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REE/Strategic Minerals Concentrator, March 18, 2014

Time for a fresh Concentrator, so here goes...

Jack Lifton's recent bombshell that both Lynas and MolyCorp need to bankrupt out is having a marked effect on the REE space. His recent comments as a guest speaker at a conference in China are here, in his current article:

Taken with his dire view of MCP and LYC, the article appears to have set some parameters which look very favorably upon a few small projects in the West, chiefly GWM and their SKK mine.

This is the sort of media exchange to gladden the hearts of the Chinese REE industry and government, of course.

I have been watching this sort of thing coming for a long time, and its both unsurprising (very) and alarming. The silence from Lynas management on such topics as their once-trumpeted sustainable pricing initiative and a lucrative tolling contract for the many valuable REE's they are not currently separating from their concentrated ore is puzzling, a puzzle I will examine more thoroughly later in this blog entry...

Frontier's CEO has some ideas about where to focus attention in the REE suite, the Critical REEs mentioned prominently here and elsewhere:

We are once again looking at an intense short term economic and geopolitical crisis involving the small REE community. Hot money and government support is rotating back into the altenergy sector worldwide (Japan's recent announcement of an immense subsidy program for Lithium Ion battery storage is a case in point), and some of that money is likely to bleed over into the REE space, but with the usual problem that the immediate market prospects are much less attractive than those excpected in another few years or so.

This time gap is being reflected in the withdrawal of support from the companies (like Lynas and MCP) currently manning the front lines, with actual production capacity, because they are perceived to be "too early" to mesh with the expected massive demand thought to be in the out-years of 2016 or 2017 or later.

Western governments are far behind the Chinese curve, of course, in every way, and I believe are unlikely to even become aware of the problem until it blows up in their faces. Much has happened to comprise "fair warning", including the stern words from Chinese national leadership, but the short-sighted West is not looking beyond its own navel and whether or not Apple can deliver their fresh new IPhone tomorrow.

Europe is pursuing its own odd path, notably with TAS, which is expanding into a template which neatly matches the anticipated strategic mineral supply problems of the next decade. Beyond the REE patch, TAS is configuring its projects to address other minerals which haunt the strategic headlines.

Lynas looks to be at a bottom, sitting on shifting sands, with every expectation that they can increase their production as well as engineer a new round of funding (probably one that overlaps the current debt, but extends their runway). The lack of substantive news about their plans leads me to think that the deal is in the works as we speak (not lurking out 12 months from now). What we don't know is how ambitious any such plan might be. I see it falling in a range from a relatively small bit of funding intended to provide operating money for the coming year or so, to a complete reworking of their current debt, rolling it into a single deal (perhaps with one of the two major participants) that nets out the needed operating funds - extends the timeline for repayment - and reduces the payment friction... With the most grand outcome potentially being to dive into developing Duncan and setting up their own separation facilities for the heavies/critical elements.

I won't try to handicap WHICH of the multiple funding options are used by Lynas, and I would be surprised if they did not also simultaneously issue more stock (they have done this before). But I don't think we will have to wait a year to see what happens.