Strategy
Q1.
Why is Medallion focusing on monazite?
Accessing the by-product monazite does not require that Medallion conduct exploration, drilling or resource calculations or fund and develop mining, crushing, grinding or most milling processes. Monazite is a single mineral with a proven, simple metallurgical process and has successfully produced commercial rare earths for more than 100 years. No other rare-earth mineral, except bastnaesite, has such a record of commercial success. These huge cost-saving and time-saving attributes offer an ideal solution to critical rare-earth supply issues.
Medallion’s “first-mover” strategy challenges the current rare-earth-exploration practice, which focuses on hard-rock rare-earth occurrences that unfortunately often come with metallurgical (mineral processing) and infrastructure challenges. Medallion firmly believes that global supply shortages cannot be met on a timely basis through existing known hard-rock occurrences. Mine development for these occurrences is a long-term process, often fraught with delays and significant risks, and the rare-earth metallurgy is complex and untested, which can add to the delays.
Q2.
Why is Medallion focusing on heavy-mineral-sands deposits?
Extracting rare earths from monazite, found in heavy-mineral-sands deposits, can be done relatively quickly and inexpensively. The huge heavy-mineral-sands industry provides the world’s main source of titanium and zirconium. Many of the mines maintain reserves in excess of one billion tonnes, which translates into 20 to 40 years of production. This means that there is an immediate and a long-term source for the key by-product, the rare-earth-bearing monazite. Presently, monazite remains in the waste stream and is usually discarded during the heavy-mineral-sands processing flow.
Q3.
What’s stopping the heavy-mineral-sands producers from getting into the rare-earth business?
Major heavy-mineral-sands producers are interested in the rare-earth industry, but only to the extent that they can make money selling monazite. They view the rare-earth industry as complex and, on their scale, not as economically worthwhile. They are focused on titanium minerals and, secondarily, on zircon. Also rare-earth extraction is a chemical process, which is a totally different business from the simple mechanical processes used for heavy-mineral-sands production.
Q4.
Why aren’t other junior explorers looking into mineral sands?
The short answer is, likely, just the inertia of conventional thinking. Junior miners generally look to develop properties from a grass-roots stage. Also, junior explorers are unfamiliar with the heavy-mineral-sands business. The newly forming, modern rare-earth-exploration industry lacks the broad-based technical expertise and experience required for exploration of the monazite by-product.
The past rare-earth exploration industry, along with the rest of the western rare-earth business, collapsed when China began selling cheap rare-earth products. In 2010, when China dramatically reduced its export quotas, the immediate need to launch a new rare-earth exploration and development industry was first met by junior-companies’ focused on known hard-rock occurrences. These known occurrences, which were discovered in the mid-20th Century during the uranium booms and before China’s rare-earth dominance, were targeted because they were easily available and they fit the junior-companies’ strategy of explore, drill and create a resource. Unfortunately, in many cases, these occurrences also required expensive solutions to complex metallurgy, huge investments for infrastructure and many years to get to production.
Given the depth of Medallion’s technical team, composed of the undisputed leaders and thinkers in the rare-earth exploration area, it recognized in 2009 that no company or rare-earth-project, with the possible exception of Molycorp’s Mountain Pass mine, seemed likely to solve the most critical REE-supply issues. Using this team’s wide-ranging knowledge of all aspects of the global-rare-earths industry, Medallion began evaluating and exploring untapped and ignored sources of rare earths. Medallion very quickly focused on the US Geological Survey’s statements that monazite could supply the world with most of its rare-earth needs.
Q5.
How does the new strategy fit with Chinese market dynamics?
The Chinese Government exerts significant control over the Chinese rare-earth industry and we assume this will continue. What we do know is that the quota system, with its two-tier pricing system (low prices for users within China and much higher prices for external users) will certainly stay in place. This pricing system encourages foreign manufacturers who depend on rare earths to relocate production in China, which is a stated goal of the government. Also, major state-controlled mining enterprises (Chinmetals, Baotao, Chinalco, and Jiangxi Copper Corporation), have been directed by the government to effectively buy up the many disparate, independent rare-earth mining companies. This will effectively consolidate the Chinese rare-earth industry. Many small or heavily-polluting operations are already being shut down. These actions are more likely to create tighter supplies going forward.
Medallion’s monazite strategy offers the potential for near-term, low-cost rare-earth production, which should be very profitable, as it sells into the higher-priced, non-Chinese marketplace. If China decides to lower its prices, Medallion expects that its low-cost production will still be very competitive. In any case, all major foreign companies that depend on rare earths are seeking reliable sources, which will encourage non-Chinese supply chain development. In this context, Medallion will be well-positioned.
Monazite
Q6.
What rare-earth elements are you targeting from the monazite concentrate?
Within the monazite concentrate, based on the average of four monazite beach sand deposits*, we expect to source 50-60% rare earths. The specific light- rare earth elements will include: Lanthanum, Cerium, Neodynium, Praseodymium, and Samarium. Primarily, the heavy-rare-earth-elements will include: Europium and Gadolinium. Minor amounts of other heavy-rare-earths also may occur.
* Source: USGS
Radioactivity
Q7.
I understand that monazite contains the radioactive element, thorium. Is this a problem?
Minor amounts of thorium are naturally present in monazite, which is slightly radioactive. In fact, all rare-earth-mineral producers must address the safe handling and disposal of the various wastes, including the radioactive elements thorium and uranium. Medallion’s monazite strategy could lead to production much more quickly than most rare-earth projects; so, it must be prepared to deal with these wastes. In January of 2012, SENES Consultants Limited, an internationally-recognized energy, nuclear and environmental consultancy, issued a report providing the positive radiological safety and environmental support needed for Medallion to confidently advance its plan for a monazite processing facility.
Approach
Q8.
Would you be doing any real mining at all? This sounds very cost-effective.
Medallion is currently working to secure monazite resources that will be shipped to our planned plant. There would be no mining involved. It will be necessary to upgrade the monazite-rich, mineral-sand by-product to an 80-90% monazite concentrate, which would then be chemically processed to extract the rare earths. This is a very cost-effective process, which bypasses the time consuming and costly exploration, mining and related permitting processes.
Q9.
Are you going to have these monazite sands shipped to you by tanker?
This is a likely scenario as virtually all mineral-sand properties are at sea-level with port accessibility.
Q10.
What are some of the factors you will need to consider when building your plant?
The major issues are those that exist for any chemical processing industry: good transportation infrastructure, power, local access to chemical supplies, governmental permitting and a stable, educated workforce.
Company Progress
Q11.
Have you finalized any agreements for these tailings yet?
As of the beginning of March 2012, the Company has not yet finalized any agreements. However, the Company is actively pursuing three separate initiatives to capitalize on the monazite opportunity:
1. Partner with a significant heavy-mineral-sands producer to construct and operate a monazite rare-earth-extraction plant.
2. Acquire monazite from several heavy-mineral-sands operators to feed a planned Medallion-owned 10,000-tonne-per-year rare-earth extraction plant.
3. Acquire heavy-mineral-sands properties.
Q12.
What is the timing of upcoming off-take agreements, selection of extraction-plant site and construction of plant?
Q13.
Are you going to sell any rare earths to China even though they produce so much of it?
China is the world’s largest producer, consumer and exporter of rare earths, so they will always play a role in the industry. That said, the rest of the world is searching for rare-earth supply and, therefore, it is logical for Medallion when seeking sales agreements to engage with American, European, Japanese and Korean entities.
Feasibility
Q14.
How does the company plan to fund its extraction plant?
That depends on a variety of factors. This includes possible investment tied to the location of the plant. Recently, a number of rare-earth projects have been funded, in part, by large industrial users or state-controlled resource companies such as Japan’s JOGMEC or Korea’s KORES. These completed agreements to fund rare-earth development have helped to secure rare-earth resources for their respective nation’s industries.
The economics of the plant are very robust so we could look at combinations of debt and appropriate equity financings.
Q15.
What are the processing costs?
Based on a 10,000-tonne-per-year rare-earth extraction plant, the estimated costs for processing are $5,000-10,000 per tonne of rare-earth carbonate produced. The total-rare-earth-carbonate product of this plant would have an estimated current value of approximately $23,000 per tonne.
Pricing
Q16.
Rare earth prices are off their highs. Is the sector on a down-leg?
Let’s first say that it is difficult to predict any market and the rare-earth markets are more difficult to predict than most. If we examine the supply of rare earths, it is clear that China is going to continue to limit both production and exports in the middle and long term.
China likely has two main concerns: (1) to ensure a sufficient rare-earth supply for its own industry (2) to obtain the highest prices for what it sells to the rest of the world. This of course will encourage the rest of the world to develop rare-earth sources.
Also, it is clear that the long-term demand for rare earths, given their uses, are very positive. Our feeling on pricing is that on a real-value pricing basis, rare earths are unlikely to go back to their historic lows; but, in the short and medium term, they are unlikely to surpass their artificial, politically induced highs of 2011. That’s the price range we’re currently in and, volatility notwithstanding for certain specific elements, we will probably stay in this current range for some time.
Q17.
With rare-earth prices off highs does it mean Medallion has missed its window?
Not at all. Medallion expects that its plan will work even if rare-earth prices decline substantially. By exploiting and accessing the by-product mineral monazite, the Company doesn’t have the related expenses of exploration, drilling, construction of a mine, mining the ore and grinding the ore. Our operating expenses will be much lower than the spate of current rare-earth, hard-rock projects in exploration and development. For capital costs, we estimate an investment of approximately $50 million, or so, to construct a rare-earth extraction plant capable of producing a concentrate containing 10,000 tonnes of rare-earth oxides annually.
Q18.
Why did you drop the Eden Lake property?
Medallion elected not to invest additional funds and effort in the exploration-stage Eden Lake property, located in Manitoba, Canada, because it did not offer, at this stage of its exploration, a near-term potential resource. We were looking for large, low-cost resources to exploit and initial exploration at Eden Lake did not show any potential for this. This decision allowed the Company to focus on its new strategy of acquiring existing rare-earth-bearing monazite resources.
Q19.
What are your plans with the Red Wine property?
The Red Wine peralkaline intrusive complex is clearly a significant occurrence of REEs. The 2011 work focused on evaluating at least three types of rare-earth mineralization, including the eudialyte mineralization, for which Red Wine is famous. In the 2010 samples where they were encountered, the other mineralization types were much higher grade than the eudialyte-bearing rocks. The Company plans to continue the Red Wine project with a limited exploration program, which will examine the higher-grade mineralization.
Q20.
If I have questions, who can I contact at Medallion?
We invite you to email your questions to us.
Contact Don Lay, President and Director, at info@medallionresources.com
or +1.604.681.9558
