Investors line up North American rare earth juniors
More wind turbines need more rare earths
Canadian exploration companies are targeting scores of rare earth projects in the country and around the world and with help from the federal government are making a concerted effort to loosen China's grip on the industry.
At the moment China produces some 90% of the world's rare earths, but the country's REE industry is beset by problems including illegal mining, smuggling due to export quotas, environmental devastation and a lack of global competitiveness as a result of weak research and development.
The Canadian REE industry players has ambitious goals to secure 20% of global supply by 2018 and lead research and development in the field.
Annual demand for REEs, used in a variety of industries including renewable energy, medical and defense systems and consumer electronics, are expected to be in the region of 200,000 this year, up from 130,000 tonnes in 2010.
China is also the number one consumer of rare earths behind Japan. China export quotas for last year was 98,000 tonnes, which means the supply shortfall is relatively small, particularly considering the capacity of current producers outside China.
Molycorp (NYSE:MCP) with its Mountain Pass mine in California is targeting production of 20,000 tonnes per year in 2014 of mostly light, less valuable REEs. Lynas (ASX:LYC) which mines in Australia and processes in Malaysia hopes to achieve annual run rate of 11,000 tonnes per year by June this year of light and heavy REEs.
On Tuesday another bout of investors interest raised the stock value of the juniors in the space, although the producers in the group, Molycorp and Lynas did not join in the rally and is even or down so far this year.
The share prices of the dozens of North American juniors in the sector are particularly volatile as are the prices of the 17 elements.
Avalon Rare Metals (TSE:AVL) was the leader of the pack on Tuesday, gaining 14% in heavy volumes and adding to a 25% spike in value since the start of the year. There was no fresh news concerning the Toronto-based company or its flagship Nechalacho project in Canada's Northwest Territories, but Avalon like other heavy REE explorers have been boosted by a recovery, albeit modest, in the price of some heavy REEs which fell to multi-year lows in June last year.
Nechalacho, which could be first past the post for the title of Canada's first rare earth mine, located some 100 kilometres southeast of Yellowknife, is a potential $1.6 billion project.
Other heavy rare earth explorers and mine developers have also seen keen investor interest. Little-traded Rare Element Resources (TSE:REE) raced ahead 6.4% – the $82 million company is advancing a project in Wyoming.
Quest Rare Minerals (TSX:QRM) added 5.7% and is now worth $37.7 million on the Toronto big board. The Montreal-based explorer's pre-feasibility study for its rare earth project in Quebec calls for a $2.7 billion mine and process plant to be up and running by 2018.
Saskatoon-based Great Western Minerals (CVE:GWG), which is recommissioning the Steenkampskraal mine in South Africa with Chinese backing, did not move on Tuesday, but the $41 million company is up more than 42% in 2014.
Canada's Frontier Rare Earths (TSE:FRO) which has teamed up with Korea Resources Corp for a separation plant in South Africa where it owns the Zondkopsdrift project, gained 2.7%. The company based in Luxembourg is worth $33.6 million on the TSX.
Micro-cap Pele Mountain Resources Inc. (CVE:GEM) last year upped the resource estimate for its uranium and rare earth Eco Ridge project in central Ontario near Elliot Lake. Toronto-based Pele Mountain's shares was static on Tuesday, but the counter is up a whopping 77.8% this year.
Ucore Rare Metals jumped 4.4% affording the company a $61.7 million market valuation. Halifax-based Ucore's is advancing the Bokan Mountain project in Alaska and last week announced the US state's industrial development authority may put up as much as $145 million in bond financing for the project on Prince of Wales Island at the southernmost tip of the Alaska panhandle.
Commerce Resources (CVE:CCE), advancing a tantalum-niobium project in BC and a rare earth project in Quebec was a loser on the day, but the Vancouver-based explorer has more than doubled in value this year and is now worth $32.6 million on the venture exchange.
Other notable players Tasman Metals (NYSE:MKT:TAS), Matamec Explorations Inc.(CVE:MAT) and Texas Rare Earth Resources (OTCMKTS:TRER) all retreated on Tuesday, but are showing good gains year-to-date.
Image of Ocotillo Express Wind Project in California by slworking2