Saturday 22nd July 2017

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Posts tagged ‘japan’

Linking the chain

June 9th, 2017

The REE world comes together at the Argus Americas Rare Earths Summit

by Greg Klein

What’s the rarest distinction of rare earths—economic deposits, expertise outside China or public awareness of our dependence on these critical metals? Those are concerns crucial to our society and among topics to be discussed as over 100 industry experts and insiders meet in San Diego from June 12 to 14. The event is the Argus Americas Rare Earths Summit 2017 and, with certain geopolitical circumstances looming in the background, this year’s conference might be especially auspicious.

The REE world comes together at the Argus Americas Rare Earths Summit

The San Diego conference scrutinizes several
rare earths topics from a variety of perspectives.

The gathering brings together end users, miners/processors, researchers/consultants and traders, as well as some investors and U.S. government reps. Topics will include supply and demand, the challenges of building non-Chinese supply chains, new developments in recovery and processing, and the potential for new production outside China.

Japanese and European markets get special attention, as does this continent. The North American session will examine the U.S. Defense Logistics Agency’s analytical techniques, rare earths stockpile and R&D programs. The session will also address Donald Trump’s impact on international trade, as well as the METALS Act, a proposed bill to provide government support for domestic sources of critical minerals.

The fate of that Congressional bill could indicate how well American lawmakers understand American dependence on China—and for minerals essential not only to the economy, medicine and green energy, but also to military defence. Those issues should also be understood by the wider populace, believes keynote speaker David S. Abraham.

Author of The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age, Abraham emphasizes the dubious origins of some necessary commodities, along with their complex and often fragile supply chains.

Companies will be on hand too. Just a few examples include vertically integrated giants Albemarle Corp and Treibacher Industrie, RE supplier HEFA Rare Earth Canada, Burundi miner-to-be Rainbow Rare Earths, along with Canadian advanced-stage RE juniors Matamec Explorations TSXV:MAT and Commerce Resources TSXV:CCE.

Presentations, panels, roundtables and networking—not to mention some conviviality at a brewery tour—portend a valuable three days. This could mark another step towards building vitally important supply chains for vitally important metals. For more information….

Converging on batteries

April 23rd, 2017

Benchmark sees big investors wakening as three huge sectors chase three vital minerals

by Greg Klein

It’s “a sign of the times that big investors with big money are starting to look at this space in a serious way,” Simon Moores declared. “We’re seeing it with lithium, that’s just starting. And I think we’re going to see it with the other raw materials as well.” To that he attributes the automotive, high-tech and energy sectors for their “convergence of three multi-trillion-dollar industries on batteries.”

Addressing a Vancouver audience on the April 21st inaugural stop of the third annual Benchmark Mineral Intelligence World Tour, he pointed out that cobalt and graphite have yet to match lithium for investors’ attention. But not even lithium has drawn the financing needed to maintain supply over the long term.

Benchmark sees investment lagging as three huge sectors chase three vital minerals

While EVs still lead the battery-powered revolution, energy storage
will become more prominent after 2020, according to Simon Moores.

Back in 2006, batteries accounted for 22% of lithium demand. Ten years later the amount came to 42%. “We believe in 2020, 67% of lithium will be used for batteries.”

What’s now driving the battery market, almost literally, is electric vehicles. Energy storage will play a more prominent role from about 2020 onwards, he maintained.

He sees three cars in particular that should lead the trend: Tesla Model 3, Chevrolet Volt and Nissan Leaf. As consumers turn to pure electric vehicles with battery packs increasing capacity to the 60 to 70 kWh range and beyond, the industry will sell “hundreds of thousands of cars rather than tens of thousands… the era of the semi-mass market for EVs is beginning and it’s beginning now, this year.”

Last year’s lithium-ion market reached 70 GWh, Moores said. Forecasts for 2025 range from Bloomberg’s low of about 300 GWh to Goldman Sachs’ 440 GWh and a “pretty bullish” 530 GWh from Cairn Energy Research Advisors. As for Benchmark, “we’re at the lower end” with a base case of about 407 GWh.

“What does that mean for lithium demand? A lot of raw materials will be needed and the investment in that space is just starting.”

Lithium’s 2016 market came to about 80,000 tonnes. By 2020, demand will call for something like 180,000 to 190,000 tonnes. While battery-grade graphite demand amounted to about 100,000 tonnes last year, “by 2020, that will be just over 200,000 tonnes.” As for battery-grade cobalt, last year’s market came to just under 50,000 tonnes. “By 2020 it’s going to need to get to about 80,000 to 85,000.”

Benchmark sees investment lagging as three huge sectors chase three vital minerals

Simon Moores: “No other mineral
out there has this kind of price profile.”

Investment so far favours lithium but for each of the three commodities, it’s “not enough, not for the long term,” he stressed.

Three years ago only two battery megafactories had been envisioned. Now in operation, under construction or being planned are 15, with the number expected to grow. “That’s going to be needed if we’re ever going to get anywhere near the forecast that everyone’s saying. Not just us, not just Bernstein or Goldman Sachs, everyone is saying significant growth is here but investment is needed.”

But although Tesla gets most of the headlines, “the new lithium-ion industry is a China-centric story.” The vast majority of megafactories are Chinese plants or joint ventures with Chinese entities operating in South Korea or Japan. “The majority of their product goes to China.”

At the end of last month lithium carbonate averaged $12,313 a tonne while lithium hydroxide averaged about $17,000. Spot deals in China, meanwhile, have surpassed $20,000.

That compares with prices between 2005 and 2008 of around $4,000 for lithium carbonate and $4,500 for lithium hydroxide. Only slightly higher were averages for 2010 to 2014. But prices spiked in 2015 and 2016. “Between now and 2020 we believe lithium carbonate will be in and around an average of $13,000 a tonne and lithium hydroxide will be closer to $18,000 a tonne.”

Those long-term averages “are important for people building mines and investing in this space.”

Except for 2010, lithium prices have shown 11 years of increases, corresponding with battery demand. “No other mineral out there has this kind of price profile.”

Moores sees no oversupply or price crash for lithium in the next five years. Spodumene-sourced lithium “will fill the short-term supply deficit and brines will help fill the longer-term supply deficit post-2019 and 2020,” he said. “Both are needed to have a strong, balanced industry in the future.”

Turning to graphite, he noted that batteries had zero effect on the market in 2006. By 2016 they accounted for 16% of demand. By 2020, that number should jump to 35%.

While flake graphite comprises the feedstock for most anode material, “really, the price you should look at is spherical graphite.” That’s fallen lately to about $2,800 a tonne.

Moores foresees better margins for companies producing uncoated spherical graphite. “The people who make the coated will also make good margins, but not as good as in the past. For this reason, and because battery buyers are becoming more powerful and there’s more competition in the space, we believe the coated spherical graphite price will actually fall in the long term average, but will still be between $8,000 and $12,000 a tonne. So there’s very high value and significant demand for this material.”

He also sees natural graphite increasing its anode market share over synthetic graphite. “That’s a cost issue primarily, but there are green issues too.”

Silicon, he added, “will play a part in anodes but it will be an additive, not a replacement.”

Speaking with ResourceClips.com after the event, Moores said Benchmark World Tour attendees differ by city. The Vancouver audience reflected the resource sector, as well as fund managers attracted by BMO Capital Markets’ sponsorship. Tokyo and Seoul events draw battery industry reps. Silicon Valley pulls in high-tech boffins.

This year’s tour currently has 15 cities scheduled with two more under consideration, he noted. That compares with eight locations on the first tour in 2015. Moores attributed the success to Benchmark’s access to pricing and other sensitive info, as well as Benchmark’s site visits. “We go to China and other countries and visit the mines,” he said. “Our travel budget is through the roof. We’re not desktop analysts.”

Not ready for another shock

March 1st, 2017

Unlike China, the West lacks a rare minerals strategy, warns David S. Abraham

by Greg Klein

Something of an epiphany came to him in 2010 as he watched the aftermath of a minor incident in internationally disputed waters. China’s shock-and-awe response turned its near-monopoly on rare earths into a mighty geopolitical weapon, exposing the perilous nature of our dependence on seemingly obscure commodities. That inspired David S. Abraham’s 2015 book The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. Now, as a similar confrontation threatens to flare up again, he sees the West still unprepared for further attacks on vital supply lines.

Asked whether people in power have at least gained greater awareness, his response is a firm No.

Unlike China, the West lacks a rare minerals strategy, says David S. Abraham

Speaking on the phone from Indonesia, Abraham took time to discuss the issue with ResourceClips.com. The 2010 event, of course, began with the China-Japan territorial dispute in the East China Sea. Late last year American warships entered the South China Sea, in another challenge to China’s claim to sovereignty. Yet compared with previous years, “I think we’re even more vulnerable to shock in our supply lines,” he says.

“If you look at rare earths, in 2010 there were opportunities for new supplies to come onstream quite quickly, and they’ve since failed. People look at that failure and say these places couldn’t compete, they couldn’t produce economically, so they failed.”

China, having pushed up prices exponentially by withholding rare earths, swung to the other extreme and flooded the market. That dashed the hopes of many potential non-Chinese producers yet encouraged complacency among end-users. “But the supply lines themselves really look no different than they did back then,” Abraham cautions.

Of course the problem’s hardly limited to rare earths. Just one example Abraham points to is cobalt and the Democratic Republic of Congo. Estimates of DRC supply range from 51% of the world total (2015 figures from the U.S. Geological Survey), to nearly 60% (Benchmark Mineral Intelligence), to 65% (Disruptive Discoveries Journal). That gives a disproportionate amount of supply not only to a single country, but one plagued with political instability and conflict mining.

Troubling too is the ownership.

Already a major player in the country, China stands to increase its DRC position should China Molybdenum and a Chinese private equity firm succeed in their $3.8-billion purchase of a majority interest in Tenke Fungurume, one of the world’s biggest copper-cobalt mines. With a 20% stake, the DRC state-owned company Gécamines has tried to block the sale but reportedly accepted a $100-million settlement.

What you see China doing is really consolidating up the supply line…. What they’re trying to do is build up their material capacity so other people producing batteries have to use material coming through China.—David S. Abraham

“What you see China doing is really consolidating up the supply line…. What they’re trying to do is build up their material capacity so other people producing batteries have to use material coming through China.”

The country fosters economic growth by “adding to the value chain that they can produce in their own country. It’s a strong economic argument. It’s not dissimilar to what Trump says, but he hasn’t really gone into the deep thinking that’s happening in China.”

Certainly, China’s strategic approach contrasts with the West. That’s suggested by the example of Tenke Fungurume’s would-be vendors, the American/Canadian team of Freeport-McMoRan NYSE:FCX and Lundin Mining TSX:LUN.

“For those companies, it’s about profits,” Abraham acknowledges. “The question is, what are the technology companies thinking about? Companies like Apple are trying to do a better job of understanding where their materials come from, but some of the others are less concerned.”

With the U.S. military in mind, Rep. Duncan Hunter is anticipated to propose a congressional bill that would help develop domestic supplies of rare minerals.

Abraham’s skeptical. “Most bills on critical materials have not passed and his bills usually have the least chance of passing…. That’s not to say the U.S. hasn’t given money to metallurgy and mining before, but with the exception of some dabbling in beryllium in the ’90s, I can’t recall a time where the U.S. was really investing in mines from a defence perspective.”

If decision-makers lack awareness, they’re not alone, he believes. Abraham sees little evidence that consumers understand the issues. “People talk about being concerned about where these materials come from but they really have to understand the challenging supply lines, and that’s what the book was trying to introduce people to,” he says. “It’s still a little too complex to fathom and I don’t think people think beyond ‘my phone causes conflict in Congo’ and get to the point that ‘my phone leads to geopolitical war.’”

If so, that makes The Elements of Power as timely now as it was in 2015. A paperback edition comes out in April.

In concluding the phone call, Abraham offers a maxim: “Nothing changes very fast. Then everything changes all of a sudden.”

The NASA model

February 14th, 2017

How the U.S. government might help build a rare earths supply chain

by Greg Klein

The timing seems ominous. As rival American and Chinese warships assert themselves in the disputed South China Sea, the United States Geological Survey reported 20 minerals on which the U.S. imports all of its supply. Included are rare earths—coming almost entirely from China, of course. It was a 2010 conflict in the same troubled waters between Japan and China that caused the latter country to cut off rare earths exports to its adversary. As other supply chains broke apart, REE prices went on an exponential tear. Might China do that again and, this time, are American decision-makers sufficiently concerned?

They should be, say some observers. Additionally, there also looms the possibility of a trade war sparked by U.S. tariffs on Chinese goods. Yet some REEs are necessary not only for consumer electronics and clean energy, but also for military defence.

How the U.S. government might help build a rare earths supply chain

The U.S. government shows increasing concern
about relying on China for defence needs.
(F/A-18 Super Hornet jet fighter photo: Boeing)

The 20 entirely foreign-dependent minerals reported by the USGS represent an increase from 19 the previous year and 11 in 1984. The list includes rare earths, scandium and yttrium as three separate categories. In February 2016 Industrial Minerals reported that the U.S. Department of Defense “identified 15 of the 17 rare earths as critical over the last five years.”

Having foreseen as far back as 2009 the possibility of China using REEs as a geopolitical strategy, Jeff Green watches the topic from a defence perspective. “I think about the tools China has to retaliate and rare earths come right to the top of the list,” he says.

Green has recently served on the U.S. House Armed Services Subcommittee on Readiness. He’s a lawyer, a member of the U.S. Magnetic Materials Association and the REE World Advisory Board, a U.S. Air Force Reserve colonel and a former USAF missile combat crew commander. He describes his Washington firm J.A. Green & Company as “primarily a defence lobbying company that’s really interested in the nexus between national resource security and national security.”

He finds the U.S. government’s concern stronger and better informed than previously. That contrasts with events leading to what he calls the “Molycorp fiasco,” a supposed market solution to the 2010 shock and a strategy that he warned against. It went on to “burn the market to the tune of one and a half billion dollars.”

The result? “Today we’re probably in a more dire China-dependent situation than ever before.”

But Green sees hope in a Congressional bill that he anticipates being introduced within a week or so. Rep. Duncan Hunter’s proposal would help American companies develop domestic supplies of REEs and other minerals critical to defence. Assistance could come in the form of no-interest loans, Green says. Additionally the Department of Defense might pay more for American products made from American commodities, with the government reimbursing the difference between domestic and Chinese costs until American companies can compete.

It’s not a pure free market economic philosophy but one that will say: ‘If we’ve got a critical supply risk and we’ve got domestic companies that can fill that gap, then let’s invest in America to protect our national security and grow our manufacturing base.’—Jeff Green

As for the bill’s chances of success, Green’s optimistic. “You’ve got an administration that is very pro Buy American, Hire American. You’ve got a Congress that very much supports manufacturing. It will be much more pro-mining, pro-industry than we’ve seen. It’s not a pure free market economic philosophy but one that will say: ‘If we’ve got a critical supply risk and we’ve got domestic companies that can fill that gap, then let’s invest in America to protect our national security and grow our manufacturing base.’

“It’s a totally different dynamic than Washington’s seen in 40 years.”

Chris Berry agrees about the need for subsidies, among other assistance. In a research report last year the president of House Mountain Partners and editor of the Disruptive Discoveries Journal warned of the cost of not creating a supply chain outside China. In an e-mail to ResourceClips.com he notes that the “mine permitting, exploration and building process would all need to be expedited through legislation and through subsidies. This is the only way I see non-Chinese deposits being able to compete with China’s RE production costs. The good news is that as various technologies grow in importance (such as EVs) and existing processes grow as well (fluid cracking catalysts), this implies steady demand for REEs.”

While Berry considers the establishment of new supply chains “a multi-year endeavour,” he adds, “a focus on recycling or funding of materials science to minimize foreign dependence of these materials is a reasonable near-term solution to encourage supply chain development.”

As for the raw materials, Green maintains the U.S. has REE resources sufficient for defence needs, which he says are relatively small. “We’re not trying to compete globally in the automotive, magnet or catalyst markets,” he emphasizes. “We’re trying to protect our national security needs.”

Yet the Congressional bill calls for assistance to all aspects of the supply chain, he says, “whether that’s processing, refinement, separation, beneficiation, metal production, alloy production, magnet production.”

Support for supply chains would benefit other sectors, he points out. “This is the old NASA model. The government for years invested in new technologies and we’ve reaped the benefits in consumer advancements. Just look at the refining industry for petroleum products, at catalysts, phosphors in electronics, magnets for vehicles, battery materials. I think the commercial applications are terrific.

“I believe the president will kind of cheerlead this effort along,” he adds. “That’s really a game-changer. He’s going to take the traditional free trade model and turn it on its head. He’ll say the rest of the world doesn’t play by these rules so we’re going to play smarter—we’re going to treat our industries like the rest of the world treats theirs.”

U.S. increases its dependence on critical mineral imports

January 31st, 2017

by Greg Klein | January 31, 2017

U.S. increases its dependence on critical mineral imports

China stands out in a map showing major sources of non-fuel mineral
commodities of which the U.S. imported more than 50% of its supply in 2016.
(Graphic: U.S. Geological Survey)

 

Lacking any domestic sources at all, the United States imported 100% of its supply of 20 minerals last year, the USGS reports. That number increased from 19 the previous year and 11 in 1984. Included in the 2016 list were rare earths, manganese and niobium, “which are among a suite of materials often designated as ‘critical’ or ‘strategic’ because they are essential to the economy and their supply may be disrupted.”

U.S. increases its dependence on critical mineral imports

Imports of rare earth compounds and metals increased 6% over 2015, although the value dropped from $160 million to $120 million. China supplied 72% directly, with other imports coming from Estonia (7%), France (5%), Japan (5%) and other countries (11%).

But the Estonian, French and Japanese material was derived from concentrates produced in China and elsewhere, the USGS added.

American imports of tantalum increased about 40% over 2015. The USGS attributed about 37% of 2016 global production to the Democratic Republic of Congo and 32% to Rwanda. Estimates reverse those numbers for the previous year.

An alphabetical list of the 20 minerals follows, with rare earths, scandium and yttrium each comprising a separate category:

  • arsenic
  • asbestos
  • cesium
  • fluorspar
  • gallium
  • graphite
  • indium
  • manganese
  • mica
  • niobium
  • quartz crystal
  • rare earths
  • rubidium
  • scandium
  • strontium
  • tantalum
  • thallium
  • thorium
  • vanadium
  • yttrium

The report listed 50 minerals for which the U.S. imported over half of its supply. Overall China was the largest exporter, with Canada running second.

The Ashram advantage

January 30th, 2017

Commerce Resources prepares for a rare earths paradigm shift

by Greg Klein

The appeal to Western markets is obvious—an advanced, low-cost rare earths project in a friendly jurisdiction. So even before the recent military build-up in the South China Sea, Commerce Resources TSXV:CCE experienced an increase in American requests for concentrate samples from its northern Quebec Ashram deposit. With the U.S. Navy now challenging Chinese territorial aggression, the confrontation seems to pit two superpowers against each other. But what does that really indicate?

It’s actually “one lonely small old Russian-built carrier against three U.S. Nimitz-class supercarriers,” Commerce president Chris Grove points out. “So when Beijing says it’s going to take off the gloves, I think they’re referring to trade.”

Commerce Resources prepares for a rare earths paradigm shift

That brings to mind the Senkaku incident, a much smaller 2010 confrontation in the same region that prompted China to cut off rare earths exports to Japan, sending global supply chains into turmoil and prices soaring. A possible Senkaku redux is one of a number of aspects to a global paradigm shift that Grove sees coming, to the benefit of Western industry in general and Ashram in particular.

The U.S. might easily outgun China, but China produces about 90% of the world’s rare earths. They’re essential to several defence needs, “a fact that really drives certain people in the U.S. absolutely apoplectic,” says Grove.

While Westerners have struggled to compete with China on costs, prices mean little to the U.S. Department of Defense, which last year began putting money behind potential domestic processors, Grove says. That support complements a multi-faceted advantage that the West is gaining over China, he explains. The latter country struggles with rising labour costs and the need to finally address its environmental woes. Meanwhile Western countries offset their labour costs with technological innovation and maintain the world’s highest environmental standards.

Even putting aside defence, demand for rare earths continues to grow with another global development. The international commitment to address climate change through clean energy, exemplified by the Paris Agreement, increases rare earths demand for numerous applications ranging from EVs to wind turbines.

In a research report last year, Chris Berry noted that “REE usage continues to grow at a pace well above global GDP growth with demand CAGRs growing anywhere from 4% to 8%, with permanent magnet demand forecast to lead this charge to 2020.”

Commerce Resources prepares for a rare earths paradigm shift

Ashram has undergone another 9,200 metres since
its resource estimate, often hitting even higher grades.

Clearly there’s a market for non-Chinese sources. And Grove sees Ashram uniquely positioned to help serve that market. Certainly others have failed but, he emphasizes, they lacked Ashram’s benefits of mineralogy, metallurgy, grade and jurisdiction—all of which add up to lower costs.

The project reached PEA in 2012, with an amended PEA in 2015. Since then the company’s been busy on multiple fronts as it advances towards pre-feasibility.

Ashram’s advantage begins with its relatively simple mineralogy, with carbonatite host rock and rare earths within the minerals monazite, bastnasite and xenotime, which dominate commercial REE processing.

Pilot plant metallurgical tests have quadrupled the PEA’s concentrate grade, producing 41% total rare earth oxides and 43% TREO, both at 71% recovery. That puts the grade well within the range of commercial producers and does so through a single-leach process that simplifies the flowsheet.

Requests for concentrate samples have come from Solvay, Mitsubishi, Treibacher, BASF, DKK, Albemarle and Blue Line, among others covered by non-disclosure agreements.

Metallurgy has also found a potential fluorspar byproduct, offering an advantage to both revenue and opex. Grove credits Glencore Canada’s interest in fluorspar with the willingness of its NorFalco Sales division to supply Commerce with sulphuric acid on highly favourable terms.

Proud as he is of Ashram’s high-grade, near-surface resource, Grove anticipates an even more impressive upgrade. The current estimate uses a 1.25% cutoff to show:

  • measured: 1.59 million tonnes averaging 1.77% total rare earth oxides

  • indicated: 27.67 million tonnes averaging 1.9% TREO

  • inferred: 219.8 million tonnes averaging 1.88% TREO

Commerce has since drilled another 9,200 metres, mostly infill but always with some stepout holes as well. “In all those drill programs, we always hit mineralized material in the stepouts, we always encountered less waste rock at surface than was modelled in the resource and we always hit zones that were higher than the average grade,” he says.

Ashram’s magnet feed distribution also has Grove enthused. Overall, the deposit ranks with the largest producers for praseodymium, neodymium, terbium and dysprosium. Ashram’s medium-to-heavy REO resource, moreover, surpasses the producers for those elements. And, as Grove points out, those are critical elements. Efforts to find substitutes for magnet REEs have failed.

Companies with higher operating costs are probably praying for higher prices. Commerce Resources doesn’t need them. We still have a margin at today’s prices.—Chris Grove

Benefiting both Ashram’s opex and the environment would be wind energy, currently being studied for the project. Commerce’s environmental commitment as well as its community outreach have been recognized by the e3 Plus Award for social responsibility from l’Association de l’exploration minière du Québec.

The company has also received a $300,000 provincial grant to optimize tailings management, funding that shows Quebec’s commitment to mining as well as the environment. Grove calls the province “a fantastic jurisdiction,” one that invests directly in companies through Ressources Québec and makes tangible progress on the visionary Plan Nord infrastructure program.

Following a private placement of up to $2.5 million offered last month, Grove looks forward to a number of near-term milestones. Still to come are final assays from last year’s drilling. The agenda also calls for completing the pilot plant and filling requests for REE and fluorspar concentrate samples. The samples, Grove suggests, could spur interest in a JV or offtake agreement.

The Commerce quest for rare metals hasn’t been confined to rare earths. Last September sampling on the company’s property about a kilometre from Ashram found “spectacular” results up to 5.9% niobium pentoxide, described by Grove as “approximately double the grade of the largest and longest-running niobium producer’s head grade, CBMM’s Araxa deposit in Brazil.”

Commerce also holds the Blue River project in southeastern British Columbia. The property’s Upper Fir tantalum-niobium deposit reached PEA in 2011 and a resource update in 2013.

But Commerce remains very much focused on Ashram. Whether events in the South China Sea send RE prices soaring, Grove sees possible increases coming from producers boosting revenues. But, he emphasizes, Ashram doesn’t need higher prices. “Companies with higher operating costs are probably praying for higher prices,” he says. “Commerce Resources doesn’t need them. We still have a margin at today’s prices.”

Visual Capitalist: What’s needed to sustain uranium’s resurgence?

January 27th, 2017

by Jeff Desjardins | posted with permission of Visual Capitalist | January 27, 2017

What’s needed to sustain uranium’s resurgence?

 

Uranium miners up 59% on pro-nuclear hopes since U.S. election

The Chart of the Week is a Friday feature from Visual Capitalist.

Uranium’s spot price had a rough ride throughout the course of 2016, but for many investors there is suddenly a new aura of optimism around the troubled metal.

It all starts with Donald Trump’s “America First” strategy, which is being perceived by many as a potential boon to the uranium sector. Official details are slim, but industry executives are currently speculating that the Trump administration will be better for nuclear power than the previous government.

If that’s true, then it would mean far less regulatory hurdles for nuclear power, and likely even funding to bring more power plants online in the United States.

A shot in the arm

Perhaps such a catalyst is just what the metal needed. The spot price and the share prices of uranium miners have been in a gruesome bear market ever since the 2011 Fukushima incident in Japan. The prolonged pain has worn down investors and companies alike, but everything has to bottom at some point.

As David Erfle from Kitco pointed out last week, the chart for the Global X Uranium ETF (URA) makes any other downturn look like a piece of cake. The ETF, which tracks global uranium miners, has lost a whopping 90% of its value over the last six years, including two rollbacks (in 2013 and 2015).

Lately, thanks to the “Trump bump” and a 10% production cut in Kazakhstan announced earlier this month, the URA is suddenly buzzing with volume. The ETF is now back up on its feet, gaining a solid 59% since the election.

But can uranium be great again?

A bounce in uranium stocks is something that was way overdue. However, if nuclear-related announcements aren’t made soon from the Trump administration, the newfound optimism could fade pretty fast.

Statistically speaking, the World Health Organization says that nuclear power kills less people per terawatt hour than any other major source of power, even rooftop solar. Nuclear is also friendly from an emissions perspective: using a life-cycle emissions analysis, nuclear generates similar emissions to wind or hydropower.

The problem, of course, lies in the fat tail risk of a nuclear catastrophe, which is something that is still fresh in people’s minds in the wake of Fukushima.

Whether nuclear and uranium can be great again depends on the public’s tolerance for such projects, as well as a significant amount of support from the government to push new projects through. The rally is much welcomed by uranium investors—but it will remain unclear if it has any long-term legs until these two considerations are met.

Posted with permission of Visual Capitalist.

A 2016 retrospect

December 20th, 2016

Was it the comeback year for commodities—or just a tease?

by Greg Klein

Some say optimism was evident early in the year, as the trade shows and investor conferences began. Certainly as 2016 progressed, so did much of the market. Commodities, some of them anyway, picked up. In a lot of cases, so did valuations. The crystal ball of the industry’s predictionariat often seemed to shine a rosier tint. It must have been the first time in years that people actually stopped saying, “I think we’ve hit bottom.”

But it would have been a full-out bull market if every commodity emulated lithium.

By February Benchmark Mineral Intelligence reported the chemical’s greatest-ever price jump as both hydroxide and carbonate surpassed $10,000 a tonne, a 47% increase for the latter’s 2015 average. The Macquarie Group later cautioned that the Big Four of Albermarle NYSE:ALB, FMC Corp NYSE:FMC, SQM NYSE:SQM and Talison Lithium had been mining significantly below capacity and would ramp up production to protect market share.

Was this the comeback year for commodities—or just a tease?

That they did, as new supply was about to come online from sources like Galaxy Resources’ Mount Cattlin mine in Western Australia, which began commissioning in November. The following month Orocobre TSX:ORL announced plans to double output from its Salar de Olaroz project in Argentina. Even Bolivia sent a token 9.3 tonnes to China, suggesting the mining world’s outlaw finally intends to develop its lithium deposits, estimated to be the world’s largest at 22% of global potential.

Disagreeing with naysayers like Macquarie and tracking at least 12 Li-ion megafactories being planned, built or expanded to gigawatt-hour capacity by 2020, Benchmark in December predicted further price increases for 2017.

Obviously there was no keeping the juniors out of this. Whether or not it’s a bubble destined to burst, explorers snapped up prospects, issuing news releases at an almost frantic flow that peaked in mid-summer. Acquisitions and early-stage activity often focused on the western U.S., South America’s Lithium Triangle and several Canadian locations too.

In Quebec’s James Bay region, Whabouchi was subject of a feasibility update released in April. Calling the development project “one of the richest spodumene hard rock lithium deposits in the world, both in volume and grade,” Nemaska Lithium TSX:NMX plans to ship samples from its mine and plant in Q2 2017.

A much more despairing topic was cobalt, considered by some observers to be the energy metal to watch. At press time instability menaced the Democratic Republic of Congo, which produces an estimated 60% of global output. Far overshadowing supply-side concerns, however, was the threat of a humanitarian crisis triggered by president Joseph Kabila’s refusal to step down at the end of his mandate on December 20.

Was this the comeback year for commodities—or just a tease?

But the overall buoyant market mood had a practical basis in base metals, led by zinc. In June prices bounced back from the six-year lows of late last year to become “by far the best-performing LME metal,” according to Reuters. Two months later a UBS spokesperson told the news agency refiners were becoming “panicky.”

Mine closures in the face of increasing demand for galvanized steel and, later in the year, post-U.S. election expectations of massive infrastructure programs, pushed prices 80% above the previous year. They then fell closer to 70%, but remained well within levels unprecedented over the last five years. By mid-December one steelmaker told the Wall Street Journal to expect “a demand explosion.”

Lead lagged, but just for the first half of 2016. Spot prices had sunk to about 74 cents a pound in early June, when the H2 ascension began. Reaching an early December peak of about $1.08, the highest since 2013, the metal then slipped beneath the dollar mark.

Copper lay at or near five-year lows until November, when a Trump-credited surge sent the red metal over 60% higher, to about $2.54 a pound. Some industry observers doubted it would last. But columnist Andy Home dated the rally to October, when the Donald was expected to lose. Home attributed copper’s rise to automated trading: “Think the copper market equivalent of Skynet, the artificial intelligence network that takes over the world in the Terminator films.” While other markets have experienced the same phenomenon, he maintained, it’s probably the first, but not the last time for a base metal.

Was this the comeback year for commodities—or just a tease?

Nickel’s spot price started the year around a piddling $3.70 a pound. But by early December it rose to nearly $5.25. That still compared poorly with 2014 levels well above $9 and almost $10 in 2011. Nickel’s year was characterized by Indonesia’s ban on exports of unprocessed metals and widespread mine suspensions in the Philippines, up to then the world’s biggest supplier of nickel ore.

More controversial for other reasons, Philippine president Rodrigo Duterte began ordering suspensions shortly after his June election. His environmental secretary Regina Lopez then exhorted miners to surpass the world’s highest environmental standards, “better than Canada, better than Australia. We must be better and I know it can be done.”

Uranium continued to present humanity with a dual benefit—a carbon-free fuel for emerging middle classes and a cautionary example for those who would predict the future. Still oblivious to optimistic forecasts, the recalcitrant metal scraped a post-Fukushima low of $18 in December before creeping to $20.25 on the 19th. The stuff fetched around $72 a pound just before the 2011 tsunami and hit $136 in 2007.

An expert view

October 27th, 2016

ALX Uranium’s new CEO Mark Lackey discusses the commodity and the company

by Greg Klein

Thirty-six years in key positions give Mark Lackey a well-rounded perspective on the uranium sector. Added to that is an investor’s outlook gained by experience in the brokerage industry. A prolific media commentator—with over 300 TV appearances—he’s frequently asked to discuss commodities, often focusing on uranium trends and uranium companies. Lackey spoke with ResourceClips.com on October 26, the day he joined ALX Uranium TSXV:AL as president/CEO/director.

Industry expert Mark Lackey takes the helm at ALX Uranium

Mark Lackey brings extensive
expertise to ALX Uranium.

Lackey has served as Bank of Canada economist responsible for U.S. economic forecasting and senior commodities manager at the Bank of Montreal. Stints with Gulf Canada, a uranium producer like many other oil companies of the time, and Ontario Hydro, a major uranium consumer, enhanced his supply/demand insight.

That uranium career includes his 16 years in the brokerage industry, serving with Brawley Cathers, Blackmont Capital, Hampton Securities and Pope & Company. More recently he’s been executive VP at CHF Investor Relations and technical adviser at Presmont Group.

To those who watch uranium, its underachieving price hasn’t just been an ongoing disappointment. It’s a source of frustration to those who’ve made bullish forecasts. Lackey has been less surprised than others, however.

“I spoke at a conference last year and might have been the only one who thought uranium was actually going to go down this year,” he recalls. “It did go down, but way more than I thought, which was about $29 or $28. I thought everybody else was too optimistic about Japan restarting all the units and we’ve seen excess supply coming out of places like Kazakhstan. So the weakness this year didn’t surprise me.”

History gives him a sense of perspective, not to mention optimism. “I’ve seen this from $8 in the late ’90s to $136 in 2007. It fell during the 2008 recession, then came back nicely to $72 in 2011, the day Fukushima was hit. So we’ve had some big moves both ways over the years but now we’re down to a price that’s not sustainable. How many new mines would you get at these prices? I can’t think of too many unless you find something huge in the Basin, because high-volume, low-grade projects in many other places have people looking for $50 to $60—not $21.”

ALX Uranium’s new CEO Mark Lackey discusses the commodity and the company

He sees a number of price catalysts over the next few years: increased buying from utilities, a possible reduction in Kazakhstan supply, Japanese restarts and nuclear expansion elsewhere.

Kazakhstan provided 39% of world supply last year (compared with Canada’s 22%). But Lackey wonders whether low prices will force the global leader to cut output. Kazakhstan has been disregarding a 2011 self-imposed production cap of 20,000 tonnes per year, the World Nuclear Association states. WNA data attributes last year’s output to 23,800 tonnes.

As for Japan, it “will have to do something ultimately,” Lackey maintains. “There are 51 of the 54 reactors idled, that’s six or seven billion dollars a plant, roughly three or four hundred billion dollars of infrastructure. Thirty of the units have been tested positively. There are political concerns and the closer you are to Fukushima the more difficult it would be to restart them, but southern Japan doesn’t seem to have the same anti-nuclear view. Japan’s burning a lot of coal, they’re burning LNG and I hear from my sources that there are brownouts and blackouts. You can’t have that in an industrial country.”

Japan’s restarts would have a symbolic effect. But it is, after all, just one country. “There are about 60 plants under construction around the world right now, and more and more of them are coming into play,” Lackey points out.

“It’s cleaner than most baseload sources and relatively cheap. The planet has 1.2 billion people with no power and another two billion with just intermittent power.”

As someone who’s been watching uranium companies for 36 years, I’ve seen it’s the team you have, the projects you have and the jurisdiction you’re in.—Mark Lackey,
president/CEO of ALX Uranium

Although near-term price scenarios can certainly influence investors, there are other priorities in assessing junior explorers. “As someone who’s been watching uranium companies for 36 years, I’ve seen it’s the team you have, the projects you have and the jurisdiction you’re in. My favourite jurisdiction’s been the Athabasca Basin. It’s got the highest grades and Saskatchewan’s a great province to work in.

“I follow the companies in this space and I can see that ALX has a very strong board, management and technical staff,” he adds. “I’m extremely bullish about uranium and extremely excited about working with such an impressive team. It’s a great opportunity and I’m glad to be part of it.”

Lackey replaces Jon Armes, who steps down to pursue other opportunities but stays on as a consultant. During his six years of leadership at ALX and its predecessor Lakeland Resources, Armes helped build one of the Athabasca Basin’s largest and most prospective uranium exploration portfolios. Most recently he negotiated the Hook-Carter transaction that benefits ALX with the budget and experience of Denison Mines TSX:DML.

Pushing the boundaries

October 12th, 2016

Technology opens new mining frontiers, sometimes challenging human endurance

by Greg Klein

This is the second of a two-part feature. See Part 1.

“Deep underground, deep sky and deep sea” comprise the lofty goals of Three Deep, a five-year program announced last month by China’s Ministry of Land and Resources. Part 1 of this feature looked at the country’s ambitions to take mineral exploration deeper than ever on land, at sea and into the heavens, and also outlined other countries’ space programs related to mineral exploration. Part 2 delves into undersea mining as well as some of the world’s deepest mines.

Looking to the ocean depths, undersea mining has had tangible success. De Beers has been scooping up alluvial diamonds off southwestern Africa for decades, although at shallow depths. Through NamDeb, a 50/50 JV with Namibia, a fleet of six boats mines the world’s largest-known placer diamond deposit, about 20 kilometres offshore and 150 metres deep.

Technology opens new mining frontiers, sometimes pushing human endurance

Workers at AngloGold Ashanti’s Mponeng operation
must withstand the heat of deep underground mining.

Diamond Fields International TSXV:DFI hopes to return to its offshore Namibian claims, where the company extracted alluvial stones between 2005 and 2008. The company also holds a 50.1% interest in Atlantis II, a zinc-copper-silver deposit contained in Red Sea sediments. That project’s now on hold pending a dispute with the Saudi Arabian JV partner.

With deeper, more technologically advanced ambitions, Nautilus Minerals TSX:NUS holds a mining licence for its 85%-held Solwara 1 project in Papua New Guinea waters. A seafloor massive sulphide deposit at an average depth of 1,550 metres, its grades explain the company’s motivation. The project has a 2012 resource using a 2.6% copper-equivalent cutoff, with the Solwara 1 and 1 North areas showing:

  • indicated: 1.03 million tonnes averaging 7.2% copper, 5 g/t gold, 23 g/t silver and 0.4% zinc

  • inferred: 1.54 million tonnes averaging 8.1% copper, 6.4 g/t gold, 34 g/t silver and 0.9% zinc

Using the same cutoff, the Solwara 12 zone shows:

  • inferred: 2.3 million tonnes averaging 7.3% copper, 3.6 g/t gold, 56 g/t silver and 3.6% zinc
Technology opens new mining frontiers, sometimes pushing human endurance

This Nautilus diagram illustrates
the proposed Solwara operation.

A company video shows how Nautilus had hoped to operate “the world’s first commercial high-grade seafloor copper-gold mine” beginning in 2018 using existing technology from land-based mining and offshore oil and gas. Now, should financial restructuring succeed, Nautilus says it could begin deployment and testing by the end of Q1 2019.

Last May Nautilus released a resource update for the Clarion-Clipperton Fracture Zone in the central Pacific waters of Tonga.

Another deep-sea hopeful, Ocean Minerals last month received approval from the Cook Islands to explore a 12,000-square-kilometre seabed expanse for rare earths in sediments.

A pioneer in undersea exploration, Japan’s getting ready for the next step, according to Bloomberg. A consortium including Mitsubishi Heavy Industries and Nippon Steel & Sumitomo Metal will begin pilot mining in Chinese-contested waters off Okinawa next April, the news agency stated. “Japan has confirmed the deposit has about 7.4 million tons of ore,” Bloomberg added, without specifying what kind of ore.

Scientists are analyzing data from the central Indian Ocean where nodules show signs of copper, nickel and manganese, the Times of India reported in January. The country has a remotely operated vehicle capable of an unusually deep 6,000 metres and is working on undersea mining technology.

In August the World Nuclear News stated Russia is considering a nuclear-powered submarine to explore northern seas for mineral deposits. A government report said the sub’s R&D could put the project on par with the country’s space industry, the WNN added.

If one project alone could justify China’s undersea ambitions, it might be a 470.47-ton gold deposit announced last November. Lying at 2,000 metres’ depth off northern China, the bounty was delineated by 1,000 workers and 120 kilometres of drilling from 67 sea platforms over three years, the People’s Daily reported. Laizhou Rehi Mining hopes to extract the stuff, according to China Daily.

China’s deep underground ambitions might bring innovation to exploration but have been long preceded by actual mining in South Africa—although not without problems, as the country’s deplorable safety record shows. Greater depths bring greater threats from rockfalls and mini-earthquakes.

At 3.9 kilometres’ depth AngloGold Ashanti’s (NYSE:AU) Mponeng holds status as the world’s deepest mine. Five other mines within 50 kilometres of Johannesburg work from at least three kilometres’ depth, where “rock temperatures can reach 60 degrees Celsius, enough to fry an egg,” according to a Bloomberg article posted by Mineweb.com.

In his 2013 book Gold: The Race for the World’s Most Seductive Metal, Matthew Hart recounts a visit to Mponeng, where he’s told a “seismic event” shakes the mine 600 times a month.

Sometimes the quakes cause rockbursts, when rock explodes into a mining cavity and mows men down with a deadly spray of jagged rock. Sometimes a tremor causes a “fall of ground”—the term for a collapse. Some of the rockbursts had been so powerful that other countries, detecting the seismic signature, had suspected South Africa of testing a nuclear bomb.

AngloGold subjects job-seekers to a heat-endurance test, Hart explains.

In a special chamber, applicants perform step exercises while technicians monitor them. The test chamber is kept at a “wet” temperature of eighty-two degrees. The high humidity makes it feel like ninety-six. “We are trying to force the body’s thermoregulatory system to kick in,” said Zahan Eloff, an occupational health physician. “If your body cools itself efficiently, you are safe to go underground for a fourteen-day trial, and if that goes well, cleared to work.”

Clearly there’s more than technological challenges to mining the deeps.

By the way, credit for the world’s deepest drilling goes to Russia, which spent 24 years sinking the Kola Superdeep Bore Hole to 12,261 metres, halfway to the mantle. Work was halted by temperatures of 180 degrees Celsius.

This is the second of a two-part feature. See Part 1.