The 2010 PDAC was host the Critical Metals Emergency Summit hosted by Zimtu Capital Corp. (TSXv: ZC). Presenters included John Kaiser, Jack Lifton, David Diamond and Molycorp.

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Critical Issues In Critical Metals
A Toronto Conference Considers The Future of These High-Tech Metals
~ By Kevin Michael Grace - March 10, 2011
The 2010 Prospectors and Developers Association of Canada convention creating substitutes for critical metals from more readily-available minerals,
attracted 33,000 to Toronto this month. One of its most important events Kaiser says this would take too long. “In the rare earth sector we’ve got a
was held March 8 before an invited audience of only a couple hundred: two-year gap where there’s basically nothing coming to take the place of
the Critical Metals Emergency Summit, hosted by Zimtu Capital Corp. the reduced growth from China and before Western mines such as Lynas
“Emergency”? Well, this designation is entirely appropriate given the critical and Molycorp come on stream. And there is a further gap before the later
importance of rare earths and similar metals to the high-tech sector and producers come onstream in 2015 to 2016. So the industry is going to have
thus the future of the world economy. to do without.”
John Kaiser of Kaiser Research Online has defined critical metals as those Over time, research and development will develop substitutes, but even
“which tend to be incremental but critical inputs to end products whose total then some metals are truly irreplaceable. According to Kaiser, “A classic
value vastly exceeds their costs.” And their total value of late has vastly ex- example of ‘unobtainium’ is scandium, a magic metal which makes very
ceeded their availability as well, since China, which produces 97% of world strong aluminum alloys that could replace entire aircraft fleets with much
rare earths, has introduced export quotas and much stronger environmental cheaper, lighter and stronger aircraft. Except scandium is so low-grade and
regulation of its production. so expensive to extract that it just isn’t being produced at all.”
Presenters included Zhanheng Chen of the Chinese Society of Rare Presenter Matt Gowing of Mackie Research Capital reports that a Canadian
Earths, Jack Lifton of Technology Metals Research, David Diamond of company, Orbite Exploration, operating in the Gaspé Peninsula, has devel-
the US Department of Energy, Critical Metals Task Force and Molycorp oped a process they claim will allow them to extract scandium from clay and
Minerals. Attendees included many other critical metals companies and become “a very large producer, if they derisk the technology.”
representatives from such financial institutions as Ernst & Young, Pope &
Company, Northern Securities, Resource Capital Funds, Byron Capital Gowing told the summit that “inves-
“
Markets, Canaccord Capital, Mackie Research Capital and Laurentian tors need to be much more discerning
Bank Securities. than they were in 2010.” Specifically,
“We’re looking for companies with
heavy rare earths exposure.” He says
We’re looking for companies that Lynas and Molycorp deposits
are “97%-plus comprised of light
with heavy rare earths exposure rare earths. Heavy rare earths are
where the demand is the strongest,
—Matt Gowing, Mackie Research but there’s a scarcity.” Heavies are
critical to the production of industrial
magnets for motors, phosphors, LCD
screens and LED lights.
John Kaiser’s presentation focused on security of supply, which, he argues,
“has become much more prominent as the world feels the repercussions According to Gowing, investors should take the profits they made in the
of the democracy revolutions we are seeing in North Africa and the Middle sector in 2010 and put them into heavy rare earth companies such as
East and the implications these have for oil.” The oil shock, Kaiser says, Avalon Rare Metals Inc and Quest Rare Minerals Ltd. He says of Avalon,
“has turned people’s attention back to the obscure metals we call critical, “They have the second-largest heavy rare earth deposit in the world and will
which have a very skewed distribution in the world. The rare earths situation be the next to go into production. They are fully financed to a full feasibility
has only worsened in the past two months [since the Vancouver critical met- study in 2012.”
als symposium in January], although China’s export quota in the first half of
this year was double what it was in the second half of last year. But prices There has been much excitement in the critical metals world regarding
have not come down; they have in fact shot higher, even in China.” vertical integration, of mining companies seeking downstream applications
for their metals. Jim Powell of Laurentian Bank Securities says, “Molycorp is
If security of supply is crucial, wouldn’t miners be best served by concen- doing a mine-to-magnet thing. They’re doing a lot of research into the use of
trating on Canada and the United States. “That would be the rational ap- cerium, a light rare earth which is a very low value material but very preva-
proach,” Kaiser responds. “But it would require us to think ahead in strategic lent in their deposit. It’s probably a good thing for them to do, for the most
terms. Over the last 20 years the process has been to find the highest- part I’m not a fan of companies that try to buy their suppliers or become
grade deposit that can be developed the cheapest. To be in jurisdictions their own suppliers.” He explains, “If you do this, you’re sort of captive and
where there are much higher permitting hurdles and perhaps lower-grade forced to buy from your own supply, as well as being forced to find uses for
deposits has been regarded as sort of in violation of the principles of the your supply, instead of buying from a lower-cost supplier.”
globalized free market.
In any event, Powell predicts that “Molycorp and Lynas will create enough
Kaiser adds, however, “The global free market is under siege right now. For supply to help companies that use rare earths expand their use into new ap-
instance, South Africa just announced it is creating a state mining company plications. Hopefully, they will also stabilize prices.”
which will have a partial interest in all operations.” As for the possibility of
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