COMMENT PRINT

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By: Matthew Hill

7th March 2011

Updated 17 minutes ago

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TORONTO (miningweekly.com) – TSX-listed Avalon Rare Metals CEO Don Bubar said on Monday there was a “good chance” of an Asian group buying a stake in his company to help finance its Nechalacho project in Canada’s Northwest Territories.

“The anxiety levels in securing supply outside of China are so high that it’s motivating a high level of interest,” he told Mining Weekly Online on the sidelines of Toronto’s PDAC conference.

Bubar added that Avalon is speaking to rare earth element end users and trading companies primarily in Asia, including Japan and Korea.

South Korea said on Monday it would increase its rare earth stockpiles as concern around China’s dominance of the sector increases. Japan is taking similar measures.

China produces over 95% of global rare earth element supplies, and has been cutting back export quotas as the government tries to reduce pollution levels among its rare earth miners.

The elements are used in a wide range of high-tech applications, including iPads, hybrid cars, and wind power generators.

Avalon’s Nechalacho project is scheduled to start producing around 2015, with a bankable feasibility study set for completion in the second half of next year.

Bubar said in an earlier presentation that the mine would cost more than $1-billion to build.

The company was already speaking to potential equity partners, though Bubar couldn’t name them because of confidentiality agreements.

SEPARATION FACILITY

In addition to the mine, Avalon plans on building a separation facility, which would produce the individual rare earth oxides for sale to refineries.

According to Bubar, there are no such facilities large enough to process the project’s heavy rare earths outside of China.

The facility would cost around C$345-million, and Avalon has studied various potential sites in North America to locate it.

He said potential customers made it clear that they wanted Avalon to process its rare earth products outside of China.

Earlier on Monday, Mackie Research Analyst Matt Gowing predicted there would be increasing merger and acquisition activity amongst rare earth companies.

Bubar agreed. “Certainly we’re hearing a lot of speculation. It’s likely that there will be some M&A activity in this space,” he said.