What is the future of the Rare Earths sector?


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Objective Capital's Global Resources Investment Forum 2012
Ironmongers' Hall, City of London
25 September 2012
Speaker: Gary Billingsley, Great Western Minerals

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  • From a handful of active projects a few years ago to over 300 today
  • What is the future of the Rare Earths sector?

    1. GLOBAL RESOURCESINVESTMENT FORUM What is the future of the Rare Earths sector? Gary Billingsley – Executive Chairman, Great Western MineralsIRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY, 25 SEPTEMBER 2012www.ObjectiveCapitalConferences.com
    2. Rare Earths: What Does The Future Hold?Objective Capital ConferencesLondon, UK Sept. 25th, 2012 TSX.V: GWG OTCQX: GWMGF info@gwmg.ca www.gwmg.ca
    3. Cautionary Statement on Forward Looking Statements 3
    4. Perspective: Global RE Projects August 2012 441 Projects…269 Companies…37 Countries 43 Advanced Projects 40 Companies 13 CountriesSource: TMR, GWMG 4
    5. Perspective: Global Rare Earth DemandKey elements of anticipated global demand for Rare Earth Oxides: 2012 Demand 2016 Demand Increase Tonnes (China%) Tonnes (China%)Permanent Magnets 23,000 (78%) 36,000 (78%) 56%NiMH Batteries 22,500 (73%) 30,000 (77%) 33%Catalysts 22,000 (58%) 25,000 (62%) 14%Phosphors 9,000 (67%) 12,000 (71%) 33%Total REO 115,000 160,000 39%Chinese Demand 77,000(67%) 104,000(65%) 35%By 2016, the most significant surpluses (%supply>demand) of REO’s will include:Lanthanum 41%Cerium 25%Samarium 275%By 2016, the most significant shortages (%demand>supply) of R EO’s will include:Europium 30%Terbium 55%Dysprosium 28%Yttrium 35% Source: IMCOA Aug 2012 5
    6. Perspective: Global Rare Earth SupplyKey locations of current REE Reserves and Production include (in tonnes): Reserves (t) Production (2011 t)United States 13,120,000 0Australia 1,700,000 0China 55,220,000(48%) 138,800(97%)Others (CIS, India etc) 44,280,000 3,600Global Total (rounded) 114,000,000 142,400Source: USGS January 2012Chinese Take On World ResourcesUnited States 13,000,000Australia 5,400,000China 18,590,000 (23%)Others 44,100,000Global Total 81,090,000Source: China Rare Earth Industry Association August 2012 6
    7. Perspective: Global Rare Earth SupplyThe history of the Chinese export quotas is as follows: Quota (Tonnes) % Change Over Prior Year2005 65,6092006 61,821 - 6%2007 60,074 - 3%2008 56,939 - 5%2009 50,145 -12%2010 30,258 -40%2011 30,184 -0.2%2012 30,996 + 3% LRE 27,122 M/HRE 3,874However…Only 18,600t of the 30,184t quota in2011 was exported! 7
    8. Perspective: REO PricingCeO2 Dy2O3 Eu2O3 Nd2O3 8
    9. What Else Is Happening In China?• Fine-tuning the quota: now split into LRE and MLE/HRE quantities. Companies now required to pass pollution control inspections.• Mining licenses reduced: In 2012 only 67 mining licenses issued down from 113 in 2011. Ionic clay licenses (included in the previous total) were down to 45 from 88 the year before.• Industry consolidation: in north China, Baotou Steel Rare Earths has announced forming a conglomerate to protect resources and improve vertical integration in the industry. This includes production, R&D, trading, stockpiling and capital management.• Baotou Rare Earths Exchange: established Sept 2012, founders control over 80% of production and export quotas. The Exchange will attempt to stabilize pricing locally and internationally. 9
    10. What Is Happening In The ROW?• Exploration and development still ongoing but slowing down.• More effort being put into HREE-enriched deposits• Third party separation plants are being built: already established in Vietnam, Laos and Thailand, India and announced in North America.• Initiatives focused on substitution, technical design, and recycling still ongoing 10
    11. So Is The Panic Over? What next?• Generally yes, but there is still concern over HREE.• Vertical integration still necessary outside China as there are still not enough third party processors.• Prices are still coming down. The Chinese are not interested in seeing prices drop too low. Whether their price control efforts work remains to be seen• If the price of LREE drops too far it effectively increases the cost of producing Nd/Pr and HREE.• Some substitution/technical advancement/recycling will be successful, but in most cases it will be hard to get rid of rare earths• HREE projects need to accelerate progress and LREE projects may not succeed. 11
    12. W Vertically Integrate? hyUpstream viewpoint: • Mining not profitable in times of low prices • Mining does not produce a saleable product outside China • Vertical integration results in saleable products and increased potential for profit when prices are lowDownstream viewpoint: • Dependency on China reduces security of supply for customers • Competitive pricing is difficult when purchasing raw materials from China • Vertical integration allows greater flexibility in fixing margins, increasing profitability and competitiveness while offering customers security of supply 12
    13. GWMG Corporate Structure Great Western Minerals Group Ltd. Various % 100% 100% 75% 100% 100% North (Planned) GQD American Rareco Marketing Joint LCM GWTI Exploration Co. Venture 74% B.E.E.Hoidas Lake (26%)Douglas River Tax Effective Steenkampskraal Birkenhead, Troy,Red Wine SKK Location Region U.KBenjamin River Michigan (Steenkampskraal) 13
    14. GWMG’s Fully Integrated Model GWMG’s fully integrated model adds a sustainable competitive advantage Exploration • Drilling Results & Mine Development Plan Mining • Ore Mixed Chloride Production • Concentrate and Mixed Rare Earth Chloride Solvent Extraction Separation • Individual Rare Earth Oxides Metal Making • High Purity Rare Earth Metals Alloy Production • Magnet alloys, super-alloys & other end-user metal alloys Industry Product Manufacturing • Industrial, Consumer & Military End Products 14
    15. GWMG: Maintaining Control• Mining: • GWMG owns 74% of the SKK mining operation • GWMG owns 100% of the SKK mine output• Mixed Chloride Production: • GWMG owns 100% of chloride production plant• Solvent Extraction Separation: • GWMG owns 75% of separation plant, 100% of oxide production through GWMG marketing company • Marketing company has chloride separated on a tolling basis, retaining 100% GWMG control• Metal Making: • GWMG owns 100% of metal making that buys GWMG produced oxides• Alloy Production: • GWMG owns 100% of LCM and GWTI that manufacture alloys from GWMG owned metal 15
    16. GWMG MilestonesGWMG focuses on major milestones during 2012/ 2013:• Operate with expanded furnace capacity at LCM.• Commence mining at Steenkampskraal• Q3 2012 scheduled receipt of chloride production plant and separation plant CapEx, OpEx and timelines.• Q4 2012 scheduled completion of Preliminary Economic Assessment.• EPCM for Mixed Chloride Production Plant for construction.• EPCM for Separation Plant for construction. 16
    17. Thank YouObjective Capital Conferences September 25th, 2012 TSX.V: GWG OTCQX: GWMGF info@gwmg.ca www.gwmg.ca