Lynas’ Lacaze gives pivotal thumbs up to ionic clay-hosted rare earths

Lynas boss Amanda Lacaze has a lot on her plate. There’s the $1 billion or so being spent on expanding the Mt Weld hard-rock rare earths deposit, the building of a cracking and leaching plant at Kalgoorlie and the work to do on building a processing operation in the US.

Then there is the issue of whether Lynas will be able to continue its cracking and leaching operations in Malaysia beyond July 1 because of change in the rules about being able to import its lanthanide concentrate feedstock.

The rule change after many years of successful and safe operation is the subject of an administrative appeal due to heard today. Given the project accounts for about 1% of the country’s GDP and thousands of jobs, the hope is that sanity prevails.

And finally, Lacaze and her team are navigating a cyclical low in rare earth prices. It is a China thing and relates both to lower demand while the economy there continues its COVID recovery and a clear intent through the quota system to keep prices lower to ward off the building challenge to China’s current dominance of the industry by the western world and non-China Asia.

So it is a full book of challenges all right. But with signs that rare earth prices are bottoming, and after posting a strong March quarter production effort, Lynas finds itself having the luxury of considering what Lacaze calls “broadening our industrial footprint”.

It does so from a position of strength, with cash standing at $1.12 billion at the close of the quarter. Japan Inc in the form of the Japan Organization for Metals & Energy Security (JOGMEC) and the trading house Sojitz tipped in $200m of escrowed equity into Lynas in March, continuing Japan’s support for Lynas in return for supply security.

“(It) means we have plenty of firepower to ensure that we are really well placed to capture upside opportunities via current growth, and any other growth opportunities that present themselves,” Lacaze told a briefing last Friday on the March quarterly.

Later in the briefing, Lacaze was asked just what the firepower could be aimed at. She said different customers in different jurisdictions were very keen to see production closer to home. All very interesting but not much meat on the bone.

But it was what Lacaze said about ambitions in the upstream part of the business that was a genuine surprise, kicking off as it did speculation on possible targets.

“We do look at alternative resources (to the fabulous hard-rock Mt Weld deposit). Certainly ionic clay deposits with their preference for heavies (heavy rare earths for permanent magnet batteries) is of interest,” she said.

So there you have it. The owner of the world’s best hard-rock mine is interested in ionic clay deposits – the very thing the Chinese mine domestically and import from Myanmar to underpin their dominance of the critical industry.

If ionic clay deposits are now of interest to Lynas, then they should probably be of interest to investors as the attack on China’s dominance of the industry steps up.

Because of their low-grade, the clay deposits rely on large tonnage, simple processing, and low capex to compete with higher-grade hard-rock shows like Mt Weld. And not all clay deposits are ionic.

Meteoric, AR3 and IXR:

Should Lynas’ interest in ionic clay deposits extend to some M & A activity, there at least three names on the ASX that could fit the bill.

Meteoric (MEI) is one of them, even though it has yet to announce a maiden resource for its Caldeira project in Brazil. But the estimate is due to be released any day now and is expected to be big in volume terms, and big in grade terms.

World-class is a term being bandied about by the pundits. Without knowing yet just what the maiden resource estimate, it is impossible to say if Caldeira is in fact world-class.

What is known is that Meteoric has run up from 1.5c when the project was picked up in December to 17c in Thursday’s market for a $278m market cap.

It is also known that Caldeira is of the ionic adsorption clay-hosted type and looks to be off the scale when it comes to the grade of the shallow mineralisation compared with grades mined in China.

And get this, JOGMEC spent $5m on a drilling program there between 2016 and 2019.

It walked away despite the campaign returning some special drill results because its entry price was based on a tonnage formula that could have ended up being a huge upfront cash payment given Caldeira‘s tonnage potential.

Meteoric’s entry price was a simple cash up front and royalty deal.

Australian Rare Earths (AR3) shot higher recently in response to an upgrade in the mineral resource estimate of its Koppamurra deposit on the SA/Victorian border to 101 million tonnes at 818ppm total rare earth oxide.

AR3 was also able to increase its “exploration target” to 330Mt-1.4 billion tonnes. It shares rocketed to 80c but have since come back to 37c for a market cap of $40.5m after a capital raise at 45c to keep up the pace of exploration in the new rare earths province.

It’s all in a name for Ionic Rare Earths (IXR). It has been working away at its advanced Makuutu project in Uganda, with a definitive feasibility study into a staged development released in March detailing some impressive numbers.

The first stage taps a probable ore reserve of 173Mt tonnes grading 848ppm. Ionic traded on Thursday at 2.7c for a market cap of $102m.

Astro:

Talking about things hosted in clay, there is a bit of a clay exploration rush in the mining-friendly state of Nevada in the US. But not for rare earths.

This one is all about lithium-in-clay mineralisation. A number of juniors are finding they can outline big resources at decent grades by drilling the extensive clays.

And this week sees them joined by ASX-listed Astro which is trading at 5.5c for a market cap of $18.4m.

So it has plenty of leverage to success with the drill bit, remembering it also has a strategically located mineral sands project in WA and an 80% interest in the emerging copper exploration frontier to the east of Tennant Creek in the Northern Territory.

It will be kind of neat if Astro’s lithium-in-clay exploration comes up with the goods as it is populated with the same guys that took Pilbara (PLS) from a lithium exploration hopeful to the producer it is today.

Astro’s maiden 8-hole program will test the clay at the recently staked Polaris and Altair prospects.