Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
Mumbles, good morning, yes, that's certainly the case; my specific concern was the fact that PA was unable to explain the reasons for the price of mixed NdPr being near the same as discrete Nd or Pr. I would have hoped that he would be aware of this level of detail, given that it underpins PRE's decision to sell mixed NdPr. Perhaps he was aware but chose not to quote this detail due to the phrasing of the question from the analyst.
Something along the lines of
“... Pr and Nd are so similar that for magnets, they are practically identical. So manufacturers of neodymium magnets don’t bother to separate them. Most neodymium in magnets actually is 25-35% praseodymium, so only about 65-75% of the “neodymium” is really neodymium.”
https://idealmagnetsolutions.com/knowledge-base/rare-earth-metals-12-things-about-neodymium/
GK, thanks for the response. Actually, I would hope for PA to know this level of detail. It may damage PRE's credibility if they were to act in a way that suggested a lack of understanding of these aspects during high level conversations with prospective customers.
GK, when discussing the plant, PA essentially says "it's difficult because Nd and Pr are close together", then later he says "we won't be separating NdPr, we'll sell NdPr oxide only", so my point is: how does the former relate to the latter? I expect that the separation process is indeed difficult, but for reasons other than those mentioned by PA.
On the subject of selling NdPr oxide, it was also concerning that PA didn't know the implications for potential customers of supplying the separated products as opposed to the NdPr mix. His view seemed to have been informed only by the price on the metal.com website! I hope there's more depth to his knowledge, and to be fair, I certainly expect that there is. I'm sure his use of "that's above my pay grade" raised a wry smile for many.
China, I was referring to LYC's Malaysia original later stage oxide separation operations rather than Kalgoorlie. The concern is perhaps over-confidence. Are PRE taking all the steps that they might in order to reduce the risk of failure at Saltend? Do PRE not at least need a small scale proof of concept to demonstrate viability to potential offtakers?
A few questions on PRE's position on Oxide separation, following discussion of this process during the webinar
PA, 21:35 “…the separation process is the key… Nd and Pr… are virtually identical… the separation process between those two is actually quite complex, it’s difficult to achieve… once you start the separation process… unless you get it exactly right you don’t get the recovery that you’re looking for… it’s a very temperamental and difficult process to setup and get right …we are allowing a year to get that setup right and hopefully achieve it and get to that point“
A harsh interpretation of the above might be that there is still some significant work to do on the Saltend process; they know roughly what to do, and are gambling that they will be able to work out the details within a year of the plant being operational.
Should we not expect a pilot operation to validate the process before building Saltend? I can find no mention of one.
How can they do Saltend FEED without this?
Didn’t it take Lynas much longer than a year?
Will this proposition be attractive to potential offtakers?
Why does PA discuss separating Nd from Pr when he later says that PRE are going to sell only a mixed NdPr oxide?
Hitch, BMW have simply innovated their way out of the problem. Others appear to be on similar trajectories, see the articles I linked in previous posts. These substitute platforms do not appear to be inferior to those based on PMs.
https://www.bmwblog.com/2021/11/23/bmw-i4-efficiency/
If alternative PM supply were suddenly to appear, would they just drop their existing technology base and start all over again? I suspect not.
Prior info: PEA expected end of 2021
https://www.youtube.com/watch?v=Kivvgn4bC-s&t=1028s
New info: sounds like PEA now expected Q1 2022, unless I've misunderstood?
At 06:20 https://www.**********.co.uk/articles/the-ceo-show-with-zak-mir-george-bennett-ceo-rainbow-rare-earths-890be9a/
GK, good morning. I certainly agree with your point that supply risk is a greater concern than cost.
However, I’m doubtful that autocos will easily switch back to PMs once they’re started down a path to eliminate them, as seems to be the case for at least some of the manufacturers.
The macro demand risks to PRE and other rare earth miners are product substitution and alternative sourcing methods
Product substitution
Perhaps in wind turbines the risk of substitution is lower, however it seems much more likely to occur in autos, where manufacturers are already developing non-rare-earth alternatives. It may be cheaper and more feasible for autos to side-step rare earth PMs altogether than replicate the entire Chinese supply chain in the west. This option would also presumably allow autocos to retain in-house control of a greater proportion of total production value.
BMW: [i4 review] “For these new models and all EVs henceforth, BMW is steering clear of permanent magnets and the rare-earth metals contained therein… Other carmakers say that induction motors don’t make enough torque… With the i4 and the iX, BMW says “nonsense.””
https://www.popsci.com/technology/bmw-ix-bmw-i4-review/
Mercedes: “plans to eliminate them [rare earths] in the medium term.”
https://www.reuters.com/business/autos-transportation/automakers-cutting-back-rare-earth-magnets-2021-07-19/
AEM (development with Bentley, owned by VW): “AEM is able to offer… higher levels of performance than the market leading permanent magnet motors...”
https://www.advancedelectricmachines.com/wp-content/uploads/2020/10/CS-Passenger-Cars-v.1.pdf
AEM might not be an eventual winner, the point is that step-change innovation is entirely possible, and an apparent focus for the autocos, as evidenced by BMW in particular.
Alternative sourcing methods
Sourcing innovation could render all primary mining to be prohibitively expensive. This could be in the form of LCM’s mineral sands suggestion, although perhaps not; a more likely candidate is Rainbow’s production of oxide from by-products as referenced in an article earlier this week. The RBW PEA will be an interesting read.
“It's worth viewing the sector not as who will be able to mine or extract successfully as that's a rather large field. Rather, which few of that many are going to be the lowest cost producer? There being no certainty at all that it's going to be anyone using the currently standard techniques”
https://seekingalpha.com/article/4472376-the-south-african-experiment-that-could-roil-rare-earths-market
GK, I think the level of dilution you’ve described below is far higher than folk were anticipating.
Using that new share base, and the current high prices, I’d estimate the SP at production in 2023 to be around £2.50, only a two-bagger from here.
A UK Government agency plans to publish a Critical Minerals Strategy (CMS) in 2022.
Would UKG not pause the issuance of new grants to mineral companies through schemes such as ATF until such time as the CMS is published?
Might anticipation of the CMS also cause more general funding delays for PRE? Wouldn’t a bank want to wait an extra six months to discover how PRE sat within the overall UK strategic context, rather than taking the risk beforehand?
Tony, remember that the number Sprott published was only 50% of NPV, the full NPV would be +300% from here. Furthermore, that was based on $80 NdPr price when we are currently around $110.
Having said that, it is reassuring that RBW has a strong NPV at those lower levels. Worth noting that this is not the case for all rare earth companies, and reflects the cost advantage that RBW has versus peers, deriving from Phalaborwa being a chemical processing operation rather than a full scale mining operation.
Tony, I'd say that might be a little on the low side - although so much depends on NdPr price, of course.
If prices stay at $110 I'd say RBW is good for 80-90p, including funding dilution, and assuming an 8% discount rate. Note that Sprott used 8% and SP Angel used 12% - I calculate the difference between those two rates to be worth around 35p.
I would hope that the PEA would allow RBW to break and hold above 20p before year end.
Just my opinion, please DYOR.
DP, thanks - found more on one of GB's presentations:
"Rainbow to fund pre-feasibility study to earn an initial 70% in the unincorporated JV - mechanism to allow Rainbow's JV ownership to vary from 60% to 85% depending on IRR of PFS at spot rate rare earth prices versus initial 25% benchmark".
Presumably Bosveld are trying to protect the quantum of their profit share, so if the IRR is, say, 75%, RBW would probably move to 85% ownership.
However, I'm having to resort to inference here. Not sure why they can't just clarify this by releasing the details of the mechanism, I can't figure how this would be sensitive.
From the Annual Report, page 46
"The agreement requires Rainbow to fund work to deliver a pre-feasibility study for the Phalaborwa development, at which point a formal joint venture company will be formed of which Rainbow will own a stake of between 60% and 85%"
Have any more details been released regarding the criteria that RBW have to fulfil in order to increase their ownership to 85%? Have been unable to find anything on this. The extra 15% should be worth around 10p per share on NPV.
Reading quickly, target of 35p based on 50% of NPV8 using $80/kg NdPr, or 69p full value.
However, $80/kg is a low price; the sensitivity tables show a full value of 96p based on $100/kg.
NdPr ex-VAT price is currently at $110/kg, which, extrapolating, would be around 110p for RBW, or roughly +600% from here.
I think others have mentioned targets of £1 which seems validated by the report, with further upside possible based on NdPr price.