Rare-Earth Consumers

Outline

Innovation Metals Corp. (IMC) will provide consumers with the opportunity to own production capacity for the specific rare-earth products that they need. Consumers participating in the IMC Consortium will have guaranteed access to those finished products, without being locked into fixed prices.

In the face of increasing concerns regarding security of supply, some consumers and end users are now considering making potential investments into rare-earth exploration and mining companies. There are significant, inherent risks associated with investing in single mining ventures, exacerbated by a lack of expertise in the mining sector as a whole. In addition, such investments also lead to exposure to the fortunes of rare-earth elements for which the consumer has no need or real interest.

In contrast, the IMC Consortium will provide inherent security of supply, through access to finished goods produced via independent, centralized and cost-effective rare-earth separation facilities. Participating consumers gain the advantage of having access to finished goods that originate from multiple mine sources. Furthermore, IMC will host a proprietary, auction-based system for finished products, with full transparency.  Members of the IMC Consortium will not only receive the benefit of  lower transaction costs, but will also retain invaluable pricing information such as market depth, which will be shared freely with all participants after each auction. Such transparency will lead to true price discovery for these rare-earth products – an industry first.

There has been a shift in the way that end users and consumers of rare earths look at getting access to these critical materials. Not only are consumers looking to find long-term procurement solutions for strategic raw materials, senior management teams now recognize that this is no longer just an operational issue, but has become a key element of competitiveness. If a competitor has access to a particular key material that a consumer does not, then the clear advantage rests with the competitor in being able to introduce new products with less risk in their long-term forecasting models. With some products, there is a 7-10 year lead time with huge investment dollars spent on the introduction of any new product. Failing to realize the dependency of such programs on certain key raw materials, could be potentially disastrous.

IMC will reduce this risk by creating a Consortium that is able to not only source multiple points of supply, but which will also become an information hub for monitoring the effects of the demand from other products, which could have an impact on end users. The production of rare earths can be seen as a complex mathematics problem where the supply of elements are fixed, yet there is little correlation between the products that use them.

Using IMC’s independent, third-party solutions will allow participating consumers to take full advantage of the diversity of supply that centralized processing facilities will provide. While IMC believes that it can provide the most cost-effective access to rare-earth products, participation in the IMC Consortium will by no means preclude consumers from pursuing other avenues for the procurement of their rare-earth needs. The IMC Consortium simply provides an additional option for participating consumers to get access to finished goods, at prices that will be lower than those obtained from non-participating producers, who do not have access to the economies of scale that centralized processing brings.

Participation in the Consortium will provide an effective use of capital that gives consumers access to what they need, for the least possible investment.  Rare earths are frequently a very small fraction of the total cost of an end product, so while price is always important, it may not be as critical as having access to it.

Ownership of production capacity will be a true investment in the physical assets of the facilities - very different from simply having a contract that may or may not survive any change of control.

Requirements

The only requirement at this stage for consumer participation in the IMC Consortium, is the execution of a non-binding Letter of Intent (LOI), outlining the nature of the relationship between IMC and the consumer. A determination of the potential production capacity that the consumer would like to reserve, and for which rare-earth product(s), would be included in the LOI. The LOI would create no obligation for the consumer; a binding commitment would only be required at the point when project financing is required.

Once the total capacity for the future separation facilities has been ‘soft confirmed’, IMC will close the offering, and thus requests that consumers only initially reserve the production capacity for which they have a need. IMC reserves the right to refuse capacity to potential participants that significantly change their requirements at the time when commitments need to be finalized, and capital obligations realized.

Consumers and end users of finished rare-earth products are invited to register their no-obligation interest in joining the IMC Consortium, via the contact form. For qualified companies, IMC will subsequently provide additional information on the Consortium, and will then extend a proposal to the potential participant for consideration – again, with no obligation.