stated at the time that it expected to be able to meet Russian rare earth demand by 2017, and increased production was expected to start by 2015. However, Russian rare earth production stayed flat in 2015 at 2,500 tons.

Russian companies are also targeting new extraction techniques to recover rare earths from uranium ore, according to a report from Russia Beyond the Headlines. Since rare

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 10

earth elements are difficult to mine and extract from mined material, new processing techniques can have a profound impact on production.

5. Thailand

Mine Production: 1,100 tons

Thailand raised production of rare earth minerals by 300 tons in 2014 to 1,100 tons 2015. Rare earth reserves in the country are not currently known, but the country remains a significant player in the second-tier group of rare earth-producing countries that below China.

6. Malaysia

Mine Production: 200 tons

Malaysia is home to the world’s largest rare earth refinery, Lynas Corporation’s Lynas Advanced Materials Plant (LAMP). As mentioned above, the LAMP facility handles refining duties for Lynas’s mines in Australia. Despite political issues that delayed the plant’s opening in 2013, the LAMP facility has helped Malaysia become an important player in the world of rare earth minerals.

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 11

What Would We Do Without Rare Earths?

China still produces the vast majority of the world's rare earths.

What if the country were to cut off supplies to the rest of the

world?

The issue of creating a secure rare earth supply outside of China is one that most within the rare earth space are familiar with.

China is still responsible for roughly 95 percent of the world’s production of rare earth elements, and has gotten itself in hot water with the World Trade Organization (WTO) for imposing export quotas in the past. However, outside of the space, the general public is blissfully unaware of the importance of rare earths in their daily lives, never mind the dangers that a lack of supply would pose.

That’s where Silicon Valley author Ann Bridges comes in. Her book,”Rare Mettle,” shines a light on the difficulties that might arise from a fictional Chinese embargo of rare earth

elements. Both government and private industry interests are affected, and challenges escalate quickly for both parties in the fast-paced novel.

Lack of secure rare earth supply

Certainly, a Chinese embargo on rare earths isn’t an impossible scenario. In 2010, China cut off rare earth exports to Japan following an incident between the Japanese Coast Guard and a Chinese fishing boat. That issue was resolved fairly quickly, but the US and other countries are still largely dependent on China for rare earths.

While the overall question of a secure rare earths supply is now getting a bit more attention, Bridges believes that the public is still not nearly as aware enough of the rare metals that are so important to our daily lives.

“I think what’s happening with China from a political perspective is fascinating to me,” she said. “I think that the General Accounting Office reports that are coming out on the Pentagon and the department of defense’s lack of solutions is getting attention in the political dialogue now.”

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 12

The General Accounting Office (GAO) found that the US Department of Defense (DOD) had “not taken a comprehensive, department-wide approach to identifying which rare earths, if any, are critical to national security.” It also recommended that the DOD put together an approach to help ensure a secure supply.

However, the problem is that China produces rare earths far more cheaply than any other country, a factor that has encouraged countries to buy from China rather than invest in development of their own supplies. Amidst a rare earth price surge in 2011, a flurry of rare earth juniors came into the market, and producers Molycorp (OTCMKTS:MCPIQ) and Lynas (ASX:LYC) saw their share prices skyrocket.

However, prices have since fallen, leading Molycorp to shut down its operations in California and file for bankruptcy protection, and both Molycorp and Lynas have seen their share prices drop to a fraction of what they once were.

That being said, reports show that the Chinese government has wheels in motion to ramp up rare earth metal exports if the country is able to regain control of rare earth pricing policy.

More support needed for rare earth projects

Certainly, countries such as the US, Canada and Australia have much stiffer environmental controls than China, making it much more difficult for rare earth companies to compete.

“I do think it’s wrong that we just decided to export our pollution to China and then simultaneously complain about the fact that they don’t have environmental controls,” Bridges said.

While she noted that mining methods have improved over the years, she argued that there’s still a lack of investment in the space due to regulatory risks.

“The key problem seems to be the commitment to investment dollars,” she said. “I think that will come from the private market as long as regulatory risk and uncertainty is removed.”

When asked what changes she’d like to see, Bridges stated that it could help to remove some of the regulatory road blocks that typically hold projects back, at least on a trial basis.

“From a public policy point of view, I think that the regulations need to be revamped,” she said. “I think there needs to at least be some sort of prototype allowed with a purchase order from the Department of Defense, that says yes, we are going to buy x thosand kilograms of product, so that they can can set up an entire supply chain. That is what’s going to be necessary. You have to have that end customer.”

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 13

Of course, in terms of pricing, it still makes sense for most customers to buy rare earths from China at cheaper prices. But Bridges argued that “the pricing can be dictated if there is a broader purpose.”

For example, she pointed out that California has higher gas prices since refineries are required to produce both a winter and summer gas due to strict environmental controls. “In this case, the state of California decided the broader purpose was air pollution control,” she said.

“If you start looking at military defense [and rare earths], I think it becomes a pretty important issue for our country to take a look at seriously.”

Examples of rare earth companies outside of China

Given the importance of a secure rare earth supply outside of China, critical metals investors may still be interested in companies attempting to succeed in the space.

Certainly, it’s been difficult for rare earth companies as of late, especially given the broader commodities price rout that’s dampened investor interest in the mining sector as a whole. Still, there are a number of innovative juniors taking different approaches to developing rare earths projects. Here are a few examples:

• Medallion Resources (TSXV:MDL, OTCQX:MLLOF) is targeting the production of rare earths from monazite, available as a byproduct from existing mineral sands mining projects. As Luisa Moreno, senior analyst and managing partner at Tahuti Global, has noted, one of the positives of this model would be that Medallion could buy the material from mineral sands companies without having to incur the costs of a mining project itself.

• Texas Mineral Resources (OTCMKTS:TMRC) is an exploration stage company, with its flagship property, Round Top Mountain in Texas. In 2015, the company has signed on with K-Technologies for a joint venture to develop, refine and market K-Tech’s Continuous Ion Exchange and Continuous Ion Chromatography technology for the extraction of rare earths. In July 0f 2016, the company noted that it–together with K-Technologies–successfully completed the rare earth strategic materials research contract for the US Defense Logistics Agency.

• Alkane Resources (ASX:ALK) is advancing the Dubbo zirconia project in Australia. In April 2016, the company secured a toll processing agreement for rare earths at the project. Ryan Castilloux, founding director of Adamas Intelligence has stated that Alkane is taking a proactive approach to optimizing its flow sheet in order to keep expected production costs down. The company is targeting production of hafnium, which could significantly bolster the project’s economics.

Rare Earth Expert Interviews and Rare Earth Stocks to Buy

© 2017 Investing News Network 14