Following up on our last article “The Knock-Out Criteria For REE Stocks: Separating The Wheat From The Chaff”, there were several comments that were noted from our readers, so I took the opportunity to discuss these with Darren L. Smith, M.Sc., P.Geol., of Dahrouge Geological Consulting Ltd. In Germany, people were even discussing emails that they received from companies that were mentioned in the article. No matter whether these are legit, or legitimately published, they make a good case for discussion nonetheless.
Hence, consider the comments from investors and company representatives, as well as the responses below, as general statements of the rare earth element (REE) space. I present these in an effort to better place and compare these deposits in context for investors; and further, to understand why I am a supporter of Commerce Resources Corp. and their Ashram Deposit as being a serious contender in the REE space.
“The article is full of inaccuracies, outdated references and misinformation.”
Anyone confronted with such a statement would very much like to know specifically the inaccuracies, outdated references, and misinformation that are being referred to. If specifics are not given, then such a statement is difficult to respond to. My best recommendation would be to read the article again, and this time with a more open mind. If such a statement as per above is made, it must be backed up with specifics or it is likely unwarranted and without merit (i.e. poor sportsmanship).
If any company feels the article is full of inaccuracies, outdated references, and misinformation, (I assume towards HREE companies) then please contact me and inform me of the specifics in order to be able to address them. However, to the author’s knowledge, the information contained in the article “The Knock-Out Criteria for REE Stocks” is accurate, current, and discussed in a clear and fair manner, with all data presented available in the public domain. In addition, Dahrouge Geological Consulting Ltd. has extensive experience in mineral exploration and development with many notable discoveries to their credit, including the Ashram Rare Earth Deposit. Further, Darren L. Smith is a well-known Professional Geologist with significant experience in the REE space. Mr. Smith’s interview is based on his considerable experience and knowledge of the REE space, and his comments should be noted as such.
“Discussing TREO grade without a breakdown of the contained light and heavy rare earth components is misleading information. In this case, only 7% of the total REEs in this deposit are medium or heavy REEs, while lanthanum and cerium (for which is there is little or no demand for new supply) comprise 72% of the TREO.”
For those that are not aware, REE distribution (i.e. the “breakdown” referred to in the comment) is the proportion of each REE relative to all the REEs combined (15 total elements, La through Lu + Y). Often companies with an REE distribution more weighted in the HREEs are considered to have a more favorable REE distribution. This is somewhat of a misleading statement itself as neodymium (Nd) and europium (Eu), light and middle REEs respectively, are also in high demand and short supply, with neodymium specifically having a larger market than all the HREEs combined! I will discuss this further a bit later in this article.
One may expect this sort of comment from HREE plays. It is sometimes the only thing they can promote on as most other REE companies do not have what they have, namely an REE distribution more weighted in the valuable high demand and short supply HREEs; terbium (Tb), dysprosium (Dy), and yttrium (Y). The article “The Knock-Out Criteria for REE Stocks” was absolutely not misleading by not discussing mineral distribution in detail. Here is why:
Anyone could make the same argument on jurisdiction, CAPEX, OPEX, native issues (social acceptability), logistics, by-products/co-products etc. The previous article was not focusing the discussion on distribution, or any other project aspect for that matter, but on metallurgy. This is because too often cost of metallurgical recovery is ignored by the HREE companies when discussing their projects as it is inherently the most difficult aspect nearly every time. A discussion on metallurgy does not require an equal discussion on REE distribution. Quest Rare Minerals Ltd (NYSEMKT:QRM) (TSE:QRM) and Avalon Rare Metals Inc (TSE:AVL) (NYSEMKT:AVL) were mentioned because both are very well-known in the REE space for having poor mineralogy/metallurgy, yet both are often cited as the “most advanced” deposits in development. The article was solely focusing on economics – pure and simple – from a metallurgical point of view. At the end of day, the REE distribution is irrelevant if one cannot get the commodity (REEs) out of the rock! That is the point.
Further, I would like to note that a typical granite rock, for which you may have as a countertop, may have a better distribution than most HREE deposits, albeit its grade is trace. Thus, in my opinion, it would be very misleading to discuss REE distribution without mentioning grade specifically because those two factors are intimately intertwined. To this effect, you may notice how many HREE deposits rarely discuss grade when discussing REE distribution; because they occupy the lower grade spectrum in the REE space.
Lastly, I consider the comments on supply/demand the pot calling the kettle black. Only three HREEs have ready markets, that being terbium (Tb), dysprosium (Dy), and yttrium (Y). The remaining five (Er, Ho, Tm, Yb, and Lu) have very tiny markets in comparison and may not sell for some time after being processed, if at all. For these reasons, those five elements are typically not included in an economic evaluation; however, many HREE companies will include several (or all) of them for some reason. I expect it is because they have more appreciable amounts than an LREE company; however, if the market is not there for these elements, it is not there. Therefore, assigning these five HREEs a value in an economic assessment may be “wishful thinking”, and certainly not a conservative approach.
Further, europium (Eu) is not an HREE and any HREE company that is claiming they have appreciable amounts is in error. Europium is preferentially removed from granitic hosted HREE deposits (dominant HREE deposit host rock type) due to the chemical composition of the magma and mechanisms involved that form such deposits. This is done through a process of substitution whereby Eu2+ will substitute for Ca2+ in the early forming feldspar minerals (plagioclase) during solidification of the magma; thus, removing Eu from the magma that still contains all the other REEs in their normal proportions. The remaining magma then solidifies, containing far less Eu, which is expressed as a ‘negative europium anomaly’ in relation to the other un-affected REEs. Therefore, most HREE deposits are depleted in this highest priced, critical element (e.g. Avalon – Nechalacho Deposit, Quest – B Zone Deposit, Ucore – Bokan Mountain Deposit, Tasman – Norra Kärr Deposit, Matamec – Kipawa Deposit etc.). This process does not occur during the formation of carbonatites as feldspar is very rare in that source