Monday, November 8, 2010

Rare Earths: What's in Your Mine? (MCP; REE; RES.tsxv; AVL.TO)

Very, very smart. Molycorp shareholders should read through to the comments.
From Technology Metals Research:

Review Of A Proposed New Method For Evaluating Rare-Earth Deposits
The Russian Academy of Sciences publishes a journal called “Geology of Ore Deposits“, which is available in both English and Russian language format. In the most recent edition of the journal (yet to appear online), Dr. Vladimir Seredin published an intriguing paper titled “A New Method for Primary Evaluation of the Outlook for Rare Earth Element Ores” [1]. Dr. Seredin works under the auspices of the Academy’s Institute of Geology of Ore Deposits, Petrography, Mineralogy, and Geochemistry, based in Moscow.
The author starts by covering an issue on which I have also previously written – in an article, in the interests of full disclosure, which is cited in this paper  - specifically the somewhat-arbitrary classification of rare earth elements as “light” and “heavy” or even “middle”. The paper does a good job in reviewing the various perspectives on this point, and the advantages and disadvantages to each approach, as it relates to evaluating the prospects for any given rare-earth deposit.
The paper then goes on to describe the proposed new method of ore-body evaluation, using what Dr. Seredin calls the outlook coefficient, Koutl, for each rare-earth ore deposit. This coefficient is a ratio of the relative presence of two groups of rare-earth elements (REEs) in each deposit:
  • Those REEs whose future demand is likely to outstrip supply (referred to as “critical” REEs), and
  • Those REEs who future supply is likely to be in excess of demand (referred to as “excessive” REEs).
Dr. Seredin uses forecast data published by Dudley Kingsnorth of IMCOA to determine which of the rare earths fall into which category. There is a third group of REEs that is not used in the coefficient – specifically the remaining REEs that are likely to be in balance (referred to as the “uncritical” REEs).
The paper defines Nd, Eu, Tb, Dy, Er and Y as being critical REEs, and defines Ce, Ho, Tm, Yb and Lu as being excessive REEs. The outlook coefficient is defined as the ratio:
(critical REEs as a fraction of total REEs present) : (excessive REEs as a fraction of total REEs present)
The author goes on to then categorize 40 different rare-earth deposits, by comparing the outlook coefficient for each deposit to the critical REEs present as a percentage of total REEs present (REEdef). The deposits are further categorized by type of deposit. The resulting figure is shown below, extracted from Dr. Seredin’s paper, with his original description of the graph:

Classification of ore objects by outlook for individual REE composition [1]. (1) Hydrothermal and magmatic ores related to carbonatite, alkaline, and alkali-granite complexes; (2) hydrothermal ores presumably related to mafic magmatism; (3, 4) placer deposits: (3) monazite and (4) xenotime; (5, 6) chemogenic sedimentary ores: (5) ferromagnesian nodules and crusts of ocean floor and (6) fish bone detritus replaced with apatite; (7) supergene clay ores in mantles of weathering; (8) hydrothermal clay ores, products of argillic alteration; (9) polygenetic metalliferous coals; (10) REE objects of unspecified origin.
Clusters of ore objects distinguished by outlook for REE composition (numerals in figure): I, unpromising; II, promising; III, highly promising.
Ore objects (numerals in figure): 1, Bayan-Obo, China; 2, Mountain Pass, USA; 3, Lovozero (loparite ore), Russia; 4, Bear Lodge, USA; 5, Mount Weld, Australia; 6, Kukisvumchorr, Russia; 7, Steenkampskraal, South Africa; 8, Hoidas Lake, Canada; 9, Nolans, Australia; 10, Thor Lake (upper ore zone), Canada; 11, Maoniuping, China; 12. Tomtor, Russia; 13, Dubbo, Australia; 14, Thor Lake (lower ore zone), Canada; 15, Benjamin River, Canada; 16, Lovozero (eudialyte ore), Russia; 17, Vergenoeg (apatite–magnetite ore), South Africa; 18, Kutessay II, Kyrgyzstan; 19, Lemhi Pass, USA; 20, Kichera, Russia; 21, Brockman, Australia; 22, Vergenoeg (fluorite ore); 23, Abramovka (kimuraite–lanthanite ore), Russia; 24, Deep Sands, USA; 25, Placers of Malaysia; 26, Northwestern Pacific Ocean; 28, Huashan; 29, Guposhan; 30, Heling; 31, Longnan, China; 32, Tenyakovo, Russia; 33, Dolna Ves, Slovakia; 34, Abramovka, Russia; 35, Zhijin, China; 36, Aduun-Chuluun, Mongolia; 37, Rakovka, 38, Pavlovka, 39, Vanchinsk, Russia; 40, Douglas River (xenotime ore), Canada.
Dr. Seredin categorizes the three broad “clusters” by their potential for exploitation on the basis of the proportion of critical REEs present.
I took the liberty of double-checking the approach here, by taking the data published in the 13 most advanced rare-earth projects currently underway (i.e. those with a mineral resource whose definition is compliant with 43-101 or JORC guidelines, and / or which have been historically mined and have reliable associated data). The results can be seen below, and indeed match the placement used by Dr. Seredin in his analysis (click to enlarge):

One potential criticism of the approach in the paper is that the outlook coefficient does not directly take into account the economic feasibility of exploiting any of these rare-earth deposits, challenges associated with infrastructure, logistics or the extractive metallurgy required to develop these projects. It would be useful to be able to factor such parameters into such a coefficient, though of course this might bring further complications. The author does acknowledge these limitations in the paper, also adding that
“the level of radioactivity in any given deposit, and the environmental consequences of mining and processing of ore also exert an effect on the eventual estimate of the outlook of a deposit for its development. Therefore, the proposed method of evaluation based on relationships between demand and supply of individual REE should be regarded as only preliminary”.
In addition, one might argue that certain REEs should be categorized differently than the ways proposed. For example, in his original categorization, Dr. Seredin placed Pr in the middle-of-the-road “uncritical” group, when it might be considered for placement in the “excessive” group by virtue of its likely supply to demand ratio being higher than that of Ce. Eu was placed in the “critical” group, even though its likely supply to demand ratio is very close to that of La, which was designated as an “uncritical” REE....MORE