Pele Mountain moves monazite processing plan ahead

When Pele Mountain Resources (TSXV: GEM; US-OTC: GOLDF) announced a strategy in October 2014 to extract and separate rare earth elements from monazite concentrate imported from overseas at its Eco Ridge project in Elliott Lake, the plan caught many by surprise.

But president and CEO Al Shefsky has wasted little time showing he means business. In December, Shefsky presented the concept to Elliot Lake’s city council, which endorsed the idea, and along with Mayor Dan Marchisella passed a unanimous resolution to issue a letter of support for developing Pele’s monazite processing strategy. (The community at Elliot Lake, built in the 1950s on the back of uranium mining in the district, saw its last operating mine in 1997.)

The strategy gained more traction when the company signed a memorandum of understanding (MOU) with one of China’s largest rare earth producers for a joint-venture processing facility in northern Ontario. Pele Mountain has also secured financing from Dundee Capital Markets, Shefsky says.

“The Chinese have the state-of-the art technology and a way to do environmentally sustainable, low-cost processing and de-risk the project technically,” he says. “Elliot Lake is the ideal location to develop a rare earth supply chain. The community really welcomes this opportunity, they understand what’s involved, and all of the infrastructure is already there.”

Monazite, Shefsky explains, is produced as a by-product of titanium and zircon production, and contains high grades of rare earth elements that can be extracted and separated using technology from its new partner, Sheng Kang Ning (Shanghai) Mining Investment.

Ninety percent of Sheng Kang Ning is owned by Shanghai-listed Shenghe Resources Holding Co., “a global leader in rare earth mining, processing and downstream chain” that Shefsky calculates is the third-largest miner of rare earths in China. Under the MOU, SKN owns 50.1% of the joint venture, with Pele holding 49.9%. Pele hopes to negotiate a definitive agreement with SKN before October 2015.

The monazite would be sourced from sustainable mineral sands mining operations in countries that are allied trading partners with Canada. Countries with mineral sands deposits include South Africa, Madagascar, India, Brazil and Australia, and Shefsky says shipping costs over those distances could work out to $500 per tonne.

Monazite contains thorium, a naturally occurring radioactive material, and its transportation and management is subject to well-defined regulations and guidelines. But thorium disposal “will comply with all regulatory requirements,” he explains. “We do have a plan on how to do that and it’s going to be something that is in compliance with all the regulations.” he says.

Pele will also have to prepare a closure plan and get it approved by the province’s Ministry of Northern Development and Mines, a process he estimates can take up to two years.

Shefsky notes that a typical distribution of rare earth elements in monazite is over 50% REE by weight, and that “you’re looking at super high-grade material.”

“There’s a lot of value in that tonne of rock for the critical rare earths used in magnets,” he says, such as praseodymium, neodymium, dysprosium and terbium. “Our goal is to process the monazite and conduct downstream value-added processing on the hydrometallurgical concentrates.”

If the joint-venture proceeds, it will need approval from Chinese authorities so that SKN can use its separation technology in Canada.

Jon Hykawy, president of Toronto-based independent research firm Stormcrow Capital, says this could be a roadblock. It’s not a given that they can export this technology, he explains, because there are restrictions.

“Which technologies do they intend to supply, and are they permitted and authorized outside of China? Because, unfortunately, a lot of the run-of-processing stuff — the rare-earth processing technologies — are not authorized for export. It’s a case-by-case decision that the state makes.”

And like many other countries, he continues, China would prefer keeping its edge in the industry. “The issue for the Chinese state is that they want, as much as possible, to keep a monopoly on any advantage that they have with respect to processing rare earths.”

Hykawy also points out that the cost of the rare-earth separation technologies and methods used in China — where cheap labour is abundant and processes can be less automated — could mean that the same methods used in Canada could be more expensive. “You perhaps might need more advanced technologies than what the Chinese are using for some of their downstream product,” he says. Hykawy also says Shefsky’s estimate for shipping costs are optimistic.

He says that everything boils down to economics. “They’re going to have to be careful in studying what this costs and what they think the longer-term prices of these materials will be in the West,” Hykawy says.

Shefsky admits that Pele has a lot of work ahead in the next six months, but says it would be a valuable endeavour. “It’s important to get a new, secure source of rare earth elements, and we believe we’ve come up with an innovative strategy to achieve that objective.”

Shefsky hasn’t given up on building a uranium mine one day at Pele’s Eco Ridge project. But with spot prices for uranium oxide cratering in 2011 after the Fukushima nuclear plant disaster in Japan, and still trading at less than US$40 per lb., the company will have to wait for prices to recover, which Shefsky is confident will happen.

“It was a challenge to raise the kind of capital to develop a hard rock mining operation, so we looked to see if there were other opportunities to kick-start a rare earth supply chain,” he says, noting that the Eco Ridge deposit also has rare earth elements. “There are more than 3 lb. of rare earths for every pound of uranium at Eco Ridge. And Elliot Lake is the only place in Canada where rare earths were produced historically.

“We’ve been fortunate and have had lots of support from all levels of government for building early-to-market critical rare earth production in Elliot Lake. We’ve identified a great partner, and our business interests are aligned in moving this forward.”