The Great Western Minerals Contender in the Race to Rare Earth Vertical Integration

Did you read Jack Lifton’s near dissertation titled Rare Earth Bull (Part II): China, Molycorp, and the Attempt to return to 1984, about Molycorp (NYSE: MCP) and NEO Material Technologies Inc. (TSX: NEM). At 3700+ words, and a beautiful Sunday afternoon; may I add – I did.  This said, it was good enough to have Constantine E. Karayannopoulos President & CEO of Neo Material Technologies write Jack and me to request posting his comments.

In this compelling ‘document’ Jack provides a history lesson on the Chinese rare earth industry. The ‘chart’ Jack made clearly shows how these two companies coming together has created a vertically integrated rare earth company.

Speaking of debate, is it just me or is Great Western Minerals Group Ltd. (TSXV: GWG) getting a lot of buzz these day. Shares trading at around CDN$0.53* and a market capitalization of CDN$203.29* million, Great Western Minerals is also on its way to becoming a vertically integrated rare earth producer. Vertical integration refers to involvement in all steps of the supply chain – in the case of rare earths, this means from mine to market. For Great Western Minerals this translates into being involved in both upstream (mining, mixed chloride production, solvent extraction separation) and downstream processes (metal making and alloy production).

In case you weren’t aware that Great Western Minerals was involved in all these segments of the rare earth supply chain, here’s a brief overview of their operations:

Mining: 100% ownership of the South African Steenkampskraal (SKK) mine output and 74% ownership of the SKK mining operation; historical tests indicate that the SKK mine has one of the highest grade rare earth deposits with 16.74% rare earth oxide.

Mixed Chloride Production: 100% ownership of chloride production plant to be located at the SKK mine site; design work is in process and has been upgraded to allow a 12,000 tonnes per year capacity.

Solvent Extraction Separation: 75% ownership of separation plant, 100% of oxide production through Great Western Mineral Group (GWMG) marketing company; to be located in proximity of the SKK mine site with plans for a capacity expansion from 2,700 tonnes  per year capacity to 5,000 tonnes per year once operational.

Metal Making: 100% ownership of metal making which purchases oxides produced by GWMG.

Alloy Making: 100% ownership of Less Common Metals Ltd. (LCM) and Great Western Technologies Inc. (GWTI) that manufacture alloy from GWMG owned metal; focused on permanent magnet industry and is a significant supplier of neodymium-iron-boron (NdFeB) alloys; supplies 20% of the world’s samarium cobalt alloy; LCM’s facility in the UK is undergoing expansion with installation of new processes to allow for the production of rare earth metals.

With investors and industry followers keen on knowing when rare earth production will begin, Great Western Minerals has put forth a timeline for its operations and here are the key highlights:

  • 1st Half 2012: Complete NI 43-101 at SKK mine site
  • 2nd Half 2012: Launch mining operations at SKK
  • December 2012: Complete Mixed Chloride Production Plant
  • Early 2013: Complete Separation Plant
  • 1st Half 2013: Begin production with mining, mixed chloride production and separation.

In a news release dated March 5th, Great Western Minerals announced that LCM was granted a rare earth metal making environmental permit to carry out electrolytic production of rare earth metals. The permit issued by the United Kingdom Environmental Agency allows LCM to make rare earth metals in accordance with the highest of national environmental, health and safety standards. Jim Engdahl, President and CEO of GWMG said, “The process of fused salt electrolysis of rare earth oxides to metals increases the existing metal and alloy making capability at LCM into bulk production of metals, principally for the permanent magnet alloy business. This represents one more step toward GWMG being the most fully integrated rare earth company in the world. That, in turn, translates into additional self-sufficiency for our production cycle and certainty of supply for GWMG’s global customers.”

So why all of the fuss with the commentators on RareMetalBlog about Jim Engdahl stepping down as CEO with Great Western being an undeniable contender as a REE leader? We decided to contact Jim who in his usual eloquence stated the following: “It was always my intention to step down once funding to production had been secured. This said, I will remain as both a Director and President to insure that we continue to meet the goals of investors and shareholders alike.” For everyone that knows and respects Jim, as we do – Jim’s health is his priority. Undoubtedly the new CEO will be a compelling player…recruitment process will start shortly.

*Prices taken from Yahoo Finance at 11:35 EST 2012-03-19