Medallion Resources President Bill Bird talks about the current status of the REE mining segment

StrategicMetalStocks.com recently had the opportunity to discuss the current market conditions surrounding Rare-Earth Elements with William H. Bird, PhD, PGeo, President and CEO of Vancouver based Medallion Resources Ltd. (MDL.CA). Following is a transcript of the Q&A session:

Rare-earth elements (REE’s) have just recently started attracting attention, but you've been at it awhile.  Tell us your background in the REE’s?

I became interested in the rare-earth elements (REE’s) during my graduate-student and teaching experience in Colorado .  Early in my career, I was able to visit several famous REE locations, such as the Wet Mountains and Powerhorn in Colorado , and Lemhi Pass , Idaho , Bear Lodge, Wyoming and Mountain Pass , California .

I had a fairly comprehensive REE background by the time I took over as president of Rare Element Resources, in 2005.  My experience over the two-and-a-half years with Rare Element solidified my interest and broadened my expertise.  I had a chance to apply my academic knowledge in REE geology and mineralogy to practical exploration and metallurgy and to learn more about the REE market. 

While I was with Rare Element, I met Jim Clark and Anthony Mariano.  They are the two foremost and respected REE experts in North America and they taught me, and continue to teach me a great deal.   This is complex area and it’s great to have access to these resources. 

Why are the rare-earths elements getting so much attention?

Most important is the increased REE consumption, although this has been building steadily over the last 30 years.  Recently, REE’s have drawn increased public attention with high-profile uses in high-tech and consumer goods, such as electric cars. 

Now, just as the REE’s begin to enter our consciousness, it has dawned on the public that China has a virtual monopoly on production.  The effect of this “China Situation” has yet to be fully understood; but it’s clear that presently China is treating its REE deposits as a strategic resource and it really does have the ability to control the market.  

There is one other very important aspect of the present REE excitement that can’t be emphasized enough.  We have had some great REE education and communication help from financial-market newsletter writers, such as Jim Dines and John Kaiser.  If this didn’t actually create the excitement, it certainly accelerated and multiplied it.  I wish that I had had this help during my years at Rare Element Resources.  In those days, if I just said the word “Neodymium”, my audience would go to sleep.

With respect to China possessing a virtual monopoly on rare-earth production, how long do you think it'll be before the rest of the world catches up?

China came into the REE market in the 1980’s, with an overwhelming and cheap supply.  This eventually drove North America’s only REE mine, Mountain Pass , California , out of business.  It also stopped all exploration and development of other, non-Chinese REE sources.  In the short- and mid-term, one of the more subtle effects of China ’s disruption of REE market is the fact that we, in the REE exploration business, went to sleep.  North American REE exploration did not, and could not compete. 

Now, we are suffering from that loss of the normal progression of exploration and development.  There is no stream of REE properties moving in the various stages of development, toward production.  We have been asleep and, as we wake, we realize that we have only a collection of exploration properties.  There is a big gap between these properties and the production that we really need.  When we have to start from the beginning, it takes a long time to explore a property, build a mine and start producing.  It could take five to ten years to catch up. 

We, in the exploration end of the business need to accelerate this start-up time.  I have ideas on how this can be done and, I’m sure, others are working on it, as well.

MolyCorp’s Mountain Pass mine can take up some of the slack and produce for our short-term needs.  It was in production for 50 years and can return to production fairly quickly.  Production has been on MolyCorp’s agenda for the last couple of years. Mountain Pass , though, can’t supply all our needs, particularly in regard to the “heavy” REE’s.  Mountain Pass is very low in heavy REE’s.  We need to develop other REE sources.

You mentioned heavy rare-earths.  Can you explain the difference between light and heavy REEs and why should we pay attention to this?

The REE’s consist of the 15 elements along the top row of the two rows of elements that appear at the bottom of the Periodic Table of the Chemical Elements.  These are the Lanthanoid elements.  The terms “lights” and “heavies” refer to the elements’ atomic weights.

Chemically, strictly speaking, the first seven lanthanoids, from left to right (excluding promethium, which doesn’t occur in nature), are the light REE’s.  The lights, then, consist of lanthanum through gadolinium (atomic weights 57 through 64).  The “heavies” consist of Terbium through lutetium (atomic weights 65 through 71). 

During the last couple of years, there has been an “inflation” of the heavies.  Now, companies are reporting heavies as including yttrium, gadolinium and even europium.  Yttrium, and sometimes scandium, is also included with the REE’s because it naturally occurs, and is commercially traded with the lanthanoids.                                                                                                               

Whenever REE’s are reported, it’s important for those interested to check which elements, and which groups of elements are actually present.  This information is referred to as the REE distribution.  Each REE has different uses and different values.  Heavies generally are more valuable than lights.  Neodymium and praseodymium are the more valuable lights and Europium, terbium and dysprosium are the more valuable heavies.

What key factors do you feel the market should focus on that it may be ignoring right now?

I think that we need to look for new and alternative sources of REE’s.  We ought to be spending some of our exploration time and money on this search.

The types of REE occurrences that are presently known, and are the focus of most of our exploration, may not be sufficient to supply our needs.  One problem that I see is that these “traditional” REE occurrences are generally small.  They just don’t fit in the modern mining world of huge bulk-tonnage open-pit mines.  If we can find a very large surface deposit, it could be profitable even at a very low grade.  The gold industry went through a similar restructuring in the 1980’s.  Before the technical advances of heap leaching changed everything, large mining companies thought they could only find gold in small high-grade deposits.  I believe the same kind of advance may occur for the REE business.  I have some ideas for new REE bulk-tonnage deposits and plan to investigate them as part of Medallion’s program.  One model that we should investigate is based on the “South China Clays”, which has been a source of heavies for the already REE-rich Chinese.

In the case of the heavy REE’s, by-product production has been a “traditional” source.  By-products may be the way to go for an alternative source of heavies.  We need to take a closer look at by-product REE’s associated with uranium and niobium deposits.

New ideas are important for the industry; however, investors need to concentrate on the companies and projects that exist today. Investors, and the more general financial markets should look for companies and projects that are advancing rapidly.  Virtually all REE projects are in the exploration stage.  In North America, only Mountain Pass is near production.  All others are still exploration projects – although some are more advanced.  That doesn’t mean that the projects don’t have merit.  Investors just need to be more aware of the methods required to evaluate these exploration-stage projects.

Check a company’s technical expertise and watch its rate of advancement as it explores a project.  Remember that the mining-industry evaluation aspects that work for other commodities also work for REE projects.  Most investors may want to rely on an REE analyst, particularly with regard to technical subjects, such as geology, mineralogy, metallurgy and mining engineering; however, certain other aspects, such as the presence of nearby roads and power lines, or potential permitting and social problems, can be easily researched and understood.

Look for properties that are economic now.  Price increases and future shortages may occur; but, don’t count on them to make up for the problems of a project that is not economic today.  A profitable project today will be a better project tomorrow, regardless of the future market.  Check a project for the presence of key REE’s.  The heavy REE’s and neodymium are high priced now.  That means demand is outstripping supply.  These are likely to remain in demand in the future.

Why is Medallion Resources well-positioned to exploit this area?

Medallion offers a tremendous opportunity to investors.  In the seven months since we reconstituted ourselves as an REE company, we rapidly advanced through several benchmarks.   Medallion’s share price has responded very well but we are just beginning our push to become a significant REE company.

I believe Medallion has the best available technical team.  It is advancing with its ideas to find new types of REE deposits and short-cuts to production.

Medallion has its first acquisition, the Eden REE Project in Manitoba , one of the top REE prospects in North America .  It plans at least one additional, heavy-REE-oriented acquisition.

Eden ’s eight-square-kilometre mineralized area, strong REE values and multiple-mineralization styles support targets for a large surface deposit.  We have determined, through examination of past Eden data, that the property could contain high neodymium values and excellent by-product heavy REE’s.  Eden is one of few REE properties in Canada within practical distance of roads, power and mining-service centres.  With Manitoba ’s mining-friendly reputation, we don’t expect significant permitting, environmental or social concerns.   We will be on the ground in June with our 2010 exploration program, which is designed to confirm fall drill targets.

Medallion has a strong share market, a low number of shares outstanding and a low market capitalization.  I think it’s poised to appreciate.