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Eamon Keane

 
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  • REE/Strategic Minerals Concentrator, March 29, 2013 [View instapost]
    Haha, it's a curious little sector all right. Are all junior mining sectors as dysfunctional as REEs?!

    Strategist's spreadsheet adventure based on a 'macro' view of the REE industry lead him to a 'conservative' $139 target in January 2012. It's easy for me to criticise because I didn't make any recommendations myself! If you would like more of his advice he's a natural resources analyst at Morgan Stanley.
    May 5 08:05 AM | 5 Likes Like |Link to Comment
  • Why Natural Gas Vehicles Won't Decrease Oil Dependence, Part VII [View article]
    Have you any evidence for that assertion? As far as I can see, the total NGV fleet declined from 123,000 in 2011 to 112,000 in 2012.

    http://bit.ly/10xgm3G
    http://1.usa.gov/XxKXu7
    http://1.usa.gov/10xgm3J
    Mar 23 01:25 PM | Likes Like |Link to Comment
  • REE/Strategic Minerals Concentrator, April 16, 2012 [View instapost]
    In case you weren't aware, the 7 page Pentagon "report" on REEs in the defense chain that they "weren't releasing" and refused to give to a Mineweb reporter (http://tinyurl.com/cth...) is available on the Homeland Security Digital Library:

    http://bit.ly/Ipc9WE
    Apr 25 06:17 AM | 5 Likes Like |Link to Comment
  • Why Are Irish Taxpayers Bailing Out Unsecured Bank Creditors? [View article]
    Nice article, thanks. Vincent Browne is a character and has been remorselessly banging on about senior bondholders for about 4 years now!

    The correct measure to use in relation to Ireland is Gross National Product, not Gross Domestic Product (€30 bn in whisked off to tax havens each year by pharma and tech companies). Ireland's 2011 GDP was €155 bn, while our GNP was €125 bn. It is the GNP which will have to pay off the debt.

    Our debt will peak in 2014 at approximately 140% of GNP (110% of GDP). If the odious banking debt was excluded, this would bring the debt down to approximately 100% of GNP.

    With history as our guide, and coupled with strong international headwinds, there is sweet f.a. chance we will pay back the 140% of GNP. In due course, if the ECB refuses to play ball, I fully expect us to unilaterally restructure the €30 bn of promissory notes which were used to bail out senior unsecured bondholders. Promissory notes are purely an accounting exercise. If they were forgiven/restructured, the only consequence would be a (very small) increase in money supply.

    The troika funding has allowed us to maintain very high social welfare rates, which has cushioned the collapse of the domestic economy. The primary deficit (i.e. before interest payments), was approximately 10% of GNP last year, so we are still living way beyond our means, making the next three years as we adjust to a primary surplus very challenging economically and politically.

    That the IMF and ECB continue to use the headline GDP figures - talking of a peak in 2013 of around 105% GDP, makes the figure seem much less alarming.
    Mar 4 12:25 PM | 2 Likes Like |Link to Comment
  • QuickChat#224, February 14, 2012 [View instapost]
    I live in Ireland and with a bit of luck we may get through this.

    We need robust international growth to fuel our exports, or else our house of debt - which will peak in 2014 at about 110% - will start to quiver. We still have a primary deficit of 7%. All the easy cuts have been made and taxes are beginning to show signs of diminishing returns. The domestic economy is shattered and unemployment is rising, now at 14.5%.

    The next 7% adjustment is going to be tough, we shall see how our public sector unions react. If we just got a 30% GDP write off (€50 bn), we'd be fine. This is the amount of money we pumped into our banks in part to prevent an EU Lehman. The ECB needs to play ball.

    It was heartening to see Xi Jinping spend 3 days in Ireland, more than the 12 hours a certain muslim terrorist from Kenya spent!
    Feb 21 06:50 PM | 9 Likes Like |Link to Comment
  • Molycorp: A Second Chance: Part III of III [View article]
    Great articles - your best ones so far.

    A few questions.

    a) On Xsorbx as you point out, there is little information out there on it, with the only ostensible sales being $8,400 (0.1% of MCP's Q3 2010 revenue according to S1 prospectus). This is based on selling Xsorbx for $9.90/kg. I estimate Xsorbx to contain 30% cerium, 70% alumina; what was your assumption? I'm in show me as you me the money mode with MCP - this product submitted a patent application in 2003, granted in 2005. Why the hold up - particularly when cerium oxide sold for < $7/kg from 2003 up to July 2010.

    b) Cerium oxide $70/kg floor? This has clearly eluded all other analysts in the REE space. Additionally buyers must have been systematically lying to Metal Pages and Asian Metal for the past four months that Ce has been trading below this level. To include this assumption based on NYT article is a stretch.

    c) NdFeB alloy margins. You will note from exhibit 13.1 from MCP IPO prospectus that SRK included 4% dysprosium in their magnets. This is bought for an assumed ~ $90/kg by SRK. Dysprosium oxide currently retails for $1,410/kg FOB. SRK further assumed $31/kg Nd oxide vs. your $120-$150/kg. In your model, for each kg of Nd in NdFeB alloy (i.e. 3.06 kg NdFeB contains 1 kg Nd), what is your assumed profit in $/kg Nd? From slide 23 (link below), if we assume MCP buys in the Nd oxide for $31/kg, the incremental profit is $40/kg. Do you assume $40/kg incremental profit? Or is it a % margin? Magnet producers have been levying surcharges on the Nd/Pr & Dy input costs, not levying an additional margin on their cost.

    http://bit.ly/y3v7ze

    Thanks.
    Jan 12 07:49 PM | 3 Likes Like |Link to Comment
  • Molycorp Set Up For A Classic Short Squeeze [View article]
    Some good info in this article, thanks. One correction, the following statement is not evidenced from Table 2: "As you can see the hard disk drive business was not a major part of the rare earths business."

    Hard drives use around 18 g neodymium magnets per HDD - two 6 g magnets for the voice coil motor and one 6 g magnet for the spindle. 30% of the magnets are the rare earths Nd + Pr. Global shipments of HDDs last year came to 651 m, so doing the sums on that, rare earth demand from HDDs was 4,102 t Nd + Pr oxide (18*0.3*651)/(0.857), or 13% of the magnet sector (4,102/26,300).

    www.techmetalsresearch.../
    Aug 22 04:07 PM | 4 Likes Like |Link to Comment
  • Seagate Blames a "Bubble" In Rare Earth Prices for Causing a Margin Squeeze [View article]
    Thanks prescient11. You often provide great links and keep the conversation going, so thanks also!
    Jul 25 11:28 AM | Likes Like |Link to Comment
  • Seagate Blames a "Bubble" In Rare Earth Prices for Causing a Margin Squeeze [View article]
    Nice article, thanks.

    A hard drive weighs around 0.5 kg (www.seagate.com/docs/p...), and rare earth magnets make up around 2% of the weight of a hard drive (www2.econ.iastate.edu/...). So you're looking at about a 10 g neodymium-iron-boron magnet per hard drive.

    These magnets usually contain about 30% neodymium, so that's 3 g neodymium per HDD. According to Arnold Magnetics, hard drives importantly "use very low or no dysprosium." (pdf direct download): (www.google.ie/url?sa=t...).

    If you look at slide 21, a reasonable average content of Dy for HDDs might be 0.5% of NdFeB content, or 0.05g per HDD. Taking current prices of neodymium oxide as $337/kg and dysprosium as $2,840/kg, this comes in at $1 neodymium content and $0.14 dysprosium. With a 1 Tb harddrive coming in around $100 (pricespy.co.nz/product...), and neodymium oxide prices quadrupling from $87/kg in January 2011, and dysprosium up 10-fold, their rare earth costs went from $0.26 to $1.14 in the space of 6 months, or an increase of almost 1% of selling price.
    Jul 22 10:32 AM | 7 Likes Like |Link to Comment
  • REE/Strategic Minerals Concentrator, June 17, 2011 [View instapost]
    There's an infinitely slicker fly-through of ucore's property here: ucore.com/media
    Jun 20 06:13 PM | 3 Likes Like |Link to Comment
  • Chinese Academic's Rare Earth Forecasts at Odds With Industry Experts [View article]
    I appreciate your articles, Dr. Duru, keep them up.

    Dr. Chen's January presentation to the Critical Metals Investment Summit in Vancouver is available here (www.slideshare.net/Teh...). Slide 9 depicts "Target Supply After 2015" as 100,000 tonnes of China supply and 170,000 tonnes ROW supply.

    The basis for this is in a December 2010 paper by Dr. Chen in the Journal of Rare Earths (available here: www.slideshare.net/hol...). Tables 2-4 depict the target output of some 25 ROW REE mines which sum to 170 kt.

    There is clearly a language barrier, however I don't believe this is a specific supply forecast on behalf of Dr. Chen, merely a scenario. He is not predicting 270 kt of demand in 2015. He is possibly exasperated that China must supply the whole world with REEs, while it only has some 36% of the resources.

    (Gareth Hatch also explains this here: www.techmetalsresearch.../).

    The oversupply of lanthanum and cerium in 2015 is not all that controversial, it is what IMCOA projects, for example.
    Jun 20 05:35 PM | 5 Likes Like |Link to Comment
  • Senate supports some ethanol subsidies, not others [View article]
    I have to admire the extreme cognitive dissonance and cynicism of Sen. Coburn.
    Jun 16 07:48 PM | Likes Like |Link to Comment
  • Molycorp: A True Value Play [View article]
    I'm not sure how long you've been following rare earths, but it's not the kind of sector that can be understood in a short period of time. It's easy to think you understand REEs but it takes a while to pick up on the nuances.

    The first mistake you make is by treating all REEs as one. Cerium and lanthanum currently make up 60% of the supply. The demand for cerium and lanthanum is rising slower than the rest of the REEs. The only trouble is that REE deposits typically contain 50-70% of Ce & La. Molycorp stands out because it has 83% Ce & La. So there is a catch 22 - if the demand for the other elements which actually do have rapid demand growth (e.g. nd, pr, dy, eu & tb) is met, there will be an oversupply of Ce & La. For example, in 2015, IMCOA projects 11% oversupply of La and 17% oversupply of Ce.

    There is some excellent daily commentary by folks who've been following REEs for years, read that for a while: seekingalpha.com/user/...

    Oh, and btw, lithium-ion batteries contain no REEs. It's the Ni-MH batteries which contain REEs (the M is mischmetal which is approx 50% La, 33% Ce, 10% Nd & 3%Pr). Next year Honda is moving its hybrid vehicles to REE-free lithium-ion, and Toyota is also considering doing so (www.plugincars.com/rar...).
    May 18 04:43 PM | 12 Likes Like |Link to Comment
  • REE/Strategic MInerals Concentrator, April 26, 2011 [View instapost]
    I posted this in the Strategist's "Molycorp's Project Phoenix Rising Along With Its NPV" (seekingalpha.com/artic...), just thought I'd repost it here to see whether you guys had any counterfactuals on Xsorbx in particular. These concentrators are a great source of information!

    "On Xsorbx, I've looked into it and based on my research I'm skeptical of its prospects, but am open to correction. Here is my take on it:

    "Molycorp’s Xsorbx uses cerium dioxide (CeO2) to remove arsenic from water. Arsenic exists in two states, As+5 (arsenate) and the much more toxic As+3 (arsenite). Cerium dioxide (Ce+4) reacts with As+3 to convert it into As+5 per the following equation, and the cerium dioxide is in turn converted to the standard REO Ce+3 cerium oxide (Ce2O3).

    Ce +4 +AsO 2 −1 →Ce +3 +AsO 4 −3

    The remaining As+5 is easy to remove by precipitation, for which the standard additive is alumina (Al2O3). Judging by the patent, Molycorp’s Xsorbx is in the region of 30% CeO2 and 70% Al2O3 and is in the form of millimetre sized particles. While the original patent application was submitted in January 2003, according to Moly’s January ’11 S1 prospectus, the only sales were in July-September 2010, where it accounted for 0.1% of revenue or a respectable $8,400. At a selling price of $9.90/kg, this amounts to 850 kg of Xsorbx or approx. 250 kg contained cerium.

    The S1 makes it clear that Xsorbx is only viable at low prices:

    “we are in discussions with multiple large, globally diversified mining companies regarding the sale of Xsorbx, which will expand demand for cerium in times when it is in surplus and low priced.”

    These are presumably the same “discussions” Moly was having as stated in the July ’10 prospectus, and possibly since the patent was granted in 2005. If this review of arsenic removal processes is anything to go by, the conversation may go on for some time yet:

    “For the effluent from mine site and metallurgical processing, the adsorption technology is less likely to be an efficient and cost-effective solution due to the relatively high level of arsenic and other species which may compete with arsenic for absorption sites or contaminate the surface of the adsorbent particles.”

    Aside from mining, Moly is targeting other segments:

    “We have begun to sell Xsorbx for commercial use in the wastewater, recreation, pool and spa, industrial processes and other water treatment markets”

    Judging by Moly’s September 2010 press release, this $8,400 of sales went to Bio-Chem Resources. This is a small company whose headquarters is ostensibly a house in Oklahoma, so you’d have to question the size of its order book. Anyway, as the S1 states, these other segments can’t handle the Ce price spike since July 2010:

    “At current prices, we would seek to sell cerium for other uses [other than Xsorbx] instead”

    So presumably sales of Xsorbx have ceased and will remain at nil for the foreseeable future until Ce prices descend to the pre July 2010 level ($10/kg). While Molycorp contend that Xsorbx is in great demand by the water treatment industry, I find this hard to believe. Since 2000, the Japanese Shin Nihon Salt Co. have had an arsenic removal product called the READ-F filter. This uses cerium and the exact same principle as Xsorbx, and is described in the attached thesis. The only difference between READ-F and Xsorbx is that rather than have the cerium dioxide particles as a powder, they are attached to an ion exchange resin. The READ-F was trialled in Bangladesh, where there is a serious problem with arsenic in the groundwater, but never got traction as it was too expensive at $50/filter, when the poor could only afford a very cheap sub $20 filter."

    US Department of Defense report. No one knows for sure why it wasn't released but as was alluded to in the recent Congressional Research Service report (fas.org/sgp/crs/na...), the reason may be the opposite of what you are intimating:

    "Congress could require DOD to immediately release the rare earths report, hold public hearings on its findings, and examine the methodology and assumptions used in collecting the data. DOD had reported to GAO that DOD’s assessment of the defense supply chain would be released in September 2010. As of March 2011, the report has not been released. The reasons for the delay are uncertain. One press report stated that at least one Member of Congress was initially provided a briefing on the report and disagreed with its conclusion, reportedly, that China’s monopoly on rare earth materials did not pose a national security threat."

    The stockpiling is significant, although I'm not entirely sure why China would want to stockpile the light REEs, since it has them in abundance compared to the more limited HREEs. This stockpiling could conceivably place a floor on the cerium and lanthanum price for a couple of years. I can't see the Chinese buying it at anything like the current $130/kg, however.

    "Unique and irreplaceable". That's a pretty broad statement. The fact is in the majority of applications they're not unique or irreplaceable, save perhaps europium in screens or neodymium for portable electronics and hard-drives.

    One point I think you're missing is that Molycorp's production (40 ktpa) is enough to move the REE market. Molycorp will produce 20 ktpa cerium, an increase of about 30% on current supply, while Lynas' 22 ktpa will similarly produce about 11 ktpa cerium, a further increase of about 15%. These forecasts that were made several months ago assumed MCP was at 20 ktpa and Lynas 11 ktpa. Lynas' levelised cost of production is about $10/kg OPEX and $2/kg Capex. Any basket above $12/kg and it's a reasonable bet. Molycorp makes sense above about $5/kg if we can take their cost assumptions at face value (not accounting for value add from mine-magnet). Most REE prospects at FOB currently are pricing at a basket of about $130-150/kg. There's currently a huge scarcity premium being applied to MCP and others, when the medium-long term RE supply-demand dynamic would suggest a lower premium."
    Apr 26 03:37 PM | 7 Likes Like |Link to Comment
  • Molycorp's Project Phoenix Rising Along With Its NPV [View article]
    Thanks for your reasoned reply.

    On Xsorbx, I've looked into it and based on my research I'm skeptical of its prospects, but am open to correction. Here is my take on it:

    "Molycorp’s Xsorbx uses cerium dioxide (CeO2) to remove arsenic from water. Arsenic exists in two states, As+5 (arsenate) and the much more toxic As+3 (arsenite). Cerium dioxide (Ce+4) reacts with As+3 to convert it into As+5 per the following equation, and the cerium dioxide is in turn converted to the standard REO Ce+3 cerium oxide (Ce2O3).

    Ce +4 +AsO 2 −1 →Ce +3 +AsO 4 −3

    The remaining As+5 is easy to remove by precipitation, for which the standard additive is alumina (Al2O3). Judging by the patent, Molycorp’s Xsorbx is in the region of 30% CeO2 and 70% Al2O3 and is in the form of millimetre sized particles. While the original patent application was submitted in January 2003, according to Moly’s January ’11 S1 prospectus, the only sales were in July-September 2010, where it accounted for 0.1% of revenue or a respectable $8,400. At a selling price of $9.90/kg, this amounts to 850 kg of Xsorbx or approx. 250 kg contained cerium.

    The S1 makes it clear that Xsorbx is only viable at low prices:

    “we are in discussions with multiple large, globally diversified mining companies regarding the sale of Xsorbx, which will expand demand for cerium in times when it is in surplus and low priced.”

    These are presumably the same “discussions” Moly was having as stated in the July ’10 prospectus, and possibly since the patent was granted in 2005. If this review of arsenic removal processes is anything to go by, the conversation may go on for some time yet:

    “For the effluent from mine site and metallurgical processing, the adsorption technology is less likely to be an efficient and cost-effective solution due to the relatively high level of arsenic and other species which may compete with arsenic for absorption sites or contaminate the surface of the adsorbent particles.”

    Aside from mining, Moly is targeting other segments:

    “We have begun to sell Xsorbx for commercial use in the wastewater, recreation, pool and spa, industrial processes and other water treatment markets”

    Judging by Moly’s September 2010 press release, this $8,400 of sales went to Bio-Chem Resources. This is a small company whose headquarters is ostensibly a house in Oklahoma, so you’d have to question the size of its order book. Anyway, as the S1 states, these other segments can’t handle the Ce price spike since July 2010:

    “At current prices, we would seek to sell cerium for other uses [other than Xsorbx] instead”

    So presumably sales of Xsorbx have ceased and will remain at nil for the foreseeable future until Ce prices descend to the pre July 2010 level ($10/kg). While Molycorp contend that Xsorbx is in great demand by the water treatment industry, I find this hard to believe. Since 2000, the Japanese Shin Nihon Salt Co. have had an arsenic removal product called the READ-F filter. This uses cerium and the exact same principle as Xsorbx, and is described in the attached thesis. The only difference between READ-F and Xsorbx is that rather than have the cerium dioxide particles as a powder, they are attached to an ion exchange resin. The READ-F was trialled in Bangladesh, where there is a serious problem with arsenic in the groundwater, but never got traction as it was too expensive at $50/filter, when the poor could only afford a very cheap sub $20 filter."

    US Department of Defense report. No one knows for sure why it wasn't released but as was alluded to in the recent Congressional Research Service report (www.fas.org/sgp/crs/na...), the reason may be the opposite of what you are intimating:

    "Congress could require DOD to immediately release the rare earths report, hold public hearings on its findings, and examine the methodology and assumptions used in collecting the data. DOD had reported to GAO that DOD’s assessment of the defense supply chain would be released in September 2010. As of March 2011, the report has not been released. The reasons for the delay are uncertain. One press report stated that at least one Member of Congress was initially provided a briefing on the report and disagreed with its conclusion, reportedly, that China’s monopoly on rare earth materials did not pose a national security threat."

    The stockpiling is significant, although I'm not entirely sure why China would want to stockpile the light REEs, since it has them in abundance compared to the more limited HREEs. This stockpiling could conceivably place a floor on the cerium and lanthanum price for a couple of years. I can't see the Chinese buying it at anything like the current $130/kg, however.

    "Unique and irreplaceable". That's a pretty broad statement. The fact is in the majority of applications they're not unique or irreplaceable, save perhaps europium in screens or neodymium for portable electronics and hard-drives.

    One point I think you're missing is that Molycorp's production (40 ktpa) is enough to move the REE market. Molycorp will produce 20 ktpa cerium, an increase of about 30% on current supply, while Lynas' 22 ktpa will similarly produce about 11 ktpa cerium, a further increase of about 15%. These forecasts that were made several months ago assumed MCP was at 20 ktpa and Lynas 11 ktpa. Lynas' levelised cost of production is about $10/kg OPEX and $2/kg Capex. Any basket above $12/kg and it's a reasonable bet. Molycorp makes sense above about $5/kg if we can take their cost assumptions at face value (not accounting for value add from mine-magnet). Most REE prospects at FOB currently are pricing at a basket of about $130-150/kg. There's currently a huge scarcity premium being applied to MCP and others, when the medium-long term RE supply-demand dynamic would suggest a lower premium.
    Apr 26 01:45 PM | 5 Likes Like |Link to Comment
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