Electric Transportation Could Jump-Start Rare Earth Markets

PW: I don’t think it has any synergistic benefits. It’s nice to have an end user that might use both, but you need to value both deposits separately.

TMR: Geomega is in Quebec, as is Quest Rare Minerals Ltd. (QRM:TSX; QRM:NYSE.MKT). What geological benefits does Quebec offer?

PW: Each mine has a different geology and will have a different metallurgical process. Quebec does boast a lot of resources. Gareth has said it has the highest concentration of REE resources in a given location, which is one reason we’re putting our REE refinery in Quebec. There are other advantages to Quebec—it also has access to cheap power and a good labor force.

TMR: REEs often come along with uranium or thorium. How do you deal with the issue of radioactivity?

PW: Mining companies must have the ability to take out and store any radioactive material at the site, because it can’t be shipped. The feedstock the refinery takes is free of radioactive material and already concentrated to a point that it’s mostly REEs.

TMR: Is the ability to deal with radioactivity one of the things that you look for in the feasibility studies? Do some companies have fewer issues with that than others?

PW: Some deposits have less radioactive material than others, but any amount needs to be dealt with. You need to have a permit and a plan for how you’re going to deal with it. In a feasibility study, I look more for its business approach. Is it going to sell a mixed REE concentrate, or does it have the ability to produce a product end users need?

TMR: What end products are most in demand?

PW: Out of the LREEs, neodymium and praseodymium are most in demand for their use in magnets. For the HREEs, dysprosium is definitely the most in demand. The markets for europium, terbium and yttrium can quickly turn around and be very strong.

TMR: Some investors in the REE space have been suffering for a while. Do you have any words of comfort?

PW: Continue to look for low-capex projects. They are less risky and have a better chance of making it to market. Look for a pragmatic management team that understands the market it’s in and can change its business strategy to suit it. The refinery space is another way to invest in the future of rare earth elements. I have found that institutional investors are interested in the space for all the reasons mentioned above. In 10 years from now, you will look back and see this was the transition point from a world dependent on petrol-based transportation to one using much cleaner, more efficient electrical or hybrid cars.

TMR: Thank you so much for your time.

PW: It was my pleasure.

Patrick Wong, chief executive officer and director of Innovation Metals Corp., is a seasoned hedge fund manager with over 15 years of experience in various trading strategies, including capital structure arbitrage. He was co-founder and chief investment officer of Dacha Strategic Metals Inc., a unique investment vehicle that invests in physical rare earths. Prior to Dacha, Wong was president of a natural gas trading company that created models to trade physical gas. More recently, he has traded rare earths and metals.

DISCLOSURE:
1) JT Long conducted this interview for The Metals Report and provides services to The Metals Report as an employee. She or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Metals Report: Matamec Explorations Inc., Tasman Metals Ltd. and Namibia Rare Earths Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Patrick Wong: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Innovation Metals is in talks with juniors about using a central refining plant. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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