Searching for the HREE winners

Yesterday I posted some analysis by David Rijkers on questions of metallurgy and economics as they relate to the range of rare earth projects. This was by way of introduction to the main thrust of his report for Australian investment house D.J. Carmichael as it relates to one particular company. But we also have views on other REE companies in Australia out from other local analysts.

David Rijkers believes that one Australian company has succeeded where most others have failed. That company is Northern Minerals (ASX:NTU) – and, while Mr Rijkers has covered this company in an earlier report, his latest note makes the point that it is the case that, with most deposits, the very low quantities of heavy rare earths are the uneconomic portion of those projects. Assuming that some or all of the HREE are unmineable, that will have a significantly adverse impact on the actual basket price for a concentrate or carbonite product.

On the contrary,in his view, NTU’s Brown Range project in Australia boasts one of the highest REE distributions globally. Not only that, but Rijkers says the company has a proven method for producing a concentrate grade of 42 per cent, very low capital requirements, short development timetable and an end product that includes significant quantities of dysprosium and yttrium. He goes further: Browns Range could, in his view, “be one of the most significant discoveries in recent memory”.

Rijkers notes again that Lynas Corp (ASX:LYC) is the second largest shareholder on NTU’s register and that this is LYC’s only upstream investment. He also believes NTU will have takeover appeal for Lynas (presumably because its HREE content is complementary to Lynas’ LREE weighting). NTU is expecting to derive over half its revenue from dysprosium and he sees the company as one of five dysprosium producers most likely to succeed – the others being Alkane Resources, Great Western Mining, Lynas and Rare Element Resouces.

He also sees TUC Resources (ASX:TUC) as being a likely candidate due to its HREE potential in Australia‘s Northern Territory.

However, as the comments posted regularly on RareMetalBlog attest, there is considerable disagreement about which companies will succeed – and certainly how many will succeed – so that these and other comments in this post remain views of the analysts concerned. As Fox News says, we report, you decide.

Another Perth-based analyst, Peter Strachan of StockAnalysis, has also weighed in on TUC in his weekly client note. In relation to that company’s drop from a 52-week high of 49c in March to a Friday close at 14.5c, Strachan notes that TUC “has experienced very strong headwinds in the market”. He writes that the company’s “low grade but high value” Stromberg deposit appears to be cut off by faulting down dip, and that the prices of REE have continued to decline due to the economic slowdown in Europe.

And a third Perth analyst, Tony Parry at Resource Capital Research, thinks that investors still probably don’t realise fully the fact that Hastings Rare Metals (ASX:HAS) has, at its eponymous project in Western Australia, a distribution whereby 85 per cent of the REE present are heavies. In fact, he produces a bar chart showing the ratio of HREE to total REE in selected deposits. Unfortunately, he does not place Northern Minerals on this chart, but of the ones included Hastings is the highest with its 85 per cent HREE weighting.

Then you go down to about a 50 per cent weighting with Norra Karr owned by Tasman Metals (TSX.V:TSM), followed by Kutessay II owned by Stans Energy (TSX.V:HRE) and then, just above 40 per cent, comes Strange Lake owned by Quest Rare Minerals (TSX.V:QRM) and Zeus-Kipawa owned by Matamec Exploration (TSX.V:MAT). The only other one listed by Parry with above 20 per cent HREE mix is Alkane Resources (ASX:ALK).

Parry writes: “There are many REO hopefuls around the globe, most of which will not be able to squeeze into a relatively low tonnage market over the next decade.” He says that HAS holds a better chance than most because of the dominance in its deposit of dysprosium and yttrium.

Disclaimer: Neither RareMetalBlog nor the writer imply any investment recommendation with regard to any stock mentioned. These analyst recommendations are the views of the analysts concerned and are reported solely for the interest of readers. Investors should seek professional advice regarding any company mentioned in this report.