The IMC Consortium Eliminating the Rare Earth Industry...
Transcript of The IMC Consortium Eliminating the Rare Earth Industry...
Bringing innovation and transparency
to the world of critical metals
www.innovationmetals.com
The IMC Consortium
Eliminating the Rare Earth Industry Bottleneck
November 2012
Disclaimer & Cautionary Statement
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among others, statements regarding the future plans, costs, objectives or performance of Innovation Metals
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materially different from those expressed or implied by such forward-looking statements. Such risks and
uncertainties could cause actual results and IMC’s plans and objectives to differ materially from those expressed
in the forward-looking information. IMC can offer no assurance that its plans will be completed. These and all
subsequent written and oral forward-looking information are based on estimates and opinions of management on
the dates they are made and expressly qualified in their entirety by this notice. Except as required by law, IMC
assumes no obligation to update forward-looking information should circumstances or management’s estimates
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The Largest Arbitrage in Human History 3
The Rare-Earth Industrial Sector
Henry Hub Natural Gas Spot
WTI Spot Crude
Changing Transportation Fuels 4
The Rare-Earth Industrial Sector
•Typical gas combustion engine is very inefficient
•Electric engines are much more efficient on a BTU basis
(refer to Appendix)
Potential critical REE supply crunch 5
The Rare-Earth Industrial Sector
Projected future shortfall of critical REEs
“Rest of the World” supply chain is vulnerable
Diversity of supply is required
CeO2 Nd2O3 Eu2O3 Tb4O7 Dy2O3 Y2O3
Demand @
150-170 kt/yr TREO 60-70 kt 25-30 kt 625-725 t 450-550 t 1.5-1.8 kt 12-14 kt
Supply @
180-210 kt/yr TREO 75-85 kt 30-35 kt 450-550 t 300-400 t 1.3-1.6 kt 9-11 kt
Forecast for global supply and demand for select rare earths in 2016
Source: IMCOA
Potential new sources of rare earths 6
The Rare-Earth Industrial Sector
Source: Technology Metals Research
The rare-earth industry bottleneck 7
The Rare-Earth Industrial Sector
The good news: plenty of potential new sources
• 440+ REE projects in 37 countries outside of China (Sep 2012)
• 45+ REE projects with mineral-resource estimates (Sep 2012)
The bad news: complete lack of processing facilities
• Separation of REEs requires complex processing routes
Many companies plan to sell mixed HREE precipitates
BUT - end users can’t use mixed HREE precipitates!
Poor alternative: sell precipitates to the Chinese?
A better solution: the IMC Consortium
The Rare Earth Industry at a Crossroads 8
The Rare-Earth Industrial Sector
What many in the Industry are currently proposing
The Rare Earth Industry at a Crossroads 9
The Rare-Earth Industrial Sector
Centralized
Quality
Control
Transparent,
Anonymous
Auction
The Centralized Approach
3 Major Industry Issues 10
Industry Issues
1. Security of Supply vs. Sourcing Risk • Buying a mine does not eliminate risk; it can add risk (lack of expertise, single source
dependency etc.). For many End Users who only use a few RE’s, it is an inefficient use of capital given the elements produced. Offtakes may be a better method
• Securing sources of CRM (ex. Dy) is a huge Competitive Advantage and lack of supply can lead to disastrous results
• Be very careful about finding substitutes; you can substitute yourself right out of the market
• A Centralized Refinery approach eliminates single mine risk by diversifying feedstock sources
2. Quality Control • Many examples of poor quality control and difficulty in receiving compensation • Very few mining companies have the expertise in separating individual elements and
recognize the important quality control issues • A Centralized Refinery approach to Quality Control is best for End Users where high
standards can be met and monitored
3 Major Industry Issues 11
Industry Issues
3. Pricing • Pricing has always been an issue with no transparency • At times, buyers have pricing power, at other times, sellers have pricing power
however in either case, price transparency is important. Without it, no liquid spot market will develop nor any futures market
• Innovation Metals Corp will use a transparent auction system that will ensure fair pricing and give participants auction data
There is an opportunity for End Users to gain back some control and own a part of the supply chain that was previously never
offered to them
The solution: the IMC Consortium 12
The IMC Consortium
A group of rare-earth producers and consumers
• Consumers include end users, traders and government stockpile
programs
Producers avoid additional & risky capital expenditure
Consumers gain access to multiple sources of supply
Centered on an independent REE separation facility
• To be located in Bécancour, Quebec
• To produce 15,000 t / year separated REE products
• Primary focus: critical REEs (Nd, Eu, Tb, Dy & Y)
IMC will receive mixed REE precipitates 13
The IMC Consortium
Source: Innovation Metals Corp.
Schematic overview of rare-earth production within the IMC Consortium
Producers in the Consortium 14
The IMC Consortium
Charged a low-cost tolling fee for processing • Proportional to operating costs & determined by REE content
• Almost certainly less than cost of capital to do it themselves
Producers retain title to their material throughout
Producers not required to fund capital costs
Initial commitment: non-binding Letter of Intent (LOI)
Producers are invited to acquire equity
Equity holders will have priority in event of over-capacity
Producer LOI status: • 1 LOI signed
• 3 LOIs in progress
• In initial discussions with a number of other potential producers
Consumers in the Consortium 15
The IMC Consortium
Consumers share in cost to build refinery
• Cost proportional to unit costs of specific REE production
Gives them guaranteed access to specific REEs
Gives them exclusive access to product auction
Can be serviced by specific producers in Consortium
• Producer facilitates off-take agreement via separation plant
• Prices agreed between consumer and producer
Consumer discussions status:
• Numerous potential participants have been approached
• Includes end users, OEMs, traders & government entities
• Active discussions will begin once pilot plant begins operation
The IMC auction process 16
The IMC Consortium
Finished products go into innovative auction system
• Hybrid second-item / Vickery auction model
• Similar to the way electricity is auctioned
Will result in fair prices for producers and consumers
Auctions might fail, in the absence of clearing price
• Maximum of two failed auctions for batches of material
• Unsold product returned to producer or stored for future sales
All data shared with all Consortium participants
• Identities remain anonymous
• Allows for true price discovery
Bécancour, Quebec selected for facility site 17
The IMC Consortium
Located within Bécancour Waterfront Industrial Park
• Direct access to multiple hydroelectricity sources
• Full year-round access to deep-water port facilities
• Bulk-liquid terminal & railway line connected to CN network
• Home of leading industrial producer of HCl and NaOH
Source: Société du parc industriel et portuaire de Bécancour
Bécancour, Quebec selected for facility site 18
The IMC Consortium
IMC currently has an option on 23 hectares (57 acres)
Exempted from Environmental Impact Assessment
Strong enthusiasm in Quebec for the project
Source: Société du parc industriel et portuaire de Bécancour
Bécancour project specifications 19
The IMC Consortium
Target capacity: 15,000 tpa REOs
• To be built out in two 7,500 tpa stages
Focusing on production of critical REOs
Working towards Certification of Authorization
Main current focus: pre-feasibility study (PFS)
Projected timeline:
• Completion of PFS: Q2 2013
• Acquisition of Certification of Authorization: Q3 2013
• Begin construction: Q2 2014
• Begin operation: Q4 2015
The IMC Rare-Earth Exchange (RE-X) 20
IMC Services
Development of live, two-sided spot market for REEs
All transactions for physical delivery
Quality control & verification protocols in place
Low (2%) transaction fees
Programming work currently in beta testing
Source: Innovation Metals Corp.
Summary 21
Summary
Why does the IMC Centralized Approach make sense for Consumers?
• Consumers get access to the specific rare metals they
require
• Shared capital cost approach maximizes efficient use of
capital
• One centralized refinery can maintain high Quality Control
standards
• Capability of structuring fixed price offtake contracts if
desired
• Own refining capacity where mines come to you rather than
you going to the mine
Summary 22
Summary
What IMC is looking for from Consumers
• A non-binding LOI is all we need to reserve your desired
quantity of oxide/metal with specifications on purity/impurity
tolerances
• We do NOT require any capital up front
• We do NOT require any exclusive commitment
• Q4 2013, a full review will be made to decide whether to
build the refinery or not depending on status of Producer
Consortium and Consumer feedback. We will then be
transforming the LOI’s into binding contracts and a
Construction Escrow Fund will be established.
IMC Management 23
The IMC Team
Patrick Wong HBA - Chief Executive Officer & Director Pat is a seasoned hedge-fund manager, with over 15 years of experience in various trading strategies, including capital-structure
arbitrage. He was co-founder and Chief Investment Officer of Dacha Strategic Metals Inc. (TSX.V:DSM), a unique investment
vehicle that invests in physical rare earths. Prior to Dacha, Pat was President of a natural-gas trading company that created
models to trade physical gas. More recently he has traded rare earths and other rare metals.
Gareth Hatch PhD CEng FIMMM FIET - President & Director Gareth is a Founding Principal of Technology Metals Research LLC, a provider of market intelligence & analysis on the rare-
metals sector. He was previously Director of Technology at Dexter Magnetic Technologies Inc., leading a team focused on the
design & application of innovative permanent-magnet devices & systems. As a materials scientist, Gareth previously conducted
research work on new rare-earth permanent-magnet alloys. He holds five US patents on a variety of magnetic devices.
Furkhat Faizulla MBA - Director Furkhat is a founding partner and Deputy Director of Advanced Material Japan Corporation (AMJC), one of the largest traders of
rare earths in the world. He is currently head of AMJC’s overseas trading department, and specializes in trading rare earths as
well as other critical metals such as tungsten. Furkhat brings over 30 years of trading experience and contacts to IMC and is fluent
in Japanese, Mandarin Chinese, English, and Uzbek.
John Veltheer PhD - Director John is a chemist and professional public-company director, who is singularly focused on building and protecting stakeholder
value. He currently sits on the Board of Directors of a number of public and private companies including Rara Terra Minerals Corp.
(TSX-V:RTX), Black Sea Metals Inc. (OTCBB: BLAK), Orange Minerals Corp. (a private exploration company) and Critical
Minerals Inc. (a private exploration asset accumulator).
Appendix 24
Nat Gas Power 1 million BTUs Oil/Gasoline 1 million BTUs
Energy left after generation (58%
efficiency) 580,000 BTUs
Energy left after refining (92%
efficiency) 920,000 BTUs
Energy left after charging losses (88%
efficiency) >510,000 BTUs
Energy left after transport (95%
efficiency) 874,000 BTUs
BTUs per kilowatt-hour
3412 BTUs BTUs per gallon of
gasoline 115,400 BTUs
Electricity available 149 kWhr Gallons available 7.6 gallons
Energy efficiency 0.19 kWhr/mile Fuel economy> 24 mpg
Miles per million BTUs 787 miles Miles per million BTUs 183 miles
IMC Technical Advisory Board 25
The IMC Team
IMC is in the process of forming a Technical Advisory Board. Its first three members:
George Demopoulos PhD - Professor of Mining and Materials Engineering, McGill University, Canada George leads an active research group focused on a variety of projects relating to hydrometallurgy, aqueous processing,
precipitation & crystallization, electrochemical deposition & corrosion, and the preparation of particulate materials & mesoporous
films. George is a Gerald Hatch Faculty Fellow.
Jack Lifton PhB - Founding Principal, Technology Metals Research LLC, USA Educated as a physical chemist, specializing in high-temperature metallurgy, Jack was first a researcher before becoming a
marketing and manufacturing executive and later a metal trader, specializing in rare metals. Today, after 50 years of industry
involvement, he advises OEM high-tech industry players and the global institutional-investment community, on rare metals.
Technology Metals Research LLC is a provider of market intelligence & analysis on the rare-metals sector. Andries Meijerink PhD - Professor of Solid-State Chemistry, University of Utrecht, The Netherlands Based at Utrecht’s Debye Institute for Nanomaterials, Andries leads an active research group focused on the optical spectroscopy
of rare-earth ions and of semiconductor quantum dots. Recent work on rare earths includes spectral conversion for solar cells,
LEDs and scintillators. Andries is a past awardee of the Gold Metal of the Royal Dutch Chemical Society, and was recently elected
to the Royal Dutch Academy of Sciences.
IMC contact details 26
Patrick Wong – CEO & Director or
Gareth Hatch – President & Director
Office: +1-416-477-2412
Email: [email protected]
Web: www.innovationmetals.com