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Libertas Companies mentioned Molycorp (MCP-NYSE) Lynas Corporation (LYC-ASX) Alkane Resources (ALK-ASX) Arafura Resources (ARU-ASX) Avalon Rare Metals (AVL-TSX) Cache Exploration (CAY-TSX-V) Dacha Capital (DAC-TSX-V) Etruscan Resources (EET-TSX) Globe Metals & Mining (GBE-ASX) Great Western Minerals (GWG- TSX-V) Greenland Minerals and Energy (GGG-ASX) Hudson Resources (HUD-TSX-V) Kirrin Resources (KYM-TSX) Matamec Exploration (MAT-TSX-V) Metallica Minerals (MLM-ASX) Neo Material Technologies (NEM- TSX) Peak Resources (PEK-ASX) Pele Mountain Resources (GEM- TSX-V) Quantum Rare Earth Developments (QRE-TSX-V) Quest Rare Minerals (QRM-TSX-V) Rare Earth Metals (RA-TSX-V) Rare Element Resources (RES- TSX-V) Stans Energy (RUU-TSX-V) Tasman Metals (TSM-TSX-V) Ucore Rare Metals (UCU-TSX-V) Rare Earths Review Is the hype justified? A fundamental growth story exists for a number of products made using rare earths. The increasing use of rare earth magnets is potentially very significant. There are strategic reasons for investment. China has cornered the market and OECD Governments may encourage the development of non-Chinese deposits. However the industry is capital intensive, and the mineralogy and metallurgy of deposits is complex, now may be a good time to raise capital owing to high levels of investor interest. Uranium and thorium are added complications for a number of deposits. Greenland currently bans uranium mining, while monazite is a pariah for the heavy minerals industry due to its thorium content. Ultimate returns may however disappoint as the industry is equity capital intensive, and sales volumes and prices for the individual products may turn out lower than forecast. Rare metals include Rare Earth Elements (REEs) and a select group of similar specialty metals used in technology applications. The increasing use of rare earth magnets to miniaturise electric motors could transform the wind power industry, as well as continue to find increasing applications in the automobile industry. The outlook for Nickel Metal Hydride (NiMH) batteries, which are significant consumers of rare earths, is however more uncertain, while there are a number of other uses which might not necessarily be growth markets, but are of strategic and military interest. The US Government is embarrassed that the Abrams tank has a navigation system that is heavily dependent on Chinese samarium metal production. Lynas (LYC-ASX) and Molycorp (MCP-NYSE) are the two sector leaders and may offer practical means of gaining exposure. Lynas is funded through to first production, but may struggle in the short term owing to a lack of newsflow. The Molycorp IPO disappointed and the company faces a number of issues before and if 2012 production can be achieved. Neo Material Technologies (NEM-TSX) appears to be an interesting producer of end products, particularly rare earth magnets and alloys. It trades at a modest 9.2 times consensus 2010 earnings. The Canadian market appears to undervalue Great Western Minerals (GWG-TSX-V) integrated operations. The ability to climb the value added chain outside of China may become significant; they own 50% of the ten most advanced rare earth mining, development, and exploration projects in the world. For a US$1bn current world market for Rare Earth Elements, that is forecast to grow to $1.9bn by 2014, one can argue that the $3.6bn current market capitalisation of the listed stocks which offer exposure is excessive. 4th August 2010 Research Roger Bade +44 (0)20 7569 9675 [email protected] Please refer to important disclosures at the end of this report.
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Page 1: Rare Earth Review - Libertas Partners LLP

Libertas

Companies mentioned

Molycorp (MCP-NYSE)

Lynas Corporation (LYC-ASX)

Alkane Resources (ALK-ASX)

Arafura Resources (ARU-ASX)

Avalon Rare Metals (AVL-TSX)

Cache Exploration (CAY-TSX-V)

Dacha Capital (DAC-TSX-V)

Etruscan Resources (EET-TSX)

Globe Metals & Mining (GBE-ASX)

Great Western Minerals (GWG-TSX-V)

Greenland Minerals and Energy (GGG-ASX)

Hudson Resources (HUD-TSX-V)

Kirrin Resources (KYM-TSX)

Matamec Exploration (MAT-TSX-V)

Metallica Minerals (MLM-ASX)

Neo Material Technologies (NEM-TSX)

Peak Resources (PEK-ASX)

Pele Mountain Resources (GEM-TSX-V)

Quantum Rare Earth Developments (QRE-TSX-V)

Quest Rare Minerals (QRM-TSX-V)

Rare Earth Metals (RA-TSX-V)

Rare Element Resources (RES-TSX-V)

Stans Energy (RUU-TSX-V)

Tasman Metals (TSM-TSX-V)

Ucore Rare Metals (UCU-TSX-V)

Rare Earths Review Is the hype justified?

� A fundamental growth story exists for a number of products made using

rare earths. The increasing use of rare earth magnets is potentially very

significant.

� There are strategic reasons for investment. China has cornered the market

and OECD Governments may encourage the development of non-Chinese

deposits.

� However the industry is capital intensive, and the mineralogy and

metallurgy of deposits is complex, now may be a good time to raise capital

owing to high levels of investor interest.

� Uranium and thorium are added complications for a number of deposits.

Greenland currently bans uranium mining, while monazite is a pariah for the

heavy minerals industry due to its thorium content.

� Ultimate returns may however disappoint as the industry is equity capital

intensive, and sales volumes and prices for the individual products may turn

out lower than forecast.

Rare metals include Rare Earth Elements (REEs) and a select group of

similar specialty metals used in technology applications. The increasing use

of rare earth magnets to miniaturise electric motors could transform the

wind power industry, as well as continue to find increasing applications in

the automobile industry. The outlook for Nickel Metal Hydride (NiMH)

batteries, which are significant consumers of rare earths, is however more

uncertain, while there are a number of other uses which might not

necessarily be growth markets, but are of strategic and military interest.

The US Government is embarrassed that the Abrams tank has a navigation

system that is heavily dependent on Chinese samarium metal production.

Lynas (LYC-ASX) and Molycorp (MCP-NYSE) are the two sector leaders and

may offer practical means of gaining exposure. Lynas is funded through to

first production, but may struggle in the short term owing to a lack of

newsflow. The Molycorp IPO disappointed and the company faces a

number of issues before and if 2012 production can be achieved.

Neo Material Technologies (NEM-TSX) appears to be an interesting

producer of end products, particularly rare earth magnets and alloys. It

trades at a modest 9.2 times consensus 2010 earnings.

The Canadian market appears to undervalue Great Western Minerals

(GWG-TSX-V) integrated operations. The ability to climb the value added

chain outside of China may become significant; they own 50% of the ten

most advanced rare earth mining, development, and exploration projects

in the world.

For a US$1bn current world market for Rare Earth Elements, that is

forecast to grow to $1.9bn by 2014, one can argue that the $3.6bn

current market capitalisation of the listed stocks which offer exposure is

excessive.

4th August 2010

Research

Roger Bade

+44 (0)20 7569 9675

[email protected]

Please refer to important disclosures at the end of this report.

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Sector Research – Rare Earths Review

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Rare Earths 4

Introduction 4

Rare Metals, Rare Earth Elements (REEs), Rare Earth Oxides (REOs) 4

Supply, Demand and Price Development 6

Rare Earth Element Uses 6

Nickel Metal Hydride (NiMH) Batteries 6

Magnets 7

Wind Turbines 9

Phosphors 9

Polishing Powders 9

Fluid Catalytic Cracking (FCC) 10

Autocatalysts 10

Supply/Demand Balance 11

Rare Earth Elements in Greater Detail 11

Global Rare Earth Production 17

China’s Impact 19

Rare Earth Oxides Uses and Prices 20

China: Export Quota History 21

US Government Accountability Office (GAO) 23

Global Rare Earth Resource Base 25

Rare Earth Applications by Weight and Value 27

Global Rare Earth Consumption 2008 28

2014 Forecasts by Weight and Value 29

Mineralogy 32

Carbonatites 32

Bastnäsite [(REE) CO3 (F,OH)] 32

Monazite [(REE, Nd) PO4] 33

Nepheline Syenite 33

Apatite 33

Ancylite (Sr (REE) (CO3)2(OH) (H2O) 33

Baddeleyite (ZrO2) 34

Loparite (Ce,Na,Ca(Ti,Nb)O3) 34

Xenotime 34

Metallurgy 34

Demonstration plant 34

Process Flowsheet – Explained 35

Ion-Exchange Extraction 35

Solvent Extraction 36

Prices 36

Project Finance 38

Rare Earth Producers 39

Bayan Obo Rare Earth Mine China 39

Longnan Rare Earth Mine China 40

Potential Rare Earth Mines 41

Contents

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4th August 2010 Sector Research – Rare Earths Review

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Potential New Suppliers 43

The Ten Steps To Rare Earths Commercial Production 44

Listed Rare Earth Equities 45

Molycorp (MCP-NYSE) 46

Lynas Corporation (LYC-ASX) 49

Alkane Resources (ALK-ASX) 51

Arafura Resources (ARU-ASX) 53

Avalon Rare Metals (AVL-TSX) 55

Cache Exploration (CAY-TSX-V) 57

Dacha Capital (DAC-TSX-V) 57

Etruscan Resources (EET-TSX) 57

Globe Metals & Mining (GBE-ASX) 58

Great Western Minerals (GWG-TSX-V) 58

Greenland Minerals and Energy (GGG-ASX) 61

Hudson Resources (HUD-TSX-V) 64

Kirrin Resources (KYM-TSX) 65

Matamec Explorations (MAT-TSX-V) 65

Metallica Minerals (MLM-ASX) 66

Neo Material Technologies (NEM-TSX) 67

Peak Resources (PEK-ASX) 69

Pele Mountain Resources (GEM-TSX-V) 70

Quantum Rare Earth Developments (QRE-TSX-V) 71

Quest Rare Minerals (QRM-TSX-V) 71

Rare Earth Metals (RA-TSX-V) 72

Rare Element Resources (RES-TSX-V) 72

Stans Energy (RUU-TSX-V) 72

Stans Energy’s properties in Kyrgyzstan 73

Tasman Metals (TSM-TSX-V) 74

Ucore Rare Metals (UCU-TSX-V) 75

Unlisted Companies 77

Dong Pao 77

Frontier Minerals Limited 77

Montero Mining 77

Spectrum Mining 78

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Introduction

In this review we briefly introduce the Rare Earth Elements and we look at those

rare earth markets that are important in driving demand. These include the

nickel metal hydride battery, the magnet and the wind turbine motor markets.

We introduce the individual elements, their properties and uses. We discuss

China’s impact as a dominant producer and the recent US Government

Accountability Office review that attempts to address this control. Before we

introduce the Chinese producers, the listed non-Chinese hopeful producers,

explorers and manufacturers, and the unlisted companies that may look to list

on a public market, we look at the mineralogy of rare earth elements, the

metallurgy of their extraction, we discover current prices and discuss the project

finance opportunities and difficulties that exist.

We shall discover that the mineralogy and metallurgical extraction of rare earth

elements is complicated, while many projects may have environmental issues

with the presence of uranium and more significantly thorium.

It is clear that rare earth element grades need to be high in order to cover the

considerable capital and operating costs of the extraction process. In addition

producing concentrates for someone else to make the final extraction of rare

earth elements is likely to be a fairly unrewarding exercise, as although demand

is potentially high, there are only one or two players, all currently located in

China.

A lucrative market may develop for Lynas, Molycorp and possibly Great Western

Minerals to buy concentrates from non-Chinese producers for onward

processing, once their hydrometallurgical plants are up and running.

As there are neither terminal markets, nor futures markets for Rare Earth

Elements, and those markets which do exist are very shallow, project debt

finance may be very difficult to secure. High capital cost projects funded solely

by equity may not offer outstanding returns.

Rare Metals, Rare Earth Elements (REEs), Rare Earth Oxides (REOs)

Rare Metals include the unique elemental suite know as the Rare Earth Elements

and a select group of speciality metals produced primarily for technology

applications.

Rare Earth Elements are most simply defined as those chemical elements

ranging in atomic numbers between 57 and 71. These elements include

lanthanum, from which rare earth metals get their collective name of

lanthanides, through to lutetium. For reasons of chemical similarity, an

additional metal, yttrium, is commonly found in rare earth deposits. Other

collateral metals often found amongst REE deposits include uranium, thorium,

beryllium, niobium, tantalum and zirconium.

Rare Earths

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The Rare Earth Elements possess varying ionic radii, which produce different

properties, and have therefore been broadly classified into two groups: Heavy

Rare Earth Elements (HREE) and Light Rare Earth Elements (LREE).

Light REEs, or the ceric sub-group, makeup the first seven elements of the

lanthanide series. They are; Lanthanum (La, atomic number 57), Cerium (Ce,

58), Praseodymium (Pr, 59), Neodymium (Nd, 60), Promethium (Pm, 61) and

Samarium (Sm, 62).

Heavy REE's, which typically have high monetary value relative to other REE's,

are the following higher atomic numbered elements from the lanthanide series;

Europium (Eu, atomic number 63), Gadolinium (Gd, 64), Terbium (Tb, 65),

Dysprosium (Dy, 66), Holmium (Ho, 67), Erbium (Er, 68), Thulium (Tm, 69),

Ytterbium (Yb, 70) and Lutetium (Lu, 71).

Historically the term 'rare earths' has been applied to the lanthanide group of

elements, which range from lanthanum (atomic number 57), to lutetium (atomic

number 71), plus yttrium (atomic number 39), which has similar properties.

The National Instrument (NI) 43-101 and Joint Ore Reserves Committee (JORC)

definition of Light Rare Earth Elements (LREE) and Heavy Rare Earth Elements

(HREE) is based on the electron configuration of the rare earths and is as follows:

” The LREE are defined as lanthanum (Z=57) through gadolinium (Z=64). This is

based on the fact that starting with lanthanum, which has no 4f electrons,

clockwise spinning electron are added for each lanthanide until gadolinium.

Gadolinium has seven clockwise spinning 4f electrons, which creates a very

stable, half-filled electron shell. The LREE also have in common increasing

unpaired electrons, from 0 to 7. The HREE are defined as terbium (Z=65) through

lutetium (Z=71) and also yttrium (Z=39). This is based on the fact that starting

with terbium, counter-clockwise spinning electrons are added for each

lanthanide until lutetium. All of the HREE therefore differ from the first eight

lanthanides in that they have paired electrons. All of the lanthanides have from 0

to 7 unpaired electrons. The defining split at the LREE gadolinium, which has

both a stable half-filled 4f shell and 7 unpaired electrons, the following HREE,

beginning with terbium, have decreasing unpaired electrons. Terbium has 6

unpaired electrons with the addition of one counter-clockwise electron which

creates one electron pair. The number of unpaired electrons then decreases

through lutetium, which has no unpaired electrons and a full stable 4f shell with

14 electrons and 7 "paired up" electrons. Yttrium is included in the HREE group

based on its similar ionic radius and similar chemical properties. In its trivalent

state, which is similar to the other REE, yttrium has an ionic radium of 90

picometers, while holmium has a trivalent ionic radius of 90.1 picometers.

Scandium is also trivalent, however, its other properties are not similar enough

to classify it as either a LREE or HREE.

“To avoid confusion this definition should be used in all descriptions of the REE

and should be applied as the standard for 43-101 and JORC compliant deposit

evaluations."

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Sector Research – Rare Earths Review 4th August 2010

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Supply, Demand and Price Development

Source: Lynas Corporation.

Nickel Metal Hydride (NiMH) Batteries

The Rare Earth Elements required for NiMH batteries are lanthanum and, to a

lesser extent, cerium, selected owing to their hydrogen storage properties. To

limit purification costs to economic levels, residual traces of less common Rare

Earths are often tolerated. In fact many NiMH applications use battery-grade

mischmetal, (containing typically 27% lanthanum, 52% cerium, 16% neodymium,

and 5% praseodymium), rather than the pure lanthanum and cerium metals.

Research indicates that removing the neodymium content does not influence

the storage capacity; hence it is removed wherever possible.

A Hybrid Electric Vehicle (HEV) combines a conventional internal combustion

engine (ICE) propulsion system with an electric propulsion system. The presence

of the electric power train is intended to achieve either better fuel economy

than a conventional vehicle, or better performance. A Plug-in Hybrid Electric

Vehicle (PHEV), also known as a plug-in hybrid, is a hybrid electric vehicle with

rechargeable batteries that can be restored to full charge by connecting a plug

to an external electrical power source. A PHEV shares the characteristics of both

a conventional hybrid electric vehicle, having an electric motor and an internal

combustion engine; and of an all-electric vehicle, also having a plug to connect

to the electrical grid. PHEVs have a much larger all-electric ranges as compared

to conventional gasoline-electric hybrids,

Rare Earth Element Uses

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4th August 2010 Sector Research – Rare Earths Review

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Hybrid electric vehicles represent more than half the usage of NIMH batteries

(57%). There is currently a great deal of debate surrounding the relative merits

of NiMH batteries compared to lithium-ion (Li-ion) batteries: Toyota’s Prius uses

NiMH batteries but other manufacturers, such as Renault, plan to use Li-ion

batteries for their forthcoming electric cars. According to Oakdene Hollins,

Toyota remains committed to the NiMH battery for its conventional hybrids,

citing NiMH’s ease of management, low cost and durability to last the lifetime of

the vehicle, although Li-ion will be the battery used for its PHEV Prius due for

commercial sale in 2011. Toyota expects almost universal adoption of Li-ion for

all EVs and PHEVs.

The consultants Roskill’s view is that NiMH batteries will remain the No.1 choice

for HEV applications until 2012-13 by which time Li-ion battery technology may

have matured. This view is also shared by Deutsche Bank who forecast the

market share of Li-ion batteries rising to 70% of the hybrid market between

2015 and 2020, although Deutsche Bank still expects NiMH to account for 70%

of the market in 2015.

Toyota Motor’s (7303 JP) decision to invest US$50m in private US electric motor

developer Tesla Motors might hasten the demise of NiMH batteries. The Tesla

Roadster, the company's first vehicle, is the first production automobile to use

lithium-ion cells and the first production electric vehicle with a range greater

than 200 miles (320 km) per charge.

The outlook for NiMH battery demand is important for many rare earth projects.

Returns may be negatively affected, particularly for those projects that could

produce significant quantities of lanthanum and cerium, if the mischmetal

market falls out of bed. This may be of significance in relation to the forthcoming

IPO of Molycorp Minerals who own the Mountain Pass rare earth project in

California, USA.

Magnets

The use of rare earths as magnets in electrical motors is likely to become the

major driver for growth for the whole rare earths industry.

Electric motors use electrical energy to produce mechanical energy, typically

through the interaction of magnetic fields and current-carrying conductors. The

reverse process, producing electrical energy from mechanical energy, is

accomplished by a generator or dynamo. At the heart of all electric motors is a

magnet. In alternating current motors, the alternating current produces the

magnetic field, whilst in direct current a permanent magnet is used. Permanent

magnets can also be used in alternating current motors

Rare-earth magnets are strong permanent magnets made from alloys of rare

earth elements. Developed in the 1970s and 80s, rare-earth magnets are the

strongest type of permanent magnets made, substantially stronger than ferrite

or alnico magnets. The magnetic field typically produced by rare-earth magnets

can be in excess of 1.4 tesla, whereas ferrite or ceramic magnets typically exhibit

fields of 0.5 to 1.0 tesla. The tesla (T) is the SI derived unit of the magnetic field

B, which is also known as the magnetic flux density or magnetic induction. One

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tesla is equal to one Weber per square metre, while a particle passing through a

magnetic field of 1 tesla at 12 metres per second carrying a charge of 1 coulomb

experiences a force of 1 Newton. One tesla is also equivalent to 10,000 gauss.

There are two types of rare earth magnets, neodymium and samarium-cobalt

magnets. Rare earth magnets are extremely brittle and vulnerable to corrosion,

so they are usually plated or coated to protect them from breaking and chipping.

Samarium-cobalt magnets (chemical formula: SmCo5), the first family of rare

earth magnets invented, are used less than neodymium magnets because of

their higher cost and weaker magnetic field strength. However, samarium-cobalt

has a higher so-called Curie temperature, creating a niche for these magnets in

applications where high field strength is needed at high operating temperatures.

They are highly resistant to oxidation, but sintered samarium-cobalt magnets

are brittle and prone to chipping and cracking and may fracture when subjected

to thermal shock. The size of the samarium cobalt magnet industry worldwide is

approximately 1,000 tonnes of alloy.

Neodymium magnets, invented in the 1980s, are the strongest and most

affordable type of rare earth magnet. Neodymium alloy (Nd2Fe14B), also called

NIB, NdFeB or Neo is made of neodymium, iron and boron. Neodymium

magnets are typically used in most computer hard drives and a variety of audio

speakers. They have the highest magnetic field strength, but are inferior to

samarium-cobalt in resistance to oxidation and Curie temperature. Use of

protective surface treatments such as gold, nickel, zinc and tin plating and epoxy

resin coating can provide corrosion protection where required.

Originally, the high cost of these magnets limited their use to applications

requiring compactness together with high field strength. Both raw materials and

patent licences were expensive. Beginning in the 1990s, NIB magnets have

become steadily less expensive, and the low cost has inspired new uses such as

children’s magnetic building toys.

Their greater strength allows smaller and lighter magnets to be used for a given

application. This is particularly useful in the automotive and wind power

industries. Electric motors made with NIB magnets are half the weight of

traditional ferrite motors, having found many applications in electric seats,

windows and mirrors, in the starter motor and alternator, whilst replacing

hydraulic systems for steering, significantly reduces weight and power

consumption.

In hybrid motors, neodymium, praseodymium, dysprosium and terbium form an

important component of the electric motor and generator. A typical hybrid car

has 2.0 kg of rare earths in the electric motor and generator, in addition to a

further 12.0 kg in the NiMH battery.

High power NIB magnets are used in computer disk drives, and in mobile

phones, and IPods™, etc.

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Wind Turbines

According to Lynas, wind turbine generator technology is moving to permanent

magnets for larger turbines, particularly those sited offshore. Demand of 400

units represented 2% of the market in 2008, but this is forecast by Lynas to grow

to 4,300 units per annum in 2020, which will represent 16% of the market. As

each 3.0 MW permanent magnet turbine uses 1.0 tonne of neodymium this

could represent a significant demand growth story. It has been suggested that

the Chinese have a target of producing 120 Giga Watts (GW) of power from

wind turbines by 2020. This could require a doubling of their requirement for

magnetic rare earth materials.

Source: Avalon Rare Metals.

The above photograph details one of the advantages of Neo (rare earth)

magnets, namely both size and weight savings. Imagine this in the head of a

wind turbine (the “nacelle”) which contains about 3 tonnes of rare earth

magnets, compared to the 6 tonne iron predecessor. The new General Electric

(GE-NYSE) wind turbine uses a 90 tonne generator with a 20 foot ring of

permanent neodymium magnets to eliminate the need for a gearbox, reducing

breakage and energy loss. At the same time the nacelle is lighter, allowing a

higher tower and less substantial foundations.

Phosphors

A traditional use of rare earths is to provide colour phosphors in television

screens. As new cathode ray tube, plasma screen and liquid crystal displays

(LCDs) have developed, their use in phosphors has been maintained. The ability

of europium, terbium and yttrium to emit red, green and white light respectively

is used in modern compact fluorescent bulbs, while the alternative Light

Emitting Diode (LED) technology also uses rare earth phosphors.

Polishing Powders

A further traditional use is as a polishing powder used in the manufacture of

television and computer screens, in addition to the production of precision

optical and electronic components.

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Fluid Catalytic Cracking (FCC)

Rare earths particularly lanthanum, is used in oil refining Fluid Catalytic Cracking

catalysts.

Autocatalysts

Rare earths, mainly cerium are used in gasoline autocatalysts; they improve

performance, increase thermal stability, extend durability and reduce precious

metals consumption. Nitrogen oxide traps under development also use rare

earths, while rare earth compounds added to diesel fuel allows diesel soot to be

trapped in a filter. Rare earths allow this soot to be burnt at lower temperatures,

thereby regenerating the filter.

Source: Lynas Corporation.

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Supply/Demand Balance

Source: Lynas Corporation.

The rare earth elements do not fit well into the periodic table. Therefore they

are usually separated from the main groupings.

Source: Lynas Corporation.

The term rare earth is disingenuous as they are neither rare nor earths. The rare

earths are apparently more plentiful than silver and some elements (lanthanum,

cerium, neodymium and yttrium) are more common than lead. Together rare

earth elements represent approximately a sixth of all known elements in the

Rare Earth Elements in Greater Detail

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earth's crust (promethium is the exception as it does not occur naturally). As

these elements are of uncommon mineable concentrations and the individual

elements are difficult to separate, their selling prices are relatively high.

Monazite and bastnäsite are the two principal commercial sources of Rare Earth

Elements.

Most Rare Earth Oxides have sharp absorption bands within the visible,

ultraviolet and near infrared. This property, associated with the electronic

structure gives beautiful pastel colours to many of the rare earth minerals.

Lanthanum (Symbol La, Atomic number 57) is one of the most reactive of the

rare-earth metals being the prototype for the lanthanide series. It is silvery

white, malleable, ductile and so soft it can be cut with a knife. Lanthanum

oxidises rapidly when exposed to the atmosphere. Cold water attacks lanthanum

slowly, and hot water is much more vigorous in its attack. The metal reacts

directly with elemental carbon, nitrogen, boron, selenium, silicon, phosphorus,

sulphur and with halogens. Lanthanum is found in rare earth minerals such as

cerite, monazite, allanite and bastnäsite. Monazite and bastnäsite are the

principal ores in which lanthanum occurs in percentages of up to 25% and 38%

respectively.

Some uses of rare earth compounds containing lanthanum are as follows;

lighting applications especially in motion picture studio lighting and projection.

(Approx. 25% of the rare earth compounds are consumed in this application);

Energy Conservation, hydrogen sponge alloys containing lanthanum take up to

400 times their own volume of hydrogen gas. (This process is reversible). When

the alloys takes up gas, heat energy is released; Lanthanum oxide (La203)

improves the alkali resistance of glass; Lanthanum is also used in making special

optical glasses and in fluid cracking catalysts; while in addition it is also a

component of mischmetal used for making lighter flints.

Cerium (Ce,58) is the most abundant of the rare earth metals. It is found in the

following minerals: allanite (also known as orthite), monazite, bastnäsite, cerite

and samarskite. Monazite and bastnäsite are the more important known sources

of cerium. Cerium is the second most reactive metal in the lanthanide series,

Europium being the most reactive. Cerium decomposes slowly in cold water and

rapidly in hot water. Alkali solutions and both dilute and concentrated acids

attack the metal rapidly. In pure form the metal is likely to ignite if struck. Once

struck, tiny pieces of cerium are knocked off and once airborne they burst into

flame reacting quickly with oxygen.

Some uses of cerium are as follows; it is a key part of the three-way automotive

catalytic converter which reduces nitrogen oxides, carbon monoxide and

oxidises un-burned hydrocarbons; the oxide is an important constituent of

incandescent gas mantels; cerium compounds are used to stain glass yellow; it is

used in organic synthesis, permanent magnets and carbon-arc lighting especially

for the motion picture industry (in combination with other REEs); ceric sulphate

is used extensively as a volumetric oxidising agent in quantitative analysis; other

compounds are used as a catalyst in petroleum refining; it has a number of

metallurgical and nuclear applications; it is also used for phosphors and

polishing powders.

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Praseodymium (Pr, 59) is soft, silvery, malleable and ductile. It develops a green

oxide coating that falls off when exposed to air, and like other REM, it should be

kept under a light mineral oil or sealed in plastic. It can be prepared by several

different methods, such as by calcium reduction of the anhydrous chloride of

fluoride. Praseodymium uses are as follows: it assists in the effort to get to

within one, one thousandths of a degree of absolute zero which is -273 degrees

C (it forms a component of the cooling coils which are used to get the

temperature down); it is used in welders' goggles where it helps filter out

harmful types of light harmful to the human eye); and it is also used in

mischmetal (used in making lighters).

Neodymium (Nd, 60) metal has a bright silvery metallic lustre. It is one of the

more reactive rare earth metals and quickly tarnishes in air forming an oxide

that spalls off and exposes the metal to further oxidation. To prevent this from

occurring, neodymium should be kept under light mineral oil or sealed in a

plastic material.

Some of neodymium's uses are as follows: in hybrid/electric vehicles

neodymium is used to manufacture magnets which have high magnetic

strength, but lower weight. These can be used in electric motors to produce

higher power and torque with much lower weight. Neodymium magnets are

used in the miniaturisation of hard disk drives used in many electronic devices;

and in lasers to provide blue light.

Promethium (Pm, 61) is highly radioactive, it is not found in nature, and is

produced from the decay of other radioactive elements. It is a soft beta emitter

(although no gamma rays are emitted), while x-rays can be generated when beta

particles are impinged on elements of high atomic number. Promethium salts

luminesce in the dark with a pale blue or greenish glow due to their

radioactivity. Uses for promethium are as follows; a beta ray emitting source for

thickness gauges; it is absorbed by a phosphor to produce light for signs or

signals that require dependable operation; it can be used to convert light into an

electric current; a portable x-ray source; a heat source to provide auxiliary

power for space probes and satellites; in the manufacture of miniature nuclear

batteries and in measuring devices.

Samarium (Sm, 62) is found along with other members of the rare earth

elements in many minerals including the common sources, monazite and

bastnäsite. It occurs in monazite to the extent of 2.8%. While mischmetal

containing 1% of samarium metal has long been used, samarium has not been

isolated in relatively pure form until recently. Ion-exchange and solvent

extraction techniques have recently simplified separation of the rare earths from

one another. More recently, electrochemical deposition, which uses an

electrolytic solution of lithium citrate and a mercury electrode, is said to be a

simple and highly specific way to separate the rare earths. Samarium metal can

be produced by reducing the oxide with lanthanum.

Samarium has a bright silver lustre and is reasonably stable in air. Three crystal

modifications of the metal exist with transformations at 734 and 922 degrees

Celsius. The metal ignites in air at approximately 150 degrees Celsius. The

sulphide has excellent high temperature stability and good thermoelectric

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efficiencies, while samarium changes oxidation stages very easily. Some uses for

samarium are as follows; it is a neutron absorber with many uses in nuclear

power stations; it is used in carbon arc lighting in the motion picture industry

(along with other rare earths); as a permanent magnet material it has the

highest resistance to demagnetisation of any known material (SmCo5 is used); as

an optical glass, it absorbs the infrared; in optical lasers, it is used to dope

calcium fluoride crystals; it is used for the dehydration and dehydrogenation of

ethyl alcohol. Compounds of the metal act as sensitisers for phosphors excited in

the infrared; while the oxide exhibits catalytic properties.

Europium (Eu, 63) metal was not isolated until recent years and is now prepared

by mixing europium oxide with a 10% excess of lanthanum metal and heating

the mixture in a tantalum crucible under high vacuum. The element is collected

as a silvery white metallic deposit on the walls of the crucible. As with other rare

earth metals (with the exception of lanthanum), europium ignites in air at about

150 to 180 degrees Celsius. Europium is about as hard as lead and is quite

ductile and is the most reactive of the rare earth metals; it quickly oxidises in air.

It resembles calcium in its reaction to water. Bastnäsite and monazite are the

principal ores containing europium. Europium has been identified by

spectroscopy in the sun and certain stars. Some known uses for europium are as

follows; europium oxide is now widely used as a phosphor activator as europium

activated yttrium vanadate in television screens; europium doped plastic is used

in lasers; it is used in the ceramics industry and it has nuclear applications.

With the development of ion-exchange and solvent extraction techniques, the

availability and the prices of Gadolinium (Gd, 64) and the other rare earth

metals have greatly improved. Gadolinium can be prepared by the reduction of

the anhydrous fluoride with metallic calcium. Gadolinium is silvery white, has a

metallic lustre and is malleable and ductile (like other related rare earth metals).

At room temperature, gadolinium crystallises in the hexagonal phase, close

packed alpha form. Upon heating to 1,235 degrees Celsius, alpha gadolinium

transforms into the beta form (which has a body centred cubic structure). The

metal is relatively stable in dry air, but tarnishes in moist air. It forms a loosely

adhering oxide film which falls off and exposes more surfaces to oxidation. The

metal reacts slowly with water and is soluble in dilute acid.

Gadolinium has the highest thermal neutron capture cross-section of any known

element (49,000 barns). Some known uses for gadolinium using this and other

properties are as follows: in Magnetic Resolution Imaging (MRI) gadolinium

changes the way water molecules react in the human body when scanned

allowing the contrast between healthy and non healthy tissue to be seen;

gadolinium yttrium garnets are used in microwave applications; gadolinium

compounds are used as phosphors in colour televisions; gadolinium’s unusual

superconductive properties improve the workability and resistance of iron and

chromium and related alloys to high temperatures and oxidation (as little as 1%

gadolinium is needed); gadolinium metal is ferromagnetic, it is unique in that it

has a high magnetic movement and for its special Curie temperature (above

which ferromagnetism vanishes), lying at room temperature. Therefore it can be

used as a magnetic component that can sense hot and cold.

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Terbium (Tb, 65) has only been isolated only in recent years with the

development of ion exchange techniques for separating the rare earth elements.

As with other rare earth metals, terbium can be produced by reducing the

anhydrous chloride or fluoride, with calcium metal in a tantalum crucible.

Calcium and tantalum impurities can be removed by vacuum re-melting. Other

methods of isolation are also possible. Terbium is reasonably stable in air, and is

a silver grey metal which is malleable, ductile and soft enough to be cut with a

knife. Two crystal modifications exist with a transformation temperature of

1,289 degrees Celsius. The oxide is a chocolate or dark maroon colour. Some

known uses of terbium are as follows; solid state devices use sodium terbium

borate; the oxide has potential application as an activator for green phosphors

used in colour television tubes; and in combination with zirconium dioxide it is

used as a crystal stabiliser of fuel cells which operate at elevated temperatures.

Dysprosium (Dy, 66) occurs along with other rare earths in a variety of minerals

such as: xenotime, fergusonite, gadolinite, euxenite, polycrase and

blomstrandine. Monazite and bastnäsite are the most important sources.

Dysprosium can be prepared by reduction of the trifluoride with calcium. The

metal has a metallic bright silver lustre. Dysprosium is relatively stable in air

temperature but is readily attacked and dissolved by dilute and concentrated

acids to produce hydrogen. The metal is soft enough to be cut with a knife and

can be machined without sparking if overheating is avoided. Small amounts of

impurities can greatly affect its physical properties. Dysprosium is very reactive

and therefore is stored in oil. Its thermal neutron absorption cross section and

high melting point suggest metallurgical uses in nuclear control applications for

alloying with special stainless steels.

Some known uses for dysprosium are as follows; dysprosium along with

neodymium is used in the production of the world's strongest permanent

magnets. The magnets have high magnetic strength, coupled with low weight.

Such magnets are used in the electronic motors used in Hybrid Electric Vehicles

(HEV) to produce higher power and torque with much lower size and weight;

miniaturisation of hard disk drives and many electronic devises also use these

magnets; owing to its ability to capture neutrons it is used in nuclear fuel rods

where it modulates the temperature progression of a nuclear reaction is getting;

dysprosium oxide-nickel cement can be used in cooling nuclear reactor rods. The

cement absorbs neutrons readily without swelling or contracting under

prolonged neutron bombardment; in combination with other rare earths and

vanadium, dysprosium has been used for laser materials.

Holmium (Ho, 67) occurs in gadolinite, monazite and in other rare earth

minerals. It has been isolated by the reduction of its anhydrous chloride or

fluoride with calcium metal. Pure holmium has a metallic to bright silver lustre.

It is relatively soft and malleable, it is able to stay dry in room temperature, but

it rapidly oxidises in moist air and at elevated temperatures. Holmium metal has

unusual magnetic properties, and has the highest magnetic moment of any

known element in the periodic table. It has the greatest number of impaired

electrons and these are what give rise to magnetism. Therefore, holmium has

many uses in magnetic materials. Very few other uses have been found for the

element. It also finds uses in ceramics and lasers.

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Erbium (Er, 68) metal is soft and malleable and has a bright, silvery, metallic

lustre. As with other rare earth metals, it's properties depend, to a certain

extent, on the impurities present. The metal is fairly stable in air and does not

oxidise as rapidly as some of the other metals. Erbium finds uses as a

photographic filter, it is apparently very good at blocking certain nuclear fissile

products; erbium tri-chloride is used in jewellery and sunglasses; erbium salts

are used in welding goggles in conjunction with other rare earths.

Thulium (Tm, 69) is the least abundant of the rare earth elements, and is very

difficult to separate from the other elements because of its similar size. It can be

isolated by reduction of the oxide with lanthanum metal or by calcium reduction

in a closed container. The element is silver grey, soft, malleable and ductile. It

can be cut with a knife. Due to the difficulty of separation it is very expensive

and rarely used. Chemists are however beginning to find uses for it and these

should increase in time. The few known uses for thulium are as follows; the

isotope 169 Tm bombarded in a nuclear reactor can be used as a radiation

source in portable X-ray equipment; while the isotope 171 Tm is potentially

useful as an energy source; natural thulium also has possible use in ferries

(ceramic magnetic materials) used in microwave equipment and it can be used

for doping fibre lasers.

Ytterbium (Yb, 70) occurs along with other rare earths in a number of rare

minerals. It is commercially recovered principally from monazite sand, which

contains about 0.03%. Ion-exchange and solvent extraction techniques

developed in recent years have greatly simplified the separation of the rare

earths from one another. Ytterbium is a silvery and lustrous metal that is very

soft and reacts very rapidly with oxygen. Even though the element is fairly

stable, it should be kept in closed containers to protect it from air and moisture.

Ytterbium is readily attacked and dissolved by dilute and concentrated mineral

acids and reacts slowly with water. Ytterbium is the least abundant amongst the

rare earths. Its chemistry is the least understood therefore it is not used often,

but it does have some possible uses; ytterbium metal may be used in improving

the grain refinement, strength and other mechanical properties of stainless

steel; it also has a use in the measurement of pressure within nuclear

explosions; it also has specialist metallurgical uses.

Lutetium (Lu, 71) occurs in very small amounts in nearly all minerals containing

yttrium and is present in monazite to the extent of about 0.003%, which is the

commercial source. The pure metal has been isolated only in recent years and is

one of the most difficult to prepare. It can be prepared by the reduction of the

anhydrous LuCl3 or LuF3 by an alkaline earth metal. The metal is silvery white

and relatively stable in air. The isotope 176 Lu occurs naturally (2.6%) with the

isotope 175 Lu (97.4%), although it is radioactive. Some known uses for lutetium

are as follows; stable lutetium nuclides, which emit pure beta radiation after

thermal neutron activation, can be used as catalysts in crackling, alkylation,

hydrogenation and polymerisation; it can also be used as a single crystal

scintillator.

As mentioned yttrium (Y, 39) is often considered to be a rare earth and is often

present in rare earth deposits. It is actually a transition metal, but is chemically

similar to the lanthanides. The most important use of yttrium is in making

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phosphors such as the red ones used in television cathode ray tube displays and

in Light Emitting Diodes (LEDs). Other uses include the production of electrodes,

electrolytes, electronic filters, lasers, superconductors, various medical

applications and as traces in various materials to enhance their properties.

Yttrium has replaced thorium in the manufacture of gas mantles. Yttrium is an

important component of xenotime type rare earth deposits, and can comprise

60% of the rare earth component. This compares to the up to 3% of rare earth’s

that make up bastnäsite and monazite rare earth deposits.

Scandium (Sc, 21) is another transition metal, which is in the same periodic

group as yttrium. It is sometimes classed as a rare earth, and can occur in rare

earth deposits. A main source is the Bayan Obo rare earth mine in China.

Scandium’s chemical properties are closer to magnesium (Mg, 12) rather than

Yttrium. The main use for scandium is as an alloy of aluminium in the aerospace

industry, but it is also used to make high-intensity discharge lamps.

Source: Kaiser Bottom Fish.

Global Rare Earth Production

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Source: Lynas Corporation.

Source: Kaiser Bottom Fish.

The annual REO production chart above shows how during the past 25 years

Chinese REO production has gradually displaced production from the rest of the

world, with the United States the biggest loser as a result of shutting down the

Mountain Pass mine in 2002.

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China’s Impact

Nearly 100% of the global supply of Rare Earth Elements, high power

Neodymium Iron Boron (NdFeB) magnets and all intermediate magnet materials

are controlled by, produced in, or manufactured from materials sourced

exclusively out of China. Consequently, all Rare Earth dependant technologies

are completely reliant on Chinese sourced Rare Earth materials for their

production. No technically viable alternatives to these Rare Earth materials are

currently known for these applications. Without continued export of Chinese

Rare Earth materials, there would be no means to manufacture these

technologies outside of China. Both production of Rare Earth materials in China

and export of those materials outside of China are strictly controlled by

government imposed quotas.

Molycorp’s (Figure 1 below) simplified representation of the flow of Rare Earth

materials (from the mine to magnet production and beyond), is that as applied

to Neodymium-Iron-Boron (NIB or NdFeB) magnets for Hybrid Electric Vehicles

(HEVs).

Source: Molycorp.

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In addition to controlling production of greater than 97% all Rare Earth Elements

on a world-wide basis (including those relied upon by all NdFeB magnet

producers outside China), China is also the world’s leading consumer of Rare

Earth materials on a global basis, currently consuming approximately 60% of

production and rising rapidly. Some leading experts project that by 2012, China’s

internal consumption of critical Rare Earth materials will rise to meet or exceed

their production. At the same time, global requirements for Rare Earth materials

outside of China are expected to grow dramatically, fuelled primarily by

continued development and deployment of emerging Green Energy

technologies such as Hybrid Vehicles, PHEVs, Energy Efficient Lighting and Wind

Power. Thus global shortages of these materials may be seen as early as 2010,

with shortages becoming severe by 2012. The implications of this trend are both

obvious and disconcerting.

Rare Earth Oxides Uses and Prices

Source: Ucore Rare Metals.

The Chinese government clearly recognises the strategic nature of its Rare Earth

deposits and is actively taking steps to ensure the longevity and security of its

Rare Earth resources for its own domestic consumption. This is illustrated by the

fact that while Chinese production of Rare Earth materials is increasing annually,

government issued export quotas are also decreasing annually, thus protecting

the flow of materials for rising internal consumption while at the same time

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reducing the amount of material exported to supply the needs of the rest of the

world. Chinese export quotas have decreased each year for the last eight years.

More recently, China has announced that export quotas for the first half of 2009

are being reduced by approximately 34% over the same period last year.

In addition to reductions in export quotas, official Chinese exports are subject to

15-25% export taxes, while Value Added Tax (VAT) rebates on exports have been

withdrawn. In terms of Chinese production, no new rare earth mining licences

are being issued and environmental legislation is being enforced. This may

curtail production at a number of the highly polluting southern clay operations

in China.

China: Export Quota History

Source: IMCOA and www.terramagnetica.com

The Ministry of Commerce of the People’s Republic of China has released 7,976

tonnes (t) of approved Rare Earths export quota for the second half of 2010.

This includes export quota for both foreign-invested firms (1,768 tonnes) and

local firms (6,208 tonnes). The total export quota for 2010 (30,259 tonnes) is

40% less than the total export quota for 2009 (50,145 tonnes). In addition, the

export quota for the second half of 2010 (7,976 tonnes) is 72% less than the

export quota for the second half of 2009 (28,417 tonnes). Below is a table

setting out the Chinese Rare Earths export quota for foreign-invested firms and

local firms for the last two years.

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Source: Lynas Corporation.

Used in electric car motors and wind turbines, neodymium and other Rare Earth

Metals are at the epicentre of the race between wealthy and emerging nations

to create green technologies, while poorer countries appear to be relegated to

spectator status. Molycorp reports that José Luis Giordano, associate professor

of engineering at the University of Talca in Chile, stated in an interview that

there is a battle between the United States, China and Japan over neodymium,

samarium and praseodymium with regards to ceramic superconductors, and for

alternatives to these materials, still in the experimental stages.

In the early 1990s, Chinese rare earth materials produced at low cost, like

neodymium, became abundant on the mining market, and prices fell from

US$12,000 per tonne (/t) in 1992 to $7,430/t in 1996. As a result of China’s

influence, the market volume jumped from 40,000 t to 125,000 t annually in a

few short years. In 2006 nearly the entire world production of these minerals—

130,000 t came from China. But in recent years, China has reduced its exports in

order to feed its own industries. That trend pushed up international neodymium

prices to $60 per kilogramme in 2007.

Independent consultant Jack Lifton, who specialises in supplies of nonferrous

strategic metals, said a US-China trade dispute over neodymium production

could be looming just over the horizon.

In a January 2010 presentation to US lawmakers, Mark Smith, director of

Molycorp, acknowledged that limited manufacturing capacity had created a gap

and that although the United States has the knowledge; it has lost the necessary

infrastructure.

The history of business development around neodymium shows how China has

imposed its conditions. In 1982, the US-based General Motors (GM), Sumitomo

Special Metals and the Chinese Academy of Sciences invented a magnet made

from neodymium, boron and iron. In 1986 they put it on the market through a

new division of GM known as Magnequench. The Chinese companies China

National Nonferrous Metals, San Huan and Sextant MQI Equity Holdings bought

Magnequench in September 1995. Neo Material Technologies (NEM-TSX) then

arose from the 1997 merger of Canada’s AMR with Magnequench. The new

company is based in Canada, with production centres in China and Thailand.

Chinese shareholding in Neo Material Technologies has subsequently been sold

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down. Commodity investor Pala Investments are now the largest shareholder

with 19.7%.

It should also be pointed out that state owned East China Mineral Exploration

holds a 22.3 % stake in Australian rare earth explorer Arafura Resources (ARU-

ASX). In addition, in May 2009, state owned China Non-Ferrous Metal Mining

agreed to subscribe for 700 million new shares at A$0.36 per share of rare earth

developer Lynas Corp (LYS-ASX), raising A$252m and offered Chinese bank

finance to restart their project. Total capex of over A$500m was envisioned for

this project at that time, US$286m to compete and commission the first phase

to produce 10,500 tpa of REOs and US$80m for phase two which would bring

production to 21,000 tpa of REOs.

However in September 2010, this tie up was dropped as Australian Foreign

Investment Review Board (FIRB) approval could not be achieved, with strategic

considerations being cited. Lynas subsequently raised A$450m in a share placing

with Australian based institutions.

Lifton believes that China will not allow western nations to purchase

neodymium for future delivery outside of their territories and not even for sales

inside China if intended for export. This means the Asian nation could harden its

strategy to acquire companies abroad and that the industrial powers and

developing countries would have to seek other suppliers of green technologies.

US Government Accountability Office (GAO)

In April 2010, US lawmakers called for a hearing after a government report

exposed potential “vulnerabilities” for the American military because of its

extensive use of Chinese metals in smart bombs, night-vision goggles and radar.

China controls 97% of production of materials known as rare earth oxides, giving

it “market power” over the United States, the GAO said.

According to Bloomberg, the Pentagon is studying how to increase domestic

availability of Rare Earth Elements “through developing new sources, re-

energizing previous domestic sources” and adding the material to the national

stockpile program. The department’s report on the issue will be completed by

September 2010 and will examine “how to better prepare for future

vulnerabilities.”

“China is a rapidly rising military and economic power and the fact is that they

cornered the market on these rare earth metals that are essential for a lot of our

advanced weapons systems as well as a lot of manufacturing in the United

States,” Representative Mike Coffman, a Colorado Republican, who asked for the

GAO report, said in an interview on Bloomberg Television. “We need to move

aggressively on this issue now before it’s too late.”

Shortages of some elements “already caused some kind of weapon system

production delay,” the GAO said, citing a 2009 National Defence Stockpile

report.

Molycorp’s Mountain Pass mine in California was once the world’s dominant

producer. It closed a separation plant in 1998 after regulatory scrutiny of its

wastewater line and suspended mining in 2002, the GAO said. As mining lapsed,

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so did companies that turned the ore into metals found throughout US weapons

systems, the GAO said. Magnequench International Inc., (now owned by Neo

Magnetic Technologies (NEM-TSX)) a maker of neodymium magnets, closed an

Indiana plant in 2003 and moved equipment to China. By the end of 2005,

magnet makers in Kentucky and Michigan also closed.

“Government and industry officials told us that where rare earth materials are

used in defence systems, the materials are responsible for the functionality of the

component and would be difficult to replace without losing performance,” the

GAO report said. It cited several specific weapons systems, including the M1A2

Abrams tank, which has a navigation system that uses samarium cobalt magnets

with samarium metal from China; neodymium magnets from China in the Hybrid

Electric Drive propulsion on the DDG-51 Navy destroyers built by Northrop

Grumman Corp. and General Dynamics; and Lockheed Martin’s Aegis SPY-1

radar, also on DDG-51 destroyers, containing samarium cobalt magnets that will

need to be replaced during its 35-year lifetime.

Even if Molycorp does reopen Mountain Pass, the U.S. would still lack

companies to process the metals, the GAO said. It may take two to five years to

develop a pilot plant to refine oxides to metal, and foreign companies own

patents over neodymium magnets that don’t expire until 2014, the report said.

Rebuilding a U.S. rare earth supply chain may take up to 15 years, the GAO said,

citing industry estimates. That is dependent on infrastructure investment,

developing new technologies and acquiring patents, it said.

Developing new U.S. sources of the metals may take “enormous investment and

time,” Dan Slane, chairman of the Washington-based U.S.-China Economic and

Security Review Commission, said “Time is of the essence because the situation

is going to get worse” as China’s domestic consumption of the material rises, he

said. Smith predicted that if the United States does not renew its capacities, in

the best case it would become a source of raw materials for China’s production,

and not a manufacturer itself of advanced clean technologies.

So far there are no viable alternatives to the rare metals. Substitution of

neodymium is possible in wind turbines. The rare metal reduces the weight of

the magnet mechanism, which will be heavier using other metals. Heavier

turbines need stronger foundations, which mean fortified concrete and higher

resultant costs.

Neodymium magnets have a magnetic force nine times stronger than

conventional magnets. The most similar alternatives, but even more costly, are

made from samarium and cobalt or from samarium, praseodymium, cobalt and

iron.

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Global Rare Earth Resource Base

Source: Kaiser Bottom Fish.

Source: Kaiser Bottom Fish.

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Source: Kaiser Bottom Fish.

The above charts have been constructed by Kaiser Bottom Fish by multiplying

the Chinese production figures for individual rare earth oxides during 2007 by

the average price of those oxides during 2007. The total amount is however less

than the 120,000 tonnes Roskill estimated for 2007 production. If we define the

heavy rare earth elements as yttrium and samarium through lutetium, the

production content chart shows that the light rare earth oxides represent 93% of

production by weight, with most of this supply coming from the Bayan Obo mine

operated by Chinese state owned Baotou Iron and Steel, while only 7% is

represented by the heavy rare earths which are produced mainly from the ion

adsorption clay deposits in southern China. This often gives rise to the dismissive

comment that future demand growth lies with the Light Rare Earth Elements

(LREEs) and all this fuss about the Heavy Rare Earth Elements (HREEs) is much

ado about nothing. The second chart, however, which distributes the production

by value, reveals that the heavies represent a surprisingly high 40% of the

estimated $1.0 billion production value in 2007.

The next two charts break down the rare earth oxide production in 2008 by their

applications both by weight and by value. This is apparently very complex

information assembled by Dudley Kingsnorth's Industrial Minerals Company of

Australia (IMCOA). What stands out is the high 31% of value represented by

phosphors, which are only 7% of the weight. Phosphors are used to create

colour in display and lighting systems and are made from heavy rare earths.

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Rare Earth Applications by Weight and Value

Source: Kaiser Bottom Fish, IMCOA.

Source: Kaiser Bottom Fish, IMCOA.

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Global Rare Earth Consumption 2008

Source: IMCOA, www.terramagnetica.com

Source: Lynas Corporation.

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2014 Forecasts by Weight and Value

Source: Kaiser Bottom Fish, IMCOA.

Source: Kaiser Bottom Fish, IMCOA

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Source: Lynas Corporation.

Source: Lynas Corporation.

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Source: Lynas Corporation.

Kaiser Bottom Fish reports that IMCOA believes that REO demand will grow to

180,000 tonnes by 2014, and the above charts show which applications are

expected to drive demand. The second chart applies the 2008 prices to the 2014

weight. When IMCOA published this forecast they apparently cautioned that it

does not incorporate a "positive" outcome for the Copenhagen Climate Change

forum that took place in December 2009. As we now know the talks

accomplished little in terms of firm commitments with regard to carbon dioxide

emission reduction goals. Kaiser Bottom Fish claims that this forecast is based on

conservative assumptions about the extent that technologies driven by climate

change concerns will be commercialised. In other words, if prices do not change,

the annual market for rare earth oxides will grow to a value of US$2.0bn, if the

world carries on without developing a major commitment to transforming its

energy foundation.

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The mineralogy of rare earths is complex; they occur in a number of exotic

minerals often with esoteric names, so named either from type location or

named after those who first discovered them.

Carbonatites

Carbonatites are rare alkaline intrusive or extrusive igneous rocks and are

characterised with a composition of greater than 50% carbonate minerals. Some

carbonatites are enriched in magnetite, apatite and rare earth elements. A

specific type of hydrothermal alteration termed fenitisation is typically

associated with carbonatite intrusions. This alteration assemblage produces a

unique rock mineralogy termed a fenite after its type locality, the Fen complex

in Norway. The Palabora complex in South Africa is the furthest advanced

carbonatite mine and has been in operation since 1960. It is mainly mined by

Palabora Mining (PAM-JSE-Rio Tinto (RIO) 57%, and Anglo American (AAL)

17%), and is a major copper, magnetite, phosphate rock (apatite) and

vermiculite (a clay mineral used for insulation) producer. Palabora is not noted

for its rare earth content, but has historical production of zirconia from

baddeleyite. Lynas’ Mount Weld rare earth project in Western Australia is also a

carbonatite, as are most of the projects being evaluated in Canada, Namibia and

Malawi. By now we speculate that most carbonates worldwide would have been

staked by Canadian juniors, just in case.

Bastnäsite [(REE) CO3 (F,OH)]

Bastnäsite is a mixed lanthanide fluoro-carbonate mineral that currently

provides the bulk of the world's supply of the Light Rare Earth Elements (LREE).

Although it is one of the more widespread rare earth containing minerals few

deposits are of sufficient size to be of commercial significance. Currently, only

two deposits in the world meet this criterion: Molycorp’s Mountain Pass deposit

in California and the Baiyun Ebo deposit in Inner Mongolia, China.

Bastnäsite is widely consumed as it is a major source of feed for downstream

recovery of the individual Rare Earth Elements. It is also the key ingredient in a

number of specialist polish products. High performing polish compounds made

from bastnäsite can be used on optical glass, mirrors, telescopes, silicon

microprocessors, hard disk drives and cameras.

Bastnäsite can also be used in television faceplates and glass melts in light bulbs

for ultraviolet shielding and de-colouring as well as for sulphur-getting in

alloying agents.

Another use of bastnäsite is in the production of a certain type of mischmetal

(mixed metal) which results when the oxides in bastnäsite are converted to

metal form. Mischmetal is used to make lighter flints and alloys for use in steel

(cerium improves the physical properties of high-strength, low-alloy steels due

to its affinity for oxygen and sulphur), batteries and magnets.

Mineralogy

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Monazite [(REE, Nd) PO4]

Monazite is a reddish-brown phosphate mineral containing Rare Earth Elements

and is an important source of thorium (Th), lanthanum (La) and cerium (Ce).

Radioactive uranium and thorium often accompany monazite and monazite

sand was for many years the main source of thorium used to manufacture gas

mantles. Monazite was the only significant source of rare earth elements, until

Mountain Pass bastnäsite began to be processed in 1965.

Due to its high density, monazite is found concentrated in alluvial sands, and is

associated with the other heavy mineral sands such as ilmenite and zircon.

However monazite sands typically contain between 6-12% thorium oxide with

variable amounts of uranium. Heavy mineral sands producers suffer severe

restrictions if this radioactivity “contaminates” ilmenite or zircon. Hence for

heavy mineral sands producers monazite has grown to become an unwelcome

waste material, which in some cases has to be stored securely.

Monazite sands are mainly composed of cerium, containing 45-48% cerium,

about 24% lanthanum, about 17% neodymium and 5% praseodymium, with

minor quantities of samarium, gadolinium and yttrium. Rock monazite from

Steenkampskraal in South Africa was processed in the 1950s and early 1960s

and became at that time the largest producer of rare earth elements. Great

Western Minerals (GWG-TSX-V) is looking to reopen Steenkampskraal.

Thorium and rare earth oxides can be separated from monazite by either

heating with sulphuric acid or sodium hydroxide. In the acid process, the rare

earths go into solution, while thorium is precipitated as a mud, while in the

alkaline process the solid residue containing both rare earths and thorium has to

be treated with hydrochloric acid. Here the rare earths report into solution with

thorium dropping out as a solid residue.

Nepheline Syenite

Nepheline is a so-called feldspathoid, a silica undersaturated aluminosilicate.

Syenite is a quartz poor (less than 5% silica) alkaline igneous rock. Nepheline

syenite is a holocrystalline plutonic rock that is a syenite that contains

nepheline, but more importantly also contains many other alkali minerals

including rare earths.

Apatite

Apatite is a group of phosphate minerals. Hydroxyapatite (HA) is the major

component of tooth enamel and bone. The major use of apatite is the

manufacture of fertiliser. Occasionally it can contain significant rare earth

elements such as that found at Hoidas Lake (Great Western Minerals (GWG-

TSX-V)) in Canada. Levels of radioactivity in apatites tend to be very low, and

this may be some advantage in rare earth mining.

Ancylite (Sr (REE) (CO3)2(OH) (H2O)

Ancylite is a rare hydrous strontium carbonate that contains cerium, lanthanum

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and other rare earth elements.

Baddeleyite (ZrO2)

Baddeleyite is the main ore of zirconium oxide (Zirconia). It has a high specific

gravity and can be associated with economic levels of rare earth oxides.

Loparite (Ce,Na,Ca(Ti,Nb)O3)

Loparite is a rare earth oxide that occurs in nepheline syenite.

Xenotime

Xenotime is a rare earth phosphate, mainly yttrium orthophosphate (YPO4).

Dysprosium, erbium, terbium and ytterbium as well as thorium and uranium can

be important secondary components, all replacing yttrium. Small tonnages of

xenotime sand are recovered in Malaysia, and Neo Material Technologies

(NEM-TSX) is hoping to produce rare earths from the tailings of Minsur’s

(MINSURI1 PE) Pitinga tin mine in Brazil.

As already noted the mineralogy of rare earth deposits can be complex, the

metallurgy of extraction of the rare earth elements or their compounds from

these various minerals can be even more complicated!

Demonstration plant

IMCOA claim that the demonstration plant is often the most important step to

commercialisation. The aim is to demonstrate that the chosen metallurgical

processes are technically and commercially viable through continuously

operated plants that produce samples to future customer specification.

A total rare earth oxide (TREO) grade by itself is meaningless, because the

relative grade of the individual rare earths differs in each deposit, and even

within different zones.

The price of individual rare earth oxides is reported as US dollars per kilogramme

($/kg) and ranges from $3/kg to as high as $1,000/kg. To assess the monetary

value of a TREO grade you need the individual rare earth oxide grades and their

prices. All disclosures should include a table listing the individual grades as rare

earth oxides. The contained value of rare earths in a tonne of rock is calculated

by converting each rare earth oxide grade into kg per tonne, multiplying the kg/t

by the price per kg, and adding up the contained value to get the total contained

or gross rare earth value per tonne or “rock value” in industry jargon terms.

The conceptual flowsheet for Greenland Minerals and Energy’s Kvanefjeld

project is typical of the various extraction techniques required.

Metallurgy

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Process Flowsheet – Explained

Source: Greenland Minerals and Energy.

It is extremely important to understand that the “mineral” value of a rare earth

deposit is simply a maximum value. The important number is the recoverable

value, which can be substantially less than the in-situ value. The recoverable

value will not be known until metallurgical studies have established the optimal

recovery process. "Optimal" will be a balance between the percentage of each

rare earth that will be recovered by a process, and the cost of that process.

The economic value of a rare earth deposit will not be even roughly be known

until it has completed the metallurgy stage of the exploration and development

cycle.

Ion-Exchange Extraction

Ion–Exchange Extraction is an exchange of ions between two electrolytes or

between an electrolyte solution and a complex. In most cases the term is used

to denote the processes of purification, separation and decontamination of

aqueous and other ion-containing solutions with solid so called ion-exchangers.

Typical ion exchangers are ion-exchange resins, and are either cation exchangers

that exchange positively charged ions (cations) or anion exchangers that

exchange negatively charged ions (anions).

Rare Earth Element separation by the so called ion-exchange lution process is

achieved in two stages. Firstly the resin is saturated with singly charge cations

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such as ammonium ion or the hydrogen ion. A solution of mixed rare earth ions

accompanied by strong acid anions is added to the ion-exchange column. When

the Rare Earth ion encounters the cation containing resin, it replaces three singly

charged cations and these along with the strong acid anion will flow through the

column in solution and out the bottom.

Rare Earth Element ion-exchange has generally been superseded by solvent

extraction, but neodymium can be extracted by the organic compound di- (2-

ethyl-hexyl) phosphoric acid into hexane by an ion exchange mechanism.

Solvent Extraction

Solvent Extraction or liquid-liquid extraction is a method to separate compounds

based on their relative solubilities in two different immiscible (non-mixing)

liquids. In solvent extraction, a distribution ratio is often quoted as a measure of

the extractability of the solutions. The distribution ratio (D) is equal to the

concentration of a solute in the organic phase divided by its concentration in the

aqueous phase. Depending on the system, the distribution ratio can be a

function of temperature, the concentration of chemical species in the system,

and a large number of other parameters. The separation factor is one

distribution ratio divided by another; it is a measure of the ability of the system

to separate two solutes.

Solvent extraction has evolved as the most used separation process for rare

earths, but many extraction stages are needed. In the multistage processes, the

aqueous raffinate from one extraction unit is fed to the next unit as the aqueous

feed, while the organic phase is moved in the opposite direction. Hence, in this

way, even if the separation between two metals in each stage is small, the

overall system can have a higher decontamination factor.

Rare Earth Product Prices in US$

Rare Earth Product 2010A 2014F 2020F 2030F

Lanthanum oxide 7.5 6.0 7.0 10.0

Cerium oxide 4.0 2.5 2.5 3.0

Praseodymium oxide 22.5 30.0 40.0 60.0

Neodymium oxide 22.5 30.0 40.0 60.0

Samarium oxide 4.5 4.5 5.0 8.0

Europium oxide 475.0 600.0 750.0 1,000.0

Gadolinium oxide 7.0 8.0 10.0 15.0

Terbium oxide 500.0 650.0 850.0 1,200.0

Dysprosium oxide 120.0 155.0 200.0 250.0

Yttrium oxide 20.0 27.5 35.0 50.0

Source: Molycorp prospectus, IMCOA and Roskill.

Prices

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Sector Research –

– Rare Earths Review

37

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Sector Research – Rare Earths Review

38

Source:

Project Finance

While the above prices and price projections are of value, on

that rare earth

market price,

project funding, as well as

the distinct possibility that

development

Although

Corporation

finance with its $125m deal with HVB

IM).

contracts, which o

prices. The bank used a 30% discount on the Mount Weld basket case to gain

comfort.

It should of course be noted that Lynas has not attempted to reactivate this

funding, should it be

funded

looking to raise US$100m in debt finance, but

in their April 2010

With signifi

into downstream processing, capital availability may become a limiting factor.

Source: www.metal-pages.com

Project Finance

While the above prices and price projections are of value, on

that rare earth prices and trades are by appointment only

market price, nor spot price, nor futures market.

project funding, as well as equity for exploration and

the distinct possibility that more equity will be required for any

development.

Although the facility was withdrawn as a result of the credi

oration (LYC-ASX) did demonstrate the possibility of obtaining project

finance with its $125m deal with HVB Group, now part of

This debt was apparently arranged on the back of signed customer

contracts, which offered a floor price for rare earth elements, with zero

prices. The bank used a 30% discount on the Mount Weld basket case to gain

comfort.

It should of course be noted that Lynas has not attempted to reactivate this

funding, should it be available, phase 1 of their production plan is now

funded solely with equity contributions. It has been suggested that

looking to raise US$100m in debt finance, but this is not immediately apparent

in their April 2010 IPO prospectus.

With significant capital costs for rare earth projects, particularly those that enter

into downstream processing, capital availability may become a limiting factor.

4th August 2010

While the above prices and price projections are of value, one should appreciate

are by appointment only. There is no terminal

or futures market. This has implications for

for exploration and evaluation; there remains

equity will be required for any project

facility was withdrawn as a result of the credit crunch, Lynas

did demonstrate the possibility of obtaining project

, now part of Unicredit Bank (UCG-

on the back of signed customer

ffered a floor price for rare earth elements, with zero caps on

prices. The bank used a 30% discount on the Mount Weld basket case to gain

It should of course be noted that Lynas has not attempted to reactivate this

production plan is now being

with equity contributions. It has been suggested that Molycorp is

is not immediately apparent

cant capital costs for rare earth projects, particularly those that enter

into downstream processing, capital availability may become a limiting factor.

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Bayan Obo Rare Earth Mine China

Source: Kaiser Bottom Fish.

Source: Kaiser Bottom Fish.

Rare Earth Producers

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The Kaiser Bottom Fish analysis of the relative proportions of rare earth

production from Bayan Obo indicates that although it is primarily a cerium

producer (50% of TREO’s by weight), lanthanum (23%), neodymium (19%) and

praseodymium (6%), are also significant in terms of volume.

In terms of revenues, neodymium is believed to be most important (44% of

revenue per tonne), but cerium (15%), praseodymium (15%), lanthanum (10%)

and europium (8%) are also important. Of course this analysis doesn’t take into

account mineral processing costs, and hence the contribution to profitability

could be significantly different.

Longnan Rare Earth Mine China

Source: Kaiser Bottom Fish.

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As can be seen in the Kaiser Bottom Fish analysis, although Longnan is primarily

an yttrium producer (65% by weight), gadolinium (7%), dysprosium (7%), erbium

(5%), samarium (3%), and thulium (3%) are also significant. In terms of

estimated revenues, terbium (27% of revenues), yttrium (22%) dysprosium

(20%), erbium (10%), and lutetium (8%) are important. Again this calculation

doesn’t take into account mineral processing costs, so the profitability split may

be significantly different.

Potential Rare Earth Mines

Source: Lynas Corporation.

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REO Content Comparison

Source: Great Western Mines Group (GWMG). Blue highlighted properties are owned by GWMG.

Rare Earth Oxide Compositions by Weight

Oxide Hoidas

SK, CA

Deep

Sands

UT,

US

Steenkampskraal

South Africa

Benjamin

River

NB, CA

Douglas River

SK, CA

(%) (%) (%) (%) (%)

Cerium Oxide CeO2 46.62 41.73 46.67 31.81 0.05

Neodymium Oxide Nd203 20.57 14.28 16.67 17.62 0.07

Lanthanum Oxide La203 20.44 22.30 21.67 12.88 0.01

Praseodymium Oxide Pr6011 5.97 4.34 5.00 4.40 0.00

Samarium Oxide Sm203 2.71 2.44 2.50 3.61 0.00

Gadolinium Oxide Gd203 1.24 2.06 1.67 3.99 0.00

Yttrium Oxide Y203 1.17 8.90 5.00 17.81 80.37

Europium Oxide Eu203 0.54 0.30 0.08 0.22 0.29

Dysprosium Oxide Dy203 0.35 1.41 0.67 3.22 11.83

Erbium Oxide Er203 0.24 0.76 0.08 1.68 3.64

Terbium Oxide Tb407 0.11 0.28 0.08 0.58 2.03

Ytterbium Oxide Yb203 0.05 0.72 0.07 1.18 1.57

Holmium Oxide Ho203 0.00 0.27 0.05 0.63 0.00

Thulium Oxide Tm203 0.00 0.11 0.07 0.22 0.00

100.0 100.0 100.0 100.0 100.0

TREO Contained Resources t(1)

95,000

Not

av. 29,066 Not av. Not av.

Value REO (US$/Kg)(2)

17.74 20.09 15.33 28.09 48.89

Total In-situ Value 1,685,000,000

Not

av. 446,000,000 Not av. Not av.

(1) Non NI 43-101 compliant estimate except Hoidas shown at 0% REE cutoff

(2) Asian Metal as at April 9, 2010

Source: Great Western Metals.

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Potential New Suppliers

Source: IMCOA, and www.terramagnetica.com. Note this analysis doesn’t include Great Western Metal’s Steenkampskraal project.

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The Ten Steps to Rare Earths Commercial Production

Source: IMCOA, and www.terramagnetica.com. Note this table doesn’t include Great Western Metal’s Steenkampskraal project.

Notes: Mountain Pass-Molycorp (MCP-NYSE)

Mt Weld-Lynas Corporation (LYC-ASX)

Nolans Bore-Arafura Resources (ARU-ASX)

Zandkopsdrift-Frontier Minerals Limited (Private)

Nechalacho-Avalon Rare Metals (AVL-TSX)

Hoidas Lake- Great Western Minerals (GWG-TSX-V)

Bear Lodge-Rare Element Resources (RES-TSX-V)

Kangankunde-Lynas Corporation (LYC-ASX)

Dong Pao-Japanese consortium

Steenkampskraal-Great Western Minerals (GWG-TSX-V)

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Source: Kaiser Bottom Fish.

Listed Rare Earth Equities

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Molycorp (MCP-NYSE)

Molycorp Inc., owner of the world’s largest non-Chinese deposit of rare earth

metals, declined in its first two days of trading after chopping the size of its

initial public offering by 18 percent. Molycorp sold 28.13m shares at US$14

each, raising $394m before expenses after its underwriters failed to attract

enough buyers at $15 to $17 apiece, according to Bloomberg data. The mining

company’s owners purchased about 8.9 percent of the shares in the IPO. In spite

of the share price fall the company is still capitalised at around $1bn. As at end

December 2009 shareholders’ equity totalled $74.6m.

The prospectus currently on Edgar is dated 16th April 2010.

http://www.sec.gov/Archives/edgar/data/1489137/000095012310035593/d704

69sv1.htm

Production of rare earth elements commenced at Mountain Pass in California,

USA in 1952. In 1965 the development of red phosphors for colour television

creates large demand for europium oxide; hence a europium recovery plant was

built. In 1977, the operation was acquired by Union Oil Company of California

(UNOCAL), and in 1981 separation plants to produce samarium oxide and other

heavy rare earths commenced. By 1990, the expanded facilities produce about

40% of global rare earth supply. In 1998, separation activity was suspended due

to wastewater disposal problems, and in 2002 the mine and mill closed. In 2005

UNOCAL was acquired by Chevron, while in 2008 the business was sold to the

current private owners. In 2009 processing of stockpiled bastnäsite concentrate

begins, while the company plans to mine fresh ore in 2011, post their recently

announced initial public offering.

The company was owned pre-IPO by Resource Capital Funds, Pegasus Capital

Advisors, Traxys North America and various other investors including the

company’s CEO Mark A. Smith. Goldman Sachs was until recently a shareholder

but sold its stake to other shareholders. The company’s prospectus did not

appear to clarify the reason for this sale.

The world’s two largest reserves of Rare Earth materials outside of China are in

Mountain Pass, California and Mount Weld, Australia. Neither of these deposits

is currently in production. Lynas Corporation (LYC-ASX) (the current owners of

the Mount Weld deposit), has begun development of a mine and concentration

plant in Australia and a processing facility in Malaysia. Lynas has not announced

plans to produce Neodymium Iron Boron (NdFeB) magnets or intermediate

materials but this formed an integral part of Molycorp’s plans post IPO.

Molycorp plans to restart mining operations and complete an extensive

modernisation and expansion of the related processing facility. Molycorp

further plans to broaden its operations to encompass the production of metal,

alloys and NdFeB magnets.

In early June 2010, Molycorp and Neo Material Technologies (NEM-TSX)

announced a rare earth “Mine to Magnets” supply chain agreement. This

contemplated a technology transfer agreement and a supply agreement where

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Neo would purchase mixed rare earth carbonates as well as neodymium and

praseodymium oxides from Molycorp.

The initial planned production upon full restart at the end of 2012, is 40 million

pounds of Rare Earth Oxides (REO) per year (19,090 tonnes per annum (tpa)-

almost 7 million pounds of neodymium and praseodymium oxides). This

production can be achieved by using less than half the tonnes of ore that was

required in the past to produce 40 million pounds REO per year. According to

Harbinger Capital, the company will look to build capacity to ramp up production

to 40,000 tpa. Molycorp’s total proven and probable reserves are 2.21 billion

pounds of rare earth oxides at an average grade of 8.24% (higher than our 2%

criteria!)

Molycorp intends to produce a very wide range of rare earth products, these

include; bastnäsite concentrates containing 58-63% lanthanum oxides; leached

bastnäsite concentrates containing 68-73% lanthanide oxides; calcined leached

bastnäsite concentrates containing 85-90% lanthanide oxides; cerium oxide,

carbonate and nitrate; europium oxide; a yttrium-europium co-precipitate;

lanthanum oxide; a high lanthanum lanthanide concentrate; a lanthanum-

lanthanide chloride solution; a lanthanum-lanthanide nitrate solution;

lanthanum acetate solution; neodymium oxide; praseodymium oxide; yttrium

oxide; gadolinium oxide; samarium oxide; terbium oxide; erbium oxide and

ytterbium oxide.

Metals Mix at Mountain Pass

Element % of bastnäsite Ore

Cerium 48.8

Lanthanum 34.0

Neodymium 11.7

Praseodymium 4.2

Samarium 0.79

Gadolinium 0.21

Europium 0.13

Dysprosium 0.05

Other REE 0.12

Source: Molycorp prospectus and Hallgarten & Company

Bastnäsite ore is crushed and milled, and then floated away from the waste

material. The resultant bastnäsite concentrate is then processed by leaching

with strong acid solutions, followed by a series of solvent extraction steps which

produce the various individual REO minerals, generally in a high purity, greater

than 9% oxide form.

The company expects to sell and transport a portion of the REOs produced to

customers for use in their particular applications. The remainder of the REOs will

be processed into rare earth metals. A portion of these metals will be sold to

end users and we expect to process the rest into rare earth alloys. These rare

earth alloys can be used in a variety of applications, including but not limited to:

electrodes for Nickel Metal Hydride (NiMH), battery production; samarium

cobalt magnet production; and Neodymium Iron Boron, or NdFeB, magnet

production.

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Initially, the company’s modernisation and expansion plans envisioned adding

facilities and equipment for metal conversion and alloy production at the

Mountain Pass facility. However, they have entered into a letter of intent to

acquire a third-party producer of rare earth metals and alloys in the United

States. If this acquisition is completed, instead of adding such facilities and

equipment at Mountain Pass, Molycorp plan to transport cerium, lanthanum,

neodymium-praseodymium (so called didymium) and samarium oxide products

from Mountain Pass to the new off-site location that already possesses the

technological capability to produce rare earth metals and alloys.

In March 2009, Molycorp signed an agreement to acquire a controlling interest

in Great Western Minerals (GWG-TSX-V), however in June 2009, Molycorp

announced that it had been unable to reach agreement and had let its interest

in GWG lapse.

According to Hallgarten & Co., Mountain Pass was always europium rich, and

has a specialised europium plant to produce red-phosphor. Molycorp maintains

a joint venture with Sumitomo called Sumiken Molycorp, which markets rare

earth products in Asia and produces permanent magnet materials in Japan.

According to Molycorp’s prospectus, they have secured letters of intent for

138% of their planned production in 2013. They could sell 268% more non-metal

lanthanum (oxides and other compounds) than they could produce (11,000

tonnes (t) versus 2013 planned production of 3,100 t), 10 times the neodymium

metal (3,300 t versus planned production of 313 t), 9 times the praseodymium

metal (1,090 t versus 116 t). Things are not so rosy as regards to lanthanum

metal, where only 17% of planned production of 2,507 t is spoken for, cerium

non-metal fares slightly better with 71% of planned production of 9,680 t

subject to letters of intent, while only 51% of planned production of NdPr in

NdFeB alloy is signed up.

Molycorp intends to develop new higher margin products and processes for

REEs that historically have had lower demand. For example, cerium is used

primarily for glass polishing and has typically sold at prices lower than those for

other REEs. However, the company has developed XSORBX® ASP or Arsenic

Sequestration Process, a proprietary product and process, primarily consisting of

cerium that removes arsenic and other heavy metals from industrial processing

streams and allows customers to more safely sequester arsenic and increase

their production. Molycorp has entered into a non-binding letter of intent with a

water filtration company to jointly develop water treatment products.

The company claims that, although the consultancy IMCOA predicts that there

will be a surplus of cerium in the future, they anticipate most of their production

will serve the new, proprietary XSORBX® ASP water treatment market segment

that they have under development. Molycorp believes that this segment alone

could consume many times more cerium units than they can produce.

Furthermore Molycorp believe the new segment negates the need for additional

letters of intent at this time.

Molycorp has suffered from a history of water related issues and indeed was

originally closed down by the US Environmental Protection Agency because of a

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water leak. In the prospectus we learn; “Currently, processing of REOs requires

significant amounts of water. The technology being developing to significantly

reduce fresh water requirements, includes proprietary production of our own

hydrochloric acid and sodium hydroxide from waste water at our own chlor-alkali

plant, has not yet been proven at commercial scale and has not yet been

implemented. Although we believe our existing water rights and water supply

are sufficient to meet our projected water requirements, any decrease or

disruption in our available water supply until this technology is successfully

developed may have a material adverse effect on our operations and our

financial condition or results of operations. “

Lynas Corporation (LYC-ASX)

Lynas argue that they are the most advanced ex-China potential producer of

rare earth elements. Their analysis also indicates that potentially their Mount

Weld project in Western Australia has the greatest in-situ value of any of the

major projects outside of China.

The company has been looking to develop the Mount Weld open pit mine since

2000 and have raised A$679.5m since June 2006 in equity to advance this

project. The company was successful in obtaining A$200m of debt in 2008 and

convertible funding both to bring the mine and concentrator in Australia, and its

associated processing facility (the Advanced Materials Plant) in Malaysia on

stream. Prior to the credit crunch, it had undertaken foundation work at both

sites, as well as limited mining. However all work came to a halt in February

2009, as convertible note holders asked for their money back and the company

was unable to draw down its $125m funding, sourced by HVB Group, now part

of Unicredit Bank (UCG-IM).

In May 2009, state owned China Non-Ferrous Metal Mining agreed to subscribe

for 700 million new shares at A$0.36 per share, raising A$252m and offered

Chinese bank finance to restart the project. A$0.36 per share represented a

52.5% premium above the volume weighted average Lynas share price for 30

trading days prior to the announcement.

Total capex of over A$500m was envisioned, US$286m to compete and

commission the first phase to produce 10,500 tpa of REO and US$80m for phase

two which would bring production to 21,000 tpa of REOs.

However in September 2009, this tie up was dropped as Australian Foreign

Investment Review Board (FIRB) approval couldn’t be achieved, strategic

considerations being cited.

In October 2009, following the recovery in markets and improved sentiment

towards rare earths, the company raised A$450m of equity from institutions and

has recently recast capital cost projections. It has recommenced work on the

processing plant in Australia and the Advanced Materials Plant in Malaysia.

The company estimates that their Phase 1 plans will cost A$339m, with first

concentrate feed to the kiln in Malaysia anticipated in Q3 2011. This forecast

incorporates a major increase in Engineering, Procurement and Construction

Management (EPCM) fee from $100m to $136.4m.

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Building the Advanced Materials Plant in Malaysia offers a number of

advantages, namely tax (0% for twelve years), plentiful natural gas, electricity,

nearby sulphuric and hydrochloric acid supplies. The company points out that 3

tonnes of reagents will be used to process one tonne of concentrates, so

bringing concentrates to the Advanced Materials Plant makes a lot of sense.

The company will enter into negotiations with the Australian tax authorities

regarding transfer pricing, as they will only be producing concentrates in

Australia. Concentrates are potentially worth very little as the Chinese are the

only other buyer. Hence the impact of the proposed 40% Australian Resources

Tax may be relatively small.

The company has outlined 12.24 million tonnes (Mt) of Joint Ore Reserves

Committee (JORC) compliant measured, indicated and inferred resources

grading 9.7% rare earth oxides (REOs) at Mount Weld, calculated at a 2.5% REO

cut off, and has already mined and stockpiled 773,000 t, grading from 8% up to

26% REOs. The company claims the low thorium content of 44 parts per million

in each percent of rare earth oxides, offers a competitive advantage against

other non-Chinese projects. Apparently beyond 100ppm per one per cent of

REO one will have problems with thorium. Uranium values are also very low.

Paterson Securities Limited- Lynas Corporation Revenue Forecasts

REO 2012

Production

tonnes

Price

per Kg

US$

Potential

Revenues

US$m

% of

Potential

Revenues

2013

Production

tonnes

Price

per Kg

US$

Potential

Revenues

US$m

% of

Potential

Revenues

Lanthanum 1,583 9.84 15.58 14.2% 4,355 10.04 43.72 13.6%

Cerium 2,901 4.92 14.27 13.0% 7,983 5.02 40.07 12.4%

Neodymium 1,148 30.62 35.15 32.1% 3,160 31.23 98.69 30.6%

Praseodymium 330 30.62 10.10 9.2% 909 31.23 28.39 8.8%

Samarium 141 5.19 0.73 0.7% 388 5.3 2.06 0.6%

Dysprosium 8 125 1.00 0.9% 21 128 2.69 0.8%

Europium 27 568 15.34 14.0% 76 580 44.08 13.7%

Terbium 4 656 2.62 2.4% 12 669 8.03 2.5%

Others 64

231.2

5 14.80 13.5% 175

312.5

7 54.70 17.0%

Total 6,206 15.34 109.60 100.0% 17,079 15.65 322.4 100.0%

Source: Paterson’s Securities Ltd & Libertas Capital Corporate Finance.

As can be noted, Mount Weld is dependent on lanthanum, cerium, neodymium

and europium revenues. It should be noted that these price forecasts are

considerably higher than those presented by Molycorp in its prospectus.

As part of their original funding effort they have signed a number of long term

customer agreements. A long term, greater than ten year agreement, worth

over US$200m, has been signed with French chemical major Rhodia (RHA-FP).

This is set to supply cerium, europium, terbium and lanthanum. This represents

about 25% of projected volumes, but due to the relative low prices of lanthanum

and cerium, a much lower proportion of projected revenues. The company has

also signed an approximate US$200m, 5 year contract to supply neodymium and

praseodymium to one customer, and has four other contracts worth from $20m

up to $80m to supply product from the Malaysian plant.

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Mount Weld has significant undrilled potential, so Lynas is well placed to meet

increasing levels of demand. As the Mount Weld concentrator operation would

be permitted and in operation, there is the possibility that deals could be done

with the other Australian hopefuls Alkane Resources (ALK-ASX) and Arafura

Resources (ARU-ASX) to buy their potential production of concentrates for

processing in Malaysia. Lynas itself have a stake in the early stage Kangankunde

project in Malawi.

Lynas is currently capitalised at around £750m (A$1,300m) and has about

A$400m of cash. Having just raised the capital to restart construction at Mount

Weld and the Advanced Materials Plant in Malaysia, news flow for the rest of

the year may be fairly limited. Owing to this placing, the company has a wide

institutional shareholder base, with Morgan Stanley being the largest

shareholder with around 5%.

They remain well placed to become the first non-Chinese producer of rare

earths. Although the share price could drift, they should eventually be buoyed

by general sentiment towards the sector.

Alkane Resources (ALK-ASX)

Alkane is developing the Dubbo Zirconia Project (DZP), an open pit zirconium

mine in New South Wales, Australia. The company is also exploring for gold

nearby, and has recently reported progress on their McPhilamys gold joint

venture with Newmont (NEM-NYSE), where they have a conceptual target of

more than 4 million ounces (Moz) of gold, and at their Tomingley project, where

mine planning is underway on a 800,000 oz JORC compliant resource

So far at Dubbo they have outlined a Joint Ore Reserves Committee (JORC)

compliant measured resource of 35.7 million tonnes grading 1.96% zirconium

dioxide (ZrO2), 0.04% hafnium dioxide (HfO2), 0.46% niobium pentoxide

(Nb2O5), 0.03% tantalum dioxide (Ta2O5), 0.14% yttrium oxide (Y2O3), 0.75%

rare earth oxides and 0.014% uranium oxide (U3O8). An inferred resource of

37.5 Mt at similar grades has also been outlined.

Resource drilling was completed in 2001; the process flow sheet was developed

between 1999 and 2002, with trails to mini pilot plant stage. An Industrial

Commercial Ready grant of A$3.3m was received from the Australian

Government in April 2006 as a contribution towards process optimisation in a

demonstration pilot plant which was commissioned in March 2008. Product

samples from the demonstration pilot plant were distributed in the second half

of 2009. The company is currently revising and updating their 2002 feasibility

study with planned delivery by Q3 2010.

They aim to process 400,000 tonnes per annum of ore to produce 15,000 tpa of

zirconium products, 2,000 tpa of a niobium-tantalum concentrate, just under

2,000 tpa of light rare earth concentrates containing lanthanum, cerium and

neodymium and 600 tpa of a yttrium rare earth concentrate containing yttrium,

gadolinium, dysprosium and terbium. The zirconium products produced include

a zirconium basic sulphate, zirconium hydroxide and zirconium carbonate. These

are expected to contain a small amount of the transitional metal hafnium (Hf,

71).

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DZP Yttrium & Rare Earth Element (REE) Output

Source: Alkane Resources.

Zirconium is used as a drying agent in paints, in solid oxide fuel cells, in

engineering ceramics where it adds toughness, and other hard wearing

properties, and has a rising use in automotive pretreatment, offering

environmental benefits over traditional zinc phosphate metal treatments.

Hafnium is used in control rods for nuclear reactors and a number of specialist

alloying purposes.

Zircon Supply Demand Price

Source: Alkane Resources.

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DZP Flow Sheet

Source: Alkane Resources.

Alkane is capitalised at around £50m (A$85m), and will possibly have to issue

more equity soon. As at end March 2010, they had A$1.8m of cash, having spent

$2.8m during the quarter. At present, private company Abbotsleigh Pty Ltd is

the largest shareholder with 28.5% of the outstanding shares.

It is difficult to determine how much value is ascribed by the market to their

Dubbo project, rare earth grades are low, and should be considered by-products

from this primarily zirconium operation. The flow sheet is complicated and could

be expensive.

Arafura Resources (ARU-ASX)

Arafura is developing their Nolans Bore rare earths, phosphates and uranium

project in the Northern Territory, Australia. East China Mineral Exploration &

Development Bureau owns just over 22% of the issued shares. The company

claims that the fluorapatite, apatite-allanite calcsilicate Nolans Bore resource is

sufficient to sustain production of 20,000 tonnes (t) of rare earth oxides, 80,000

tpa of phosphorus pentoxide (P2O5), 400,000 t of calcium chloride and 150

tonnes (0.33 Million pounds) per annum of uranium for more than 20 years.

Located close to infrastructure, it is 10 kilometres (km) from the Stuart Highway,

Nolans Bore has a total Joint Ore Reserves Committee (JORC) compliant

measured, indicated and inferred resource of 30.3 million tonnes (Mt) grading

2.8% rare earth oxides, 12.9% phosphate and 0.44 pound per tonne U3O8. The

company intends to chemically separate rare earths from phosphate. From the

phosphate line the company intends to produce phosphoric acid with a calcium

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chloride reside. From the rare earth stream they intend to produce rare earth

products and uranium oxide.

Nolans Rare Earth Mix

Source: Arafura Resources.

In Situ REO Value (February 2010)

Source: Arafura Resources.

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Project Valuation (estimated costs)

Source: Arafura Resources.

Arafura is at a relatively early stage of its development, from 2010 through to

2013 they intend to continue drilling out the resource, and undertake the

various mine site selection tasks. They also need to seek finance and are looking

for a strategic partner.

The company has recently reported that the average price for a Nolans mix now

amounts to around US$22.23 per kilogramme an increase of 100% since the

December 2009 quarter. They are currently capitalised at around £130m

(A$225m), having just raised A$19.5m in a placement and rights issue. Nolans

Bore is relatively low grade, and relatively low returns seem evident in their

estimated 6 year project payback. Arafura also have an issue with uranium, the

Northern Territory is already a significant producer of uranium at Ranger in the

Kakadu National Park. Local authorities and native title groups have not been

keen on new uranium producers in the Territory.

Avalon Rare Metals (AVL-TSX)

Avalon is focused on their 100% owned Nechalacho underground rare earths

deposit, near Thor Lake in the Northwest Territories of Canada. A National

Instrument (NI) 43-101 compliant inferred resource of 64.2 million tonnes (Mt)

grading 1.96% total rare earth oxides, plus tantalum, niobium, zirconium,

hafnium and gallium has so far been outlined. Nechalacho is relatively well

endowed with gadolinium and dysprosium, and has low thorium levels.

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N-S Composite Section (looking west)

Source: Avalon Rare Metals.

Following underground mining, the company is looking to recover a Rare Earth

Element concentrate (REE con) with grinding and froth floatation. A

hydrometallurgical plant is planned offsite; here the concept is to caustic crack

the REE con, followed by acid leaching. Solvent extraction is then hoped to

precipitate two mixed REE carbonates one mainly Light Rare Earth Elements

(LREEs) the other mainly Heavy Rare Earth Elements (HREEs). Final separation of

REE oxides may be achieved in Asia, whilst metallurgical testwork continues.

They hope to produce 5-10,000 tonnes per annum of rare earth oxides, 49.4%

lanthanum and cerium, 21.3% neodymium, 4.2% praseodymium, 3.7% samarium

or otherwise 25.6% heavy REEs plus yttrium. The company expects first

production in 2015.

Avalon’s recently released Prefeasibility Study is as feared, pretty poor, with pre-

tax and post-tax Internal Rates of Returns (IRR) of 14% and 12% respectively.

Project capital cost is estimated to amount to a huge C$900m, operating costs

amount to C$267 per tonne of ore mined or $5.93 per kilogram of product. The

PFS now models the construction of a hydrometallurgical plant, possibly using

some of the facilities at the historic Pine Point lead-zinc mine also in the NWT,

and also miles from anywhere. An additional capital requirement of $500m for a

hydrometallurgical plant does sound expensive, so it is possible that a number of

other costs have increased as well.

The poor returns illustrate the need for high grades; the Nechalacho resource

grade of 1.7% Total Rare Earth Oxides (TREO’s), 3.16% zirconium oxide, 0.41%

niobium oxide and 0.041% tantalum oxide doesn’t appear high enough.

Furthermore the difficulties and costs of extracting the TREOs from the

zirconium, niobium and tantalum, are also illustrated. It is however encouraging

that they have recognised the need for fully integrated production, returns

would probably have been even lower if they had stuck to their original plans to

sell two concentrates to the Chinese for final Rare Earth Element (REE)

extraction.

Avalon is capitalised at about £130m (C$210m), has C$15m of cash and a wide

institutional shareholder base. Grades at Nechalacho are not outstanding,

although they do claim a high HREE content and low thorium levels.

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Cache Exploration (CAY-TSX-V)

Cache is busy acquiring rare earth element properties, and has acquired

positions in the Welsford igneous complex in New Brunswick, Canada, the Louil

Hills peralkaline complex in Newfoundland, the Cross Hills plutonic suite also

located in Newfoundland.

They have a very modest capitalisation of C$4m, while their projects are too

early stage to come to a view as to their merits.

Dacha Capital (DAC-TSX-V)

Dacha is marketed as the first Exchange Traded Fund (ETF) to invest in rare earth

metals. From the first half 2010 Chinese export quota detail analysed by Lynas

Corp, one notes that the export quota for the first half of 2010 was 22,283 t, of

which 5,978 t was “available” for “Foreign-Invested firms”. Dacha Capital, has so

far this year purchased 53 t of REEs and 163 t of REOs. Overall Dacha has

therefore bought about 1% of the first half export quota or around 3% of that

“available” to Foreign-Invested firms, hence they have barely scratched the

surface and as yet don’t have the clout to move prices.

The share price of the worlds’ only Rare Earth Element (REE) investment fund

has plunged following the release of their maiden Net Asset Value. As at end

June 2010 this was C$0.38 per share based on 72.16m shares outstanding. In

addition to the 5 tonnes (t) of Dysprosium oxide, 30t of ferrous dysprosium, 20 t

of Gadolinium oxide, 3t of Lutetium oxide, 12t of terbium oxide and 20t of

yttrium oxide held outside China in their South Korean warehouse, they also

have 6t of Europium oxide and 120t of yttrium oxide held within China. They

also retain $6.7m of cash and other assets.

Dacha is an interesting concept and offers zero mining, processing, and uranium-

thorium risk. When it was placing 48.9m shares at 45 cents, the company had

hoped for them to trade at twice NAV. Obviously the market saw through that

argument when it noticed the NAV release. With rare earth prices continuing to

perform during the month following the Chinese quota news, a positive end July

NAV might be anticipated. At end June they were already up 15% on cost, so

C$0.33 per share might be a very interesting entry point.

Etruscan Resources (EET-TSX)

Etruscan Resources is a West African gold mining company that has just

undergone a management buy-in led by Endeavour Financial (EDV-TSX). One of

the stones unturned was a rare earths project in Namibia. The company failed in

its search for Iron Oxide Copper Gold (IOCG) style mineralisation, but the rare

earth containing carbonatite discovered could be world scale.

Over a 15 kilometre strike length at Lofdal, encouraging rare earth grab samples

of up to 1% total rare earth elements plus yttrium had been discovered. The REE

carbonatite dykes at Lofdal are enriched in HREEs. The average grade of all dyke

samples taken to date is 0.7% total rare earth elements plus yttrium ("TREE+Y").

The highest individual sample graded 8.9% TREE+Y and the highest heavy rare

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earth (HREE) enriched sample graded 1.5% HREE. The company is hoping to

outline a 25-30 million tonne deposit. The company is looking to spin out its rare

earth interests into a new pure exploration company. This appeared to be too

small to impact the Etruscan share price.

Globe Metals & Mining (GBE-ASX)

Globe’s main focus is its Kanyika niobium, uranium, tantalum and zircon project

in Malawi. A Bankable Feasibility Study (BFS) was commissioned in August 2009

and production is planned to commence in 2013 at a rate of 3,000 tonnes per

annum niobium metal, principally in the form of ferro-niobium. Mine life is

forecast in excess of 20 years.

At the same time they announced that Thuthuka Group, a private South African

engineering and construction contracting company, entered into a formal

agreement to invest US$10.6m to earn a 25% interest. This $10.6m injection was

expected to fund 85% of the estimated cost of the BFS. In early April 2010, Globe

announced that a dispute between the two parties had slowed work on the

project and in June Thuthuka withdrew.

Globe is also exploring the Machinga rare earth project in Malawi, where they

are farming into a Resource Star’s (RSL-ASX) project. Here they could earn up to

an 80% interest. Recent trenching has shown Total Rare Earth Oxides (TREO) and

Niobium grades of up to 1% TREOs and 1.34% niobium pentoxide respectively.

Globe is currently capitalised at around £10m (A$17m), with A$3.0m of cash.

There remains considerable uncertainty about progress at Kanyika, while

Machinga is very early stage and possibly too low grade to be of interest.

Great Western Minerals (GWG-TSX-V)

Great Western Minerals (GWMG) is developing an integrated rare earths

business, and was formed by the merger of the exploration stock Great Western

with the manufacturing business of Less Common Metals (LCM).

LCM, located in Birkenhead UK, and Great Western Technologies Inc. (GWTI),

located in Troy, Michigan, USA produces a variety of specialty alloys for use in

the rechargeable battery, permanent magnet, automotive and aerospace

industries. LCM currently supplies 20% of the world’s samarium-cobalt (SmCo)

alloy for used in permanent magnets and is a significant supplier of alloys for

NdFeB permanent magnets. The company claims that they have the only fully

integrated mine to market rare earth elements business model outside of China.

LCM has a current productive capacity of 1,100 tonnes per annum (tpa) of rare

earth alloys, whereas Great Western Technologies has a 2,550 tpa capacity. LCM

currently sells 430 tpa of alloys, whereas GWTI sells 250 tpa. Potential

productive capacities may not sound large in tonnage terms, but the company

claims that they may represent US$150-200m in potential revenues.

LCM also produce other rare earth alloys, including magneto-optic and

magnetostrictive materials, hydrogen storage systems and master alloys, high

purity rare earth metals, spluttering targets and ultra pure indium. GWTI

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manufactures high purity custom made alloys, sputtering targets, precious

metals, special high purity alloy foils, ingots and rods, special low oxygen

powders, single crystal isotopes, rare earth special elements, brazing alloys,

raney nickel alloys and is involved in scrap metal recovery.

Overview of Rare Earth Alloy Production

Source: Great Western Minerals.

It should be mentioned before one gets too excited, that manufacturing

revenues amounted to a modest C$12m in 2009, but potential margins are very

high, particularly with their own feed from Steenkampskraal in South Africa.

The rare earth alloy business is evolving, with the industry moving towards strip

cast alloys for the magnet industry becoming the new preferred quality. Great

Western proposes to build two strip cast furnaces to meet this demand. The

company has been in discussions with potential customers and two of them

could consume the entire output of both furnaces. Coupled with production

from Steenkampskraal, the first furnace could have first saleable product in June

2011.

The company has an option to acquire the former operating Steenkampskraal

rare earth mine in South Africa where a New Order Mining Right has just been

issued and continues to explore the advanced Hoidas Lake rare earth prospect in

Saskatchewan, Canada. It also has two other less advanced rare earth prospects

in Canada, Douglas River in Saskatchewan and Benjamin River in New Brunswick

and a 25% share in the Deep Sands heavy mineral sands project in Utah, USA.

At Steenkampskraal, an underground in-situ resource of 117,550 tonnes (t) of

monazite grading 16.74% of rare earth oxides (REO), a broken underground

resource of 47,000 t grading 5% REOs, while a surface resource of 85,000t

grading 8.29% REOs remains from past mining operations. Steenkampskraal was

originally a thorium mine, and retains its licence to store that material. The

company intends to mix thorium with concrete for storage, but recognise if the

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thorium market ever returns, the Indians are quite keen developers of thorium

for nuclear power, this thorium concrete can be acid leached for thorium

recovery.

Preliminary Cash Flow Projections (1)

– Mining Plus Downstream Revenue

Year 2012 2013 2014 2015 2016

Revenue (C$) 78,739,725 120,951,441 122,158,630 121,003,187 121,014,224

Cost of Sales 58,094,720 87,993,453 88,630,217 88,040,854 88,054,064

EBITDA 20,645,005 32,957,989 33,528,413 32,962,333 32,960,160

Note 1 – Assumptions:

1 Based on historical data and in-house engineering and economic assumptions

2 Converted from SA Rand-exchange rate projections

3 Escalation for certain op costs, no pricing escalation

4 Consolidated from Chloride Production, Separation, Metal Making and Alloying stages

5 Assumes using all Nd, Pr, Sm and Dy from Steenkampskraal, Partial La and Y.

Source: Great Western Minerals.

The company estimates that Steenkampskraal could be re-opened at a cost of

US$30m, and could supply 100% of GWTI and LCM rare earth element needs for

10 years. Like many rare earth projects, the proposed process flow sheet is

complicated, although as the mine successfully operated during the 1960s and

1970s the metallurgy is well understood. After crushing and grinding, the

monazite ore is gravity and magnetically separated from the gangue. It is then

floated to separate a copper silver concentrate, while the resulting monazite

concentrate is subject to digestion and leaching. A fertiliser tri-sodium

phosphate is separated in a solid-liquid separator, while rare earth hydroxides

are selectively dissolved in hydrochloric acid. The thorium hydroxide residue is

transported for safe storage, while the 45% Total Rare Earth Oxide (TREO)

concentrate is then subjected to solvent extraction. From this rare earth

carbonates are precipitated, they are calcined to produce rare earth oxides

which are then subject to electrolysis or metallothermic reduction to produce

rare earth metals or alloys.

GWML have already outlined National Instrument (NI) 43-101 compliant

measured and indicated resource of 2.5 million tonnes grading 2.075% Total

Rare Earth Elements (TREE) or 2.43% Total Rare Earth Oxides (TREO) at Hoidas

Lake. The level of neodymium at 0.42% is particularly encouraging. The company

intends to conclude its metallurgical and transportation tests with a pre-

feasibility study by late 2010, and a full bankable feasibility study completed by

2011. Production is slated for 2014.

At Deep Sands in Utah, USA the company has a target resource of 500 Mt

grading 0.25% rare earth oxides. This monazite deposit has a significant yttrium

and other heavy rare earth element content, so high potential in-situ values may

make up for the low overall grade.

Great Western Minerals is currently capitalised at just under £30m, with C$5m

of cash, and has a widely spread shareholder base. They have a unique

integration strategy with the hope of re-opening Steenkampskraal to supply

their manufacturing operations with raw material. The company forecasts that

the value added from manufacturing could be considerable, while Hoidas Lake

remains a prospective rare earth target. Due to the mix between exploration

and manufacturing, the company appears to be undervalued by the Canadian

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market. Vertical integration in the rare earths industry appears to be a virtue

rather than a problem, they deserve support.

Greenland Minerals and Energy (GGG-ASX)

Greenland, who have just raised A$21m in an equity placing is exploring the

Ilimaussaq intrusive complex, where they have defined at Kvanefjeld in

Greenland, at a cut off of 0.015% U3O8, a Joint Ore Reserves Committee (JORC)

compliant indicated and inferred resource of 457.0 million tonnes grading

0.028% U3O8 (0.62lb per tonne (lb/t)), 1.07% total rare earth elements

(including yttrium) and 0.22% zinc. Kvanefjeld is 7 kilometers from tidewater

with deep water North Atlantic Ocean fjords.

The company is currently undertaking a pre-feasibility study, with particular

emphasis on metallurgical testing. Alkaline pressure leach is being investigated

for uranium recovery, and the company hopes to build a pilot plant by mid 2012.

First production could occur in 2015. The company forecasts nominal production

of 43,700 t of rare earth oxides and 3,895 t (8.6 Mlb) of U3O8 per annum,

following a capital spend of US$2.31bn. Unit costs were estimated at US$29.6

per pound of U3O8 and $5.75 per Rare Earth Oxide (REO) kilogram. Using a REO

price range of $13/kg and $80/lb for U3O8, an Internal Rate of Return (IRR) of

24% was estimated.

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Source: Greenland Minerals and Energy.

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Kvanefjeld – Multi-Element Ore

Source: Greenland Minerals and Energy.

As well as metallurgical issues and a relatively low internal rate of return, the

company faces a major issue in that uranium production is not currently

permitted in Greenland. “Greenland Minerals and Energy Ltd are aware of and

respect the Greenlandic government’s stance on uranium exploration and

development in Greenland, which is currently a zero tolerance approach to the

exploration and exploitation of uranium. Any potential change toward the

current stance of zero tolerance is not expected until after the public consultation

and review process is concluded in the coming months. The company is currently

advancing the Kvanefjeld Project, recognised as the world’s largest undeveloped

JORC compliant resource of rare earth oxides (REO), in a multi-element deposit

that is inclusive of uranium and zinc. Greenland Minerals will continue to

advance this world class project in a manner that is in accord with both

Greenlandic Government and local community expectations, and looks forward

to being part of the community discussion on the social and economic benefits

associated with the development of the Kvanefjeld Project.”

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Process Flow Sheet – Base Case Scenario

Source: Greenland Minerals and Energy

Greenland is capitalised at about £60m (A$105m), and at the end of December

2009 had A$7.6m of cash. The recent placing raised $6m initially with $15m in

place as an equity facility with YA Global Investment (Yorkville). Two private

companies Quayside and Westrip hold 15.5% and 10.3% of the outstanding

shares respectively. Kvanefjeld is undoubtedly a very large potential rare earth

and uranium deposit, however rare earth grades are low and the metallurgical

characteristics look difficult. In addition the uranium issue has yet to be

resolved; uranium remains important for the economic viability of this project.

Hudson Resources (HUD-TSX-V)

Hudson is developing the 100% owned early stage Sarfartoq rare earth

carbonatite project in Greenland. It is also exploring the nearby Garnet Lake

diamond project, but the company points out that the potential in-situ value of

rare earths is up to ten times that of diamonds. Hudson claims an advantage

over Kvanefjeld in that uranium levels are very low at Sarfartoq.

2009 drilling highlighted 50.25m grading 2.189% total rare earth oxides (TREO),

with neodymium oxide and praseodymium oxide averaging over 25% of the

TREO’s.

With regard to location, Hudson point out that access to open water shipping is

critical given that reagents comprise 40% of mining costs, while power

comprises 30% of mining costs. Fortunately for Hudson, Alcoa is planning to

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build an aluminium smelter with a 600MW hydroelectric power plant located

within kilometres of the project. Deep water access is located within 20km.

The company has a lot of exploration and evaluation work to undertake on this

project, a new drill programme has just commenced, funded by a $5m recently

concluded placement.

The company is capitalised at around £20m (C$32m), with $2.2m of cash and

has Teck Corp (TCKB-TSX) as the largest shareholder with an 8.22% holding.

Although early stage, Sarfartoq looks an interesting prospect.

Kirrin Resources (KYM-TSX)

Kirrin is accumulating a portfolio of early stage uranium and rare earth element

projects in Canada. So far interesting grab samples and limited drill results have

been recorded at their Alexis River in Labrador and Lost Pond property in

Newfoundland. They are earning 50% of Last Pond and 60% of Alexis River.

Kirrin is capitalised at less than £1m (C$1m) and will need to raise funds to

pursue its exploration plans.

Matamec Explorations (MAT-TSX-V)

Matamec has a number of exploration projects in Ontario and Quebec. It has

had recent success at its Kipawa rare earth project in Quebec. Kipawa

mineralogy appears complicated, but 2.57m grading 2.22% zirconium dioxide,

0.356% light rare earths oxides (lanthanum to neodymium), 0.037% medium

rare earth oxides (samarium to gadolinium), 0.121% heavy rare earths (terbium

to lutetium), and 0.242% yttrium oxide are worthy of note.

Kipawa Deposit Mineralogy

Source: Matamec Exploration.

The company has recently released a maiden National Instrument (NI) 43-101

resource for Kipawa. Reflecting the complex mineralogy the company has set

this out under two scenarios Scenario 1 is presented as a Total Rare Earth Oxides

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(TREO) resource with Zirconium Dioxide (ZrO2) by products. Scenario 2 is

presented as a Zirconium Dioxide resource with by product TREOs.

Source: Matamec Explorations

Matamec is capitalised at around £7.5m (C$11m) with C$1.2m of cash at the end

of December 2009. They will have to raise funds to pursue their exploration

plans.

Metallica Minerals (MLM-ASX)

Metallica is getting very excited about their Lucknow nickel cobalt and scandium

prospect at the former Greenville nickel mine in Queensland, Australia. This

project is sometimes called NORNICO.

The company claims this has the potential to make the company the world’s

largest supplier of scandium.

Metallica are initially planning to produce scandium oxide (Sc2O3 - so called

scandia), which sells for US$1,400 per kilogramme, but are also evaluating the

production of value added scandium aluminium master alloy and scandia

stabilised zirconia, used in solid oxide fuel cells.

Drilling at Lucknow has outing drill grades of plus 200 grammes per tonne (g/t)

scandium, the best result being 27m from surface grading 882 g/t scandium,

including 9m @ 1,417g/t scandium.

Metallurgical test work has shown that in addition to high nickel and cobalt

extractions, high extractions of scandium, (around 90%) can also be achieved

through the proposed heated Atmospheric Acid Leach (AAL) nickel-cobalt

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processing plant which will be located at the Greenvale mine site. There is

excellent potential to produce scandium oxide as a valuable by product from this

Ni-Co & Sc recovery process.

Grants Gully Cross Section

Source: Metallica Minerals.

Metallica is capitalised at around £16m (A$29m), with $8.8m of cash. They have

a large portfolio of Australian assets, which as well as NORNICO includes 56% of

Metro Coal (MTE-ASX), a Surat basin thermal coal and underground coal

gasification project, 33% of Cape Alumina (CBX-ASX) (close to Rio Tinto’s (RIO)

Weipa bauxite mine), 76% of Planet Metals (PMQ-ASX), which hold 85% of the

Wolfram Camp, tungsten-molybdenum project, and 100% of the Mt Cannindah

copper gold porphyry.

In early August 2010, their stakes in MTE, CBX and PMQ were worth about

A$40m, which suggests they are worthy of interest, particularly as NORNICO is

potentially very valuable.

Neo Material Technologies (NEM-TSX)

Neo Material Technologies is a producer, processor and developer of

neodymium-iron-boron magnetic powders, rare earth, and zirconium based

engineered materials and applications, and other high value niche metals and

their compounds through its Magnequench and Performance Materials business

divisions.

Magnequench’s Neo powders are used to produce bonded magnets generally

used in micro motors, precision motors, sensors and other applications requiring

high levels of magnetic strength, flexibility, small size and reduced weight. The

company believes it is the world’s number one producer with a 15-20% market

share.

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Rare earth and zirconium applications include catalytic converters, computers,

television display panels, optical lenses, mobile phones and electronic chips.

Gallium metal, nitrate tri-chloride and oxide sales from the newly acquired

Recapture Metals are primarily used in the wireless, Light Emitting Diode (LED),

flat panel, solar and catalyst industries. The company believes that it is a strong

number 2 in these various markets with a 10-15% market share.

Approximately 50% of sales are achieved in China, with 23% in Japan. North

America and Europe lag and represent 8% each of sales. Customers include

Daido, Ohara Optical (5218 JP), Epson (6724 JP), Canon (7751 JP), BASF (BAS

GR), Murata Manufacturing (6981 JP), Philips (PHIA NA), Panasonic (6752 JP),

Samsung (005930 KS) and Hitachi (6501 JP).

The company announced, in April 2009, an agreement with Peruvian tin miner

Minsur (MINSURI1 PE), to investigate the potential to produce a Heavy Rare

Earth Element (HREE) concentrate from the tailings and from newly mined

material from Minsur’s Pitinga tin and niobium-tantalum ferro alloy mine in

Brazil. The company has been quiet on progress at Pitinga, but brokers Fraser

Mackenzie forecast that Pitinga will likely go commercial by the end of 2011. It is

not immediately clear who will process the HREE concentrates.

Recently released Q1 results to end March 2010 are encouraging, revenues

increased 126% to US$65.1m, while EBITDA of $19m, net income of $12.8m and

earnings per share of $0.11 per share compares to a Q1 2009 negative EBITDA of

-$1.3m, a net loss of -$3.1m and loss per share of -$0.03. Cash provided by

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operations in the quarter was $5.7m. During a traditionally slow first quarter

both divisions enjoyed robust demand for their products.

The company has recently announced a technology tie up with Molycorp (MCP-

NYSE). Both have probably noted that integration from mining, through

processing, to final product manufacture is the key to making superior returns in

the Rare Earth Element space.

Molycorp has the Mountain Pass potential rare earths mine in California, but

lost the manufacturing connections during closure in the 1990’s. Neo was

formed as those manufacturing operations were sold off by the Chinese, and has

grown by acquisition since. It has been searching for non-Chinese rare earth

supplies to become more integrated for some time and has been investigating

the re-processing of waste material from Minsur’s (MINSURI1 PE) Pitinga tin

mine in Brazil, but progress on this front has been quiet of late.

Bloomberg consensus forecasts for the full year amount to C$0.41 per share and

trade at 12.6 times that forecast. This appears undemanding, Bloomberg 2011

forecasts suggest a further rise in earnings to 47 cents. Pala Investments hold

19.7% and they usually know a thing or two. Neo are capitalised at around

£300m (C$480m) and had US$67.1m of cash at the end of the first quarter.

Peak Resources (PEK-ASX)

Source: Peak Resources.

Peak have a number of gold exploration projects in Australia and Tanzania and

are farming into the private company Zari Exploration’s Ngualla rare earth

project in Tanzania.

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At Ngualla three test pits have confirmed consistent concentration of

mineralisation with grades up to 16.42% phosphate, 0.69% lanthanum, 0.33%

niobium, 0.48% neodymium, 0.14% praseodymium, 0.63% cerium, 0.03%

yttrium 306ppm, 1.79% titanium, and 0.007% tantalum in an unconsolidated

alluvial deposit.

The alluvial potentially could be quite large, the company has an initial target of

2.5 kilometres (km) by 1.5km to a depth of 10m (over 100 Million tonnes), with a

further 1.5 km by 0.8 km target to a depth of 7m.

Peak can earn 80% of the equity in this project upon sole production of a

Bankable Feasibility Study (BFS). Peak has committed A$1.9 m to produce a

JORC compliant resource estimate by November 2010 and a scoping study on

the alluvium by April 2011.

Peak is capitalised at around £6m (A$11m), with A$3.7m of cash.

Pele Mountain Resources (GEM-TSX-V)

Pele Mountain is developing its 100% owned Eco Ridge uranium mine near Elliot

Lake in Northern Ontario, Canada. Elliott Lake is a former uranium mining area,

with mines operated by Denison Mines (DML-TSX) and Rio Tinto (RIO).

A National Instrument (NI) 43-101 compliant indicated and inferred resource of

42.5 million pounds of U3O8 has been outlined. In 2008, Pele commenced the

permitting process by filing a Project Description with the Canadian Nuclear

Safety Commission and the Federal Government’s Major Project Management

Office.

Drilling has also confirmed the presence of low grade Rare Earth Elements (REE),

occurring as rare earth oxides in conjunction with uranium oxide (U3O8) in the

Main Conglomerate Bed at Eco Ridge. To date, all 30 drill intersections that

have been analysed for REE, have contained REE, although grades of no more

than 0.32% REO’s suggest that the economics of uranium will prove more

significant.

Although yttrium and heavy REE comprise a minority of the deposit’s overall

rare earth content, these minerals have far greater economic value than the

light REE and have demonstrated good recoverability. Preliminary leach testing

at SGS Canada Inc. indicates potential recoveries of approximately 64% of

combined yttrium and heavy REE. The Elliot Lake mining camp was a global

producer of yttrium during the 1980s as a by-product of uranium production.

Pele Mountain has a number of other gold and nickel exploration projects in

Ontario, and are capitalised at around £7m (C$11m). On 11th January 2010, they

had C$2m of cash.

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Quantum Rare Earth Developments (QRE-TSX-V)

Quantum Rare Earth Developments are exploring a number of early stage rare

earth projects. At Archie Lake in Saskatchewan, Canada, the company is

exploring a monazite occurrence, where numerous grab samples have shown

very high rare earth anomalies. The company is also exploring the Jungle Well

and Laverton projects within 150 kilometers of Lynas’ Mount Weld project in

Western Australia, and has recently acquired the Elk Creek carbonatite in

Nebraska, USA.

Quantum has a market capitalisation of around £4m (C$6m), and presumably

will be looking for cash to advance their early stage projects. Cliffs Natural

Resources (CLF-NYSE) have inherited a 10.24% shareholding following their

acquisition of Freewest Resources.

Quest Rare Minerals (QRM-TSX-V)

Quest Rare Minerals which has just changed its name from Quest Uranium has

two rare earth exploration projects, Misery Lake and Strange Lake both on the

border of Quebec and Labrador in Canada. They retain their Plaster Rock

uranium project in New Brunswick, Canada.

Quest was the best performing TSX Venture Exchange stock in 2009 with a

5,530% increase in share price.

Strange Lake located 125 kilometres (km) west of Vale’s (VALE5 BZ) Voisey’s Bay

nickel copper cobalt mine. It has a historical pre-National Instrument (NI) 43-101

resource of 52 million tonnes grading 3.25% zirconium dioxide (ZrO2), 0.66%

yttrium oxide (Y2O3), 0.56% niobium oxide (Nb2O3) and 1.3% total rare earth

oxides (TREO). The company has recently outlined a maiden compliant inferred

resource of 115,000 t grading 1% TREO, 1.973% zirconium dioxide, 0.208%

niobium pentoxide (Nb2O5), 0.053% hafnium dioxide (HfO2) and 0.082%

beryllium oxide (BeO).

Source: Quest Rare Minerals

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Misery Lake is at an earlier stage of exploration, but encouraging grab samples

grading up to 8.56% TREO plus yttrium, 42.4% iron, 7.12% phosphorus pentoxide

(P2O5), 4.85% titanium dioxide (TiO2), 3.05% zirconium dioxide and 2.72%

niobium pentoxide have been recorded. The target is associated with a 6 km

diameter magnetic anomaly.

Quest is capitalised at around £75m (C$120m) and at 15th April 2010 had cash of

C$5.1m. With relatively low rare earth grades, remote location and complicated

metallurgy this appears high.

Rare Earth Metals (RA-TSX-V)

Rare Earth Metals is developing their 100% owned Clay Howells carbonatite

exploration project near Timmins in Ontario, Canada. Recent drill results include

76.6 m grading 0.69% TREO, 0.12% Nb2O3 and 47.2% magnetite (Fe2O3). The

light rare earth component appears to be large with 92-94% LREE in the total

rare earths.

The company has a number of other rare earth exploration projects, Red Wine

in Labrador, and the Lackner project in Ontario.

They are capitalised at around £10m (C$15m), with C$9.6m of cash. This appears

reasonable particularly as magnetite may carry the day.

Rare Element Resources (RES-TSX-V)

Rare Element Resources is developing the Bear Lodge project in Wyoming USA,

which the company believes has similarities to Mountain Pass in California.

Newmont Mining (NEM-NYSE) is earning a 65% joint venture interest in the

Sundance gold venture, but Rare Element controls 100% of the rare earths

occurrences. Bear Lodge is an alkaline igneous complex, with the rare earth’s

contained in ancylite and bastnäsite in veins and dykes. The company is hoping

to outline a National Instrument (NI) 43-101 compliant resource by mid 2010.

The company has just announced a National Instrument (NI) 43-101 inferred

resource of 4.0 million tonnes grading 6.65% Rare Earth Oxides (REOs) using a

4% REO cut off grade. The company calculates the resource to a wide range of

cut off from 1% up to 5%, but gives a REO breakdown only at 1.5%, in this base

case scenario. At this cut off cerium oxide represents 47.1% of the REOs,

lanthanum oxide 31.2%, neodymium oxide 11.9%, praseodymium oxide 4%,

samarium oxide 2.3%, gadolinium oxide 1.2% and the rest 2.3%.

They are capitalised at around £65m (US$90m) with US$5m of cash. Considering

the projects are early stage, with a high proportion of Light Rare Earth Elements

(LREE) they appear expensive.

Stans Energy (RUU-TSX-V)

Stans Energy has a number of rare earths and uranium projects in the central

Asian state of Kyrgyzstan. They are looking to re-establish production at its 100%

owned Kutessay II rare earths mine and plant in Kyrgyzstan. Kutessay produced

80% of the rare earth elements for the former Soviet Union for 30 years. The

mine has a historic, non National Instrument (NI) 43-101 compliant Russian

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reserve estimate of 63.3 tonnes of rare earths, with a 50:50 split between lights

and heavies. The deposit also contains thorium, silver, molybdenum, lead, zinc,

tantalum, niobium, hafnium and bismuth, but benefits from known metallurgy,

120 Rare Earth Element products have been produced from Kutessay

concentrate including oxides, metals and alloys. Historical Rare Earth Element

recovery rates of 65% were recorded in Soviet times.

Stans Energy’s properties in Kyrgyzstan

Source: Stans Energy.

Source: Stans Energy.

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Kutessay II Rees by Value USD

Source: Stans Energy.

Stans Energy owns an exclusive option to purchase the Kyrgyz Chemical-

Metallurgical Plant (KCMP). KCMP was designed to separate rare earth elements

from Kutessay II concentrates, and produced oxides, metals and alloys grading

up to 99.99% pure. KCMP has been under care and maintenance since 1990, but

almost all equipment remains on site.

Stans Energy are currently calculating a Joint Ore Reserves Committee compliant

resource estimate for Kutessay II, and analysing the potential for reopening

KCMP. The company is due to report on progress by Q3 2010, when it hopes to

proceed with a pre-feasibility study.

Stans Energy is capitalised at around £18m (C$29m) and have just raised C$1.5m

in a share placement. The concept is interesting, but one has to question how

much of a processing plant mothballed in 1990, will be useable. Recent political

turmoil in Kyrgyzstan won’t help.

Tasman Metals (TSM-TSX-V)

Tasman is in the process of building up a portfolio of Rare Earth Element

exploration projects in Scandinavia.

Norra Kärr in Sweden is their most advanced project and benefits from past

exploration activity. A northern trench in nepheline syenite assayed 244m

grading 1.9% zirconium dioxide (ZrO2) plus 0.37% TREOs, while a southern

trench assayed 149m grading 1.5% ZrO2 and 0.43% TREOs and 52m @ 1.47%

ZrO2 and 0.54% TREOs. The company point out that these trenches were never

assayed for 6 of the 9 higher value Heavy Rare Earth Elements (HREE), while

subsequent grab samples showed elevated HREE values.

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Source: Tasman Metals.

Recent drilling from Norra Kärr has confirmed the encouraging trench data.

108.1m from 43.4m grading 0.74% TREO and 2.1% ZrO2 was pulled from one

hole, while 149.2m from 2.5m grading 0.61% TREOs and 1.7% ZrO2 was pulled

from a second. The company believes that the high proportion of HREO (49% of

TREOs), including 278 parts per million (ppm) of Dysprosium oxide (Dy2O3) is

significant. The company also believes that the low content of radioactive metals

(averaging only 15ppm uranium and 10 ppm thorium) will simplify future

permitting, processing and mining options.

Tasman is capitalised at around £22m (C$36m), and have just raised C$3m of

equity in a placement. Rare earth grades don’t appear particularly special, while

the metallurgy doesn’t look straightforward.

Ucore Rare Metals (UCU-TSX-V)

Ucore Rare Metals, formerly Ucore Uranium, is exploring a historical non-

National Instrument (NI) 43-101 compliant resource of 374 million pounds

(170,000 tonnes) of rare earths, 11 Mlbs of uranium, 96 Mlbs of niobium at their

huge 100% controlled Bokan Mountain project in Alaska. The deposit also has

significant beryllium, zirconium and thorium mineralisation.

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Source: Ucore Rare Metals.

Ucore – Bokan – I&L 2.5 m Drill Interval – REE $/t

Source: Ucore Rare Metals.

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Recognising its strategic importance, the Alaska State House of Representatives

has unanimously passed a resolution in favour of expedited permitting and

production of heavy rare earth resources at the Bokan Mountain project in

southeast Alaska. Resolution 16 – Mining-Processing of Rare Earth Elements

recommends the continued exploration of rare earth deposits in Alaska and,

more specifically, the issuance of permits, as promptly as allowed by law, for

extraction, processing and production of rare earth materials on the Bokan

Mountain properties.

Bokan Mountain was a previous producer with significant remaining

infrastructure. Recent drilling has been encouraging with up to 95% HREOs and

up to 1.13lbs/ton Terbium Oxide (Tb2O3 and 7.69 lbs/t Dysprosium Oxide

(Dy2O3). The company intends to drill at least 3,000m in 2010 with a view of

declaring a National Instrument (NI) 43-101 compliant inferred resource.

Ucore has a market capitalisation of around £19m (C$28m), and have about

C$2m of cash. Bokan appears to be an interesting project, and may benefit from

considerable Alaskan state support.

Dong Pao

In 2009, the Japanese trading companies Toyota Tsusho Corp (8015 JP) and

Sojitz Corp (2768 JP), and a Vietnamese government-run resource development

company, launched a joint venture to start developing a major earth mineral site

at Dong Pao, about 280km northwest of Hanoi in Vietnam.

The joint venture will begin commercial mining operations as early as 2011,

supplying about 5,000 tonnes of the minerals, or about a quarter of Japan's

annual consumption, for about 20 years.

A study by the Japan International Cooperation Agency and the Metal Mining

Agency of Japan dated March 2001 indicated that reserves of the F3 orebody at

Dong Pau amounted to 890,000 tonnes grading 12% rare earth oxides.

Bastnäsite, being the main ore mineral, is apparently enriched in light rare earth

elements, while there are suggestions that thorium levels are quite high. It is not

clear whether the presence of the potential environmental contaminant arsenic

is an issue, the Governmental report also reports processing issues arising from

the weathered nature of the bastnäsite.

Frontier Minerals Limited

Private company, Frontier Minerals, is developing their Zandkopsdrift rare earth

carbonatite in South Africa, where estimated resources of 31.5 million tonnes

grading 3.6% REOs have been outlined. It is not clear to which standard these

resources are reported.

Montero Mining

Montero Mining is a private Vancouver company with listing aspirations. They

are exploring the Wigu Hill project in Tanzania. Wigu Hill is a prominent 3

Unlisted Companies

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kilometres (km) by 6 km carbonatite intrusion, where historical rare earth oxide

grades of 10% with associated uranium and phosphate concentrations have

been reported. Montero is required to spend US$3.5m by November 2012 to

earn a 60% interest, with an option to purchase or earn an additional 10% for

$2m once it has earned in.

In 2009 they mapped the property, carried out scintillometer surveys and

extensively sampled the carbonatite dykes. The company is looking to raise

C$6m in a pre-IPO placement in order to advance the project. They feel they can

get to a National Instrument (NI) 43-101 compliant resource of 1 million tonnes

grading 10% rare earths pretty quickly, at which point they will able to list in

Vancouver.

Montero appears to be an interesting situation; it is always useful to start off

with high grades. They have yet to undertake any metallurgical tests, and their

95% exposure to light rare earths might be a disadvantage.

Spectrum Mining

Spectrum is a private company that has recently reported drilling on their

Wicheeda rare earths project in British Colombia, Canada. 48.64 metres (m)

averaging 3.55% Rare Earth Elements (REE), 72m grading 2.92% REE and 144m

grading 2.20%. As can be seen a staking rush has followed this announcement,

with a number of parties including Commerce Resources (CCE-TSX-V) getting in

on the act.

Source: Commerce Resources.

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Sector Research – Rare Earths Review

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