We sat down with Luisa Moreno, Managing Partner and Analyst with Tahuti Global, to discuss Rare Earth Elements (REE), and the impact of the US-China trade war and COVID-19 on the current market.
LUISA MORENO is managing partner and analyst with Toronto-based Tahuti Global. She covers industry metals with a major focus on technology and energy metal companies. She has been a guest speaker on television and at international conferences. Moreno has published reports on rare earths and other critical metals and has been quoted in newspapers and industry blogs. She holds a bachelor’s degree and a master’s degree in physics engineering, as well as a Ph.D. in materials and mechanics from Imperial College, London.
Luisa, great to have you in The Assay. Let’s start by talking about Rare Earth Elements in the current political landscape. Are you seeing increased interest in REE due to the US-China trade war?
Yes, market participants and governments around the world are paying close attention to the US-China trading relations. Some media analysts believe that if the relationship between the two economic powers goes sour, then China may restrict rare earth exports to the US, or not allow rare earth concentrates from Mountain Pass to enter China for processing.
Is this the case even with the Phase One Deal in place?
The relationship between the US and China seems to be very volatile, recently aggravated by the rhetoric about the origins of COVID-19 virus. But the election results in the US this year will have a tremendous effect on future relations between China and the US. If the current administration stays for another term, a final trading deal may take time, and fears surrounding the steady Chinese supply of rare earths and other critical materials to the US may intensify.
Does it seem likely that China would use rare earth dominance in the trade war?
It’s believed that President Xi Jinping visited a rare earths magnet manufacturer, right after the US announced sanctions against Huawei. However, I’m not sure if Chinese officials have formally or openly stated that they would use rare earths restrictions against the US or any other country that they feel are economically or politically hostile to them. That said, things could change if the relationship between the US and China continues to deteriorate because of COVID-19.
In light of the COVID-19 virus and the negative downturn in the US China relationship, where are some of the new REE opportunities for investment?
Back in 2010, over 400 rare earths occurrences were identified, but only about 50 projects actually received any sizeable investment, and many were found to be extremely complex from a metallurgical perspective. It seems that mining companies have been focusing on the projects in Africa, Latin America, and the US, that did not receive as much attention in 2010. Hopefully these projects have less complex mineralogy and metallurgy.
Some of the new companies that come to mind are Pensana Metals (ASX: PM8) with the Longonjo project in Angola, and Oro Verde (in joint venture with Ionic Rare Earths (ASX: IXR)) with the Makuutu project in Uganda. However, I don’t know if their metallurgical process is less complex than other more developed projects.
Based on what you’ve seen, do you believe that countries such as the US, Japan, Australia, and Canada can be successful in developing their own REE industries (including processing plants)?
Yes, absolutely. If governments decide to actually support REE projects and commit financial resources over an extended period of time, anything is possible.
What are some of the main barriers those countries face in diversifying away from China-centered supply chains?
The first hurdle is to be able to develop an economic mining project capable of producing a mixed rare earths carbonate concentrate that can be processed further. Unfortunately, many companies are not even able to achieve this initial step economically. If a concentrate is produced but it’s not economical to separate it locally, the next obvious stage is to invest in the development or improvement of separation technologies. It’s important for governments to focus on one or two projects instead of multiple projects with completely different minerology and processes. In the end, governments would have the difficult task of deciding on the “winner”, but it has been done in other industries. R&D funding would also be needed for REE metal and alloy fabrication.
The last time we spoke, you were interested in the prospects for Tantalum. Is this still the case?
Yes, it is. Tantalum is mostly mined in Africa (>80 percent), particularly in the DRC and the neighboring countries of the Great Lakes Region, but is processed mostly in China, with some plants also in the US and Europe. End-users welcome a more diversified mining supply of tantalum. The 2017/2018 increase in lithium prices led to an increase in financing for hardrock lithium deposits in Australia and Canada that could become suppliers of tantalum as a by-product of lithium production. The Wodgina mine in Australia, one of the largest suppliers of tantalum in the past, was being re-developed by Mineral Resources Ltd (ASX: MIN) in a JV with Albamarle Corporation (NYSE: ALB) (60 percent), but the project was mothballed in 2019 in the hope that lithium prices and demand will improve. Unless spodumene and lithium prices stay comfortably above historical levels (> USD 350 spodumene and >USD 6,500 lithium carbonate), tantalum supply from hard-rock lithium mines may be limited.
What’s your take on these metals at the present time:
a. Niobium
Niobium continues to be one of the most critical materials for some developed nations because it is geographically concentrated. Most of the niobium is produced in Brazil (80 percent) and Canada (10 percent). One single mine in Brazil, the Araxá mine, accounts for about 65 percent of the world production.
Most of the world’s niobium is used to make ferroniobium, an alloy that is essential for the production of automobile steel. There are enough resources of niobium in Brazil so there’s no shortage of it, but it’s highly concentrated in oneregion and any disruptions at the Araxá mine would have a significant negative impact on the world production of steel and the automotive industry.
b. Scandium
Scandium is usually associated with lanthanides (rare earths). Scandium carries a high price (it can vary from USD 1,500 per kilo to more than USD 10,000 per kilo) and is very volatile. Scandium projects are also complex to develop as the metal is usually found in small concentrations and is expensive to process. The main application for scandium is as an alloy, particularly as an aluminum alloy. Scandium enhances the toughness of aluminum, and scandium-aluminum alloys are perfect for ultra-lightweight, highstrength applications such as electric vehicles and aircrafts, as well as professional sports equipment.
The greatest limitations for scandium are low production rates and high prices. If a sizeable supply of scandium became available, it would lead to greater demand and likely lower and more stable prices.
Companies developing scandium projects includeScandium International Mining Corp (TSX: SCY) (Nyngan Scandium project) and ClenTeq (ASX: CLQ) (Syerston Nickel Cobalt Scandium Project).
c. Manganese
Manganese is mostly used for the production of ferromanganese, an alloy that is essential in steel production (it improves steel’s mechanical properties like toughness and strength). However, manganese is also an important material in batteries. It is used in NMC (Lithium-nickelmanganese- cobalt) batteries that are very common in electric vehicles, and there is substantial research on alkaline manganese dioxide rechargeable batteries which suggests they may be an inexpensive battery option for stationary energy storage.
