Three North American rare earth elements miners that are looking to take advantage of being first-movers in the sector.
By Robert Sullivan – Exclusive to Rare Earth Investing News
As the leading source of rare earth oxide (REO) output outside of China at present, Molycorp Inc. (NYSE:MCP) has naturally commanded a lion’s share of the recent interest in the North American rare earths sector.
Production of REO’s across Molycorp’s three properties in the US and Estonia totalled just shy of 5,000 tonnes in 2011, and has been forecast to reach 8,000-10,000 tonnes in 2012.
There are, however, a number of other companies with an array of projects and prospects in Canada and the US that could soon follow in Molycorp’s footsteps, and even surpass the Colorado-based mining outfit.
Determining who will be able to make a splash in the market with a move to commercial production is hotly debated among analysts and investors, but one factor that is often brought up as key is first-mover advantage.
Brian Chin, a research analyst with Gabelli & Company Inc., told The Critical Metals Report in a November interview that “having the first-mover advantage is very important for these REE companies because the market isn’t very large, but there is going to be demand from customers looking for secure sources of supply outside of China.”
Chin added that “the companies that are going to be able to get to production first and secure supply contracts are the ones that are going to be successful.”
Three first-movers to watch
Three companies frequently brought up in conversations about first-movers in the North American rare earths sector are outlined below. Important to note as well, is that all three have deposits that are NI 43-101 compliant, and are projecting initial output of over 10,000 tonnes of REO per year.
Avalon’s Nechalacho Rare Earth Element Project at Thor Lake in the Northwest Territories has one of the higher concentrations of heavy rare earth oxides (HREOs) in the world at the moment, with 26.1 percent of their 4.298 million tonnes of total rare earth oxides (TREO) composed of pricier HREOs.
The project is currently at the bankable feasibility stage, which is slated to wrap up in late 2012. Should this prove to be successful, the company is aiming to progress to construction between 2013-2015, with first production possibly coming in late 2015 or early 2016. Once production is underway, Avalon expects output to hit 10,000 tonnes of REO within the first year.
Quest is another Canadian junior who is holding a relatively high proportion of HREO’s. The company’s Strange Lake project in Northern Quebec is believed to hold at least 2.1 million tonnes of TREOs in its B-zone section, of which 39 percent is estimated to be HREOs.
Quest is currently lining up a pre-feasibility study for the B-zone section of the project, and is looking to start-up production in mid-2015 to 2016, with output initially expected to top 12,000 tonnes of REO per year.
Rare Element Resources, meanwhile, find themselves facing a different situation than that of Avalon and Quest, as their projects have a higher concentration of light rare earth oxides (LREOs). This puts the company at a slight disadvantage given that Molycorp is already producing LREOs and will be ramping up production in the coming years.
Rare Element Resources’ core property at Bear Lodge in Wyoming, on the other hand, is believed to be one of the richest LREO deposits in the US. And with the company looking to begin production in 2015, with an anticipated output of 11,400 tonnes of REO per year, it could be well-positioned to meet growth in demand for LREOs and to take up any market-share Molycorp hasn’t managed to corner by then.
Securities Disclosure: I, Robert Sullivan, hold no direct investment interest in any company mentioned in this article.