11 th September 2009 Rare Earth Metals: Mine to Market

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1 11 th September 2009 Rare Earth Metals: Mine to Market

2 Advanced Rare Earth Projects

3 Advanced Rare Earth Projects Steenkampskraal (Rareco), South Africa

4 REE Environmental Uses Wind Power Hybrid Vehicles Efficient Lighting Fuel Additives Pollution Control Batteries

5 IMCOA 5

6 REO Consumption By Value and Volume

7 Rare Earth Metals Mine to Market Estimates for REO Production (tonnes) REO China Mtn. Pass Mt. Weld Nolan's Bore Thor Lake Total Supply Demand Surplus/Shortfall Lanthanum 39,000 8,300 5,376 4, ,081 53,000 4,081 Cerium 63,000 12,275 9,605 9, ,370 66,000 29,370 Praseodym ium 7,500 1,085 1,138 1, ,089 9,250 1,839 Ne odym ium 24,000 3,000 3,910 4, ,990 43,475-7,485 Sam arium 3, ,085 5,277 2,775 2,502 Europium Gadolinium 2, ,209 2, Terbium Dysprosium 1, ,702 2, Er bium Yttrium 8, ,178 14,800-5,622 Ho-Tm-Yb-Lu ,850-2, ,000 24,960 20,992 20,104 5, , ,000 21,056

8 GWMG Projects-Potential Production REO Production (t) vs Projected REO Hoidas Deep Sands Total Other Total Shortfall Lanthanum 988 2,230 3,218 3,206 6,423 Cerium 2,289 4,173 6,462 6,282 12,743 Praseodymium ,072 1,795 Neodymium 1,095 1,428 2,523 3,656 6,178 7,485 Samarium Europium Gadolinium Terbium Dysprosium Erbium Yttrium ,844 2,798 5,622 Ho-Tm-Yb-Lu ,000 10,000 15,000 17,939 32,939

9 GWMG as an Integrated RE Producer Shifting the Balance Towards HREO Advanced Projects LREO (%) HREO + Y (%) Hoidas Lake 96 4 (Canada) Deep Sands (USA) Rareco (South 92 8 Africa) Grassroots Projects Benjamin River (Canada) Douglas River (Canada) Misty (Canada) 97 3 By-Product Projects

10 Overview of Rare Earth Alloy Production Rare earth ore e.g. Bastnaesite / Monazite/Ion Absorption Clay Contains all rare earth elements Production of a mixed rare earth concentrate Separation into individual rare earth oxides / fluorides / chlorides etc. Converted to metals Electrolysis / Vacuum reduction Production of alloys by direct co- reduction Production of alloys by melting and casting

11 Rare Earth Metals Mine to Market

12 Extrapolated Quantities of Rare Earth Metals from Separated Ores Produced in 2008 (est 140,000 tonnes total RE oxide) Rare Earth Metal Supply in 2008: - Neodymium: 17,000t - Praseodymium : 4,600t - Dysprosium: 1,200t - Terbium : 170t - Samarium : 2,400t Estimated at 97% minimum of Chinese Origin.

13 Estimated Worldwide Production of RE Magnets NdFeB Sintered Magnet Production 2008*: - China: 49,880t - Japan: 12,600t - EU: 1,100t - USA: Nil Total: 63,580t * Yang Luo, REPM 2008 NdFeB powders for Polymer Bonding. Chinese Origin, Estimated Total: 5,000t

14 Rare Earths: Mine to Market Examples of Permanent Magnet Growth Opportunities - NdFeB and SmCo have no potential threats from substitute materials. - The motor/generator in a hybrid vehicle contains 2kg of NdFeB. This application is set to grow to between 10million and 20million vehicles by The new designs of wind generators use NdFeB magnets at a rate of 0.5t per mega-watt. This application alone has potential to increase RE demand by 25% per year above current production. - Hard disc drives cannot function without RE permanent magnets. Formerly 70% of the NdFeB market this is now diluted by the other major applications.

15 Permanent Magnet Demand Underestimated? WIND POWER PROJECTIONS Per the US Department of Energy: 300,000 MW of wind power by 2030 Per the UK Crown Estate: 25,000 MW of wind power by 2020 Assume 1/3 generated by permanent magnet generators: 325,000 MW = 185,000 t NdFeB = 57,000 t Nd X 1/3 = 20,000 t Nd (= 125,000 t TREO) China has proclaimed that they will lead the World in wind power.

16 Rare Earth Permanent Magnet Raw Materials Supply Commodity Pricing. General: Price is derived from the balance between Supply and Demand. Discovery of the price in the Marketplace. Resolution of a price between Buyer and Seller. Scale of Business: London Metal Exchange (LME) example Nickel Open Outcry Nickel annual production is approximately 1.5Mt. Minor Metals example Cobalt, one of the larger specialty metals. Production approximately 60,000t per year. Rare Earths. Fifteen metals occurring together. Totalling approximately 140,000t of contained oxides.

17 LME Nickel Prices over Last Three Years A Variation of $10,000 to $54,000 per tonne

18 Rare Earth Permanent Magnet Raw Materials Supply Cobalt. Very small market (60,000t) compared with Nickel at 1.5Mt. Price is discovered by journalists and is a necessarily (sometimes despised) subjective process. Journalistic reports are sold; those currently available: Metal Bulletin. Reuters. Metal Pages. Ryans Notes. Dow Jones. There is a plan for LME to provide a market for cobalt.

19 Cobalt price over the Last Two Years A Variation of $13.00 to $52.00 per lb MB High Grade Average Cobalt Price Price ($/lb) $50.00 $46.00 $42.00 $38.00 $34.00 $30.00 $26.00 $22.00 $18.00 $14.00 $10.00 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Mar-09 Month

20 Rare Earth Permanent Magnet Raw Materials Supply Rare Earths. The situation is more complex than for a single commodity 15 elements. This market is less well developed than cobalt. Quantities are still small for Nd, approximately 17,000t. Discovery of price is highly subjective and trades are private. There is only one known regular price published. Disproportionate demands lead to shortages and price spikes. Those elements in high demand will bear the costs for separating the other oxides. This situation of seeking balanced demand for more than one element is not unique. An example of 6 metals of similar chemistry occurring together requiring complex separation techniques are the Platinoids (Pt, Rh, Ru, Pd, Os and Ir). Cobalt is generally a (valued) by-product of other base metals Ni and Cu.

21 Rare Earth Permanent Magnet Raw Materials Supply Neodymium Metal Pricing April 2001 to April 2009 US$/kg Cautionary note: This is a journalistic report and may not reflect real market conditions

22 Rare Earth Permanent Magnet Raw Materials Supply Terbium Metal Pricing April 2001 to November 2008 Cautionary note: This is a journalistic report and may not reflect real market conditions

23 Rare Earth Permanent Magnet Raw Materials Supply Chinese Government Policy for the Rare Earth Industry This is classed as a resource industry. All mining is local or national government controlled. Tax rebate for exporting material reduced and then cancelled. Export tax imposed now at 15% to 25% on oxides, compounds and metals, 20% on alloys. Export quotas tightened year on year Quota is traded commodity affects price Historically quotas only affected supply of low added-value products Quotas now starting to affect availability of some metals

24 LCM Vacuum Induction Melting Facility LCM 300kg VIM Furnace. In the background is a 50kg charge weight Precision casting Furnace.

25 GWTI Troy Facility Production facility installed initially for the production of alloy powders for Nickel-Metal Hydride Batteries. Pictured is one of the two 1,000lb Vacuum Induction Melting Furnaces. Total melting capacity in the facility exceeds 2,500 tonnes per year.

26 GWTI Troy Facility, cont. Inside the Hydrogenation processor showing the containment grid and heating/cooling circuit.

27 GWTI Hydrided/Dehydrided NdFeB SEM image of LCM/GWT NdFeB alloy that has been subject to hydrogenation and crushing to powder for research and development in permanent magnets.

28 Recycling Potential Regarding solid magnet scrap generated within customer premises (and therefore wholly traceable), LCM provides a recovery service for both NdFeB and SmCo materials. There are two possible processes; co-reduction for samarium cobalt, or remelting in two stages (for both SmCo and NdFeB) by melting scrap, analysing and readjusting for supply as reusable feedstock for Magnet Production. Remelting of general magnet scrap for rare earth magnets is limited due to the sensitivity of composition and intolerance to impurities of the fundamental magnetic properties. Direct recovery of RE permanent magnet powders from scrap magnets. A research project lead by the University of Birmingham ( HYPROMS ) has potential to recover powders that can be used directly as feedstock for polymer bonded or sintered magnets.

29 Recycling Potential (Continued) Recovery of grinding swarf from machining of RE magnets is not simple for the recovery of the rare earth constituent. In the distant past with samarium oxide in short supply and priced at $100+ per kg the chemical dissolution of scrap and recovery of Sm2O3 was a routine process. Currently SmCo scrap that is not acceptable for melting or co-reduction is recovered for its cobalt content. Recovery of NdFeB scraps by chemical means is possible though the technical barriers and practical costs of dissolving large quantities of Fe alloys should not be underestimated.

30 Rare Earths. Is Harris Sustainable?