byby

Judith Chegwidden & Dudley J KingsnorthJudith Chegwidden & Dudley J Kingsnorth

Roskill Information Services Ltd & Industrial Minerals Company of Australia Pty Ltd

66thth International Rare Earths ConferenceInternational Rare Earths Conference

Hong Kong, November 2010

““Rare Earths: Rare Earths: Facing the Uncertainties of SupplyFacing the Uncertainties of Supply””

DISCLAIMERDISCLAIMER

2

The statements in this presentation represent the considered views of the Industrial Minerals Company of Australia Pty Ltd (IMCOA) and Roskill Information Services Ltd (Roskill). It includes certain statements that may be deemed "forward‐looking statements." All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward‐looking statements. Although IMCOA and Roskill believe the outcomes expressed in such forward‐looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward‐looking statements. Factors that could cause actual results to differ materially from those in forward‐looking statements include new rare earth applications, the development of economic rare earth substitutes and general economic, market or business conditions.

While, IMCOA and Roskill have made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only.

Summary of Presentation Summary of Presentation ––DemandDemand

3

The last 18‐24 monthsThe rare earths industry todayChinaPresent and future global demandRest of World demandWhere to in 2020?

3

The Last 18The Last 18‐‐24 Months24 Months

4

China unofficially temporarily suspends shipments of rare earths to Japan (September and October 2010)

Chinese export quotas reduced significantly (July 2010)

Global financial crisis (Growth set back 2 years)

China declares ‘heavy’ rare earths resources are finite (approximately 15 years)

Chinese rare earths industry consolidationMt Weld & Mountain Pass to move seamlessly to production capacity of 20,000tpa REO each

4

China: Export Quota HistoryChina: Export Quota History

5

Chinese Export Quota History 2005-2010 (Tonnes Product)

YearRare Earth Quotas ROW

DemandDomestic

CompaniesForeign

CompaniesTotal Change

2005 48,040t 17,659t 65,609t 0% 46,000t

2006 45,752t 16,069t 61,821t -6% 50,000t

2007 43,574t 16,069t 59,643t -4% 50,000t

2008 Actual: 34,156tAdjusted: 40,987t*

Actual:13,293tAdjusted: 15,834t*

Actual: 47,449tAdjusted: 56,939t* -5½%* 50,000t

2009 33,300t 16,845t 50,145t -12% 25,000t

2010 22,512t 7,746t 30,258t -40% 48,000tNote: * Quotas adjusted to an equivalent 12 month quota as there was a change in the dates for which they were issued; so that now they are for a calendar year

Global Rare Earths Consumption in 2010Global Rare Earths Consumption in 2010

Estimated Global Rare Earths Demand in 2010 (t REO ±15%)(Source: IMCOA, Roskill and Rare Earths Industry Stakeholders)

Application China Japan & NE Asia

USA Others Total Market Share

Catalysts 9,000 3,000 9,000 3,500 24,500 20%

Glass 7,000 1,500 1,000 1,500 11,000 9%

Polishing 10,500 6,000 1,000 1,500 19,000 15%

Metal Alloys 15,500 4,500 1,00 1,000 22,000 18%

Magnets 21,000 3,500 500 1,000 26,000 21%

Phosphors 5,500 2,000 500 500 8,500 7%

Ceramics 2,500 2,500 1,500 500 7,000 5%

Other 4,000 2,000 500 500 7,000 5%

Total 75,000 25,000 15,000 10,000 125,000 100%

Market Share 60% 20% 12% 8% 100% -

6 Source: IMCOA

Rare Earths Growth in Consumption Rare Earths Growth in Consumption 2010 to 20152010 to 2015

Global Rare Earths Demand in 2010 & 2015 (tpa REO) ± 15%

ApplicationConsumption tpa REO Rate of

Growth2010-15

Market Share20152010f 2015f

Catalysts 24,500 28,500 3-5%pa 15½%Glass 11,000 11,000 Negligible 6%Polishing 19,000 30,500 8-10% 16½%Metal Alloys 22,000 35,000 8-12% 19%Magnets 26,000 48,000 10-15% 26%Phosphors 8,500 13,000 6-10% 6%Ceramics 7,000 9,500 6-8% 5½%Other 7,000 9,500 6-8% 5½%Totals 125,000 185,000 6-10% 100%

7 Source: IMCOA

Global Rare Earths Consumption in 2015Global Rare Earths Consumption in 2015

Estimated Global Rare Earths Demand in 2015 (t REO ±15%)(Source: IMCOA and Rare Earths Industry Stakeholders)

Application China Japan & NE Asia

USA Others Total Market Share

Catalysts 12,500 3,000 10,000 3,000 28,500 15½%

Glass 7,000 2,000 1,000 1,000 11,000 6%

Polishing 12,500 10,000 4,000 4,000 30,500 16½%

Metal Alloys 25,000 7,000 2,000 1,000 35,000 19%

Magnets 37,000 6,000 3,000 2,000 48,000 26%

Phosphors 8,000 3,000 1,000 1,000 13,000 6%

Ceramics 3,000 3,000 2,000 1,500 9,500 5½%

Other 6,000 2,500 500 500 9,500 5½%

Total 111,000 36,500 23,500 14,000 185,000 100%

Market Share 60% 20% 13% 7% 100% -

8 Source: IMCOA

Global Rare Earths Demand 2005Global Rare Earths Demand 2005‐‐1515

99

Source: IMCOA

Summary of Presentation Summary of Presentation –– SupplySupply

10

Rare earths resources and reservesOverview of current supply – focus on ChinaExisting supply from the Rest of the WorldForecast potential supply from the Rest of the WorldRest of World historical price trends

10

Deposits vary greatly Deposits vary greatly ‐‐ matching the ratio in the natural matching the ratio in the natural occurrence of REOs to the demands of the market is a key occurrence of REOs to the demands of the market is a key considerationconsideration

Rare earths content of major source minerals (% total REO)Basnaesite Ion adsorption clays Monazite Loparite

Bayan OboInner

Mongolia

Mountain PassUSA

Xunwu Jiangxi

LognanJiangxi

Mount Weld

Guangdong LovozerskyRussia

La2O3 23.0 33.2 43.4 1.8 25.5 23.0 28.0

CeO2 50.0 49.1 2.4 0.4 46.7 42.7 57.5

Pr6O11 6.2 4.3 9.0 0.7 5.3 4.1 3.8

Nd2O3 18.5 12.0 31.7 3.0 18.5 17.0 8.8

Eu2O3 0.2 0.1 0.5 0.1 0.4 0.1 0.1

Tb4O7 0.1 trace trace 1.3 0.1 0.7 0.1

Dy2O3 0.1 trace trace 6.7 0.1 0.8 0.1

Y2O3 trace 0.1 8.0 65.0 0.3 2.4 trace

1111

Components of rare earth supply in 2008/2009Components of rare earth supply in 2008/2009China

o 124,800t REO in chemical concentrates in 2008, falling to 120,000t in 2009

o Mainly from bastnaesite from Baotou and ion adsorption clay from southern provinces

o Circa 15,000‐20,000t REO from “unofficial” sources

Russia

o 2,470t REO in chemical concentrates from mine output , falling to 1,898t in 2009

India

o Circa 50t REO in chemical concentrates from tailings, possibly 75t REO in 2009

USA

o 1,700t REO in chemical concentrates from stockpiled ore arising from mining in the 1990s

Others

o Small amounts of monazite and xenotime from south east Asia12

Facets of Chinese supply to RFacets of Chinese supply to R‐‐OO‐‐WW• Positive impact on supply:

o Reserves >25Mt REO

o Excess secondary processing capacity

o Access to relatively low cost processing chemicals

o Heavy investment in research and technology

• Negative impact on supply of REO and RE metals to R‐O‐W:

o Finite heavy rare earth resources (15‐20 year mine life)

o Increasingly rigorous environmental legislation (plus clean–up costs)

o Policies to encourage downstream processing

o No new exploration and mining licences until 2011 (at the earliest)

o Export taxes

o Tighter mining and export quotas

o Uncertainty over future availability – very mixed messages in Q4 2010

13

Comparison of mine and separation quotas and estimated Comparison of mine and separation quotas and estimated production in Chinaproduction in China

Year

NDRC/MIIT concentrate

Quotas

Estimated mine output (1)

NDRC/MIITseparation

quotas

Estimated separation output

2007 131,780 120,800 118,700 126,000

2008 129,178 124,800 118,700 135,300

2009 119,500 120,000 110,700 129,400

2010 89,200 110,000f 86,000 110,000f

Source: CREIC, NDRC/MIIT, Roskill Note: (1): Includes estimate for illegal mining

f: forecastNDRC = National Development & Reform Commission MIIT = Ministry of Industry and Information Technology14

Measuring the impact of diminishing Measuring the impact of diminishing quotas quotas –– 40% decline in 201040% decline in 2010

China: Exports of selected rare earths, China: Exports of selected rare earths, 20012001‐‐2010 (t)2010 (t)

0

5,000

10,000

15,000

20,000

25,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan‐Aug

Cerium oxide Rare earth oxides other than of cerium Cerium Compounds, Nes Lanthanum oxide

16

Source: Global Trade Atlas

Decline in Japanese imports of rare earth compounds and Decline in Japanese imports of rare earth compounds and metals since 2007 metals since 2007 –– replaced by imports of processed replaced by imports of processed materials?materials?

Japan is overwhelmingly dependent on supply from China99% of lanthanum oxide sourced from China 89% of cerium oxide.90% of yttrium oxide

Source: Global Trade Atlas1: Including intermediate compounds

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Yttrium oxide Cerium oxide Cerium compounds Lanthanum oxide Rare earth metals

17

Japan: Imports of rare earth compounds and metals, 1999‐2009 (t)

Existing and potential supply from Existing and potential supply from the Rest of the Worldthe Rest of the World

Existing RExisting R‐‐OO‐‐W producers accounted for less than W producers accounted for less than 5% of supply in 20095% of supply in 2009

Company Location Ore type Capacity(tpy REO)

Notes

Molycorp Minerals

Mountain Pass, CA Bastnaesite Current 2,000‐3000

Currently processing ore from stockpile, main products are mixed rare earth oxides for FCC catalyst and didymium oxide, lanthanum compounds and SEG concentrate

Lovozersky Mining Company/

Solikamsk Magnesium Works

Kamasurt Mine , Kola Peninsula, Russia

Solikamsk processing plant, Urals, Russia

Loparite, processed to yield rare earth carbonate, which is shipped to Estonia, Kazakhstan, Austria and China for further processing

Up to 4,400 Levels of radioactivity in some zones of the mine

Indian Rare Earths

Mineral sands from Orissa, Tamil Nadu and Kerala have in the past been processed at Udyogamandal, Kerala. Current output from stockpiles of Th rich residues

Monazite from extensive deposits of mineral sands

25‐100 Plans for a new monazite processing plant but start‐up has been delayed (new jv with Toyota)

IREL is under the control of the Department of Atomic Energy

Other Vietnam, Thailand, Malaysia Monazite 1,800‐2,000 Monazite has a significant Th content 19

Rare earth operations under development Rare earth operations under development ––Lynas CorpLynas Corp

Mount Weld deposit, Western Australia, and a processing plant inGebeng, Malaysia

Resource of 17.49Mt at 8.1% REO (equivalent to 1.42Mt REO)

Capital raising in October 2009 raised A$450M which is being used to finance Phase 1 development, completing construction at Mount Weld and Gebeng

Concentrator will produce 35ktpy of concentrate grading 40% REO

Phase 1 plant at Gebeng has the capacity to produce 10,500tpy REO

Possible expansion to 21,000tpy REO (fund raising started?)

Start up planned for late 2011, full production by 2012

Four sales contracts in place – including with Rhodia, plus further letters of intent

20

Rare earth operations under development Rare earth operations under development –– Molycorp Molycorp Minerals LLCMinerals LLC

Over 50 years of production history at Mountain Pass, California, USA

Proven reserves 40,000t of REO contained in 0.48Mt ore at average grade of 9.38%

Probable reserves of 960,000t of REO in 13.8Mt ore at average grade of 8.2%

Projected mine life of 30 years

Mining scheduled to re‐start at the end of 2010

Production of REOs at the rate of 19,090tpy by 2012/2013

Possible expansion to circa 40,000t REO

Plans for conversion of REOs to metal and alloys and then magnetmanufacture

Raised US$394M in August 2010 from IPO – plan to spend US$511M on modernisation and expansion of mine and processing facilities

21

Rare earth operations under development Rare earth operations under development ––Japanese investments in potential producers of Japanese investments in potential producers of REEsREEs

Sumitomo/Kazatompromo SARECO JV plans to build refinery to treat Y‐rich uranium ore tailings, uranium ores and rare

earth concentrates to produce REOs and RE metals

o Output could be 3,000tpy REO by 2011 rising to a possible 15,000tpy REO by 2015

o However – still the subject of a feasibility study

Toyota/Sojitz/Govt. of Vietnamo Dong Pao consists of number of ore bodies with a total reserve of ~9.7Mt REO. The most

prospective deposit contains 0.65Mt REO

o Scheduled to produce 2‐3,00tpy REO by 2013, rising to 5,000tpy

o Mine life of around 20 years

Toyota/Indian Rare Earths jvo New monazite processing plant in Orissa with a capacity of 10,000tpy concentrate

o Previously subject to local opposition

Mitsubishi/Neo Material Technologieso Undertaking research to extract HREEs from tailings at Mineracao Taboca’s Sn, Ta and Nb mine

at Pitinga, Brazil

o Tailings reported to contain 8.5% REO – with a high grade of Dy

22

The search for The search for heavy rare earthsheavy rare earths –– but at what but at what costcost?

Alkane Resources

o Proposed production of HREEs as by‐product of zirconium production at Dubbo, NSW, Australia

o Base case of 2,000tpy LREO and 600tpy HREO could be produced by 2013/14 with potential to expand to 6,000tpy.

o Undertaking definitive feasibility study by early 2011

Avalon Rare Metals Inc

o Nechalacho deposit rich in HREEs in NWT, Canada, low ore grade overall (176Mt at 1.43% REO) but high ratio of heavies

o BFS could be completed by 2012, construction could start in 2013 resulting in production of 5,000tpy REO by 2015, rising to 10,000tpy REO.

o Capital costs could be up to US$890M for mine, mill and metallurgical plant – including US$346M for separation plant

Quest Rare Metals

o Strange Lake and others in Quebec/Labrador, Canada. High proportion of HREEs in Strange Lake deposit

Ucore

o Bokan‐Dotson Ridge project, Alaska. Comprehensive suite of HREEs

Matameco Kipawa deposit in Quebec, Canada contains 3 major types of REE mineralisation (eudialyte,

yittrio‐titanite, and britholite), including LREEs, HREEs and Y

23

The majority of deposits are rich in The majority of deposits are rich in LREEsLREEs ‐‐ projects projects where feasibility studies are underway includewhere feasibility studies are underway include::

Rareco, Steenkramskaal, South Africa ‐ reopening and reequipping underground mine, undertaking pre‐feasibility study, mining permits received

Arafura, Nolan’s project, Australia. Bankable feasibility study underway. Construction could begin in 2012. Target production of 10,000toy REO by 2013 with possible expansion to 20,000tpy. Processing complex to be built at Whyalla

Great Western Minerals Group, Hoidas Lake, Canada – prefeasibility underway, could produce 3‐5,000tpy by 2014. Relatively small resource

Rare Element Resources, Bear Lodge, Wyoming, USA – inferred resource of 17.5Mt at 3.46% REO. Scoping study completed, pre‐feasibility and pilot plant for 2011, possible production from 2015

Stans Energy Corp, studying feasibility of reopening Kutessay ll Mine, Kyrgyz Republic, and utilising processing plant at Orlovka (50:50 LREEs and HREEs)

24

The search continues: Over 200 rare The search continues: Over 200 rare earth projects identified by mid 2010earth projects identified by mid 2010

But commercial considerations are key:But commercial considerations are key:

Rare earths are not commodities – in many cases they are customer specificThe rare earth projects that have emerged in the west are singleproject companies (debt has to be non‐recourse project funded)Developing a rare earth mine and processing plant is capital intensive (>US$40,000/t capacity)History shows that the development time can be very long (10‐15 years)Limited technical expertise on mining, cracking and separating outside ChinaPercentage REO content is only half the story – REO distribution and amenable mineralogy are importantMost deposits contain radioactive material that has to be contained and stored – a cost rather than a benefit for the momentProjects that rely on shipping low grade concentrate over 100s of km are going to be costly

26

Will production from the rest of the world plug the Will production from the rest of the world plug the forecast supply gap?forecast supply gap?

Rest of the World: Mine production of REOs, 2004‐2015 (t)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2004 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

27

Source: Roskill

Historical price trendsHistorical price trends

How have rare earth prices performed in relation How have rare earth prices performed in relation to IMF Commodity Price Indexto IMF Commodity Price Index‐‐Metals?Metals?

29

0

100

200

300

400

500

600

700

800

900

1000

Jan‐10 Feb‐10 Mar‐10 Apr‐10 May‐10 Jun‐10 Jul‐10 Aug‐10 Sep‐10

IMF Metals Index Lanthanum oxide Cerium oxide Neodymium oxide

Source: Roskill, Metal Pages, IMFIMF basket comprises copper, aluminium, iron ore, tin, nickel, zinc, lead, uranium

The impact of the export quota on prices has The impact of the export quota on prices has disproportionately affected those rare earths with disproportionately affected those rare earths with

lower selling prices and magnet raw materialslower selling prices and magnet raw materials

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

Jan‐06

Apr‐06

Jul‐0

6Oct‐

06Jan‐0

7Apr‐0

7Ju

l‐07

Oct‐07

Jan‐08

Apr‐08

Jul‐0

8Oct‐

08Jan‐0

9Apr‐0

9Ju

l‐09

Oct‐09

Jan‐10

Apr‐10

Jul‐1

0U

S$/k

g

Lanthanum oxide Cerium oxide Praseodymium oxide Neodymium oxide

30 Source: Metal Pages

Prices for high value rare earths have risen Prices for high value rare earths have risen ––but impact has been limitedbut impact has been limited

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

Jan‐06

Apr‐06

Jul‐0

6Oct‐

06Jan‐0

7Apr‐0

7Ju

l‐07

Oct‐07

Jan‐08

Apr‐08

Jul‐0

8Oct‐

08Jan‐0

9Apr‐0

9Ju

l‐09

Oct‐09

Jan‐10

Apr‐10

Jul‐1

0

US$

/kg

Europium oxide Dysprosium oxide Terbium oxide Yttrium oxide

31

Source: Metal Pages

Comparison of Chinese domestic price and Comparison of Chinese domestic price and FOB price for selected rare earth oxides FOB price for selected rare earth oxides

(%age difference)(%age difference)

‐

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Nov‐07

Jan‐

08M

ar‐0

8M

ay‐0

8Ju

l‐08

Sep‐

08Nov‐0

8Ja

n‐09

Mar

‐09

May

‐09

Jul‐0

9Se

p‐09

Nov‐09

Jan‐

10M

ar‐1

0M

ay‐1

0Ju

l‐10

Sep‐

10

Nd,

Eu,

Dy,

Tb

‐

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

1,000.00

La, C

e

Neodymium oxide Europium oxide Dysprosium oxide

Terbium oxide Lanthanum oxide Cerium oxide

32Source: Roskill, Metal Pages

Evaluating the supply/demand Evaluating the supply/demand balance to 2015balance to 2015

2015 2015 –– Surplus or Deficit Surplus or Deficit

34

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

(000

t RE

O)

China Supply ROW Supply Global demand China Demand

Source: IMCOA, Roskill

The Issue of The Issue of ‘‘BalanceBalance’’ in 2015in 2015

Forecast Supply and Demand for Selected Rare Earths in 2015

Rare Earth OxideDemand @

180,000tpa REOSupply @

208,500tpa REO

Cerium 63-68,000t REO 80-85,000t REO

Neodymium 35-40,000t REO 30-35,000t REO

Europium 725-775t REO 575-625t REO

Terbium 450-500t REO 375-425t REO

Dysprosium 2,500-3,000t REO 1,600-2,000t REO

35Source: IMCOA

Impacts on Demand Trends in 2015Impacts on Demand Trends in 2015‐‐2020

Greater availability of non‐Chinese

products

Price

Potential impact of substitution

Electric Vehicles

Location of value‐add manufacturing

36

Supply Supply –– Where to in 2020?Where to in 2020?

Recycling

Further consolidation of industry in China

Emphasis on heavy rare earths

Bayan Obo (iron ore prices falling)

Dudley J Kingsnorth Dudley J Kingsnorth

Industrial Minerals Company of Australia Pty LtdIndustrial Minerals Company of Australia Pty Ltddjk@imcoa.co.audjk@imcoa.co.au

Judith ChegwiddenJudith Chegwidden

Roskill Information Services LtdRoskill Information Services Ltdjudith@roskill.co.ukjudith@roskill.co.uk

Thank you