The electrification of the transport industry will continue to require rare earths including dysprosium and terbium to drive the demand in the near future

Asian Metal: Dear George, Thanks for accepting the interview of Asian Metal. Would you like to give a brief introduction of your company firstly?

George: Northern Minerals is an emerging heavy rare earths mining house. We have commenced the development of the Browns Range Pilot Plant Project in northern Western Australia and aim of producing first heavy rare earth carbonate in 2018.

Asian Metal: Would you like to introduce your project process briefly?

George:The Browns Range Pilot Plant Project will involve the mining of xenotime ore, beneficiation of the ore involving crushing, grinding, magnetic separation and flotation to produce a xenotime concentrate. The xenotime concentrate will then undergo a sulphation bake, water leach and carbon precipitation before drying to produce a mixed rare earth carbonate product that will be sold to our Chinese sales partner.

Asian Metal: Please introduce the Advantage of Brown Range Project. What’s your project’s development prospect in the coming years? What do you see as the main challenges for this?

George: The main advantage of the Browns Range Project is that it has the potential to become one of the few heavy rare earth projects outside of China, opening up the potential for security of supply from a new production source. In terms of development prospects, we have a three stage development plan for Browns Range. We have recently commenced development of a three year pilot plant project. We will use the results of the pilot project to refine the project in stage two before we commit to the larger full scale development in stage three.

In terms of challenges, as one of the few heavy rare earths projects ever attempted outside of China and the first hardrock xenotime development, there are a number of unknowns that we foresee. Hence, it is for this reason that we have started with a pilot plant development at 10% of the full scale size to work through any issues relating to mining, processing or sales.

Asian Metal: I noticed that your company has entered a sales agreement with Lianyungang Zeyu New Materials Sales Co., Ltd. (JFMAG), a 51% owned subsidiary of Guangdong Rare Earths Group early this month. Would you like to introduce the details?

George: Northern Minerals has entered a Sales Agreement with LianyugangZeyu New Materials Sales Co Ltd (JFMAG), a 51% owned subsidiary of Guangdong Rare Earths Group. Guangdong Rare Earths Group is a 100% subsidiary of Guangdong Raising Asset Management (GRAM).

Guangdong Rare Earths Group is one of the 5 major heavy rare earth companies in China which is vertically integrated producers.

The milestone Sales Agreement covers all planned production from the Browns Range Pilot Plant. The Sales Agreement terms are based off CIF Incoterms 2010 with pricing referenced from a 2-month average of quoted prices on Asian Metals and another website.

Under the Sales Agreement, prior to the first shipment of rare earth carbonates, JFMAG will make a pre-payment to Northern Minerals of A$10 million. The prepayment covers approximately 15% of the expected value of production during the Pilot Plant phase, with the remaining 85% to be paid to Northern Minerals over the course of the agreement based on volumes delivered. JFMAG or its nominated beneficiary will be issued 40 million unlisted options at $0.25 exercise price which can be converted to ordinary shares to offset the pre-payment of A$10 million.

Following execution of the Sales Agreement, Northern Minerals will issue 14 million Ordinary shares to JFMAG or its nominated beneficiary.

Asian Metal: Current rare earth market is oversupplied and consumers delay making substantial purchasing. How do you think about the rare earth supply and demand in the coming years?

George: Whilst the current market maybe oversupplied the electrification of the transport industry will continue to require rare earths including dysprosium and terbium and this will drive demand in the near future. Bringing on a new source of heavy rare earths into the market will provide confidence to the magnet market and should drive demand as well.

Asian Metal: Chinese rare earth demand remained soft over the past years and the competition among Chinese suppliers is rather furious. The majority of Chinese participants lack confidence in rare earth market in the near term. May I know your forecast for your products’ demand in the coming years?

George: Whilst we do not have our own forecast modelling, various sources including the Adamas Intelligence Report indicates future demand of Dysprosium from 1,500 tonnes in 2017 to 2,000 tonnes by 2023.

Asian Metal: Affected by the national storage, Chinese rare earth market witnessed increasing price over the past three months despite of weak demand and large supply. What’s your opinion about the rare earth price trend in the near term?

George: Our focus is dysprosium and terbium prices as this accounts for over 75% of our total revenue. Dysprosium has been flat for the past 6 plus months and we forecast dysprosium price to increase by up to 10% per annum of the coming 5 years. Some internal sources in China have suggested prices of dysprosium to rise by as much as 50% over the coming 18 months. Terbium has increased nicely over the past 12 months and we see steady prices for terbium over the coming 5 years. The other price we monitor closely is lutetium as we have a good amount of Lutetium in our product mix.

Asian Metal: Thanks for your time and support for Asian Metal. Wish you every success in your business.

George: Thank you very much!