It has been another eventful week for the rare earth element (REE) sector, despite prices remaining flat. Investors have primarily been focused on a significant industry merger and potential market-changing regulations announced in China.
Molycorp takeover complete
US-based Molycorp (NYSE:MCP) confirmed that it has completed its takeover of Canadian rare earth processor Neo Material Technologies (TSX:NEM), creating an integrated mine-to-magnets rare earth company.
As part of the deal, Molycorp can now mine REEs in California, process them into oxides and alloys at facilities around the world, and produce bonded rare earth magnets through its Magnequench subsidiary – acquired as part of the Neo deal.
Under the deal, worth approximately $1.17 billion, Molycorp will have access to Neo’s patents and, as Reuters reports, provides the company with a foothold in China, where Neo has operations.
“We believe that this acquisition is a win-win situation,” said Byron Capital Markets analyst Jon Hykawy in a note to clients last month. “Not only should it significantly improve Molycorp’s earnings but it also de-risks the start-up of Molycorp’s own (processing) facility.”
The company expects the acquisition to add to its 2012 earnings and cash flow.
China-Philippines joint program faces delays
The Filipino government confirmed that its planned REE exploration joint program with China is unlikely to commence in 2012.
In an interview with local media, Leo Jasareno, director of the Mines and Geosciences Bureau (MGB), said, “[t]here has been no progress on our communication with the CGS (China Geological Survey). It looks like we won’t be able to proceed with it this year.”
In February, Jasareno confirmed that the MGB sought the help of the CGS to determine if the Philippines has commercial quantities of rare earths, and to upgrade production capabilities.
MGB officials were scheduled to meet with a CGS team to discuss and finalize terms for a memorandum of agreement that would determine the details of the program. According to MGB officials, the government allotted PhP20 million for the initiative in 2012.
“We have followed up with the CGS through e-mails, mostly, but we’ve received no response,” said Jasareno. “They were previously very interested in the project.”
China announces REE national inventory reserve
China announced that it is considering creating a national inventory reserve in a bid to stabilize REE prices. In a separate announcement, the government also confirmed that it will be looking to implement a new tax aimed at controlling the sale and production of REEs.
Enterprises will be required to purchase and reserve REEs according to a pre-set mechanism when prices fall to a certain level; when prices eventually rise to a set price, these same enterprises will then be required to sell.
Market price update
Prices across most REEs remained flat last week, with some elements displaying minor movements based on demand.
Europium oxide prices recorded the largest drop, plunging 9 percent to trade between $2,300 and $2,320 per kilogram, while lanthanum oxide dipped 5.06 percent to RMB74,000 per metric ton (pmt).
Praseodymium prices remained flat, closing out the week at RMB630,000 pmt. Yttrium oxide prices fell 2.94 percent to RMB160,000 pmt, and praseodymium oxide dipped slightly to trade at RMB405,000 pmt.
Other rare earth price points traded sideways for most of the week, recording no notable fluctuations.
Tasman Metals (TSXV:TSM,AMEX:TAS) announced that it has entered into an agreement to acquire a 100 percent interest in three new REE exploration properties in central Finland. The Korsnäs South, Siilinjärvi, and Laivajoki projects are being acquired from Magnus Minerals, an arm’s length private company. Magnus has been engaged to manage exploration on Tasman’s Finnish exploration portfolio, and a summer work program of surface sampling and mapping is underway.
Mark Saxon, Tasman’s president and CEO, stated, “[w]hile the projects are of an early stage compared to our Swedish assets, they have been selected due to their potential for elevated grades of neodymium, one of the critical REE’s that is in short supply and high demand within the green technology, high technology and automotive industries.”
The company noted the latest drill holes confirm the continuity of heavy rare earth enriched mineralization with similar grades and widths to previously reported results, as well as the potential of the deposit to continue at depth.
Drill intercepts displayed an intercept of 11 meters of 1.40% total rare earth oxides with 96.1% heavy rare earth enrichment. Results from 13 holes remain outstanding, but are expected by the end of June. The initial NI 43-101 compliant mineral resource report remains on schedule and should be delivered in the third quarter of 2012.
Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.