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Former Soviet Mine Reports Rare Earth Progress

A former Soviet Union mine that closed several years ago contains significant amounts of rare earth elements and could begin small-scale production as early as next year, a company representative says.

Indeed, industry analysts say the recent release of a comprehensive 179-page resource report has built renewed interest in Stans Energy Corp., a small Canadian company at work in the former Soviet republic of Kyrgyzstan.

Observers note that successfully reopening the Kutessay II mine could have broad economic and geo-political overtones. That’s because the Kutessay II mine is the only rare-earth plant outside of China ever to produce all 10 “heavy” rare earths.

As opposed to so-called light elements, the heavy rare earths are of particular importance because, among other things, they form the backbone of permanent magnets used in hybrid vehicles, wind turbines and a wide range of U.S. missile systems.

James Mackay, an investor relations representative, also noted in an interview with Defense Media Network that Stans Energy has another major strategic advantage in the rare earths field. The Kyrgyzstan facility houses a center with a successful history of processing heavy rare earths.

“The metallurgy of these things is not easy,” said Mackay, who also is the son of the company’s cofounder and chief executive officer. “It really isn’t. To get those quality products at the end you are looking at years and years and millions and millions of dollars of testing.

“I’ll give you an example. There is a Russian resource that’s 10 percent rare earths, and a very significant portion of that is heavy rare earths. The Russians spent about five years on it at an industrial scale with an unlimited budget trying to crack the metallurgical code on that property and never were able to do it.”

Stans Energy’s resource estimate comes at a time of mounting tensions between the United States and China over rare earths. The U.S. formerly led the world in rare-earth production but the sole domestic mine closed several years ago amid environmental concerns.

Though the Mountain Pass mine is scheduled to reopen this year, it contains mostly light rare earths and won’t significantly undercut China’s monopoly status, observers say. China not only controls more than 95 percent of rare-earth supplies, it has sent prices skyrocketing by curtailing exports.

With the resource report behind it, Stans Energy will concentrate on further metallurgical testing and on completing a feasibility report to show investors the company can run the mine profitability, Mackay said. He said the comprehensive report confirmed the existence of high-grade resources but also showed quality will diminish after about 12 years.

“I wouldn’t say that the overall grade years and years from now is all that important,” Mackay said. “I think what’s most important is you reach production in the near term and are able to capture these extremely high prices of rare earths.”

For that reason, Stans Energy hopes to begin small-scale production next year. The Soviets achieved about 500 metric tons of annual rare earth production, but Mackay said Stans Energy officials hope to triple that amount.

Kutessay II previously produced 80 percent of the former Soviet Union’s rare earths from 1960-1991. In its heyday, Kutessay II produced 120 separate compounds. The facility contains an open-pit mine and already has the necessary infrastructure in place to ship the elements after processing.

Stans Energy has a 20-year operating license, enjoys good relationships with local government officials and has strong ties to the region. The senior Mackay cofounded the company with Boris Aryev, an engineer who held posts with the former Soviet government before emigrating to Canada in 1983.

Elena Masters, the company’s chief financial officer, has one of her college degrees from Kemerovo State University in Russia. Gennady Savchenko serves as a managing director. He has a doctoral degree in mining and geology from a technical university in Kyrgyzstan, where he later worked for a uranium mining company.

Investors clearly appreciate the company’s value proposition. Trading recently at about $2.25 a share, the stock has gained more than 600 percent in roughly the past year, according to statistics compiled by Google Finance.

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Michael A. Robinson has written articles for some of the nation's more prestigious publications. As...