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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What is the future of the Rare Earths sector?
1. GLOBAL RESOURCES
INVESTMENT FORUM
What is the future of the Rare Earths sector?
Gary Billingsley – Executive Chairman, Great Western Minerals
IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY, 25 SEPTEMBER 2012
www.ObjectiveCapitalConferences.com
2. Rare Earths: What Does The Future Hold?
Objective Capital Conferences
London, UK Sept. 25th, 2012
TSX.V: GWG OTCQX: GWMGF info@gwmg.ca www.gwmg.ca
4. Perspective: Global RE Projects August 2012
441 Projects…269 Companies…37 Countries
43 Advanced Projects
40 Companies
13 Countries
Source: TMR, GWMG
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5. Perspective: Global Rare Earth Demand
Key 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
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6. Perspective: Global Rare Earth Supply
Key locations of current REE Reserves and Production include (in tonnes):
Reserves (t) Production (2011 t)
United States 13,120,000 0
Australia 1,700,000 0
China 55,220,000(48%) 138,800(97%)
Others (CIS, India etc) 44,280,000 3,600
Global Total (rounded) 114,000,000 142,400
Source: USGS January 2012
Chinese Take On World Resources
United States 13,000,000
Australia 5,400,000
China 18,590,000 (23%)
Others 44,100,000
Global Total 81,090,000
Source: China Rare Earth Industry Association August 2012
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7. Perspective: Global Rare Earth Supply
The history of the Chinese export quotas is as follows:
Quota (Tonnes) % Change Over Prior Year
2005 65,609
2006 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 3,874
However…
Only 18,600t of the 30,184t quota in
2011 was exported!
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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.
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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
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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.
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12. W Vertically Integrate?
hy
Upstream 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 low
Downstream 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
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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.K
Benjamin River Michigan
(Steenkampskraal)
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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
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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
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16. GWMG Milestones
GWMG 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.
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17. Thank You
Objective Capital Conferences September 25th, 2012
TSX.V: GWG OTCQX: GWMGF info@gwmg.ca www.gwmg.ca
Editor's Notes
From a handful of active projects a few years ago to over 300 today