The business model of copper smelters (extensive summary)

In the past few months there has been lots of news flow around the fact that copper Treatment- and Refining costs (TC/RCs) have fallen to near-zero in China, reflecting a tightening concentrate market.

TC/RCs are the costs that Cu smelters charge (thus revenue for the smelter, and a cost to the miner) for converting the Cu concentrate into Cu cathode (which is the Cu price of ~$4/lb many of us follow daily)

Now, lower TC/RCs exert significant pressure on smelters, since lower revenue leads to tighter margins (or even negative margins)

However, while TC/RCs paint a big part of the picture, they are, in contrast to popular notion, not the only source of revenue for a Cu smelter

Besides TC/RCs, smelters also generate revenue through:

1. Payability (also termed 'free metal')
2. Cathode premium
3. Sulfuric acid by-product

Let's cover them one-by-one to get a better picture of the smelter's business model 1. Treatment- and Refining charges (TC/RC)

Treatment Charge (TC): The fee charged by the smelter to treat and process a tonne of copper concentrate.

Refining Charge (RC): The fee charged by the smelter to refine the copper to the required purity.

TC/RCs are quoted in USD$/dmt or US$/lb of payable copper. The price of these charges are market-driven and can be short-term (spot price) or negotiated on an annual basis between the smelter and the mining company. The price reflects the variations in supply and demand in the copper concentrate market.

For smelters, they represent a stream of revenue, while they are a cost to mines (mines pay TC/RCs to smelters).

See an example of a TC/RC calculation below (not the 'payable' term, we'll get to what this means later)

American Rare Earths ($ARR.ASX) has captured recent headlines, and if one believes what they say, this company is destined to be USA’s golden ticket to rare earth independence

Sounds fantastic right?

Well it is, except for the fact that this company is just your next scam preying on uninformed investors and politicians in the often misunderstood rare earth space

This thread will tell you exactly why this project is not going to materialize, and why the people behind it do everything to cover up it’s absurdity
Looking at the recent share price performance, one might assume that rare earths has indeed made a wild discovery, and is bound to be the rare earth treasure trove the USA was searching for all this time

However, when we dive into the details, we see that this company is just your typical junior covering up an uneconomical project with a neat looking powerpoint deck, and a shitty scoping study

Let me state it clearly: There is approximately 0 chance this will be a commercially and technically viable source of separated rare earth oxides for the USA

Let’s take a look

The Ionic Clay Rare Earth Hype on the ASX

They are considered to be two of the hottest stocks on the ASX right now: Meteoric Resources $MEI and Viridis Mining & Minerals $VMM

'Ionic Rare Earths Discovery' is the name of the game, and these two juniors have supposedly found the jackpot in Brazil.

$MEI is trading at fully dil. ~AUD$500M market cap, with the smaller $VMM trading at full dil. AUD$95M market cap.

There has been lots of hype in both plays, but especially $VMM is in focus among speculators for the fact it has similar geology + supposedly similar resource base as $MEI, while trading at a considerable discount to this peer.

However, when we dive into the details, it seems that it is not as simple as it might seem at first sight (as with many things in life).

Let's dive in. 🧵 Let's first start with the location.

Both companies have land holdings located in a unique geological complex called a caldeira (essentially a collapsed volcano) situated in South-Eastern Brazil, bordering the renowned mining province Minais Gerais.

The crater has provided some unique geological circumstances, which are ideal for the formation of ionic clays.

The main one being the fact that the crater (which is essentially formed like a bowl) prevented the outward transportation of the ionic rare earth mineralization and allowed for an effective concentration process.

Looking at the picture below, one can clearly discern the forested crater walls, which form an almost perfect circle.

Understanding Rare Earth Deposit types:

Ionic Adsorption Clays (Part 1)

Rare Earth Deposits can broadly be divided into three classes:

1. Carbonatites (hard rock)
2. Ionic Adsorption Clays
3. Heavy Mineral Sands In this series, I want to talk about Ionic Clays - and not only what role they play in the rare earth industry – but also how they shape geopolitics on a global level (!)

It’s about the following (extensive summary):

TREO stands for Total Rare Earth Oxides

This is the sum of all rare earths (the 15 elements of the lanthanide group in the periodic table + yttrium) oxides together. (1/x)

https://twitter.com/MiningCatalyst/status/1724834913986421080

However, in most cases, only 4 rare earth oxides are of importance for an economic mining operation

These are the ‘magnet’ rare earths – they are key ingredients in permanent magnets, used extensively in electric motors (which are ubiquitous in EV’s, windmills and electronics)