Medallion develops a fast-track approach
According to Chen Zhanheng, vice-secretary general of the Association of China Rare Earth Industry, Chinese rare earth demand will increase 50% in the next five years, putting pressure on China to eliminate production quotas.
China currently produces 90% of global rare earth supplies, while consuming 80%. In 2015, China will export 30,000 tonnes through official channels. The fractured rare earth industry is consolidating production into six government controlled conglomerates.
The demand for rare earths outside China is growing faster than supply.
Medallion Resources (TSX.V: MDL) (PINK: MLLOF) has an innovative first-mover strategy highly differentiated from the standard rare-earth-exploration approach. The company believes that future global supply shortages will not be met through hard-rock deposits.
Medallion Resources rare earth production is focused on monazite—a by-product of heavy mineral sand mining. The monazite is relatively easy to access, and the metallurgy is well established, although Medallion is developing proprietary techniques to optimize existing processes.
“What differentiates Medallion resources from other rare earth juniors is that we avoid high risk, time-consuming, expensive activities like exploration, drilling and inventing brand new metallurgy,” stated Medallion President & CEO Don Lay in an exclusive interview.
Mineral sands are beaches with special geology that nature has worked over for millions of years. The biggest production regions are in Southern Africa, India and Australia. Beaches at Cancun and Waikiki contain about 1% of heavy mineral content. Remote industrially mined beaches are typically 5-10% heavy minerals. Monazite, which is more than 50% rare-earth content, is mined and concentrated with the rest of the heavy minerals.
“There are mineral sand miners around the world interested in selling their monazite to 3rd party processors,” stated Lay. “Often the board will tell the operations people, ‘We’re in the titanium and zircon business—if you can make money selling monazite for the rare-earths go ahead.”
But thorium—a slightly radioactive element—is present in monazite and presents a challenge. Rare-earth operators are required to safely handle and dispose of radioactive elements. However, an internationally recognized nuclear consultancy has issued a positive radiological and environmental report for Medallion’s proposed monazite processing facility.
Lay is talking to large players about securing supplies of monazite.
“In 2010, China told the rest of the world, ‘We want you to develop your own rare earth resources,’” stated Lay, “and they clamped down on domestic producers with export taxes and export quotas. But China is part of the World Trade Organisation (WTO) and they were forbidden to do this. So the Chinese have adapted with production taxes and production quotas.”
In the next 12 months Medallion intends to advance a pilot plant in preparation to launching a commercial one. Lay is also working on finding a location for the plant, likely within the central part of North America.
Medallion recently completed bench-scale metallurgical testing of its rare-earth extraction process. These tests confirmed that a caustic-process approach yielded a high-purity rare-earth concentrate suitable for standard rare-earth refineries or separation plants. Concentrate samples will soon be sent to interested refineries for further testing.
Lay and his team were pleased to discover that there was also an economically viable calcium phosphate by-product. Typically monazite contains around 35% phosphate. Medallion’s extraction process liberates the phosphate and converts it to calcium phosphate—a commonly used animal feed supplement.
The global market for feed phosphates is estimated to be over $4.5 billion per year. Current prices for calcium phosphate in North America are about $400 per tonne.
Medallion estimates a capital cost of about $50 million to construct a rare-earth extraction plant capable of producing 10,000 tonnes of rare-earth oxides annually.
“The Medallion model eliminates the long lead-time for producing rare earths,” stated Jon Hykawy in an exclusive interview. “Instead of permitting and building a mine, Medallion plans to use someone else’s waste as the feedstock for a chemical operation which requires a specialised skillset, which they excel at. This approach allows Medallion to focus on the money making part of the business.”
Industrial corporations outside China are searching for rare-earth supply. Medallion is investigating sales opportunities with American, European, Japanese and Korean entities.
“Medallion is searching aggressively to secure a good source of high grade monazite,” confirmed Luisa Moreno, Senior Analyst and Partner of Tahuti Global. “Unlike their peers they do not have to spend money securing and exploring a deposit. Mineral monazite usually contains about 60-65% rare earths, so Medallion should end up with a high grade source feed.”
Many of the existing mines have reserves of over a billion tonnes of mineral sands—about 30 years of production. Monazite remains in the waste stream and is discarded during the heavy mineral sands processing flow.
Heavy mineral sand miners have shown a lack of interest in processing monazite, which has created an opportunity for Medallion to enter the production chain at an advanced stage and build a cash-positive business with low risk investment.
LYC Price at posting:
5.9¢ Sentiment: Buy Disclosure: Held
(20min delay)