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Medallion Resources Ltd. –Rethinking Rare Earths Resource Development

Overview

Medallion Resources Ltd. (TSXV:MDL, OTCQX:MLLOF) is focused on becoming a low-cost producer of industrially important rare earth elements (REEs) from Monazite. Monazite is available as a by-product from existing mineral sands mining sources. Medallion Resources is pursuing monazite purchasing agreements, and processing partnerships, and plans to build a rare earths processing facility in North America.

“We’re taking a different approach to rare earth production than our peers. We are not focused on exploration and developing metallurgical techniques to get to production. Rather, we are exploiting a well-known resource,” said Medallion Resources President and CEO Don Lay. “Our objective is to import that resource into North America to a processing plant and create a rare earth chemical concentrate product. We sell to or partner with a rare earth separation company to separate individual rare earth oxide to be sold as individual products.’’

The company recently raised $300,000 from a non-brokered private placement of units priced at $0.03 each. Proceeds of the offering are earmarked for a pilot-scale metallurgical test program, including customer development work and jurisdiction and site analysis for the company’s proposed rare earth extraction plant.

Investment Highlights

  • REEs are recognized as important industrial commodities.
  • Monazite feedstock contains a good distribution of magnetic materials which are driving the bulk of the revenue in current REE markets.
  • Building a redundant supply chain by acquiring more than one supply source outside of China from existing stockpiles and mining operations.
  • Well-understood metallurgical requires no mining or a high purity input, translating to a low capital cost project with low operating costs.
  • A well-respected, talented management and technical team with wide industry depth.

Growing Market for Magnetic Rare Earths

The rare earths market has received a lot of investor attention over the past few years on a precarious supply/demand balance. Industrial market demand for REEs is growing, especially in the magnet fabrication industry, while near-term supplies outside of China remain tight. China, the world’s main producer is also the main consumer, reducing export flow to global markets. Further increasing demand for alternative sources to China comes from ethically-minded companies looking to secure a conflict-free supply of rare earths.

At a recent PDAC conference, Ryan Castilloux, founding director and industry analyst at Adamas Intelligence, shared his predictions for rare earths prices, specifically for dysprosium, terbium, neodymium, and praseodymium. Castilloux pointed to increased demand from magnet manufacturers as one of the main drivers of the market.

Most of the world’s magnetic REEs are found in the phosphate mineral ore monazite, a by-product of the heavy mineral sands mining process. Monazite can be isolated as a nearly pure concentrate containing significant amounts of key REEs used in magnet manufacturing including neodymium, praseodymium, dysprosium and terbium.

“Right now the size of the global rare earths market is about 130,000 tonnes per year,” stated Lay. “And we are on the path to becoming a significant player in this market. What we’re offering is low cost, near-term production of high-grade rare earth products approach outside of China.”

Strategy for Building a Low Cost Rare Earths Producer

Medallion Resources’ strategy is centered on the near-term, low-cost production of rare earths from monazite. Monazite is a rare earth phosphate mineral commonly produced and discarded or stockpiled by mineral sands mines around the world making it available in large quantities at a low cost.

Monazite has a long history as a source of rare earths dating back to the late 19th century. The process for extracting rare earth elements from monazite is relatively simple and well established. And with many of the heavy mineral sand operations having an average mine life of 20 to 40 years, long-term production is guaranteed.

Medallion-Rare-Earths-Mineral-Sands

Figure 1In the same manner as gold, heavy mineral sands sink and can be panned

Medallion Resources’ rare-earth production strategy includes entering into long-term monazite supply agreements with reliable heavy-mineral sands producers in different regions outside of China. In this way, the company hopes to position itself as a leading supplier of non-China rare earths chemical concentrate to downstream separation processors.

Conventional hard-rock rare earths projects carry the risk and expense of exploration, drilling, metallurgical design, construction, and mining. By acquiring or partnering with heavy mineral sands operations, Medallion Resources expects significantly lower risk and lower capital and operational costs. Cutting out these stages of development will also move projects into production more quickly, generating cash flow faster for future growth even when REEs prices are low.

“We think we’ve got the best pathway to get into quick production of a concentrate,” said Lay. “There is a race to production in rare earths and once you’re in production you’ve got a much bigger advantage over the competition. We’ve got a lot of interest in the downstream side looking for rare earths concentrate product they can then separate into the individual oxides and these markets are keen on having alternatives to Chinese supply.”

Strategy includes North American processing facility

Medallion Resources’ management is actively working to negotiate and finalize partnerships or purchase agreements to build a large-scale monazite processing facility to produce rare earths. Possible North American locations for its future monazite processing facility are also under review. Concurrently, Medallion Resources is working to build relationships with rare earth refiners and other end users to secure a market for its products.

In 2015, Medallion Resources made significant progress on its lab-scale metallurgical testing, overseen by the company’s Chief Technical Advisor Dr. Bill Bird, to extract REEs from monazite sand. Recent test work has confirmed Medallion’s caustic-route metallurgical process plans, bringing the company closer to full process refinement and commercialization. The test work has also resulted in improved techniques for the production of phosphate as a potential commercial fertilizer by-product of the process.

Medallion product validated by industry

In late 2015, Medallion provided mixed-rare earth concentrate samples extracted from by-product Monazite to rare-earth separators and other interested parties. Based on the feedback it received, the company believes the concentrate product, when delivered in commercial quantities, is suitable for input into standard commercial rare-earth refineries or separation plants.

“This is a welcome and expected response as well as validation of our approach.  Rare-earth processing can be technically challenging, so we have taken a straightforward approach to get to production.  Our strategy is to purchase by-product monazite sand.  This will serve as a high-grade feedstock for our planned commercial extraction plant,” said Lay.

Plans for 2016: Pilot Plant

Medallion said its plans for 2016 include requesting proposals from qualified mineral labs to scale up to pilot plant level. This will allow the company to test the operating parameters for the variety of monazite input feedstocks currently under consideration.

Another key priority this year is spending the time needed to build relationships with both solvent extraction-based refiners and new groups working to commercialize alternative rare-earth separation techniques. The company needs to raise more capital for pilot-plant funding and business development activities. “Although our ‘burn rate’ is low, we expect additional equity raises or other forms of financing,’’ stated Lay.

Pilot plant scale tests that are needed to confirm the commercial viability of Medallion’s rare earths extraction process are expected to cost approximately $200,000.

Management

Don M. Lay—President, CEO and Director

Don Lay focuses on the company’s corporate strategy and finance. He has more than 25 years of experience in public and private venture capital, corporate communications and international business. He has served as a senior officer and director for a number of public companies including mineral-exploration companies International Taurus Resources Inc, American Bonanza and Medallion Resources Ltd. He was a principal at China MobileSoft, a seed-funded, embedded-software supplier that delivered solutions to Chinese telephone handset makers that provided an exceptional return to shareholders. Before entering the venture-capital world in 1994, Lay invested 13 years in enterprise software arena in development, sales and support. He holds a Bachelor of Science degree in Computer Science from the University of British Columbia.

Tom Arnould, CA—CFO and Corporate Secretary

Tom Arnould is a graduate from Queen’s University in Kingston Ontario, receiving his Chartered Accountant’s designation after articling with Coopers & Lybrand (now part of PriceWaterhouseCoopers) in 1982. Since then, he has worked with various private companies in the food processing and distribution and group-benefits areas where he assisted with the sale of these companies to public entities. More recently, he has worked as a CFO of a private strategic-marketing firm and as a principal with Adler Business Solutions Inc. In addition, he consults with other companies on finance and accounting matters.

David Haber, ICD.D. Chairman & Compensation Committee Chair

David Haber serves in Vancouver as the Honorary Consul General, Republic of Austria. He was educated in Austria and graduated from the Vienna Business School. In 1981, Haber founded what later became Heath Benefits Consulting Inc., a major National Pension and Benefits consultancy with offices in six major Canadian centres. In 2006, he sold Health Benefits Consulting to Morneau Sobeco, the largest Canadian employee benefits consultancy, where he served on its Senior Executive Committee until early 2009. As a past President and Founding Member of the BC Chapter of Certified Employee Benefits Specialists (CEBs), Haber has played a key role in the development of the benefits industry in British Columbia. He is a member of the International Foundation of Employee Benefit Plans (IFEBP), the Canadian Pension and Benefits Institute (CPBI), and BC HRMA.

David Shaw, PhD—Director                                    

Dr. David Shaw has nearly three decades of experience in the resource and finance industry, with specific emphasis on technical and financial due diligence of resource projects. He is an independent geological consultant and has focused on geological analysis of structural controls of ore mineralization and on the risk and financial assessment of resource-projects investments. In September 2009, Dr. Shaw was appointed Chairman of Salares Lithium Inc. One year later, Salares Lithium completed a merger with Talison Minerals Pty Ltd (TSX: TLH), combining their respective lithium assets and creating the world’s largest, publicly traded lithium production and exploration company. He is currently a director for Talison. He is also an independent director of First Majestic Silver Corp (TSX: FR, NYSE: AG), Great Quest Metals Ltd (TSX-V: GQ), and President of Albion Petroleum Ltd (TSX-V: ABP.H). Dr. Shaw has held the position of Senior Mining Analyst, Corporate Finance, at Yorkton Securities Inc, based in Vancouver and Santiago, Chile. He attained a PhD in Structural Geology from Carleton University, Canada.

Rod C. McKeen, LLb—Director 

Rod McKeen is a lawyer, and a founder and principal of Axium Law Corporation in Vancouver, a Canadian since January 2004. He has more than 25 years’ experience in all facets of securities and corporate law pertaining to the mining and mineral-exploration industry. Prior to forming Axium Law Corp, McKeen was a partner in the law firm Gowling Lafleur Henderson LLP and a partner with the law firm Mountpellier McKeen Varabioff Talbot and Giuffre. His practise encompasses emerging and mid-size mineral resource companies with projects and operations around the world and involves dealing with stock exchanges and mergers, acquisitions and financing transactions on a similarly global basis. McKeen earned a Bachelor of Laws degree from the University of British Columbia, Vancouver, Canada and a Bachelor of Arts degree from the University of Alberta, Edmonton, Canada.

Andrew Morden, CA—Director, Audit Committee Chair

With over 20 years of operations and finance experience, specializing in taking small companies to the next level of growth, Andrew Morden is a seasoned executive and leader. He joined Webtech Wireless in 2010, getting back to a focus on the mobility sector. Prior to Webtech, he spent eight years working at the C-Level in eCommerce and mobility software companies, managing operations and raising venture and public market financing. As Vice President, Financial Planning and Systems, Morden spent four years at Intrawest Corp. and was also Senior Manager in the Assurance and Corporate Finances practises at KPMG. He is a Chartered Accountant and holds a Bachelor of Commerce (Honours) from the University of British Columbia.

Warwick Bartle—Feedstock Acquisition Consultant

Warwick Bartle’s commercial experience with titanium and related minerals spans almost 50 years. He started as an industrial chemist, working in pigment production for Laporte Titanium (now Cristal Pigments). He soon found his way into international mineral sales and marketing, and over the years has held those responsibilities for titanium minerals, zircon and monazite for leading companies that include Western Titanium (now Iluka Resources), QIT (now Rio Tinto Iron & Titanium Inc), Cable Sands/RZM (now Bemax), and others. Bartle, who is based in Australia, is a graduate of the Royal Institute of Chemistry, London.

Robert Roe—Mineral Sands Geologist

Robert Roe is an expert consulting geologist with more than 35 years of diverse experience in mineral exploration, mining-property evaluation, mineral-sands evaluation and supply-chain management. He has managed regional polymetallic exploration programs in diverse geologic environments for a variety of mineral commodities including gold, base metals, uranium and titanium. He has worked on all major continents while working for Rio Algom, Phelps Dodge and Essex International as a field geologist and for Kerr McGee Corporation as regional exploration manager and manager of geological services. Environmental remediation is also part of Roe’s resume, leading a Kerr-McGee in-house group of geosciences professionals to deal with remediation of nuclear, mining and chemical-manufacturing sites. Additionally at Kerr-McGee, and its spin-off Tronox, heprovided titanium-resource evaluations in support of the third largest manufacturer of titanium oxide in the world. Roe has a MS Geosciences degree from the University of Arizona and is a member of the Society of Economic Geologists.

Sothi Thillairajah, MBA—Middle East Consultant

Sothi Ahillairajah has two decades of experience in management, international finance, advising North American corporations on Middle East joint ventures and early-stage, mineral projects in Africa and Latin America. Most recently, he was Managing Director of Revere Capital Advisors, a hedge-fund seeding group, working with investment professionals at Middle Eastern financial institutions, sovereign-wealth funds, and investment offices evaluating and recommending hedge funds and private equity investments. Thillairajah earned a BA cum laude in Economics at the University of Rochester and holds and MBA in Finance and Statistics from the University of Chicago.

James G. Clark, PhD, LGeo—Advisory Board Member

Dr. James Clark brings to Medallion 30 years of exploration experience in a broad cross section of commodities, including rare-earth-elements (REE’s). He is the past Vice President of Exploration for Rare Element Resources Ltd (TSX-V: RES), owner of the Bear Lodge, Wyoming, REE project. Dr. Clark has a strong field and laboratory orientation with extensive experience in managing exploration programs for REE’s, niobium, gold, base metals, and industrial minerals. He has worked for Molycorp Inc’s REE program and played a key role in Hecla Mining Company’s identification of the Bear Lodge REE resource. Dr. Clark is the owner and Chief Geologist of Applied Petrographics, Inc, a consulting company he formed in 1998 to provide petrographic and micro-analytical services to the mining industry. He holds a PhD from the University of Oregon and is an NI43-101 Qualified Person licensed in the State of Washington.

Anthony (Tony) Mariano, PhD—Advisory Board Member

Dr. Tony Mariano is a highly-respected geological consultant who has been the “go-to” expert for decades on the geology and mineralogy of rare-earth elements (REEs), niobium, tantalum and other rare metals. A seasoned mineralogist, exploration geologist and petrographer, he integrates his strong knowledge of geology, mineralogy and extractive metallurgy to predict the success of proposed rare-earth ventures. Many international companies depend on Dr. Mariano’s professional opinions on the economic viability of deposits based on mineralogical examination, lab work and field visits. After earning his PhD in geology from Boston University, he worked a number of years at Kennecott Research’s lab in Massachusetts, after which he began his career as a consulting geologist, specializing in carbonatite-hosted rare-earth and niobium deposits. Dr. Mariano is an advisor to a number of REE Companies including MolyCorp Inc. (NYSE:MCP) and Rare Element Resources Ltd. (AMEX: REE, TSX.V:RES,).

Mark Saxon—Advisory Board Member

Mark Saxon is President and CEO of Tasman Metals Ltd., which is a company focused on the development of the Norra Karr heavy rare-earth and industrial minerals property in Sweden. He has more than 22 years of experience in mineral resource exploration and geology with junior and senior companies in gold, base and specialty metal projects. In addition to his role as a founding director and officer at Tasman Metals, Saxon also sits on the board of Mawson Resources Ltd and Flinders Resources Ltd. An Honours BSc graduate in Geology from the University of Melbourne and a Fellow of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists, he also has received a Graduate Diploma of Applied Finance and Investment through the Financial Services Institute of Australasia.

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