CANADIAN SUPPLY CHAIN

The creation of a Canadian rare earth supply chain is essential for Canada to maintain competitiveness in strategic industries such as green energy, high technology, and defense. China currently controls about 90-percent of global rare earth production including 99-percent of heavy rare earth production and has managed to leverage its dominant position in rare earth production and value added processing to create important manufacturing value chains in these key industries.

Pele has publicly advocated for the development of a Canadian rare earth supply chain. In February 2014, Pele President and CEO Al Shefsky presented Testimony to the Standing Committee on Natural Resources at Canada’s House of Commons. In his testimony, Mr. Shefsky emphasized,

“Canada has a compelling opportunity to leverage its critical rare earth resources into a powerful engine of innovative economic growth. Achieving production and separation of rare earths in Canada will spawn the creation of a rare earth supply chain to support downstream value-added manufacturing in Canada.”

The Committee concluded its hearings with the publication of its report The Rare Earth Elements Industry in Canada, in which it called attention to many of the points made by Mr. Shefsky, in June 2014.

In 2014, Pele announced the expansion of its business model to include processing high-grade rare earth bearing monazite in Elliot Lake, Ontario, at its Eco Ridge Project. Pele’s objective is to produce separated, high-purity, individual rare earth oxides that have much greater value than mixed rare earth concentrates and can be used in downstream value added processing and manufacturing. Management believes that monazite processing is the best way to achieve rare earth production outside China and kick start the sustainable development of a Canadian-based, low cost, early-to-market, rare earth supply chain.

According to the U.S. Department of Energy, “Supply challenges for five rare earth metals (dysprosium, neodymium, terbium, europium and yttrium) may affect clean energy technology deployment in the years ahead.”1 Pele believes that the ongoing decline in rare earth prices does not necessarily portend an amelioration of supply risks. However, establishing a rare earth processing center in Elliot Lake can improve security and reliability of rare earth supplies by supporting the creation of a Canadian-based rare earth supply chain. Furthermore, the development of monazite processing and rare earth separation facilities in Elliot Lake can support the development of Eco Ridge as market conditions improve.

Elliot Lake is the ideal location to host a rare earth processing center. It is Canada’s only proven historic rare earth mining and processing camp and has outstanding regional infrastructure including highways, railway, electricity, natural gas, airport, deep-water ports, and a qualified workforce. The region hosts vast undeveloped rare earth and uranium resources, such as those at Eco Ridge. The community supports Pele’s monazite processing strategy and has said so publicly.

Pele is engaged with all levels of government, local communities and First Nations, rare earth industry leaders, and end users of rare earths to advance the sustainable development of Canada’s first rare earth supply chain in Elliot Lake.

1 U.S. Department of Energy, Critical Materials Strategy, December 2011 (DOE PI–0009)