Canadian REE explorers giving up in the wake of Chinese control of REE markets

I read this article on my LinkedIn feed and thought it worth sharing with those of you following the REE market and keen to see HXG become a "disruptor" in the REE downstream processing industry.

'You don’t control your destiny': Why Canada's rare earth deposits are staying in the ground.

China controls three-quarters of the global market and nobody, especially investors, wants to mess with that. Canada’s rare earth industry has shrunk over the past decade from a hundred explorers to just a handful of companies, which mostly refine or recycle the elements.Somewhere on the outskirts of Montreal, Kiril Mugerman, chief executive of Geomega Resources Inc., aims to build a recycling plant that can produce rare earth oxides — the obscure set of elements that recently emerged as a flash point in the U.S.-China trade war. Turning to recycling marks an about-face from the original game plan for his company, which spent millions of dollars trying to prove it could mine rare earths from a patch of land in northern Quebec.

Its story encapsulates the scaling back that has occurred throughout the Canadian rare earths’ sector over the last decade, shrinking down from more than a hundred explorers to just a handful of companies, mostly studying opportunities downstream from mining, in areas such as refining or recycling.You don’t control your destiny — if the price goes up, China can still bring it down. Geomega CEO Kiril Mugerman Found inside green energy items such as electric vehicles and wind turbines but also washing machines and hard drives, rare earths face growing demand. But China dominates the supply chain, and fears that it could manipulate the market has kept investors away, even as the U.S. and Canadian government discuss ways to help foster the sector in North America. “The (mining) project is not forgotten, it’s still within the company,” said Mugerman, “but today to bring it to value is very hard. It’s a very high risk for a company to begin committing hundreds of millions of dollars when you don’t control your destiny — if the price goes up, China can still bring it down.”

Mugerman says that since he started as chief executive in 2015 it’s been clear that the half a billion dollar mining project would need to be shelved.Instead, he spent the past few years studying recycling methods, and stockpiling old rare earth magnets’ waste. Earlier this month, Geomega released plans for a plant that would cost $2.5 million to build and would have an estimated $30 million in annual revenue.Rare earth magnets, recovered from the rotors of discarded compressors, at Hitachi Plant Technologies Ltd.’s research laboratory in Matsudo City, Japan.

Recycling rare earths has become common as electronics makers seek to reduce their reliance on Chinese supply. Kiyoshi Ota/BloombergHe’s hopeful that if they bring the plant online in 2020, and start generating cash flow, the company can still open the mine one day.“We want to sell to anybody but China,” said Mugerman. “You want to stay small because you basically want to stay under the radar as long as possible.”It’s not the only company that is looking to enter downstream from mining.In Vancouver, Don Lay, chief executive of Medallion Resources, said his company is studying ways to extract rare earths from a byproduct of heavy mineral sands mining, known as monazite.