Chris Berry Identifies Commodity Companies with the Disruptive Advantage
The Mining Report: ...rare earths (REEs) often come down to the processing. You've talked about the long-term picture for REEs outside of China. What companies are you watching there?
CB: I'm focused on four companies: Tasman Metals Ltd. (TSM:TSX.V; TAS:NYSE.MKT; TASXF:OTCPK; T61:FSE), Commerce Resources Corp. (CCE:TSX.V; D7H:FSE; CMRZF:OTCQX), Namibia Rare Earths Inc. (NRE:TSX, NMREF:OTCQX) and Ucore Rare Metals Inc. (UCU:TSX.V; UURAF:OTCQX).
TMR: Commerce just released its metallurgy report for the Ashram deposit. Did that show you that it could actually make an economic product?
CB: That was one of the takeaways, yes. But when you talk about Commerce, you need to think about the optionality inherent in its business model. Commerce really is both an REE play and a tantalum/niobium play. Based on initial economics, individually, both are valuable and highly strategic assets.
We also know a lot about the mineralogy with a majority of the Ashram REE deposit hosted in monazite. This is an underappreciated positive as commercial quantities of REEs have been produced from monazite (as well as bastnasite and xenotime) in the past.
Another point concerns Commerce's ability to raise money in a really terrible market for juniors—specifically REE plays. Commerce has raised close to $11M in 2014. While some may decry the dilution, these funds allow the company to push forward with its plans while many other juniors are struggling to survive.
TMR: Namibia released its PEA for the Lofdal project. What do you think of it?
CB: It was a very positive step forward. The major host mineral is xenotime, which I mentioned above has been proven to lend itself to commercial REE production. The PEA gives us a baseline to measure Lofdal relative to other projects. At $162M, the capex is extremely manageable and, just as important, the value of the concentrate the company aims to produce is heavily slanted toward the most critical REEs, including dysprosium and terbium. Namibia Rare Earths is a good example of a critical metals story that slowly continues to derisk itself and impress in the process. When sentiment in the space turns, it will be well positioned.
TMR: Ucore just released its heavy rare earth (HREE) concentrate. Did the market like that news?
CB: The market didn't really react and I think it was a positive step for the company. The use of the Molecular Recognition Technology (MRT) to produce a high purity HREE concentrate opens up the possibility for the company to now focus on establishing end-user relationships. These results really set Ucore apart from much of the pack in the REE space.
Overall, I consider REEs to be a 2019 story. By that I mean it will be 2019 before any realistic supply chain is constructed outside of China, and China will likely still play a significant role in the market. That said, it is the junior space that will provide the foundation for future supply chains and that's where I see the most opportunity going forward. I think you can use REE prices as a signal for where the market is going. Prices have collapsed and seem to still be under pressure. It appears that we've bottomed right now, but I haven't seen a sustained upturn, even in the face of a magnet business that's growing at 10% per year and requires a host of rare earths.
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