A complete punters guide to Aussie rare earths stocks
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China’s total dominance in the rare earths industry has been identified as a major problem by other major global powers.
Data suggests that about 95% of the world’s heavy rare earths come from China and neighbouring Myanmar. All that production is effectively funnelled through China’s downstream industry, then used domestically or exported overseas.
Commodity research group Roskill says production at both the mining and refined stages in China – and hence the world — is controlled by quotas assigned to six state-owned enterprises, highly integrated throughout the rare earth supply chain.
In 2009, prices shot through the roof when a diplomatic dispute saw China unofficially block rare earth exports to Japan. As tensions rise globally, governments are worried it could happen again.
There’s been a lot of talk about establishing downstream processing ex-China, but at the moment it is mostly talk and not a huge amount of action, says Ionic Rare Earths (ASX:IXR) managing director Tim Harrison.
“How long until they [non-Chinese governments] start to realise they have a problem? Too late,” he told Stockhead.
“The reality is that there is a problem now, and I don’t think anyone has any real appreciation how much time it takes to build substantial heavy rare earths separation and refining capacity.
“This is what the Chinese have been able to develop over the last 30 years – an immense understanding and competency that we are going to try and replicate in a short space of time.
“To be able to do that is going to require a substantial amount of capital.”
Not all of the ~15 rare earths are created equal. To lump them all together is simplistic, Harrison says.
“[Companies] can say ‘we are going to produce 20,000 tonnes a year of rare earth oxides’. But that doesn’t really help if 16 or 17,000t is lanthanum and cerium, two rare earths there is effectively no market for,” he says.
Investors should primarily be focused on the magnet rare earths – neodymium, praseodymium, dysprosium and terbium.
“While there are potentially many sources of neodymium and praseodymium, (NdPr) there are very, very little potential for substantial supply of dysprosium and terbium,” Harrison said.
Rare earth permanent magnets are a crucial component in wind turbines and in the drive train of hybrid and electric vehicles.
There’s a couple of kilos of rare earths magnets in every EV, and about a tonne in every MW of power produced by wind turbines.
It is the next decade when we will see demand get a little out of control, driven by a projected 7-fold growth in electric vehicles. On top of that you have a forecast 8-fold growth in the offshore wind turbines sector over the next nine years.
By 2030, demand of magnet REOs is forecast to exceed supply by 40%.
The forecast production of the magnet rare earths terbium and dysprosium appears to be in shortfall from about 2025 onwards, Harrison says. Where is the supply going to come from?
“The likelihood is that these forecasts will continue to grow at a rate that exceeds our ability to supplement the shortfall in supply,” he says.
“We simply don’t have the projects to be able to come online to supply the sheer demand for [magnet rare earths].”
These are companies in production or at PFS/DFS level.
Market Cap: $5.06 billion
As the only scale producer of separated rare earths outside China, Lynas has a massive head start on the pack.
It currently supplies ~ 20% of world demand for separated rare earth products.
By 2025, the company is targeting NdPr production capacity of at least 10,500 tonnes per annum, with a new Kalgoorlie processing facility able to feed to downstream operations in the US and Malaysia.
Market Cap: $172 million
Vital Metals – led by former Lynas management — will become Canada’s first rare earths producer with production from Stage 1 (demonstration phase) at the ‘Nechalacho’ project on track to commence this month.
Stage 2 at Nechalacho will be the money maker: a long term/large scale commercial operation from 2024 providing long term security to the non-Chinese rare earth supply chain.
Market Cap: $166 million
Northern Minerals has spent +$272m on its advanced ‘Browns Range’ project over the past 11 years.
The company is now producing a mixed rare earth carbonate (MREC) product through a large pilot plant at its Browns Range project in WA.
It remains unclear when the company might take the next step to establish a commercial-scale operation at Browns Range.
Work is also being done to investigate separating the MREC produced at Browns Range into individual heavy rare earth oxides like dysprosium and terbium, which would increase the price Northern Minerals receives.
Market Cap: $160 million
‘Nolans’ is a $1.05 billion capex NdPr project with the potential to supply 5-10% of the world’s rare earths magnet supply over a 35 year mine life, Arafura says.
Arafura is targeting a financial investment decision in 2H 2022.
This is about the time “when the rare earth market is expected to enter deficit given there has been underinvestment in the supply chain, there is a strong demand outlook, and China is short of resources”.
Market Cap: $287 million
“Australia’s next rare earths producer” recently raised $100m to advance its flagship Yangibana rare earths project in WA.
The $449m operation would produce 15,000tpa mixed rare earth carbonate (MREC) — equivalent to 3,400tpa NdPr oxides after separation.
Construction is targeted to start Q2 2021 ahead of first production in 2023.
Market Cap: $130 million
GGG has been operating in Greenland with a focus on the ‘Kvanefjeld’ rare earth project since 2007.
Kvanefjeld is underpinned by a JORC-code compliant resource of >1 billion tonnes, and an ore reserve estimate of 108 million tonnes. That’s enough to sustain an initial 37-year mine life.
The recovery of critical magnet rare earths including neodymium, praseodymium, terbium and dysprosium will ensure low rare earth production costs, it says.
The stock took a hit in April after the new Greenland Government publicly stated its political intention to cease development of Kvanefjeld.
In early June, Greenland advised that the public consultation period for the Kvanefjeld Project had been extended until 13 September this year, following a change of government.
Market Cap: $1.08 billion
From $1.25 to $7.72 per share — the Alkane Resources (ASX:ALK) spinoff has performed admirably since hitting the bourse July last year.
Its main game is the advanced ‘Dubbo’ project which will produce zirconium, rare earths, niobium and hafnium oxides.
Studies, plant design, metal offtake and financing agreements are targeted for completion this year.
A Final Investment Decision (FID) on Dubbo is due by end of March quarter 2022, with first production targeted in 2024.
Market Cap: $3.41 billion
Australia’s most prominent mineral sands miner is undertaking a feasibility study for the development of a fully integrated rare earths refinery at Eneabba, WA.
The Eneabba refinery, if executed, would be capable of processing some third-party rare earth concentrates, in addition to Iluka’s own monazite.
Good news for the juniors out there.
Market Cap: $153 million
Peak’s main game is the Ngualla rare earths project in Tanzania.
The explorer is currently waiting for a Special Mining Licence (SML), the final major regulatory requirement before it can negotiate an Economic Framework Agreement for the project.
“Upon receipt of the SML, the project will be the among the most advanced rare earth development projects that has a JORC Compliant Ore Reserve, completed definitive feasibility study, and fully piloted process from ore to separated oxides that is permitted and ready to construct,” the company says.
Construction of the downstream ‘Teeside’ refinery in the UK will occur in parallel with Ngualla development.
The new class of rare earths players.
Market Cap: $92 million
In April, Ionic released the scoping study demonstrating the potential for its ‘Makuutu’ project in Uganda to be one of the lowest cost rare earths operations in the world.
The project represents one of the last large-scale undeveloped ionic adsorption clay (IAC) deposits globally with a 315Mt (and growing) resource grading 650 parts per million total rare earth oxides.
IAC deposits – like the ones exploited in southern China — are commonly considered to be some of the cheapest and most readily accessible sources of heavy rare earths.
Market Cap: $26 million
The stock, formerly cobalt play Broken Hill Prospecting, has been flying since acquiring the La Paz rare earths project in August last year.
First drilling at the Arizona project since 2012 was completed in late April, and is designed to build on an existing 128 million tonne resource.
Results indicate the company may have unearthed a new orebody about 4-7km southwest of the maiden resource – an area that has never been drilled until now.
ARR also has another rare earths project in Nevada called ‘Searchlight’, about 30km from the US’ only integrated rare earths operation.
Market Cap: $30 million
A major new drilling program is underway at the ‘Cummins Range’ rare earths project in WA, designed to grow the current resource.
The deposit already hosts a JORC-2012 compliant inferred resource of 13Mt at 1.13% total rare earths oxides, for 147 million kg.
22% of that is neodymium and praseodymium.
The drilling program is expected to take 3-4 months to complete.
Market Cap: $12 million
Fellow WA explorer Red Mountain is sampling three priority heavy rare earth targets at the ‘Mt. Mansbridge’ project ahead of drilling later this year.
The targets are analogous to Northern Minerals’ (ASX:NTU) unconformity related HREE deposits ‘Dazzler’ and ‘Iceman’, Red Mountain said.
Market Cap: $153 million
Lotus’ main focus in the ‘Kayelekera’ uranium project in Malawi – purchased from fellow Africa-focused Paladin Energy (ASX:PDN) in March 2020 – which will cost just $US50m to get up and running.
But a focused drill program is also due to kick off soon at the recent ‘Milenje’ rare earths discovery to see how deep the mineralisation goes.
Samples collected from the drilling and trenching program will be used in metallurgical test work to see if it is suitable to be beneficiated into a concentrate for further downstream processing.
The target includes a highly desirable assemblage of rare earths, with high value neodymium and Praseodymium oxides representing on average ~20% of the total, the company says.
Market Cap: $12 million
The Aussie explorer is set to join the bourse on July 1 after completing a heavily oversubscribed $12m IPO.
Its Koppamurra project in South Australia and Victoria “is Australia’s largest prospective ionic clay hosted rare earth element deposit”, the company says.
AR3 has hit the ground running, recently completing a 79-hole core-drilling program with the first set of assay results expected in Q3 2021.
“Koppamurra has the potential to be a world-class ionic clay REE operation and we are listing at the right time to ensure we are well-funded and supported to explore and develop our exciting project,” chairman Professor Dudley Kingsnorth says.
At Stockhead, we tell it like it is. While Arafura, Ionic, Red Mountain, and RareX are Stockhead advertisers, they did not sponsor this article.