Monetizing monazite

Global supplies of rare earth elements (REEs) have been threatened ever since China (which produces over 90% of global REEs) imposed export quotas in mid-2010. Affecting virtually everyone outside of China, the biggest impact was felt by the largest industrial nations, primarily those heavy in electronics and automotive manufacturing: Japan, Korea, US and Germany. In the aftermath, increased attention was drawn to potential producers like MolyCorp (NYE: MCP) and Lynas Corporation (PK: LYSCF) (ASX: LYC), while the sector was viewed in need of a savior outside of China. Among the juniors aiming to join the fray, Medallion Resources (TSX-V:MDL) (OTCQX:MLLOF) has proposed a unique strategy to gain low-cost production in the very near term.

By rethinking the typical exploration process that involves identifying an REE signature, initiating exploration, grabbing samples and then drilling, Medallion has posed a historically significant solution in the form of monazite. By processing the tailings piles from monazite-rich mineral sand mining operations, Medallion’s alternative method to meet REE supply needs is set to utilize historically proven metallurgical methods to derive rare earth elements from monazite, which contains 60% REEs.

THINKING OUTSIDE THE MINE

Unlike rare earth explorers who are on a timeline that could span over 10 years, the Medallion strategy is looking to bypass the costs and risk associated with establishing a mine. Typically a rare earth mine, when looking at the pre-feasibility assessments of some of the Canadian Juniors, ranges in cost in the vicinity of $200-600 million.

As well, while good grades of rare earths in the 4-6% range are available in some deposits, the economics of actually separating the REEs from the host minerals can be an insurmountable barrier. Unless a property comes with proven metallurgy like that found at MolyCorp’s Mountain Pass Mine, establishing a mine has major hurdles.

Factoring in these complications, Medallion saw a lot of prospects and targets among other juniors that didn’t have a chance of establishing a producing mine in less than 10 years. With some exceptions like Avalon Rare Metals’ (TSX:AVL) (AMEX:AVL) Thor Lake Project, and Rare Element Resources’ (TSX:RES) (NYSE:REE) Bear Lodge Project, which are further along in development, there aren’t too many projects that will reach completion in time to make a difference.

Instead of directly competing with junior explorers, Medallion is taking a shortcut that could provide production within a much shorter timeframe. The solution, according to Medallion, comes from a proven method in use for over a hundred years. Medallion is looking to derive REEs from monazite, which occurs in mineral sands around the world, and is most often associated with titanium and zircon mining. By sourcing monazite supplies from these same producers, Medallion seeks to offer a cost-effective waste disposal alternative for mining operations and to obtain REEs at pennies on the dollar.

HISTORY OF REE USAGE AND SUPPLY

The North American rare earth sector’s story begins in 1949. After rare earth mineralization in the form of bastnaesite was discovered at Mountain Pass in California, MolyCorp. (known as “Molybdenum Corporation of America”) purchased the mineral rights.

By 1965, the demand for Europium Oxide (a REE) grew with the advent of the colour television (its phosphor created the red tint on the tv screen). In response, Europium recovery facilities were built, and the market went on to thrive for decades.

Newer uses for other REEs emerged, with a crescendo of “heavy” REE production coming in the early 1980s. At about this time, China also entered the market as a significant producer of the elements, later to surpass the world and take over the sector with over 90% of REE production by the 2000s.

Today, there are very few producers of rare earths outside of China.

MEDALLION’S TARGETS

Unlike their junior counterparts that stake ground, explore and drill en route to a mine, Medallion stands apart with its unique attempt to reach production. In order to establish a source of monazite, the company is targeting the tailings piles from existing producers of heavy minerals which can theoretically be shipped from anywhere in the world.

The lion’s share of the world’s mineral sands production comes from the Indian Ocean Basin. This area houses production from Africa, South Asia and Australia. As well, there currently exists extraction of rare earths from monazite in India, Brazil and China.

Site selection is a key factor, with the goal of establishing a large-scale facility capable of processing tens of thousands of pounds of rare earth oxides per year. Recently, the well-recognized energy, nuclear and environmental consultancy, SENES Consultants Limited, commissioned a report that confirms the safety and effectiveness of Medallion’s plans for a large-scale production rare-earth extraction facility in compliance with all major national and international mining and environmental safety standards. With the proper operational controls and the use of modern handling and disposal systems, Medallion can confidently proceed with its fast-track strategy to source and procure the substantial amount of available monazite.

Next, Medallion would seek to find an area with a workforce that has the expertise, workable licensing and proper infrastructure capable of hosting such an operation. If its goals are accomplished the company would then have the largest monazite facility ever constructed, and would soon move to selling to specialty customers that include rare earth separators and refiners, among others.

With an ever-present supply threat from China, strategic buyers such as electronics manufacturers in places like Japan, are looking for supplies from outside China’s grasp. Add in the ever-present drive towards implementing greater amounts of green energy across the developed world, and the demand for the REEs required for these technologies increases further.

MANAGEMENT

Built around the expertise brought to the company through Chairman and CEO Dr. Bill Bird, Medallion is comprised of a team familiar with the rare earth sector. Formerly the CEO of Rare Element Resources, Bird helped to develop the Bear Lodge Property before exiting in 2007 to devote his energy to Medallion.

Working with President Don Lay, a strategy for reaching rare earth production in a timely fashion at a low cost was hatched. Medallion has since brought in a heavily qualified team of advisors and geologists that includes rare earth expert Dr. Tony Mariano and Bob Roe with over 20 years of titanium experience and a valuable knowledge of mineral sands all over the globe.

Increasingly lively and vocal on the new approach, Medallion’s team of experts is confident in the company’s ability to reach near-term production at a low cost to get a supply of rare earths to market quicker than its competitors.

G. Joel Chury
The Bottom Line Report