The following is a summary of an interview done with James Engdahl last year. You can hear or read the full interview at:
The advantages to first movers:
-- the shortfall in the midterm is in rare earth magnet elements. And the positive impact of the fact that there are many rare earth companies will be to show the end users that there will not be a supply shortage overall going forward, and it will be a handful of first movers that will be the major players in this game
-- We are one of those first movers, and you will see the effect of this as it becomes harder and harder for juniors to find the huge capital requirements to get some mines to production.
-- The other key will be separation technology, and unless you are integrated already, you will have problems getting off-take agreements, including take or pay contracts from end users, which will be a strong requirement for the financing required
The benefits to GWG of its integrated mine-to-market business model:
-- Our mine-to-market model is focused primarily on the magnet sector of the industry, but will expand as we get to production and work to get more value out of other elements. But it starts at the mining exploration stage where we will end up producing a mixed rare earth chloride. From there it will go into our separation facility, separating the rare earths out to the various elements at various purity levels of each as per our customer requests
-- After this phase, we then will send the magnet rare earth elements, such as neodymium, samarium, terbium and some lanthanum to our Less Common Metals plant in the UK, where we will make the oxides into metals and then, further into alloys, selling it to our magnet maker customers of the world as an alloy. We will not be making magnets, as we feel that would mean we would be competing with our major Customers
-- The rest of the elements will then be sold off as some form of an oxide such as samarium and lanthanum to end users. We will also have other heavy rare earths that will be sold off as well
-- This integrated model is key to minimising commodity risk and ensuring our customers have a non-Chinese source of material
-- LCM is really our crown jewel as it produces high quality alloys and has done so for the past 20 years. Our customers rely on them again and again. That makes us unique, as you must have a high quality product that the end users value. And Dave Kennedy, Ian Higgins and Dave Murphy and their team, have created one of the best reputations in the business from a very unique facility in the western world. They have created trust and respect from end users and our loyal customers. We will more clearly see the benefits when we are able to provide our own mine to production to LCM
-- What attracted us there was when we discovered that our Hoidas Lake project was going to be delayed and the concern that China would be closing the door to exports. We were looking for a project that we felt we could bring into production sooner rather than later and meet the demands that we have from our clients.
-- Steenkampskraal was fully permitted to be put back into production as a rare earth mine as opposed. We could see production in very few years rather than five or six years from other sources
-- Steenkampskraal coming into production will allow LCM to expand from its present production of around 600 tons per year of alloy to around 3,500 tons over the next two to three years, once we’re able to separate the rare earth
-- It will substantially change LCM’s input costs when taking into account our fully integrated model, and it will allow them to be able to compete globally with any producer
Expansion at LCM and customers:
-- We’ve just commissioned our first new furnace for expansion. As well, we moved into a much larger facility that allows us to add three more furnaces over the next couple of years to get production capacity that has been requested by our long-term customers at Aichi Steel, Toyota Group Company and Vacuumschmelze
-- continues to be a project that could be moved forward to production, but at a pace that will be dictated by available capital to do so, as the majority of our cash is focused strictly on Steenkampskraal and LCM over the next 18 months.
-- We will be looking to ways to be able to move these projects forward through other types of deals such as joint ventures that don’t affect the capital that’s earmarked for our major project