American Rare Earths Ltd (ASX:ARR) (FRA:1BHA) is poised and ready to take advantage of recent legislation in the US to promote domestic upstream and downstream production of rare earths, including the provision of US$800 million for research & development.
Adelaide broker Taylor Collison Limited is confident the company is strategically placed in the US market, with the re-joining of the Paris Accord by the Biden administration also expected to drive US domestic growth in the take-up of green technologies – key users of the targeted metals.
The broker said: “This presents an ideal opportunity for companies to move into the rare earth space in the US, both in mining/processing and in taking part in R & D in processing technologies.
“American Rare Earths has recognised this, setting up operations in the US.”
La Paz resource
The company’s La Paz Rare Earths and Scandium Project in Arizona has an indicated and inferred mineral resource estimate of 128.2 million tonnes at 0.037% total rare earth elements (TREE)
The Laramie Rare Earths Project in Central Wyoming is in process of being acquired from Zenith Minerals Ltd (ASX:ZNC) (FRA:ZCB) and the company has also identified another project in Nevada, 30 kilometres from Mountain Pass, the only operating rare earths mine in the US.
Samples have been collected for assaying and petrographic analysis in preparation for staking and claim filing.
Supply chain security
The threat of supply chain security for rare earths has been recognised by the US government, with China currently producing close to 90% of the global separated rare earths supply.
To put this in perspective, the only non-Chinese producer of separated rare earths is Lynas Rare Earths Ltd (ASX:LYC) (OTCMKTS:LYSCF) (FRA:LYI), producing 19,737 tonnes of total rare earth oxides (TREO), including 5,898 tonnes of NdPr in 2019, which equates to ~12% of TREO and 16% of NdPr of the global supply of 170,000 tonnes.
Taylor Collison stated: “The need to secure and develop security of supply is also underpinned by the forecast increase in demand, largely due to the adoption of green technologies, including electric vehicles (EV) and wind turbines.
“These are major users of rare earths, particularly neodymium and praseodymium (NdPr) which are key elements in the magnets used in these applications.
“Some see the demand for NdPr oxide growing to up to 70,000 tonnes by 2020, a 7% CAGR growth.
“As such an additional five Lynas Mount Weld operations would need to progressively come online by that time to meet demand.
“We would expect this to put upward pressure on prices.”
Non-Chinese mine production in 2019 included the US (Mountain Pass - 26,000 tonnes), Australia (Mt Weld - 21,000 tonnes) and Myanmar (22,000 tonnes).
La Paz Project location and claims.
Metallurgy key at Laz Paz
Taylor Collison said: “Metallurgy is the key to unlocking value and that optimising work that was completed in 2011 could result in a flowsheet that would produce a clean high-grade/high recovery concentrate that may, with the other factors mentioned above, overcome the low grade.
“Mineralisation is mineralogically relatively simple and importantly has no radioactive elements that add significant costs to other rare earth projects.
“Our view is (which is also that of the company), given the low-grade resource, metallurgy will be a critical element in determining the economic and technical viability of La Paz.
“Metallurgical studies are a key part of ARR’s activities going forward, with primarily the concentration test-work with Wood plc and the Saskatchewan Research Council (SRC) being critical.”
Rare earth extraction research
Another plank in ARR’s US rare earth strategy is research and development into innovations in the processing side.
Taylor Collison said: “The company has partnered with the Lawrence Livermore National Laboratory (LLNL) and Pennsylvania State University (Penn State), collaborating on research on rare earth extraction using samples from both La Paz and Laramie.
“This has resulted in a proof-of-concept demonstration using biosorption technology, with work ongoing.
“The company has also interest from other groups in testing innovative extraction technologies, including Lixivia, with their SELEX™ process.
“As part of the above, the company is looking for up to US$1.4 million in research funding from the US Department of Energy (DoE).”
Work programs for March quarter
With A$5 million in the bank as of January 19 and shareholdings with a value of around A$2.13 million, American Rare Earths is cashed up to support its ongoing work programs.
Major work will include a nine-hole diamond core drilling program which, depending on permitting is expected to begin within Q1, 2021.
Metallurgical results from surface samples are expected to be received in March, with results for the core potentially around mid-year.
Activities at the other rare earth properties will include early-stage groundwork with the State Lease approval for Laramie expected to be granted by mid-year.
The company is also awaiting results from the Nevada sampling, with claims to be staked and lodged over selected areas should results warrant.
Drilling and metallurgical results at La Paz are expected to flow into a planned scoping study.
Laramie project location.
Threats and risks assessment
Taylor Collison noted the below threats and risks for American Rare Earths activities in the US:
- Exploration/Resource risk –This is a key risk for any junior resource stock. This includes the discovery of new deposits, as well as delineating potentially economically and technically viable Resources following an initial discovery;
- Metallurgical risk – This applies largely to La Paz, given that viable project economics will depend largely on metallurgy. As mentioned previously the company is cognisant of this and as such is focussing efforts on metallurgy, both concentration and extraction. Initial work at Laramie indicates better beneficiation characteristics from higher-grade mineralisation;
- Markets – The markets and appetite for risk are currently at high levels, however, can turn on a dime due to any number of factors, including geopolitical and economic amongst others;
- REE prices and currency rates – Negative movements will adversely affect the viability of any future operation, access to capital and the sentiment of investors. The converse will also apply, with positive movements in prices and exchange rates. Several factors can affect prices, including changes in demand and supply amongst others. Changes in demand are expected to largely flow on from the take up of EVs and wind turbines; and
- Permitting and approvals – This is a key risk for all potential developers, both for ongoing exploration activities and for approvals for any future operation. In the case of La Paz and Laramie, this may be somewhat mitigated by the history of mining in the relevant states, and their rankings (at 9 and 26 respectively) in the 2019 Fraser Institute Mining Industry Survey. In our view, the main issue here is that time frames may be longer than targeted, with COVID-19 also being a factor in this.
Story by ProactiveInvestors
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