TORONTO - A Canadian mining company is ready to dig into the lucrative market for rare earth minerals after reporting positive results from its key project in northern Quebec.
Quest Rare Minerals Ltd. (TSX:QRM) said providing a steady supply of the rare earth elements was critical as they are used in the production of high-tech electronics. But pricing and availablity are not always guaranteed when dealing with China, the world's largest source of the material.
"Rare earths are critical components on modern technologies that we take for granted right now _ smartphones, flat screens, compact fluorescent lighting, LED lighting, as well as in the automotive industry," said Peter Cashin, Quest's president and chief executive.
"I would say that they're important inputs into the new economy."
China has cut back exports in an attempt to boost prices and maintain reserves in some of the materials, despite rising global demand.
That has created both a need for outside supply and an opportunity for North American companies to enter into a market dominated by China.
Luisa Moreno, a research analyst at Euro Pacific Canada, said the makeup of Strange Lake's deposit will be particularly good for the global market if Quest is able to bring it to production.
"They have this multi-product deposit producing a lot critical elements," she said.
A handful of producers are beginning to come online in the U.S., including Molycorp Inc. (NYSE:MCP) and Lynas Corp. (ASX:LYC) and some countries, such as India and Vietnam, are already looking to expand.
But Moreno said Quest has a "unique opportunity" because the company should be able to produce the less common heavy rare-earth metals. Those are scarce and sold at higher prices than the so-called "lights".
She said China, which controls 90 per cent of the heavy market, has said that it only has 15 years of production left.
Cashin sees the current situation as a chance for Quest to establish itself as a global enterprise.
"We have the good fortune that the Strange Lake deposit is particularly well-endowed in what they call the heavies, which as a source form the Chinese, tend to be quite finite," he said.
"They've actually admitted that they would eventually ... be in a position to be a net exporter of those products. The materials flow will go the other way around."
Quest's pre-feasibility study is projecting an average annual rare earth oxide concentrate production of 13,650 metric tonnes. It said 47 per cent of Strange Lake's annual rare earth oxide production and 56 per cent of its total revenues will be derived from heavy rare earth elements plus yttrium concentrate, which would make Quest one of the world's leading suppliers of HREE+Y.
Total project construction capital costs for the open pit mine are expected to be $2.57 billion, based on a minimum mine life of 30 years. The project will generate on more than $1 billion of revenue per year, with first delivery of the product in 2018.
In addition to the open-pit mine itself, Quest will also build a plant in southern Quebec to process whole ore shipped from Strange Lake. The plant will produce four separated products - a mixed HREE+Y oxide concentrate, high-purity zirconium basic sulfate, high-purity niobium oxide, and a mixed light rare earth double-sulfate concentrate.
The Toronto-based company has already signed a letter of intent with U.S.-based TAM Ceramics Group for the purchase of up to 24,000 tonnes of zirconia annually.
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