Developing the Rare Earth Hub in Quebec: GEOMEGA Business Plans at VRIC 2020

Read this transcript of Kiril Mugerman’s speech at the 25th annual Cambridge House VRIC in January 2020. Study this information closely to understand the GEOMEGA business plans. Watch the video here.

Geomega Resources — I’ll talk today about developing the rare earth hub in Quebec, Canada. Basically, we want to bring rare earths back into North America. How do we do that?

Forward-looking statement, as usual.

The challenges of critical minerals or strategic metals are immense. What we’ve seen over the last ten years in this industry is that there are no majors coming in to acquire juniors or develop rare earth projects, lithium projects, cobalt projects, or graphite projects. We see that the juniors are obliged to develop them by themselves. At the same time, that creates a huge financing risk for those companies and exposes them to sharp drops in commodity prices where the project can quickly become no longer economic. Quite often, it requires a new technology. Those new technologies have their own issues.

What are the challenges with those new technologies? Quite long R&D processes. And they are seen as a black box — how do we know that it works? What’s the scale-up? The scale-up is often too aggressive because the junior wants to save time, so they go from a pilot immediately to the size of a mine. That drives cost overruns and cost overruns cause other issues. Quite often, those companies end up going bankrupt and not operating anymore. Quite often, the process is more challenging than the mining. We keep all of that in mind when we think about how Geomega is doing it differently.

Study this transcript of Kiril Mugerman’s speech at the 25th annual Cambridge House VRIC in January 2020 to understand the GEOMEGA business plans.

Contact us to discuss the GEOMEGA Business Plans.

Let’s ask a simple question — what is the Canadian advantage in rare earth elements? Is it because our mining projects are so much better than Chinese mining projects or Australian or African projects? I’d say no. Is it because our infrastructure is better? Well, that’s still debatable. A lot of those Canadian projects are located very far up north, where the infrastructure is not necessarily ready. Is it our labour cost? No. One of the main advantages for Canada and Quebec is clean and cheap energy. That is one very strong point to help us develop the rare earth sector. We have to use it! The second point is the strong support for innovation that we have from the governments.

Quebec is North America’s opportunity for a new rare earth hub. We can start using the ISR technology that we’ve developed to establish Quebec as the clean and cost-efficient recycler of choice for rare earth magnets.

We focus on recycling because you want to start as a small, high-grade feed processor. Once we have the magnet processing facility that is generating cash, everybody in this room will be very excited because we know the technology works and then we can go to other specialty metals that need to be recycled as well. More material to be processed means more cash to be generated. Then, the big goal is refining concentrates for mines but that requires a much bigger facility. That bigger facility is usually where people try to go right away. We’ll get there, gradually. We will get there and when we do, we will be the processor of choice or refiner of choice for rare earth concentrates outside of China. Once you are there, if you really want to dream big, you can go for all the other sources of rare earths. It can be the red muds that everybody’s been talking about in the US. It can be coal. It can be tailings of other mining feeds. There are lots of other rare earths to be processed, but you want to get there gradually because if you go there too aggressively then we’ve seen what happens.

What does it mean to have a recycling facility in Quebec? The first major advantage is that it helps in the future to develop the mines in Quebec or elsewhere in Canada. Montviel is the project that Geomega has and that could get developed. Besides that, it attracts downstream processors. It attracts the rare earth industry to North America and Quebec, which is what the governments are trying to do. Finally, it attracts the users of the magnets and the metal. It can attract the entire industry back.

Now, I look at the Geomega business plans as a three-stage process. You start with lab scale development, go through small increases of ten-times. We’ve done that. We completed all that and now we’re in this stage two, developing the process for the recycling approach. We did the pilot plant and that worked great, but now we are doing the demonstration plant. When the demonstration plant is running, you start doing R&D to modify your technology to process mining concentrates. By the time you have an operational unit for your magnet recycling business generating cash flow, the objective is to be ready to move on to the next stage of processing the mining concentrates.

The key here is a gradual scale-up. The gradual scale-up has several advantages. It reduces the technological risk of scaling up. It reduces the CAPEX that’s required in the beginning. It allows the company to establish cash flow, which is very important. Cash is king and brings credibility to the technology. As we said in the beginning, it’s seen as a black box! And number five — relationship with clients. Those relationships are very important. You’re starting small but now they know you, they know your product, and they know your quality. Finally, it lowers the risk when scaling up. With all new technologies, there is a risk of scaling up.

That’s a picture of our pilot plant. I’ll focus on the three key points for us. First, the recovery of the reagent. We are using a very different reagent than what is traditionally used in the mining industry. We recover 95% of the reagent and that’s a huge advantage for us. Because of that recovery, I don’t have any liquid effluent. I don’t have any liquid waste coming out of the plant and that means my iron oxide is trapped within the magnet, as well. I can produce a high-purity iron oxide, which is a saleable product. No liquid tailings, no solid tailings, no tailings at all. Solid material coming in, solid material coming out — that’s the advantage.

Besides that, I have a very small footprint and that means my CAPEX is very low. What do I mean by “very low capex”? My capital costs here are $2.6 million dollars for a plant that can process 1.5 tonnes per day of material. That gives me potential to generate $10 million in sales per year, with a profit margin of 20%. If I want to really run the plant at full capacity, then I can run it at 24 hours instead of 8 hours. Multiply all those numbers by three — that’s 4.5 tonnes per day and $6-8 million of profit per year. That’s a very small plant.

Now, where is the plant going to be located? We just announced that a few days ago. It will be in St. Bruno, half an hour outside of Montreal. This is a strategic location with service by rail, air, and sea.

There are upcoming milestones. You can see what has been completed over the last 6-9 months and now the main objective is to complete a debt financing with the government. As soon as that’s announced, we can move on towards the next stages, which is finalizing all the engineering, selection of the equipment, start ordering the equipment, and construction. All that fits with our objective to become a producer of rare earth elements in Quebec, Canada in 2020.

Where’s the feed coming from? I’ll mention that just briefly. The interesting thing about rare earth magnets is the waste. When you produce magnets, the industry average is 15-30% percent waste being generated during the cutting and polishing of the actual magnets. Once the magnet is made and goes to the OEM, the loss there is minimal. But during the manufacturing process of the actual magnet, the industry’s very inefficient. That material that is being lost has to be recycled. Today they’re recycling it in China. Chinese are the leaders in rare earths recycling, but outside of China nobody does it. Old electric vehicles and wind turbines — those provide future sources for big volumes of rare earth magnets. There is more growth in all those industries and more magnet waste to be processed in the future.

If you look at the numbers for 2018, approximately 160,000 tonnes of magnets were produced. You can do the calculation yourself — 15-30% waste of that is a lot of material. Who is the biggest producer? China. Second is Japan. There’s a lot of material that’s being generated outside of China that needs to be recycled.

There’s an educational process that’s an essential next step for generating more and more feed in North America. The recycling industry of today does not know that magnets can be recycled efficiently. Very few recyclers collect them today and ship it to Asia. More and more of them are figuring it out, understanding what it is, and seeing what we are doing. As they start to collect it, it’s all going to be processed here by us — Geomega.

Consider the Geomega business plans in context of the overall market for permanent magnets. Today, the magnet waste market is over a billion dollars. It’s going to be almost two billion dollars ten years from now. The potential of our operation is quite significant. You can see the numbers — even if we put a second plant, I’m still a fraction of what is being processed today. There’s a lot of opportunity ahead of us.

Why are we doing all this? It’s the circular economy principle. Once we are doing this recycling, it closes the production cycle as Europe and North America are trying to do right now. I’ll finish by saying that rare earth prices are low, but that’s what drives demand and demand is positive for innovation and recycling. That’s where we are today in the rare earth cycle. Low capex, low opex, small footprint, clean process, and cash flow — these are the objectives of the company in the near future. Thank you very much.

KIRIL MUGERMAN, 2019-11 SPEECH | Geomega Ressources

KIRIL MUGERMAN 2019-11 SPEECH TRANSCRIPT https://www.youtube.com/watch?v=0b4FZbpDZxg “Rare Earths, Refining, Recycling” Kiril Mugerman at Cambridge House in San Francisco, November 2019. Going from figuring out what gold is doing next, we’ll go to rare earth elements. We’ve been hearing a lot from the US government, Canadian government, and others all over the world what is happening …