Medallion Resources: A Non-Traditional Approach To Low-Cost, Near-Term Production

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Rare earth metals are a set of 17 chemical elements that improve our lives, yet most people don’t know what they are. It might be attributable to their location at the very bottom of the periodic table of elements. Without them, computer screens would be less vibrant in colour, modern mobile phones would only be possible in science fiction novels, and stereo speakers would still be half as tall as a person. Rare earths are a critical component in the manufacturing, and in the technological leaps and bounds of the electronics, automotive, renewable-energy, and defense industries. Rare earths, despite their name, are not especially rare, and can be found throughout the world. However, they don't often exist in sufficient concentrations for economic access. Add to this a technically complex extraction profile, and the business of rare-earth mining can be very costly.

But Medallion Resources Ltd. (MDL) (MLLOF) , an exploration company who is rethinking rare earths, may have established a truly unique strategy to achieving near-term, low-cost production. Accessing the by-product monazite, which is rich in rare earths, has been commercially successful for more than 100 years and readily available from heavy-mineral-sand mining reserves in the Indian Ocean basin, Medallion effectively eliminates the costs of drilling and conducting resource calculations, as well as funding and developing mining, crushing, grinding and most milling processes. For many reasons, they have chosen Duqm, Oman as the processing plant site, and are currently working with regional partners to finance and complete financial and technical studies.

Medallion Resources is led by CEO Dr. William Bird, a geologist with over 40 years of experience. Bird is globally recognized as an expert on metallurgy, mineralogy and rare earths. He was previously the CEO of Rare Elements Resources Ltd. (REE.V), where he reorganized and sharpened the focus of the company. He left in 2007 to devote himself fully to Medallion. He and his team are now developing a novel approach to extracting and refining the rare earths that are absolutely vital to many major technological achievements.

Equities.com had the opportunity to learn more about Medallion’s unique business strategy, speaking with Don M. Lay, President and Director of the company, as well as discussing more the rare earths market, and how Chinese domination of the rare earth market could soon be coming to an end. 

 

EQ: Can you provide Equities with a brief overview of Medallion Resources’ operations?

Lay: Medallion Resources is a junior mining exploration company. We’re based in Canada and are focusing on the rare earths area.

Rare earths are 17 different elements that are found in the periodic table with special unique properties. The properties are very important for electronics, like for phosphors, which color your computer screen, and they’re also used in the defense industries.

If one looks at the mining industry, there are really three different types of elements produced. There are precious metals such as gold, silver, platinum, and palladium. Then there are base metals such as copper, nickels, iron, et cetera.

Then there’s doping agents. Those are metals and elements that tend to improve or affect other elements. The 17 rare earths are doping agents that are used to affect other things, and are typically used in small quantities to have a big effect.

EQ: Can you elaborate on what rare earth metals are used for?

Lay: A good example is stereo speakers. When I went to college, the speakers in my dorm room were two-and-a-half feet high. I’m sure you’ve seen those speakers for $2 a piece at garage sales. Now that same speaker is four inches high and it produces the same amount of sound.

They’ve been able to shrink the size and the weight of the magnets in the speakers dramatically by using rare earth elements. So now you have tiny little magnets, driving a huge amount of sound from tiny little speakers. That’s what rare earths do.

That doping agent, just a little bit of it, totally affects the performance of the magnet. And that’s a perfect example of what rare earths do. That same powerful magnet you see in the small speakers is also what helps drive wind turbines. You’ve got a wind turbine up there creating power, and it’s got a very powerful, light magnet. If you put a huge magnet up in a wind turbine, the whole thing would fall over. But because you can put a small magnet up there, the turbine can be used to generate power. Same goes with electric and hybrid vehicles, and basically anything with an electric motor in it.

EQ: Could you tell us a little bit about the areas Medallion is exploring for these rare earths?

Lay: The odd thing about Medallion is we’re an exploration company that is not exploring right now. I can explain that by taking a look at the history of rare earths.

Rare earths have been commercialized and used for about 100 years, and for at least 30 years, it has been dominated by the Chinese, in terms of producing rare earths and providing them to the rest of the world. Prior to that, America was the biggest producer, but today it’s the Chinese.

They’re the biggest producers for a variety of reasons. They have a bounty of good geological occurrences of rare earths. Also, the other reason is that the Chinese government supported the development of the rare earth industry within China because rare earths are by-products of iron mining in the country. If we go back to the rule of Deng Xioping in China, who said, “the Middle East has oil; we have rare earths.” By that, he meant they have a bounty of rare earths, and that’s very true.

The Chinese government has been supporting the development of the rare earth industry, and as we all know, for many years the Chinese were lax on their environmental regulations. Labor is cheap in China, and the state was supporting the research and development in rare earths. For all those reasons—and the fact that rare earths were already a by-product—China was able to produce rare earths cheaper than everyone else. Really, the price stayed quite low for many, many years by international standards. And everyone else in the world virtually stopped producing rare earths. So the Chinese ended up dominating the market.

EQ: The Chinese at one point had 95 percent of the world’s rare earth market. So could you tell us what will be Medallion’s strategic advantage over your competitors—not just the Chinese, but the broader market?  

Lay: Four years ago, the Chinese announced they were changing their strategy with the development of rare earths. They were no longer going to allow them to be exported and used by the foreignindustry cheaply. It was a wake-up call to the rest of the world that they better get into the rare earth business.  So, prices of rare earths rose dramatically, by as much as 20 or 30-fold for certain elements, which is virtually unheard of for metal prices to go up by those numbers. The rest of the world decided to start looking to find and produce rare earths.

What’s happening right now is thatcompanies are going out and trying to find rare earth deposits and turn those deposits, eventually, into mines. That tends to be quite a difficult thing to do because the rare earths tend to be found in complex mineralogy, and the metallurgy and the chemical processes you need to put the ore through to extract the elements tends to be quite complex. It takes a long time to figure it out.

So what Medallion is doing is accessing a well-known and well-understood mineral that’s a by-product of another mining business, and we’ll be processing that. It’s called monazite, and it’s widely available through producers of heavy mineral sands. These are companies that mine beaches, in different parts of the world, typically for their titanium and zircon. Monazite is a by-product of this production, and we can process the monazite to extract the rare earths cheaply and easily.

EQ: That’s avery smart strategy. Can you tell us more about Medallion’s management team?     

Lay: The key person at Medallion is Dr. William Bird, our Chairman and CEO. He’s a former professor of mineralogy at the Colorado State University. He’s spent many years in the rare earth business, and he developed the strategy that Medallion is implementing.

My background is actually in the technology world, and I’ve been involved in public companies and the investment world for about 20 years.

EQ: In terms of recent key milestones for Medallion, are there any significant developments or achievements you’d like to share with us?

Lay: Since we’re not developing a property to turn into a mine, it was important for us to determine a location with which to process these materials. For the last year, we’ve been working with sovereign related groups in the Middle East to set up an independent processing location.  

We’ve just recently announced two agreements in that area. The first agreement was with Takamul Investment Company, which is an Oman-based investment group, owned by Oman Oil, the state oil company.  They’re really a development partner to build new industries in Oman. We’ve targeted an industrial city there called Duqm on the Indian Ocean. We’ll be able to import our monazite feedstock there to get to the rare earths.

Our second agreement was one with Arab Mining Company, which is a pan-Arab investment fund that has invested in mining and mineral processing ventures in the Arab region. We have an exclusive arrangement with them, and they’re looking to come in as a financial partner with Medallion for rare earths in the Arab region, including the proposed monazite processing plant in Oman.

EQ: What are some key developments over the next year you’d like people to look out for to make sure you are hitting you’re on track?

Lay: The first primary metric would be for us to start the formal studies, environmental as well as technical and financial studies, which will be independently conducted, and necessary to start the processing plant in Oman.

The second metric is to secure supply agreements with mineral sand miners for their monazite product. We also plan to finalize the financial arrangements for the Oman plant with the Takamul and Arab Mining Companies.

EQ: Do you have any closing thoughts regarding Medallion Resources for our readers?

Lay: One of our key things about our strategy is that we have virtually no technological risk, because the process to extract the rare earths from monazite has been done for over a hundred years. It’s well known. Other companies and properties are having challenges in this area. Our capital cost to process significant amounts of rare earths is very low because we don’t have to build a mine and we don’t have to build any infrastructure. Our input product can be put on a ship to Oman, unloaded, and processed right there.

The operating costs of such a plant are also low, so it allows us to get to production quickly and easily, versus some of the alternatives that are out there in the marketplace.

Rare elements are of very strategic importance to many industrial countries. Once we have secured our mineral sands, and once our acquisition agreements are in place, we plan on having discussions with sovereign-related industry partners that are interested in securing long-term, rare earth supplies.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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