Medallion Resources (TSX-V: MDL) CEO Mark Saxon on the Formation of US-Focused REE Supply Chain Consortium & Medallion's Unique Niche in the Rare Earths Industry

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President and CEO of Medallion Resources (TSX-V: MDL)(OTC: MLLOF), Mr. Mark Saxon. Mark, how are you?

Mark Saxon: Hey, Gerardo. Good afternoon. I'm doing pretty well, no complaints at all.

Gerardo Del Real: Healthy, happy amongst these interesting times, I take it?

Mark Saxon: Interesting times. No doubt about that. I live in Victoria in Australia where we're having a bit of a resurgence, but the numbers are still not too bad in terms of how we're looking in Australia. So I think we're in good shape and able to do my work and keeping busy and keeping optimistic.

Gerardo Del Real: Let's talk about that. You had some news a few days ago that I think, given the context of U.S.-China relations and the direction that that seems to be trending, is going to play an important part. The news release, the headline was "Medallion forms U.S.-Focused REE Supply Chain Consortium.” 

Let's go one at a time. First, can we talk about what the initiative is about? And then let's talk about how Medallion plays a part in that. We've described Medallion before as a puzzle piece that could be valuable to many potential suitors. We'll get into that a bit. But can you give us an overview quickly of the news here recently?

Mark Saxon: For sure. Very happy to talk about it. It's an exciting time in the industry, and Medallion has a very important role to play. As an overview and a refresher, Medallion is focused on rare earth metals, particularly within the U.S. and the production of rare earth metals. Medallion has developed a proprietary technology that takes a byproduct mineral, which is called monazite, and uses that to process and produce high-value rare earth products. 

So it's a little bit different to some other rare earth companies around that I'm sure your listeners are familiar with in that Medallion has focused on the technology side rather than the resource side. That's given us a real niche. It allows us to move quickly and by using a byproduct mineral, it means that we're able to come into production with relatively low CapEx and a highest degree of security with regard to our timing.

That niche has meant that we have been recently approached by some other partners within the supply chain – and the rare earth industry is very much a supply chain driven industry. Its got a lot of steps. We are in discussion now as part of this consortium with different parts of that supply chain. At the moment it's on a no-names basis. We're not allowed to say who we're working with. But it's financial partners, it's separation partners, it's Medallion in the middle as an extraction partner. 

Really, it's a way to accelerate our part of the business into production, cheaply and efficiently. That's really been quite hard to do. We're very pleased with progress, particularly with the timing at the moment where U.S.-China relations are a little strained unfortunately and with COVID.

Gerardo Del Real: Can you explain for people that aren't as familiar with the story as I am, why Medallion could be a very valuable puzzle piece to a variety of suitors as I said up top? I think that's not as well understood as it should be. I think you're the perfect person to kind of give us an overview of what a supply chain looks like and the various steps that different partners play in that. I think this release is important because you're bringing what looks like everyone to the table, right?

Mark Saxon: Yeah, exactly. The missing link in the rare earth supply chain in the western world has been the earliest parts of the supply chain. So at the moment, the rare earth supply chain is very dependent on Chinese production, and that has been that way for 30 years for the U.S. and Europe. They have played very little role within rare earth production. 

So we all understand the supply security threat that that is creating for the U.S. That's particularly in the defense industries, that's in the automotive industry, that's in the renewable energy industries as well. So at the moment the U.S. doesn't produce any rare earths, it doesn't really contribute at all in the downstream. 

But if we think about a company that has to open a brand new rare earth mine, then that's a very big hurdle to get across. So a big CapEx, lots of technology risk, lots of dependence on market prices, where the Chinese competitors can influence the market price. We saw that before when Mountain Pass opened and had a range of problems. It was just kind of too big for the industry. 

Medallion in contrast is a small and nimble player within that industry. So the business model for Medallion is to take a byproduct mineral from the mineral sands industry and use that to produce rare earth metals within the U.S. So we can look in the U.S. today. There's mineral sands already being mined. There is monazite, our feedstock, already being produced and stockpiled that is going to waste or being sold to China. So it either sits on a stockpile and doesn't go anywhere, or it gets on a ship and heads off to China for processing.

That gives us a niche where we can take that product and at very low CapEx and very competitive OpEx. We can convert that into a rare earth product for sale, and that can entirely be done within the U.S. that can be using U.S. chemicals, U.S. equipment. It never needs to leave the borders of the United States. But I guess if we look more broadly, our transferable technology can drop into other locations around the world as well, where monazite from mineral sands is available and function equally well.

It's not dependent on one location. The beauty of using mineral sand monazite is that it's a very homogeneous product. It means that wherever we go in the world, the material is almost identical. It's almost like adding another chemical into our process. So we don't have the big variability of a normal mining project. It means we can be very consistent. We can be predictable in our costs. We can be predictable in our timelines. That really means that we can get customers. We can talk about supply chain. We can talk about real timelines. We can talk about reasonably low costs and really that's the thing for the industry plan.

Gerardo Del Real: Excellent. Can you explain the technology and how it's different from what other companies and what other groups are doing in this space?

Mark Saxon: Really, we have very few competitors in this space and there's many rare earth companies around, but they're all doing slightly different things. So head to head competition is really not that common. If you look within the U.S. or within, let's say North America, there's a number of companies that are working on hardrock projects, looking to open a mine and extract rare earth from a mining project. All strength to their arm, I think some of them are very good projects and will have success, but that is a multi-year project. That's very large CapEx and will take a long time to be able to find the capital required to move ahead. That's one set, sort of normal mining companies. 

There's another set of companies that are working on separation technology. So the separation is where they'd take a mixed rare earth product, and they take it out into the individual metals. In between those two kind of end members, we've got Medallion sitting where we focus completely on a byproduct. We're able to take a low-value byproduct and turn it into a high-value finished product in a way that doesn't require opening of a mine, and it doesn't require high capital cost. 

We can use a chemical process to break down the monazite. The monazite feed comes in and literally it looks like a brown sand that even today we could buy from Georgia in the U.S. We could buy it from Western Australia. We could buy it from a number of parts of Africa, Sri Lanka, or Indonesia. We could buy that brown sand. We take it into our process. We use a chemical process and then out comes a phosphate product for a fertilizer industry and out comes a rare earth product to go into a high-strength rare earth magnet.

Gerardo Del Real: Whether or not president Trump is reelected and whether or not Joe Biden becomes president of the United States, both sides have made it very clear that clean energy and developing the infrastructure of this country is likely to be one of the key packages that will be passed by either, or at this point is what it looks like to me. I noticed in the release there's a comment that says where appropriate public sector funding from a range of supportive U.S. agencies will be entertained, of course. 

Is that the logical next step, now that you have this powerhouse of a team all coming together and looking at the different steps within that supply chain? Does it allow for leverage in presenting a more comprehensive request if that's the path that that Medallion takes and the group takes?

Mark Saxon: I guess on the politics side – and I'm the worst person to talk about U.S. politics, obviously, and that's not my realm – but I guess if we look at whoever gets elected in the U.S. this is too important to be left to the political cycle. I think if we look at a mirror image of what's happening within Europe at the moment, then exactly the same conversations are happening and the supply security angle has never been more important. Also the sustainability of supply in terms of the environmental impact and at the moment, the rare earth industry, because it's so Chinese-dominated. It has a very poor record in terms of its environmental impact. That needs to change going forward, and it doesn't matter who was elected, where you are, where I am, or what's happening in Europe. It's a bigger issue than any of those election cycles. 

In terms of public funding, the supply security issues, pre-COVID and for a much longer time have been identified as a very critical issue for the United States and for other areas as well. Long-term investments are being made in researching what can be done entirely within the United States, without reliance on external suppliers. 

What we're doing in Medellin is the perfect answer for that. There's many parts to the rare earth supply chain. What we're doing, through this consortium, is we're bringing a very substantial part of that supply chain back into the U.S. Obviously, if public funding's available, that's great. We will certainly seek to be part of that. Really the public funding giving us access to money is nice, but access to profile and smart people and laboratories is just as important.

We can bring a substantial part of the industry back into the U.S. that will enable other parts of the rare earth industry particularly downstream. That in particular is high-strength, permanent magnet manufacturing. It will allow that to develop as well, because suddenly they have a confidence that the materials, the raw materials will be available within the U.S. which cannot be said today because everything is only being imported in through China. At the moment, really, without the Chinese supply, there is no magnets for the U.S., there is no magnets for wind turbines. There is no magnets for the EV industry, and really that supply chain needs to be greatly improved and strengthened, and the U.S. should and needs to be a big part of that.

Gerardo Del Real: Well said, Mark. Is there anything else that you'd like to add to that? I thought that was thorough, a great overview. Thank you obviously for your time. What can we expect from Medallion? What's next?

Mark Saxon: So I guess since we last spoke, we've done quite a bit. So we completed a small financing, we've restarted some technical work, and it's back on the path and moving ahead. With the launching of this consortium alliance, it's giving us a much stronger view up and down the supply chain. So we're really pushing ahead now, feeling very confident about the place we are. Obviously, COVID slows things down at the moment, but because of the work we're doing we're in good shape to weather that storm. Yeah, we're feeling optimistic.

Gerardo Del Real: We weren't able to talk names about this new group that everybody's coming together for. I get the sense and I suspect that that will change in a short time. Hopefully I can have you back on so we can talk in more specific detail about the work that's being done. It's important work. Again, thank you for that overview. I appreciate it.

Mark Saxon: Thanks, Gerardo. Have a good evening there and thanks for support.

Gerardo Del Real: Chat soon.

Mark Saxon: All right, thanks for that. Bye for now.