The Metals Report: Your last interview with us took place in July. Have there been any real significant industry developments in the last six months that investors should be aware of?

Alex Knox: There are, actually. The tenor of the rare earth element (REE) space has changed quite dramatically in the last six or seven months.

TMR: What are the biggest factors that have influenced the business?

AK: The general lack of ability to raise financing has severely affected the junior companies, especially those that didn’t have a deposit or had a deposit at a preliminary economic assessment (PEA) stage. Investors have seemed to have lost interest, and certainly there is far less news about exploration for new deposits or developing deposits that hadn’t reached a PEA stage by last summer.

The focus has shifted from exploration to development. Because of the drop in prices for the commodities themselves since that time, costs have become extremely important, and that includes the costs of doing a feasibility or a prefeasibility study as well as production costs.

TMR: What has been the cause in the drop in prices for the elements during this time period?

AK: I’m no economist, but the lack of projected world growth plays a part. It was expected that these commodities were going to be needed in significant additional quantities, and the lack of growth has slowed demand. China, though it’s not in recession by any stretch, has slowed down its development.

TMR: China is now talking about tightening up its environmental regulations. Is that going to have a significant effect on either REE supply or prices?

AK: I think it’s going to. China is still in the driver’s seat, especially on the heavy rare earth element (HREE) side, it has said for years that it was going to try to reduce its output in order to conserve its low-cost sources of production of HREEs. Certainly, any spark that’s been left in the REE market is on the HREE side. We’ve all heard of the impending production of Lynas Corp. and Molycorp Inc., which, along with a few others, are probably going to satiate the light rare earth (LREE) market with the development of additional production. But because there is still no significant production of HREEs in the Western world and many of these deposits, half a dozen at least, have reached at least the post-PEA stage and are approaching a production decision, there is still a place for HREEs, despite the drop in prices and consumer attempts at HREE substitution or recycling.

TMR: Is the number of survivors in the industry going to be curtailed drastically?

AK: That was always going to be the case. Two years ago, when over 200 companies were exploring for REEs, the sensible companies were aiming to be low-cost producers. And when prices start to drop, the low-cost producer of any commodity, especially HREEs, is going to be the last one standing, and will be available to a) acquire additional sources of production from the failed producers or b) stay in production and wait for times to get better in this business. As long as we’ve been in this business, we know that prices fluctuate dramatically over the years. So investors have always been looking for the company that could either reach production and distribution first, and/or the company that had the lowest production costs so that when the free market price started to fall, this company would be able to hang in there the longest.

TMR: What’s the ballpark range of capital expenditure needed to put a REE mine into production?

AK: Again, specific numbers are not my bailiwick; I’m an exploration geologist. But proximity to infrastructure is a big cost factor. If you have to transport your chemicals, raw materials and construction materials a long distance and then transport your product a long distance back to be sold, that’s obviously going to be more expensive.

The second factor is metallurgy. You have to take these REE elements, break down the minerals that they occur in, get them into solution and then be able to precipitate them in a form that will allow them to be separated into individual elements so that they can be sold at a maximum profit. If your minerals are hard to break down, require expensive acid treatments or even an acid manufacturing plant at your site, which costs hundreds of millions of dollars, these are going to carry price tags that many companies can’t cover.

Another important cost factor is the cost associated with anomalous radioactivity. These deposits tend to accumulate uranium and thorium. That’s just the nature of the beast. The key question is, are these radioelements occurring within the minerals that contain the REEs, or are they in subsidiary minerals, such as thorite? The common REE mineral that contains significant radioactivity is monazite, which is commonly found in certain LREE deposits. If you have monazite or other REE minerals that contain the radioelements, then these will have to be disposed of later on, as opposed to on site. That’s going to be extremely expensive. If, on the other hand, the REEs are in a separate mineral, they can be left behind and put back in the tailings, which carries a significantly lower cost for the producer.

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Western Australia based St George Mining has used an infill MMI soil geochemical survey to identify anomalous and coincident heavy and light rare earth element values at the Red Dragon prospect.

The prospect in located on the company's East Laverton Property in the NE Goldfields region of Western Australia.

St George said that the high priority area forms an ovoid shape measuring 2 kilometres by 1.5 kilometres, which is situated within a large carbonatite alteration system covering over 60 square kilometres.

The company now has high priority targets for drilling in the June quarter of 2013, with the reconnaissance program at Red Dragon to include four reverse circulation holes each with a target depth of 250 metres.

St George is targeting to establish a third dimension to the extensive carbonatite‐REE surface alteration system which is indicated by the current geochemical and geophysical signature.

Government Drilling Grant

St George has also been awarded a grant of $122,000 to be applied towards the direct drilling costs of the drilling, which is under the West Australian Government’s “Innovative Drilling Program” within its Exploration Incentive Scheme.

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WEST PERTH, AUSTRALIA - Jan 22, 2013) - Peak Resources Limited ("Peak" or "the Company"), the developer of a potentially low cost, long term rare earth project in Tanzania, today announced it has received final assay results for its 100%-owned Ngualla Rare Earth Project. Additionally, it has entered into agreements with two groups in Asia to assist in identifying and securing strategy funding partners for its Ngualla Rare Earth Project.

About Peak Resources

Peak is developing the Ngualla Project, a potentially low-cost, long term rare earth project located in south west Tanzania. Ngualla has been ranked as the fifth largest deposit in the world outside China, and the highest grade of the top seven.

Ngualla has a Mineral Resource of 170 million tonnes grading 2.24% of rare earth oxides (REO). Within the resource there is a highly weathered and near-surface zone estimated at 40 million tonnes at 4.07% REO, equivalent to 1.6 million tonnes of contained REO. Ngualla is also a bulk deposit which is largely outcropping. These attributes place the project among the world's most notable rare earth discoveries of recent years.

Ngualla is a potential low cost open pit mine due to its shallow outcropping high grade mineralization. The initial sighter metallurgical test work to date has been completed using a sulphuric acid leach process route suggesting a relatively less complex, potentially cheaper capital outlay and shorter time to production.

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Water-shedding surfaces that are robust in harsh environments could have broad applications in many industries including energy, water, transportation, construction, and medicine. For example, condensation of water is a crucial part of many industrial processes, and condensers are found in most electric power plants and in desalination plants.

Hydrophobic materials — ones that prevent water from spreading over a surface, instead causing it to form droplets that easily fall away — can greatly enhance the efficiency of this process. But these materials have one major problem: Most employ thin polymer coatings that degrade when heated, and can easily be destroyed by wear.

MIT researchers have now come up with a new class of hydrophobic ceramics that can overcome these problems. These ceramic materials are highly hydrophobic, but are also durable in the face of extreme temperatures and rough treatment.

The work, by mechanical engineering postdoc Gisele Azimi and Associate Professor Kripa Varanasi, along with two graduate students and another postdoc, is described this week in the journal Nature Materials. Durability has always been a challenge for hydrophobic materials, Varanasi says — a challenge he says his team has now solved.

Ceramics are highly resistant to extreme temperatures, but they tend to be hydrophilic (water-attracting) rather than hydrophobic. The MIT team decided to try making ceramics out of a series of elements whose unique electronic structure might render the materials hydrophobic: the so-called rare earth metals, which are also known as the lanthanide series on the periodic table.

Since all of the rare earth metals have similar physico-chemical properties, the team expected that their oxides would behave uniformly in their interactions with water. “We thought they should all have similar properties for wetting, so we said, ‘Let’s do a systematic study of the whole series,’” says Varanasi, who is the Doherty Associate Professor of Ocean Utilization.

To test this hypothesis, they used powder oxides of 13 of the 14 members of that series (excluding one rare earth metal that is radioactive) and made pellets by compacting and heating them to nearly their melting point in order to fuse them into solid, ceramic form — a process called sintering.

Sure enough, when tested, all 13 of the rare earth oxide ceramics did display strong hydrophobic properties, as predicted. “We showed, for the first time, that there are ceramics that are intrinsically hydrophobic,” Varanasi says.

These rare earth oxides “are exotic materials, and interestingly their wetting properties have not been studied,” he says, adding that many of the properties of the entire series are not systematically documented in the scientific literature. “This paper also gives a whole host of the properties of rare-earth oxides.”

This includes, Azimi says, their morphology, surface chemistry, crystallographic structure, grain structure, sintering temperature and density — yielding “a catalog of information” about how to process and use these materials. The MIT researchers also showed that the materials have greater hardness than many others currently used in rough industrial settings.

Despite their name, rare earth metals are not particularly rare. “Some of them are as abundant as nickel or copper,” Azimi says — both of which are widely used industrially.

But separating rare earth metals from the minerals in which they are found can be costly and can leave toxic residues, so their production has been limited. China is currently the world’s major supplier of these elements, which have many high-tech applications.

The ceramic forms of rare earth oxides could be used either as coatings on various substrates, or in bulk form. Because their hydrophobicity is an intrinsic chemical property, Azimi says, “even if they are damaged, they can sustain their hydrophobic properties.”

To prove the point, the team exposed some of these ceramics to a steam environment, similar to what they would face in a power-plant condenser. Typical polymer-based hydrophobic coatings quickly degrade when exposed to steam, but the ceramics kept their hydrophobicity intact, Varanasi says. The materials sustained their hydrophobicity even after exposure to abrasion, as well as temperatures of 1,000 degrees Celsius, Azimi says

By coating nanotextured surfaces with these ceramics at MIT’s Microsystems Technology Laboratories, the team also demonstrated extreme water repellency where droplets bounced off the surface. “These materials therefore provide a pathway to make durable superhydrophobic surfaces as well, and these coatings can be fabricated using existing processes. This makes it amenable to retrofit existing facilities, Azimi says. Such extreme non-wetting properties coupled with durability could find applications in steam turbines and aircraft engines, for example.

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