Palisade Research - Tue, Nov 7, 2017

Demand In Rare-Earth Elements Set To Increase 2,600%

picture of five piles of rare earth minerals

Rare-earth elements (REEs) are quietly on a tear. Since bottoming in 2015, REEs have finally broken out in 2017, gaining 65%, with REE companies up almost 100%.

2-year indexed line chart compares prices of REE stock to rare earth minerals from Sept. 18, 2015

While not on the radar of many investors, REEs are poised with lithium and cobalt to face significant supply shocks in the evolving electric vehicle market. Rare earths are used in electric-motor magnets and represent 8% of the total motor cost today.

Researchers at MIT expect demand for certain REEs to sky-rocket by 2,600% over the next eight years. This supply crunch will be exaggerated by the fact that REEs are highly controlled by the Chinese, and that there are significant timelines to production.

There is no rare earth production in North America, and only two projects are slated to come online in the next two years, none of which are in Canada or the United States.

Our subscribers know we have covered the EV revolution extensively, recently profiling battery metal expert and resource investor, Mike Beck, and his top picks.

We are also invested in two rare earth companies that stand to benefit from the EV revolution.

Appia Energy Announces Highest-Grade Grab Samples In Canada

Appia Energy (CNSX:API, FRA:A0I, OTCMKTS:APAAF) has just released extraordinary geochemical assay results from its ground campaign on its REE and uranium Alces Lake property. Highlights include (reported as total rare earth oxides (TREO)):

Ivan - 49.64 weight % TREO over 0.95 meters; 45.92 weight % TREO over 1.85 meters

Wilson - 30.76 weight % TREO in boulder; 18.53 weight % TREO over 2.7 meters; 9.07 weight % TREO over 4.6 meters including 20.94 weight % total REO over 1.8 meters; 6.62 weight % TREO over 1.8 meters

Danny - 13.63 weight % to 2.43 weight % TREO outcrop grab samples

Hinge - 8.73 weight % to 3.74 weight % TREO in boulders; 1.90 weight % over 1.5 meters TREO

NW Wilson - 5.10 weight % to 1.68 weight % TREO in boulder and outcrop grab samples

To put these numbers into perspective, a high-grade deposit has a resource that is greater than 2% TREO, while a world-class deposit is greater than 5% TREO. Appia's numbers meanwhile are running over 49% at surface.

This mean Appia's Alces Lake has the potential to be a world-class REE deposit, with at least 5 zones of surface defined mineralization. The sub-surface radiometric anomalies and in-field investigation, suggest that there is, even more, mineralization to be discovered beneath overburden. Because Alces is surface mineralization, Appia will be able to define a resource estimate very quickly - something the company plans for the summer program.

If grades continue below surface into a meaningful ore body, Alces Lake could be a game changer for both Appia, and Canadian rare earth production.

Medallion Resource - The World's Next Rare Earth Producer

Medallion Resources (CVE:MDL) is one of just two companies in the World slated for near term REE production. Medallion is a company focused on processing monazite sand which contains 50-60% REEs. Monazite sand is produced as a by-product during the heavy-mineral-sands processing flow, discarded after titanium and zircon have been extracted.

Because of this, there are over 200,000 tonnes of monazite sand stockpiles around the world, and Medallion is seeking monazite processing partnerships to process and produce rare-earth products.

In terms of infrastructure, Medallion has executed a non-exclusive commercial agreement with Rare Earth Salts Separations and Refining LLC, to produce, market and share revenues from the sale of finished rare-earth products. Medallion will produce and supply rare-earth concentrate to Rare Earth Salts, who will, in turn, separate and refine it into marketable rare-earth oxides.

The partnership anticipates initial production of 500 tonnes per year of rare-earth oxides beginning in 2019 and growing over time to 3,000 tonnes per year.

Medallion differs from other REE deals as there is no exploration risk. Monazite sand stockpiles are discarded, and the company can take advantage of it with minimal technical risk, low operational costs, and low capital expenditures. In fact, there is an enormous valuation discrepancy between Medallion Resources and other North American REE names.

Stay tuned for more coverage.

Palisade Global Investments Limited holds shares of Appia Energy and Medallion Resources. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence. publishes interesting contributor articles in addition to its own content. We have not verified any of the above details.

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