Rare Earth Market Records Calm Trading Week

It has been a relatively subdued week across the rare earth market, with the majority of focus being on increased quotas, drill results, and an outspoken research report.

Industry focus again shifted east as China left analysts scrambling at its announcement of additional export quotas for 2012. The Ministry of Commerce has now confirmed that it will allow companies to export an additional 10,680 tonnes of REEs, bringing the total quota for this year to 21,226 tonnes.

Meanwhile, Lynas Corporation Ltd. (ASX:LYC) was left waiting on a decision from local officials in relation to its project in Kuantan, Malaysia. The news came as Malaysian Science, Technology and Innovation Minister Datuk Seri Maximus Ongkili announced that he needs more time to make a decision on the appeal to revoke Lynas’ temporary operating licence.

Research report provides recommendations

Independent investment bank Jacob Securities Inc. issued a research report on the junior rare earth element (REE) space, including “speculative buy” recommendations for a number of junior explorers.

According to Luisa Moreno, one of the firm’s analysts, demand for commodities including REEs may grow substantially if emerging markets continue to expand their middle class, and many emerging “green” technologies critical to increasingly populated regions will spur even further demand.

She added that under normal market conditions, it has been estimated that demand for REEs could grow between 5 and 15 percent over the next five years, depending on the application. Jacob Securities continues to expect long-term rare earth prices to “stay above the historically low prices of 2007-2009, but well below 2011 peak prices.”

The company’s research note gave special mention to Tasman Metals Ltd. (AMEX:TAS,TSXV:TSM), a Canadian exploration and development company focused on strategic metals in the European region, describing it has having “one of the highest concentrations of heavy rare earth elements.”

The note touted two other companies as “speculative buys,” including Montero Mining & Exploration Ltd. (TSXV:MON), a company exploring for REEs and uranium deposits at its principal asset in Tanzania, and Frontier Rare Earths Ltd. (TSX:FRO), an explorer focused on its Zandkopsdrift rare earth deposit in the Namaqualand region of South Africa.

“Montero has achieved important milestones in this rare earth race and may cross the finish line before all the other companies in our coverage universe,” said Moreno, before commenting that the company believes Frontier Rare Earths is “significantly underpriced compared to its peers.”

Zandkopsdrift is currently the largest NI 43-101 compliant REE resource in Africa, and has estimated resources amounting to 43.7 million tonnes at an average grade of 2.16 percent and a 1 percent cut-off grade.

Market price update

Prices across the majority of REEs remained flat though the week’s trading, with a few elements displaying movements based on demand.

Yttrium oxide prices displayed the largest movement, plunging 9 percent to trade between $98,000 and $103,000 per metric tonne (pmt), while praseodymium oxide dipped 2.35 percent to RMB410,000 pmt. Dysprosium oxide prices remained flat, closing at $1,050 per kilogram.

Gadolinium oxide prices fell 5.19 percent to RMB180,000 pmt, and cerium oxide dipped slightly to trade at RMB80,000 pmt.

Other rare earth price points traded sideways for the week, with no notable price fluctuations.

Junior stock price surge

Shares in emerging exploration company Galileo Resources (LSE:GLR) recently surged 42 percent on the back of an impressive maiden resource estimate at its Glenover rare earth joint venture project in Limpopo, South Africa.

Late last month, the company announced an indicated and inferred independent gross resource estimate of 28.93 million tonnes at 1.24 percent total rare earth oxides (TREO) at Glenover which, between 1957 and 1984, was mined for phosphate. CEO Colin Bird stated, “[t]he entire resource is around and below the old open pit and therefore will be relatively easy access and low cost to mine.”

“A combination of drilling, testwork, environmental and market studies should take us to feasibility study mid-2012. A decision to mine is expected by about September 2012. Production would then start mid-2014,” he added.

Junior company news

Commerce Resources Corp. (TSXV:CCE) announced results of a NI 43-101 compliant Preliminary Economic Assessment for the Ashram REE deposit at the Eldor property in Quebec.

According to a press release, results confirm a strongly positive cash flow from a 4,000 tonne per day open-pit operation with a 25-year mine life. The economic evaluation was based on an earlier resource estimate that used a base case geologic cut-off grade of 1.25 percent TREO and provided 29.3 million tonnes (mt) of measured and indicated resource, as well as 219.8 mt of inferred resource averaging 1.88 percent TREO.

Mkango Resources Ltd. (TSXV:MKA) announced results for three holes of its stage two drilling program at the Songwe project in Malawi. Highlights include a 30.4 meter sample grading 1.7 percent TREO, as well as a 66.5 meter sample grading 2.3 percent TREO – including 18.1 meters grading 3.2 percent TREO and 10.2 meters grading 3.7 percent TREO.

According to a company announcement, a total of 25 holes will be completed during the second stage, with a total of approximately 4,500 meters drilled to date. It added that as Malawi’s rainy season finishes, and pending receipt of all the assay results for Songwe, exploration will re-focus on other rare earth targets in the Phalombe licence.

Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.