Ann: Consistently high grade returned from recent drilling, page-20

Did a bit more digging into Ionic Clay hosted deposits (ICD), which of course is not just AR3's peer comparison but also their competition. I look at the resource sector through the lens of competition theory and the cost curve, meaning low cost deposits will ultimately be developed and squeeze out high cost operations over time and the price cycle. The resource sector is infamous for over-investing at the price cycle highs and sending companies to the wall during price cycle lows. Banks and equity funders especially are rightly suspicious of backing low margin mines in bull markets and doing their shirt longer term.

Maybe ionic clay with low capex stays the predominant REE global supply source over next decades, maybe government support for high capex but low opex new mines outside China drives an oversupply and drops REE prices to squeeze out ionic clay producers (because the sunk capex in primary mineral deposits is dusted and only operating margins matter moving forward). Leaving aside the debate of REE demand-supply growth, balance and product pricing for now, AR3 investors should want to know what is the competition for their ionic clay hosted project? The competition is nearly all 'Laterite Hosted' ionic clay deposits, which have some very different features to AR3's transported, back-shore lagoon style clay sediment hosted REE deposits. Summary of Chinese ICD's taken from one of articles linked below (plenty on Google)

According to Bao andZhao (2008), the weathering crusts are up to 30 mdeep and divided into four layers: (A) An upperhumic layer of quartz, organic matter and soil: 0–2 m thick, with very low/nil REE content; (B) astrongly weathered layer enriched in REE: 5–10 mthick with kaolinite, halloysite, quartz and mica;(C) a semi-weathered layer: 3–5 m thick withkaolinite and sericite; (D) a weakly-weatheredbottom layer with the same mineral compositionas the host rock. Up to 80–90% of the adsorbedREE are hosted by the strongly weathered layer (B),whereas <15% are found in the semi-weatheredlayer (C). Depending on the nature of the originalhost rocks, the general components of the weathered ores are kaolinite, halloysite and muscovite,with a typical composition (as wt.%) of ∼70%SiO2, 15% Al2O3, 3–5% K2O, 2–3% Fe2O3 andless than 0.5% of CaO, MgO and other elements(Ishihara et al., 2008; Weng et al., 2015).
Google: Anoverviewofrare-earthrecoverybyion-exchangeleachingfromion-adsorptionclaysofvariousorigins.pdf
http://repository.azgs.az.gov/sites/default/files/dlio/files/nid1570/ree_cocker_chp4.pdf

There are similar laterite hosted deposits across the northern and southern hemisphere outside of China, REE are not actually rare minerals, and one expects the leaching and enrichment of REE's into clay mica mineral lattice in the weathering profile to be similar in many remnant laterite profiles. What makes one laterite profile more economic than another depends on the primary host rock and it's original REE conc, chemical conditions that most efficiently enriches the clay minerals with REE cations, specific REE mineral enrichment, thickness of REE clays in the profile, depth of overburden, location of deposit regards infrastructure, license to operate, sovereign risk etc.

Advantages of laterite hosted ICD's vs sedimentary (possibly transported secondary) deposits might include:
lateral extent of deposit formation (size)
thickness of REE enriched clay and depth of overburden (economics)
Lack of Calcium in REE clays, CaO is highly mobile and stripped out during intense laterite weathering (acid consumption).

The last point obviously relates to AR3's hosted clay deposits. The sedimentary environment on the coast is chockablock with limestone and CaCO3 detritus. Whether or not clay material is contaminated with this calcium or it hasn't been stripped during weathering and transport as with laterite hosted clays does not matter, the presence of high calcium levels is the problem for recovery. Sulphuric acid is not cheap relative to salt based leach and pH levels will not fall as required until all the calcium has been chewed up by H2SO4. This is a major problem and potentially fatal flaw to consider. below is an extract that summarises hydrometallurgical extraction leaches from ionic clay. Chinese deposits use cheap and efficient salt leach obviously, nobody uses pH=1 strong acid leach by the looks. IXR's Makutu project uses salt leach with 5-10g/L H2SO4 to bring down the the pH to 4 and increase recoveries cost effectively.



It seems to me, whether its AR3 or FNT etc, this Murray basin ICD clay material is currently very binary in outcome... either it releases REE cations from the clay mica matrix with high recoveries in a heap leach cheaply or it is a dead end idea and worthless. They may or may not find some thick, good grade, low overburden REE clays during exploration and this may or may not give the share price small pumps along the way. Unless they come up with a cost effective leaching process that makes Murray Basin clay cost competitive with global laterite hosted ICD deposits nobody will risk a large amount of equity and finance to fund the project into construction. In which case the stock is not worth very much I suggest.

Where the Murray Basin might become a globally significant REE player is in mineral sand deposits further inland that have high concentrations of primary mineral hosted REE as by-product to traditional TiO2 and Zircon production. The Murray Basin has large, fine grained 'WIM-style' deposits rich in Monazite and Xenotime, such as ILU, amongst others, are trying to develop (and Kalbar in Gippsland). Monazite and Xenotime are a major source of REE's, both from mineral sand mines and many primary deposits being developed (Bastnaesite is the third major mineral deposit source of REE).

The question is: does AR3 have a new and cheap hydromet leach process that does not require +100kg/t of sulphuric acid and a pH=1 for what still looks like pretty average recoveries? When considering a stock's market cap, always consider all the shares and options on issue, not just the one's listed on ASX (ie 'fully diluted' assumes all shares list, options convert). At $1 AR3 still has a MC of $125M... looks a bit rich to me considering the risks.