As the name suggests, Canada Rare Earth Corp (TSX-V:LL). is in the business of providing the world with rare metals, vital in such things as electronics, wind turbines and electric vehicles - in other words, for the green energy revolution.
The industry has huge, global customers but few producing participants - and herein lies the quandary and the opportunity.
Canada Rare Earth aims to establish its own mining, concentrating and refinery capabilities and it is already selling products that could be redirected as feedstock to its own processing/refinery operations. It is also selling oxide products that are the same as would be produced by the refineries. A priority focus is to expand its “trading” activities for increased positive cashflow and in anticipation of its own proprietary property portfolio and value-add processing.
With China’s (80%) dominance in the supply of critical minerals, including rare earths, and today’s geo-political uncertainties, there is a strong global demand pull to regionalize and secure supply chains, Canada Rare Earth is well positioned to address the strong demand for its products and to capture a sizeable amount of the multi-billion dollar market for rare earths which are critically incorporated into the US$7 trillion downstream market.
Canada Rare Earth has a 20% ownership interest and management control in a stockpile in Brazil comprising 70 million metric tons of tailings containing cassiterite (a source of tin), zircon, ilmenite and rare earths. As part of its management control responsibilities, the company is assessing the scale and suite of products to be produced and how best to implement the operations in the most effective and profitable manner. The company is looking to form a mining and processing hub centered on this stockpile and extending its capabilities to process materials from other sources in the region, both proprietary and third party.
Other ongoing, mid- to long-term initiatives include acquiring or developing additional near term production properties and downstream processing capabilities.
Proactive recently sat down with CEO Tracy Moore who explained more about the mechanics of the company.
Proactive: Why is it important to establish rare earth supply chains?
Tracy A. Moore: Rare earths have thousands of interesting and wide reaching applications, some of which are extremely high profile such as electric vehicles, wind turbines, fighter jets, medical equipment, cell phones, computers, etc as well as lessor known applications such as refrigeration, night vision googles and cracking of oil. There are estimates of US$7 trillion of products highly dependent on the continuing, reliable and secure supply of rare earths. Over the course of the past 40 years, Chinese businesses have come to dominant global supply and while the supply may continue, the rest of the world is looking to diversify the supply chain, for basic business reasons – to minimize dependency on a sole supplier. Current geo-political tensions emphasize this point. The rest of the world is hopeful of continuing supply but there is no guarantee. Hence the push to establish alternate supply, whether partial or in entirety. Meanwhile, China is looking to leverage its strong position by capturing more of the downstream market.
Why are you focusing in South America and Southeast Asia?
We have conducted business and studied opportunities in many parts of the world and have gravitated to South America and Southeast Asia for a number of reasons including proximity to natural resources and to our customer base. We are continually approached with new opportunities for additional supply and to form joint ventures for processing. We consciously place most of our attention to business at hand.
What is your aim as a company and what do you bring to the rare earth space?
Our immediate focus is two-fold: generate positive cash flow from sourcing and selling mineral concentrates while we develop and commission the processing system for the tailings. We are also mindful of acquiring and developing properties to add synergies and economies of scale to the immediate focus.
Our plan involves sourcing critical minerals from proprietary and excellent third party sources; adding value through processing; and selling mineral products such as concentrates, intermediates and oxides.
Property ownership is very important to us. With third party supply we will be able to balance capital costs, operating costs, volumes, working capital requirements and assurance of supply. The processing capability can range from fairly simply gravity systems to much more complex rare earth processing.
Rare earths continue to be a mainstay for our business. The mineral trading has allowed us to extend our reach and diversify with poly-metallic properties containing multiple commercially interesting minerals.
Who are your customers currently and what products are you selling?
Currently, we have two primary types of products: mineral concentrates and rare earth oxides. Concentrate customers are based in Asia where the vast majority of processing takes place. We expect this to continue for the foreseeable future until additional refining capability is established, either with Canada Rare Earth’s refineries or by others. We have sold oxides to customers in six different countries.
What is the difference between oxides and concentrates?
A concentrate is generally a sand like mixture that contains rare earths in a mineral form. The rare earth content of a concentrate we deal with is generally between 20% and 97%. The concentrate must be further processed to allow the individual rare earth elements to be extracted and sold in an oxide powder form.
Is there any rare earth processing capability in the US currently?
Yes, there are a number of small operations but most are in development stage. Additionally, there are at least two mining operations with the vast majority of the concentrate materials exported to China.
Can you outline your likely near- to mid-term news flow and your plans for the next year or so?
We have a number of complementary and simultaneous initiatives which will generate news. One of our immediate focuses is on increasing positive cash flow from trading activities. This entails increasing supply volumes from existing suppliers and on-boarding new sources;
We are progressing with action plans for developing and commencing processing operations for the Bom Futuro tailings property in the near term. Our team has studied the commercial mineral content under a variety of scenarios, considered the desired output products (whether a mixed concentrate, individual mineral products, or combinations of minerals). Also, the scale of operation is being finalized which affects the duration of the processing operation. We have team members with directly related experience and we will be adding to the team as we approach commissioning.
We are also looking to increase our proprietary property portfolio; and we are looking at establishing downstream processing capabilities through development, acquisition and joint ventures.
You’re working towards owning your own refinery at some point. What will that mean for the company?
Owning our own refinery will allow us to become one of the few players in the rest of the world that is capable of creating rare earth oxides. This is a significantly unique proposition and in high demand by companies in the rest of the world.
What do you bring to the company as CEO?
My background is corporate finance, strategic and business planning and international business development.
I work very closely with Peter Shearing, Canada Rare Earth’s chief operating officer. Together we developed the company’s vision and goals and together we execute the plans. Peter focuses on operations, systems and technical aspects whereas I work on forging new relationships, financings and reporting. Peter and I have worked in over 25 countries while based in Canada.
What would you say is the scale of the opportunity here for the company?
To answer the question, we need to look at three parts of our business: Trading revenues are a function of sourcing mineral concentrates for a customer base that will accept $20 million to $30 million of product per year, and likely much more. Additionally, we have an oxide product line to generate revenues. The Bom Futuro stockpile, based on previously commissioned 43-101 report, contains hundreds of millions of dollars of commercial minerals, of which Canada Rare Earth owns 20%. Rare earth refineries, if we were to own and start operations, would each generate annual revenues in the order of $100 million or more.
As you can see the business is extremely scalable. With additional human and financial resources we will be able to accelerate the business at an even faster pace.
Contact the author: giles@proactiveinvestors.com