Quest Rare Minerals (CVE:QRM)(AMEX:QRM) B-Zone update

QRM provides progress update on its B-Zone Heavy Rare Earth project at Strange Lake, Quebec

from ProactiveInvestors.co.uk

Wednesday morning, the company's shares ticked up 1.35% to $3.

Quest is advancing the project to deliver a pre-feasibility study (PFS) for the deposit in the second half of 2012. At that time, the company said it will have a more accurate idea as to the delivery timelines for its definitive feasibility study and for mine start-up.

The company is following a parallel path for the collection of the necessary data for use in the subsequent definitive feasibility study. A budget of $2.5 million has been allocated for completion of this work, the company said.

In a conference call, Quest's president and CEO Peter Cashin said: "We have been working on a PFS but also on a full feasibility study in parallel in order to accelerate delivery."

"Our 2011 prefeasibility work is advancing well, important changes in the scope of the project are being made when compared to how it was developed in our September 2010 Preliminary Economic Assessment (PEA).

"Changes include consolidating the mine and mill complex at Strange Lake, Quebec, in proximity to the B-Zone to capture the power, infrastructure and heat synergies of a combined operation. This will allow for more streamlined permitting timelines related to a single footprint site.

"The modifications also include the construction of a 160 km access road to the Labrador coast and port facility as opposed to the originally-conceived road and slurry pipeline for delivery of crushed ore to a coastal Mill Complex.

"As well, in order to accelerate the completion of the metallurgical flow sheet of B-Zone ore to saleable product, Quest has engaged a second metallurgical laboratory, Process Research ORTECH to work in parallel to Hazen Research."

The Strange Lake property, located 220 km northeast of Schefferville and 125 km west of the Voisey Bay Nickel-Copper-Cobalt Mine, covers an area of 54,000 hectares.

Quest's 2009 exploration program led to the discovery of a significant new Rare Earth metal deposit, the B-Zone, at Strange Lake.

An April 2010, an NI 43-101 preliminary resource estimate of the B Zone completed by Wardrop Engineering indicated that at a 0.95% total rare earth oxides (TREO) base-case cut-off grade, the B Zone contains an Indicated Resource of 36.4 million tonnes grading 1.16% TREO, 2.17% zirconium oxide, 0.24% niobium pentoxide, 0.05% hafnium oxide and 0.12% beryllium oxide.

This resource calculation demonstrated the extremely heavy rare earth oxide-rich nature of the B Zone, representing between 40 percent and 51 percent of the TREO in the deposit.

Quest said a total of 23 geotechnical drillholes for 953 metres were completed on the project, with the holes being used for rock
stability testing, groundwater flow testing, condemnation drilling over proposed tailings and mine complex sites and for a proposed airstrip site.

Quest's pre-feasibility team is in the process of updating project capital costs and incorporating their findings into capital expenditure models for the project. A project cost optimization process will determine where maximum cost efficiencies can be realized for the final project scope.

Considerable effort is being undertaken to minimize the capital cost escalation that many projects are experiencing around the world.

Reno Pressacco, vice president of Operations, said: "The work on revising the project scope when compared to our 2010 PEA will serve to optimize the economic potential of the B-Zone deposit over its notional production life.

"This revised project scope offers the advantage of using a single power supply for the entire project, removes the risks associated with a pipeline transportation system in those climate and terrain conditions, improving the management of the operation and simplifying and streamlining the permitting processes.

"We have been very encouraged by recent positive findings from our metallurgical test work and are confident that a final metallurgical solution for Strange Lake mineralization will be developed."

The company is also in the process of a rare earth market study in order to better understand the market and target potential buyers. Quest is targeting the production of niobium, zirconium and potentially berylllium at the B-Zone deposit.

Additionally, the company is looking to add a beryllium contribution to its model in the wake of recent comments from Canada's government was looking to buld a strategic stockpile for military use.

Beryllium has been used as a component in next-generation fighter jets and in both military and civillian aircraft as brake components in landing gear.

Earlier this year, Quest released the results of its successful B-Zone definition diamond drilling program.

Final results for holes BZ-11-118 to BZ-11-255 returned multiple, high grade intersections of between 1.12% and 6.11% total rare earth oxide (TREO), over thicknesses of 2.34 to 147.0 metres, the company said.

The higher in value heavy rare earth oxide (HREO) represents between 22.4% and 76.5% of the TREO content intersected in the new drilling.

Among the best holes of the infill program, BZ11218 hit 1.44% TREO over 144.4 metres, and hole BZ11189 returned 1.23% TREO over 116.1 metres, including 3.04% TREO over 11.7 metres and 4.9% TREO over 4.9 metres.

The 2012 pre-feasibility study work program will include completion of the metallurgical solution for the B-Zone, finishing of the preliminary engineering for the project, execution of the financial analysis for the project and delivery of the final National Instrument 43-101 compliant Pre-Feasibility Study technical report.

This program has been budgeted at $21.0 million for Quest's 2012 fiscal year.

Quest Rare Minerals is a Canadian exploration company focused on the identification and discovery of new and significant Rare Earth deposit opportunities.

Quest is currently advancing several high-potential projects in Canada's premier exploration areas: the Strange Lake and Misery Lake areas of northeastern Quebec and the Plaster Rock area of northwestern New Brunswick.

Rare Earth Elements metals prices expected to fall further

Global automotive industry seeking alternative materials

Sept. 29 (Bloomberg) -- Rare-earth prices are set to extend their decline from records this year as buyers including Toyota Motor Corp. and General Electric Co. scale back using the materials in their cars and windmills.

Prices for cerium and lanthanum, the most abundant rare- earth elements, will drop by 50 percent in 12 months, Christopher Ecclestone, an analyst at Hallgarten & Co. in New York, has forecast. Neodymium and praseodymium, metals used in permanent rare-earth magnets, may fall as much as 15 percent, he said.

Makers of electric cars, wind turbines and oil-refining catalysts have sought to reduce use of the metals after China, which supplies more than 90 percent of the market, said in July 2010 that it would cut exports and clamp down on the industry. That boosted prices, encouraging mining companies to develop new prospects and buyers to find alternatives.

“If you think you can keep raising the prices for those materials and still keep your customers, you're crazy,” Jack Lifton, co-founder of Technology Metals Research, said in a telephone interview. “The principal customer for rare-earth metals is a global automotive industry using rare-earth permanent magnets. That industry will engineer this stuff out.”

Declines in August and September pared a five-month, fourfold surge that brought the average price for eight of the most widely used rare-earth oxides to a record 396,850 yuan ($62,068) a metric ton in July, data from consultant Shanghai Steelhome Information show. The average price declined 13 percent from its July peak as of Sept. 27.

Share Performance

The Bloomberg Rare Earth Mineral Resources Index dropped 41 percent in the last three months, led by a 60-percent decline in Montreal-based Quest Rare Minerals Ltd. Great Western Minerals Group Ltd., which explores in North America, climbed 4.6 percent in the period and is the only gainer on the 17-member benchmark.

Rare earths have been pushed lower because of selling by speculators, Michael Gambardella, a New York-based analyst at JPMorgan Chase & Co., said in a report last week. Tsunami- related disruptions in Japan and dumping of unpermitted material in China have undercut prices, while industrial substitution has driven “demand destruction,” said Sam Berridge, a Sydney-based analyst at Royal Bank of Scotland Group Plc.

“A greater focus on recycling and substitution, particularly by Japanese consumers, has resulted in tightness of demand easing somewhat for the lighter rare earths,” Berridge said by phone.

‘Huge Savings'

Rising prices for the so-called light metals, such as neodymium and lanthanum, have prompted automakers including Toyota, Asia's biggest automaker, to look at reducing the use of relatively powerful and expensive rare-earth magnets in their vehicles. Some Toyota vehicles will be built with an induction motor, which doesn't use rare-earth magnets, said John Hanson, a Toyota spokesman in Torrance, California.

“Moving from a fixed-magnet motor to an induction motor is a huge savings with regard to rare-earth metals,” Hanson said by phone.

“The Japanese are leading the push to replace, reduce and recycle their rare-earths consumption,” said Dudley Kingsnorth, chief executive officer of Perth-based advisory Industrial Minerals Co. of Australia. “Users are recycling rare earths wherever they can, using them more efficiently, particularly in the magnet industry where they are producing powerful magnets with smaller volumes.”

GM's Plans

General Motors Co., the largest U.S. automaker, plans to sell a Chevrolet Malibu Eco next year that uses an induction motor, and otherwise cut down on magnets that use a lot of rare earths.

“The magnets are like God's gift to electric motors,” Pete Savagian, GM's chief engineer for electric motors, said in a telephone interview. “But we don't always need that level of magnet. Even at prices we saw three and four years ago, there's a more economic alternative, albeit at slightly less efficient outcome.”

The largest portion of demand for rare earths, one third, comes from generating electricity, according to Bloomberg Industries.

In August, GE announced the development of wind-turbine generators that will reduce dependence on the rare-earth materials prevalent in so-called permanent-magnet machines. Some current offshore wind turbines may contain as much as half a ton of the metals, according to Bloomberg Industries analysis.

Gasoline Refining

“Everybody is going back to the drawing board and trying to redesign their generators to minimize the usage of permanent magnets,” said Steve Duclos, chief scientist and manager of material sustainability for GE Global Research. “In all of our businesses we're looking to reduce our usage.”

W.R. Grace & Co. this year began selling an oil-refining catalyst with reduced lanthanum, a rare earth that has increased in price more than fourfold in the past year. Lanthanum improves the amount of gasoline refiners can extract from crude oil and is also used in hybrid-car batteries.

Half of the company's customers had switched to the new formula, which offers the same performance and gives them “double-digit type percent decreases in their cost,” Grace Chief Financial Officer Hudson La Force III said on a conference call this month.

Companies that use cerium to polish glass, such as manufacturers of liquid crystal displays, will reduce their reliance on the element by as much as 70 percent this year by installing new polishing machines, said Jonathan Hykawy, an analyst with Byron Capital Markets in Toronto.

‘Demand Destruction'

“They made the decision to substitute operational expenditure with capital expenditure,” Hykawy said. “Even if the price of cerium goes back to $5 a kilo, they will continue to buy less cerium because the machines are there and they'll save a little bit of money. That's a quasi-permanent demand destruction for cerium.”

The development doesn't worry Mark Smith, CEO of Molycorp Inc., owner of the largest rare-earth deposit outside China.

Fluid-cracking catalysts have “always been one of the largest single markets for any of the individual rare earths,” Smith said in an interview at Bloomberg headquarters in New York. “We don't see that deteriorating in any significant form.”

While rare-earth prices have fallen, demand will outpace supplies even with new mines in California and Australia expected to come online in 2014, Smith said.

“Like any market, you're going to see up and down in the course of a month or two,” Smith said. “But the overall trend remains short supply, heavy demand.”

Magnetic Powders

The ability to substitute many rare-earth applications will be limited, said Constantine Karayannopoulos, CEO of Neo Material Technologies Inc., a Toronto-based producer of rare- earths, magnetic powders and rare metals.

“All kinds of folks are trying to use alternative technologies,” he said by phone. “Longer-term, don't expect these technologies to be in place this quarter or the next.”

GE's Duclos says he has little doubt companies will find substitutes, sooner or later.

“It will depend on the element, it will depend on the usage, but getting 10-20 percent efficiencies out of the usage of an element is not that terribly difficult,” Duclos said. “What I don't subscribe to is this idea that there's nothing we can do.”

--With assistance from Elisabeth Behrmann in Sydney and Jason Scott in Perth. Editors: Steven Frank, Todd White.




Source: Bloomberg, via http://news.businessweek.com

WSJ reports pros are shorting rare Earth (REEs) stocks

By BRENDAN CONWAY And TATYANA SHUMSKY, Wall Street Journal (27jun11)

The rare-earth minerals sector is drawing near-record short interest as bearish investors bet against its previously highflying stocks.

The industry, whose minerals are used to help power items as varied as vacuum cleaners and smartphones, had been a darling of the stock market over the past year. Investors snapped up shares of the North American trio of Molycorp Inc., Avalon Rare Metals Inc., and Rare Element Resources Ltd. as rare-earth minerals were viewed as short in supply, likely to be hit by Chinese export curbs and all but certain to enjoy steady future demand by a broad range of tech customers.

That all came to an end in recent months after a confluence of events sideswiped the industry, causing short sellers to swell. Investors who want to short shares borrow the stock and then sell it, betting that the price of the shares will fall and that they can buy them back at a lower price, for return to the lender.

Shares of rare-earth mineral companies have been punished amid doubts that the Chinese supply crunch—the country now accounts for 95% of world output—is as bad as surging prices imply. Last week's share sales by executives at North American industry leader Molycorp may also be weighing on sentiment.

"Short interest in the three quoted rare-earth miners outside of China has continued to build since April and stands just off record highs," said Will Duff Gordon, research director for Data Explorers. Despite a recent share-price correction in the three stocks, "it seems that short sellers still believe them to be overvalued."


Molycorp, Avalon and Rare Element Resources all targeted

These non-Chinese rare-mineral stocks have seen share prices fall between 33% and 42% from their highs in the early part of this year. The proportion of Molycorp shares on loan, a proxy for bearish short interest, hit a high of 11.5% on June 15 and has since hovered slightly below that mark, according to Data Explorers. Avalon and Rare Element have also seen more bearish-looking short activity in recent months.

"The peaks of all three of these stocks were a good 40% above where they are now, so some froth has been blown off the beer," said Christopher Ecclestone, mining strategist at Hallgarten & Co.

The "rare earth" name is something of a misnomer. The 17 metals are found in deposits all around the globe and aren't limited to China.

The range of uses is wide. Certain rare-earth elements, like yttrium, have been used to make specialty steel stronger and more durable over the years, but the industry blossomed with the rise of certain high-tech products over the past decade.

Companies like Dyson Appliances Ltd. rely on neodymium magnets to create the powerful suction vortex in their vacuum cleaners. Apple Inc. and Blackberry maker Research In Motion Ltd. use terbium to make their phones smaller, lighter and faster.

Other countries largely dismantled their mining operations as China undercut competitors and came to dominate processing over the years, according to market participants. The country is in the position of restricting supply to some degree, but recent price gains mean that extracting the metals elsewhere is once again profitable.

Outsiders are only now beginning to rebuild that capability. Mr. Ecclestone said the two companies besides Molycorp "don't have a ghost's chance of production in the next two years, maybe more."


Insider Sales also affecting downward pressure

Some of Molycorp's recent declines may be linked to large insider share sales conducted over the past month. Chief Executive Mark Smith reported a sale of nearly 175,000 shares last week, or about 16% of the executive's holdings as of May.

A Molycorp spokesman said that the short interest may not be driven by sentiment, and may instead be the result of complex arbitrage trades. He added that Mr. Smith's sales were "prudent personal financial planning" and said the "vast, vast majority of [Mr. Smith's] personal net worth is tied up in the single stock."

He added that the executive's interests "remain completely aligned with shareholders" and his financial success "still depends almost completely on the success of the company."

The bearish action comes as some Wall Street analysts have grown more positive on the stocks, largely to reflect the jump in prices. J.P. Morgan Chase & Co. stock analysts led by Michael F. Gambardella raised their Molycorp target price recently to $105 from $87, in part "to reflect the continued rise in rare-earth prices."

But even some bullish analysts are voicing doubts that the surge in prices will last. Dahlman Rose & Co. analysts Anthony Young and Anthony Rizzuto said this week that the underlying metals have already priced in tighter Chinese quotas, adding that they are "uncertain current levels are sustainable."

The analysts have a "buy" rating on the stock, though they reduced their price target, to $120 from $125.

— Chuin-Wei Yap also contributed to this article.

Van Eck launches investment fund for rare earth metals

Rare Earth Minerals investment fund from Van Eck Global

The Market Vectors® Rare Earth/Strategic Metals ETF (REMX)seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Rare Earth/Strategic Metals Index, a rules based, modified capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of publicly traded companies primarily engaged in a variety of activities that are related to the mining, refining and manufacturing of rare earth minerals and strategic metals.

Rare Earth Metals ETF investing and performance information