Tim Treadgold: Greenland rumbles back to life with a switch to rare earths
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Political problems for Lynas Corporation in Malaysia could be just what another Australian rare-earth stock needs at its project on the other side of the world and in a very different climate; Greenland.
Seemingly a million miles apart (but actually just 11,000km) there are three factors more important than distance which connect Lynas with the aptly-named Greenland Minerals — geology, technology and economics.
In the geology of Greenland can be found rocks which contain the same rare earth elements, neodymium and praseodymium, which are in strong demand for conversion into the permanent magnets found in the motors of electric-powered appliances and electric vehicles (EVs).
If there is a geological difference it is in the location of the material mined by Lynas, the Mt Weld project in Western Australia, but it’s in the transport of the ore to Malaysia and the processing in that country where Lynas’s problems can also be found, and Greenland’s opportunity might lie.
What’s happening with Lynas in Malaysia is a three-act circus of political shenanigans, corporate manoeuvring and international intrigue which can be measured in the company’s roller-coaster share-price; down one week, up the next.
Malaysian politics are the biggest threat to Lynas thanks to “changeable” government policies (also known as moving the goal posts) which initially encouraged the business of rare earth separation and storage of low-level radioactive waste but now want the waste removed.
Without a solution, such as that proposed by Wesfarmers in its takeover bid for Lynas, the rare earth processing plant could be closed, or forced to relocate. Either event will heighten tension in a market for material dominated by China and could lead to a price spike.
Exactly what the Malaysian government wants Lynas to do is a significant unknown in the rare earth business which is starting to create a disturbance in the rare earth market, encouraging consumers of the elements to start looking for alternative sources of supply.
Most importantly for other potential players in the rare earth sector is that Lynas’s woes could be their free kick they need to successfully develop a rival project to meet rapidly-rising demand for magnets.
Enter Greenland (country and company) where government policy has shifted from being less than encouraging towards mining to one of rolling out the welcome mat, even for sensitive proposals such as rare earth production with uranium as a by-product.
For ASX-listed Greenland (ASX: GGG) the encouraging turn at a government level has been matched by improved results revealed in an updated feasibility study released last week which demonstrate that the company’s Kvanefjeld project is the lowest-cost undeveloped rare earth project of any Australian-listed stock.
The plan, which has been more than 10 years in the hatching since Greenland identified the uranium potential of Kvanefjeld in 2007 (and the uranium price was much higher than today), is to develop the discovery as a rare earth mine producing 32,000 tonnes of rare earth oxide a year from the mining of three million tonnes of ore.
Highlighted in last week’s updated feasibility was an annual $US31 million increase in revenue compared with the original 2016 study and a 40% reduction in operating costs which Greenland said would make Kvanefjeld:
“One of the lowest cost, highest-margin, undeveloped rare earth projects globally.”
Having raw material in the ground is, however, just the first step for any project developer, especially with a mine that produces sensitive material such as uranium, even as a by-product.
Greenland is confident that it can convince the government of the part-frozen island nation with its historically strong connections to clean and green Denmark that the development of Kvanefjeld would significantly boost an economy heavily dependent on fishing and an annual financial hand-out from Denmark.
Lending a helping hand on the technology and marketing side of the business is Greenland’s biggest shareholder, the Chinese-based Shenghe Resources which is a major producer and processor of rare earth elements.
Shenghe has already signed an agreement to buy all of Kvanefjeld’s rare earth output and is providing essential technical assistance to develop the processing circuits which Greenland said last week had been significantly improved.
The latest, and potentially critical upgrade in processing, is said to be a customised metallurgical program which improves overall performance and reduces the size of the refinery circuit.
“This represents a simpler path to rare earth production without the complex, high-temperature, chemically aggressive mineral cracking stages that are required for common rare earth ore minerals,” Greenland said.
Whether those comments on processing technology were aimed at Lynas and its Malaysian problems is unknown, but it certainly read like that.
Greenland has a lot further to go before it knows it can build a project and enter the rare earth business but there are signs of renewed investor interest in the stock which has risen by close to 80% over the past six weeks, up from 4.9c to last trades at 8.8c.
Impressive as that latest rise looks there are probably some investors who remember Greenland in its heyday back in 2007 as a potential uranium producer when it rocketed up to $1.72 before diving to just 2c in 2016.
The comeback has been slow, but with rare earths in demand and Lynas in trouble, the pendulum appears to be swinging in favour of Greenland.