Rare earths officially off the boilBY: ROBIN BROMBY From: The...

Rare earths officially off the boil
BY: ROBIN BROMBY From: The Australian December 21, 2012 12:05PM

RARE earths confirmed -- not many people interested.

That could be the headline over an announcement this morning. A year ago it would probably have yelled “Rare earths confirmed -- shares soar”.

That the rare earths sector has gone off the boil was evidenced in the first hour of trade as Northern Minerals (NTU) saw its stock still at its last close of 20c with just 20 trades worth a total $68,743 in that 60 minutes. They weren’t exactly knocking down the door even though the announcements that came this morning make the company now a viable rare earths contender.

NTU has reached an important milestone -- its maiden JORC resource at the Browns Range heavy rare earths project on the Northern Territory-Western Australia border. It came in at 1.44 million tonnes at 0.73 per cent total rare earths. This is not large but the resource has confirmed the domination of the rare earths mix by two high value elements, dysprosium and yttrium, both of which are expected to be in severe deficit for the foreseeable future and of which China may have to become an importer after 2020.

The company issued a chart which shows the financial benefits of having a preponderance of heavy rare earth elements -- usually called HREE. NTU’s basket of rare earths at present pricing is close to $US120/kg. By contrast, Lynas Corp (LYC), whose West Australian mine is dominated by the less valuable light rare earth elements (LREE), has its basket worth just under $US40/kg. In fact, NTU’s mix is slightly higher in value than the acme of heavy rare earth production, the Jiangxi ionic clays of southern China.

There was also an announcement of a memorandum of understanding for the off-take of 1500 tonnes a year of HREE with an unnamed company. If you were a betting man or woman, you’d probably find the favourite would be Japanese.

Taking the gloss off the announcements for many traders, apart from the fact all rare earth element prices have been in retreat, would have been the NTU statement they’ll be spending 2013 with more drilling in an attempt to increase the resource.

That makes sense in terms of the economics of the project but it also signals the first production day is still a long way off.

Investors would also be wary of any MoU these days, as so many counter-parties over a range of mineral commodities have walked away from these as prices of metals and demand have dropped. But the demand for a secure, non-China source of HREE is so great this reduces the chance of the off-take party walking away.