IM Rare Earths News in Brief 9 – 15 February

By Laura Syrett
Published: Monday, 15 February 2016

US GAO tells Department of Defense to “get strategic” about rare earths; Molycorp creditors battle rages on; Tantalus withdraws insolvency application.

The US Government Accountability Office (GAO) has issued a report on Department of Defense's (DoD) efforts to identify risks in its rare earths supply chain. The report (GAO-16-161), entitled "Rare Earth Materials: Developing a Comprehensive Approach Could Help DOD Better Manage National Security Risks in the Supply Chain," was sent to congressional committees last week.

The report stated that the US DoD depends on rare earths with unique properties, such as magnetism at high temperatures, to provide functionality in weapon system components. It pointed out that many steps in the rare earths supply chain, including mining, are conducted in China – a situation that "may pose risks to the continued availability of these materials".

The GAO study was intended to determine the extent to which rare earths, if any, are critical to national security and to identify and mitigate risks associated with rare earths, including the effects of a potential supply disruption.

It found that the minerals are critical to some defence applications, such as lasers, but said that the DoD had not taken a comprehensive, department-wide approach to identifying which rare earths, if any, are critical to national security.

Using different statutorily-based definitions, the DoD identified 15 of the 17 rare earths as critical over the last five years and the GAO concluded this approach was "fragmented".

The report added that acomprehensive approach for ensuring a sufficient supply of rare earths for national security needs, establishing criticality, supply risks and mitigating actions would better position the DoD to ensure continued functionality in weapon system components should any disruption occur.

Creditors of US rare earths miner Molycorp Inc. are still nowhere near reaching a deal to reorganise the company, according to a report by Bloomberg.

The newswire reported that Andrew Leblanc, attorney for Oaktree Capital Management LP, Molycorp’s principal creditor, told US bankruptcy judge Christopher Sontchi "I might not recommend you hold your breath," during a court session in Wilmington, Delaware, last week.

Oaktree is battling a committee of lower-ranking creditors over the size of its loans and how best to restructure the company. Oaktree and Molycorp agree that loans made before and after the bankruptcy bring the amount owed to Oaktree to $514m, but other creditors, which are collectively chasing a debt of $1.4bn, dispute the senior lender’s figure.

Molycorp filed for Chapter 11 bankruptcy in June  last year, as a series of operational problems, falling rare earths prices and mounting debt made the business unprofitable. The company is planning to either sell itself at an auction or reorganise and reduce debt by turning itself over to Oaktree.

Canada-listed rare earths junior Mkango Resources Ltd is aiming to dual list on the UK’s Alternative Investment Market (AIM) next month, according to the company’s CEO, William Dawes.

Speaking to IM at the Mining Indaba Conference in Cape Town, South Africa, last week, Dawes was upbeat about the reception Mkango is likely to receive in London. Mkango, which OWNS the early-stage Songwe Hill rare earths project in Malawi, will be the only pure rare earths junior to be listed on AIM.

The company plans to use the proceeds of its initial public offering (IPO) to fund A bankable feasibility study (BFS) at Songwe.

Dawes said that junior miner IPOs are generally greeted with lukewarm responses from investors in the current depressed commodities market, but that listing remains a good source of capital for developing assets.

Germany-based Tantalus Rare Earths AG has withdrawn its application to open insolvency proceedings, following the signing of a sale and purchase agreement in December last year between Tantalus and Singapore-based Apphia Minerals Ltd for 60% of the shares in the German explorer’s subsidiary, Tantalum Holding (Mauritius) Ltd.

Apphia agreed to pay €3.7m ($4.14m*) for the shares and last week transferred the second tranche of this sum, which amounted to €1.35m, to Tantalus. In addition, some of Tantalus’ creditors have signed moratorium agreements, meaning that the company is no longer illiquid within the meaning of section 17 of the German Insolvency Code.

Tantalus now plans to hold an extraordinary general meeting with its shareholders to decide on the arrangements with Apphia. The company, which owns the TRE ionic clay project in Madagascar, filed for insolvency in October 2015.

Peak Resources Ltd has delivered a simplified leach recovery flow sheet for its Ngualla rare earths project in Tanzania, following the completion of technical development programmes on processing bastnaesite mineral concentrates from the deposit.

The ASX-listed company said that the new flow sheet, which is a four-stage alkali roast process, compared with the previous five-stage double sulphate process for producing rare earths solution, would lead to reduced plant capital cost through a smaller, modular design of plant as well as lower operating costs due to reduced reagent consumption.

It added that the new flow sheet would allow Peak to focus on extracting and recovering higher value elements, praseodymium and neodymium, while reducing extraction of the low value rare earth, cerium.

The revised process was developed by Peak’s metallurgical team and optimised in Australia by Nagrom, in Western Australia and ANSTO Minerals, in New South Wales.

TSX-V-listed Commerce Resources Corp., which is developing the Ashram rare earths project in Quebec, Canada, has also managed to reduce the number of processing steps in its flowsheet, following the completion of pilot-scale test work.

The leach stage pilot plant work, completed last year, was based on a double leach process that resulted in a more than 99% stage recovery, with complete carbonate removal, Commerce said.

A further positive development from this piloting was obtaining bench scale evidence that the process could be further optimised using only a single leach. The recently completed single leach mini-pilot plant confirmed that process efficiency can be maintained with a reduced number of processing stages, while operating at a larger scale, the company added.

TSX-listed Avalon Rare Metals Inc. has said that its Nechalacho rare earths project in Canada’s Northwest Territories will remain inactive in 2016, while the company focuses on lithium and tin at its other Canadian properties.

Avalon said that work on the project in 2015 consisted mainly of concluding metallurgical research, disposal of waste materials and storage of bulk samples for future use.

The company blamed falling rare earths prices, which have persisted owing partly to illegal supply from China which has caused an imbalance in the market, bankruptcies at other rare earths explorers and a dramatic decline in investor interest, for its decision to mothball Nechalacho.

Avalon added that it had agreed with Belgian chemicals producer Solvay SA to terminate a toll processing agreement for refining Nechalacho concentrate, which the companies signed in March 2014 and that it was assessing the cost of continuing with permitting applications for the property.

Avalon also owns the Separation Rapids lithium project in Ontario and the East Kemptville tin-indium project in Nova Scotia.

Finally, Japanese engineering group Honda has come up with a way of reusing rare earths extracted from nickel-metal hydride (NiMH) batteries to make new batteries for hybrid vehicles.

Honda has been working on the process, which it claims is a world first, since April 2012, at a plant belonging to ferroalloy manufacturer, Japan Metals and Chemicals Co.

According to a report by The Observer Star, the rare earth elements are recycled by applying molten salt electrolysis to the NiMH oxide, achieving purities of more than 99% in the recovered materials.

*Conversion made February 2016