Following Stans Energy Corp.’s (TSX-V: HRE.V) press release last Tuesday announcing that Plant #3 of their Kashka REE Plant (KRP) will be ready for operational testing by mid-July 2012, and by August 30, 2012, the KRP is expected to be ready to produce its first product- Heavy Rare Earth Oxides of Dysprosium, Gadolinium, and Erbium to 99.99% purity, shares of the resource development company focused on progressing Heavy Rare Earth (HRE) properties in areas of the Former Soviet Union climbed to a high of 0.95, the highest they’ve been since early March.
While shares have dipped since hitting that high, currently trading around the 0.81 level, they remain well ahead of their 50-day moving average of 0.69 and within reach of their 200-day moving average of 0.82. Trading volume has also picked up for HRE.V over the past week, averaging nearly 224,000 during a five-day span.
This surge in activity is in response to HRE.V’s report that they are close to completion in regards to their renovation of KRP, the plant they acquired in spring 2011. In addition to nearing completion of the plant HRE.V President and CEO, Robert Mackay, revealed that through the course of renovating, and in consultation with their technical advisors at the Russian Research Institute of Chemical Technology (VNIIHT) “we discovered the potential for recovering nearly two tonnes of mixed rare earths oxides from concentrate that remains in the holding tanks.”
Mackay went on to say, “The concentrate consists of Dysprosium, Gadolinium, Samarium, Yttrium, Holmium, Ytterbium, Erbium, Thulium and Lutetium This production test run will demonstrate the operational viability of the KRP plant. This validation of our proven metallurgical processes and production assets will solidify our position as one of the front-runners to Rare Earth Oxide production outside of China.”
To become one of the front-runners to Rare Earth Oxide production outside of China would obviously be a massive accomplishment for HRE.V and open a number of possibilities for the company. With China accounting for more than 95% of the global production of REEs and maintaining export limits on their production there is a growing demand for new suppliers. That being said, there is also a demand for particular elements, specifically heavier rare earth elements such as, dysprosium, terbium, neodymium, europium and erbium.
The demand for these heavier rare earth elements is what makes HRE.V’s release last Tuesday so intriguing given the fact they said they expect the KRP to be ready to produce its first product – Heavy Rare Earth Oxides of Dysprosium, Gadolinium, and Erbium to 99.99% purity by August of this year.
Now it should be noted that while HRE.V has supplied investors with an August date for their first product that shouldn’t be viewed as the date HRE.V ramps up production and becomes a global supplier of REEs. There is more to the production of HRE.V’s REE mining than just Plant #3 and what lies ahead is laid out in that Tuesday press release:
“The Russian Research Institute of Chemical Technology (VNIIHT) is currently designing new technology that will be incorporated into a new Plant #1. This plant was historically used to both crack the concentrate from the milling stage and remove radioactivity before it was sent to Plant #2 for solvent extraction. Based on consultations with VNIIHT, Stans expects the process circuit design to be finalized in Q3 2012. This design will be incorporated into the Company’s Bankable Feasibility Study (BFS), which will begin in Q3 2012.”
“Plant #2 was previously used for solvent extraction of rare earths. Stans is investigating whether to rehabilitate Plant #2, or to construct a 1500 tonnes per year new plant using plastic solvent extraction equipment. Until that decision is made, pilot scale extraction testing will be continued in Plant #3.”
Reading this an investor may get the idea that any kind of financial benefits from production could be some time off. Just how long? Well in their press release distributed on June 18, 2012 HRE.V announced they had “received an extension to its Licence Agreement within the Company’s mining licence to mine REE until December 31, 2014. This period will provide Stans Energy Corp. with the necessary time to prepare Kutessay II for production. Stans’ existing Mining Licence will govern the production period at Kutessay II, which is valid through December 31, 2029.” That should give investors some picture as to the timeline for meaningful production.
There is still a long road ahead for HRE.V before they get the ball rolling. While they have stated that the Kashka Rare Earth Processing Plant (KRP) is the same plant that previously refined REEs historically from Kutessay II and that the KRP was the only hard rock plant to produce all rare earth elements outside of China, producing 120 different metals, alloys, and oxides, the plant hasn’t been in operation for nearly 20 years and a lot changes in two decades. That’s not to say that REEs change but the process of mining and the regulations that go with it certainly have and that can be costly.