11th September 2009

Rare Earth Metals: Mine to Market

Advanced Rare Earth Projects

Advanced Rare Earth Projects

Steenkampskraal (Rareco), South Africa

REE Environmental Uses

Wind PowerWind PowerHybrid VehiclesHybrid VehiclesEfficient LightingEfficient LightingFuel AdditivesFuel AdditivesPollution ControlPollution ControlBatteriesBatteries

IMCOA 5

REO Consumption By Value and Volume

Rare Earth Metals Mine to Market Estimates for 2012-214

REO China Mtn. Pass Mt. Weld Nolan's Bore Thor Lake Total Supply Demand Surplus/Shortfall

Lanthanum 39,000 8,300 5,376 4,000 405 57,081 53,000 4,081Cerium 63,000 12,275 9,605 9,640 850 95,370 66,000 29,370Praseodymium 7,500 1,085 1,138 1,196 170 11,089 9,250 1,839Neodymium 24,000 3,000 3,910 4,300 780 35,990 43,475 -7,485 Samarium 3,000 200 512 480 1,085 5,277 2,775 2,502Europium 600 25 116 82 40 863 925 -63 Gadolinium 2,400 50 204 200 355 3,209 2,775 434Terbium 300 0 19 16 45 380 700 -320 Dysprosium 1,350 0 34 68 250 1,702 2,600 -898 Erbium 600 0 0 10 105 715 850 -135 Yttrium 8,250 25 78 90 735 9,178 14,800 -5,622 Ho-Tm-Yb-Lu 0 0 0 22 180 202 2,850 -2,648

150,000 24,960 20,992 20,104 5,000 221,056 200,000 21,056

REO Production (tonnes)

GWMG Projects-Potential Production

vs ProjectedREO Hoidas Deep Sands Total Other Total Shortfall

Lanthanum 988 2,230 3,218 3,206 6,423Cerium 2,289 4,173 6,462 6,282 12,743Praseodymium 289 434 723 1,072 1,795Neodymium 1,095 1,428 2,523 3,656 6,178 7,485Samarium 144 244 388 582 969Europium 30 30 60 32 91 63Gadolinium 65 206 271 499 770Terbium 7 28 35 68 103 320Dysprosium 18 141 159 343 502 898Erbium 11 76 87 149 236 135Yttrium 64 890 954 1,844 2,798 5,622Ho-Tm-Yb-Lu 3 120 123 207 330

5,000 10,000 15,000 17,939 32,939

REO Production (t)

GWMG as an Integrated RE Producer Shifting the Balance Towards HREO

Advanced Projects LREO (%) HREO + Y (%)Hoidas Lake (Canada)

96 4

Deep Sands (USA) 85 15Rareco (South Africa)

92 8

Grassroots ProjectsBenjamin River (Canada)

70 30

Douglas River (Canada)

0 100

Misty (Canada) 97 3By-Product Projects

Production of a mixed rare earth concentrate

Production of a mixed rare earth concentrate

Separation into individual rare earth oxides / fluorides / chlorides etc.

Separation into individual rare earth oxides / fluorides / chlorides etc.

Converted to metals

Electrolysis / Vacuum reduction

Converted to metals

Electrolysis / Vacuum reduction

Overview of Rare Earth Alloy Production

Rare earth ore – e.g.

Bastnaesite / Monazite/Ion Absorption Clay

Contains all rare earth elements

Rare earth ore – e.g.

Bastnaesite / Monazite/Ion Absorption Clay

Contains all rare earth elements

Production of alloys by direct co- reduction

Production of alloys by direct co- reduction

Production of alloys by melting and casting

Production of alloys by melting and casting

Rare earth ore – e.g.

Bastnaesite / Monazite/Ion Absorption Clay

Contains all rare earth elements

Rare earth ore – e.g.

Bastnaesite / Monazite/Ion Absorption Clay

Contains all rare earth elements

Rare Earth Metals Mine to Market

Extrapolated Quantities of Rare Earth Metals from Separated

Ores Produced in 2008 (est 140,000 tonnes total RE oxide)

Rare Earth Metal Supply in 2008:

- Neodymium: 17,000t- Praseodymium : 4,600t- Dysprosium: 1,200t- Terbium : 170t- Samarium : 2,400t

Estimated at 97% minimum of Chinese Origin.

Estimated Worldwide Production of RE Magnets

NdFeB Sintered Magnet Production 2008*:- China: 49,880t- Japan: 12,600t- EU: 1,100t- USA: NilTotal: 63,580t* Yang Luo, REPM 2008

NdFeB powders for Polymer Bonding.Chinese Origin, Estimated Total: 5,000t

Rare Earths: Mine to Market

Examples of Permanent Magnet Growth Opportunities

- NdFeB and SmCo have no potential threats from substitute materials.

- The motor/generator in a hybrid vehicle contains 2kg of NdFeB. This application is set to grow to between 10million and 20million vehicles by 2018.

- The new designs of wind generators use NdFeB magnets at a rate of 0.5t per mega-watt. This application alone has potential to increase RE demand by 25% per year above current production.

- Hard disc drives cannot function without RE permanent magnets. Formerly 70% of the NdFeB market this is now diluted by the other major applications.

Permanent Magnet Demand Underestimated?

WIND POWER PROJECTIONSPer the US Department of Energy:300,000 MW of wind power by 2030Per the UK Crown Estate:25,000 MW of wind power by 2020Assume 1/3 generated by permanent magnet generators:325,000 MW = 185,000 t NdFeB = 57,000 t Nd X 1/3

= 20,000 t Nd (= 125,000 t TREO)China has proclaimed that they will lead the World in wind power.

Rare Earth Permanent Magnet Raw Materials Supply

Commodity Pricing.

General:Price is derived from the balance between Supply and Demand.“Discovery” of the price in the Marketplace.“Resolution” of a price between Buyer and Seller.

Scale of Business:London Metal Exchange (LME) example Nickel “Open Outcry”Nickel annual production is approximately 1.5Mt.

“Minor Metals” example Cobalt, one of the larger specialty metals.Production approximately 60,000t per year.

Rare Earths. Fifteen metals occurring together.Totalling approximately 140,000t of contained oxides.

LME Nickel Prices over Last Three Years

A Variation of $10,000 to $54,000 per tonne

Rare Earth Permanent Magnet Raw Materials Supply

Cobalt.

Very small market (60,000t) compared with Nickel at 1.5Mt.

Price is “discovered” by journalists and is a necessarily (sometimes despised)subjective process.

Journalistic reports are sold; those currently available:Metal Bulletin.Reuters.Metal Pages.Ryans Notes.Dow Jones.

There is a plan for LME to provide a market for cobalt.

Cobalt price over the Last Two Years

MB High Grade Average Cobalt Price

$10.00$14.00$18.00$22.00$26.00$30.00$34.00$38.00$42.00$46.00$50.00

Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 M ar-09

Month

Pric

e ($

/lb)

A Variation of $13.00 to $52.00 per lb

Rare Earth Permanent Magnet Raw Materials Supply

Rare Earths.

The situation is more complex than for a single commodity – 15 elements.This market is less well developed than cobalt.Quantities are still small for Nd, approximately 17,000t.Discovery of price is highly subjective and trades are private.There is only one known regular price published.Disproportionate demands lead to shortages and price spikes.Those elements in high demand will bear the costs for separating the other oxides.

This situation of seeking balanced demand for more than one element is not unique.An example of 6 metals of similar chemistry occurring together requiring complex separation techniques are the Platinoids (Pt, Rh, Ru, Pd, Os and Ir).Cobalt is generally a (valued) by-product of other base metals Ni and Cu.

Rare Earth Permanent Magnet Raw Materials Supply

Neodymium Metal Pricing April 2001 to April 2009

Cautionary note: This is a journalistic report and may not reflect real market conditions

US

$/kg

Rare Earth Permanent Magnet

Raw Materials Supply

Terbium Metal Pricing April 2001 to November 2008

Cautionary note: This is a journalistic report and may not reflect real market conditions

Rare Earth Permanent Magnet Raw Materials Supply

Chinese Government Policy for the Rare Earth Industry

This is classed as a resource industry.

All mining is local or national government controlled.

Tax rebate for exporting material reduced and then cancelled.

Export tax imposed – now at 15% to 25% on oxides, compounds and metals, 20% on alloys.

Export quotas tightened year on yearQuota is traded commodity – affects priceHistorically quotas only affected supply of low added-value productsQuotas now starting to affect availability of some metals

LCM Vacuum Induction Melting Facility

LCM 300kg VIM Furnace.

In the background is a 50kg charge weight Precision casting Furnace.

GWTI Troy Facility

Production facility installed initially for the production of alloy powders for Nickel-Metal Hydride Batteries.

Pictured is one of the two 1,000lb Vacuum Induction Melting Furnaces.

Total melting capacity in the facility exceeds 2,500 tonnes per year.

GWTI Troy Facility, cont.

Inside the Hydrogenation processor showing the containment grid and heating/cooling circuit.

GWTI Hydrided/Dehydrided NdFeB

SEM image of LCM/GWT NdFeB alloy that has been subject to hydrogenation and crushing to powder for research and development in permanent magnets.

Recycling Potential

• Regarding solid magnet scrap generated within customer premises (and therefore wholly traceable), LCM provides a recovery service for both NdFeB and SmCo materials.

• There are two possible processes; co-reduction for samarium cobalt, or remelting in two stages (for both SmCo and NdFeB) by melting scrap, analysing and readjusting for supply as reusable feedstock for Magnet Production.

• Remelting of general magnet scrap for rare earth magnets is limited due to the sensitivity of composition and intolerance to impurities of the fundamental magnetic properties.

• Direct recovery of RE permanent magnet powders from scrap magnets. A research project lead by the University of Birmingham (“HYPROMS”) has potential to recover powders that can be used directly as feedstock for polymer bonded or sintered magnets.

Recycling Potential (Continued)

• Recovery of grinding swarf from machining of RE magnets is not simple for the recovery of the rare earth constituent. In the distant past with samarium oxide in short supply and priced at $100+ per kg the chemical dissolution of scrap and recovery of Sm2O3 was a routine process. Currently SmCo scrap that is not acceptable for melting or co-reduction is recovered for its cobalt content.

• Recovery of NdFeB scraps by chemical means is possible though the technical barriers and practical costs of dissolving large quantities of Fe alloys should not be underestimated.

Rare Earths. Is Harris Sustainable?