RE: A bit of Burundi research7 Sep 2022 21:00
LB,
Imagine you own a farm and sell your product to a wholesaler who then sells it to a packaging company and then to a national grocery retailer like Waitrose. The farmer cannot claim the profits that waitrose makes on sales, nor on the packager or the organisation that may have collected good from the farm. The article looks at the end of stage sales and believes and wants that final percentage as a cut. The Burundi mines only extract from an open pit in the ground of raw material and at best what happens is some sorting out, but the vast majority of the soil is not rare earth and so it exists as a soil concentrate. The cost to produce may be $16 a kilo and it is sold on for the next stage at $40 a kilo as 30-50% rare earth oxides. It is that stage which Burundi owns 10% shares in. The company also pays taxes on the profits and the workers' pay taxes on their pay. The problem Rainbow had was three-fold. The first is that China who sponsored Burundi palace building and other Burundi projects was the only buyer for rare earth processing, and they forced the price down cheaper per kilogram as Rainbow started producing. The second problem was that the CEO before George arrived was less experienced in mine planning and used inadequate equipment to do mining in the rain and carried out vastly higher stripping rates as they did not do enough drilling to identify where the best rare earth veins were located in the soils and so costs over ran. The third issue was the production volume was much lower than planned. As a consequence, Burundi made little money out of it. When George came the competencies on Rainbow's side all improved but he did not get the chance to export any product out to deliver better returns.
Another issue for Burundi is that it is land locked away from the coast to ship ore to any third country. Most processing facilities for rare earths are near a port or have a transfer route does not go through other countries to do the processing. As a consequence, it is practically impossible to go from a concentrate to a final magnet product in Burundi. Only a handful of countries around the globe can do it. Therefore, the rare earths remain in the ground in Burundi until there is a way to separate rare earths without resorting to thermal cracking at high temperatures. Hope this all helps Tony. (Anyone disagrees please edit as all was done from my memory from a story a long time ago).
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