Here are the key trends in rare earths, according to global investment fund Talaxis
Most mining investors would be familiar with the huge potential opportunities in rare earths — the group of 17 elements used in everything from smartphones to electric vehicles.
But despite the broader narrative around future demand, investing in the space isn’t a simple exercise. For one thing, imbalances frequently occur as the complex global supply chain slowly takes shape.
Investment firm Talaxis is one player that’s looking to leverage its expertise to extract value as the market develops.
Founded in 2016, Talaxis is a wholly-owned subsidiary of Noble Group that invests in technology metals, with a special focus on rare earth elements used in batteries and electric vehicles.
As an investor, the company then utilises its network of supply chain partners in the upstream and midstream segment of the market to add value.
Recently, Talaxis took a 5.23 per cent stake in the ASX-listed Arafura Resources (ASX: ARU), which is developing its Nolans project for neodymium-praseodymium (NdPr) in the Northern Territory.
Stockhead spoke with Talaxis Executive Director Daniel Mamadou about the firm’s industry outlook.
“Over a more extended time horizon we remain generally bullish across technology metals, as the fundamental factors that underpin long-term demand haven’t changed.
“However, certain niche products — such as lithium spodumene — are generally well supplied and the softness in prices might linger for a few months more.
“More broadly, our investment view is that markets are near to the bottom of a protracted commodities cycle, and we are positioning for a synchronised global recovery next year.”
“Fundamentally, the supply and demand gap relating to decarbonisation of the global energy grid — and the increasing usage of electric vehicles — is a promising thematic.
“And within that, rare earths are a critical niche market which gives them an element of downside price resilience. But at the same time, their outlook needs to be assessed individually.
“Whilst lanthanum is in a state of oversupply, neodymium (Nd) and other magnet-related rare earths such as praseodymium (Pr) are seeing a sustained rate of demand.
“In either case, the risk of disruption cannot be ignored. The need for alternatives to current pathways is something that many stakeholders are actively pursuing.
“Back in 2017, both Talaxis and Noble Holdings made a strategic decision to commit to the sector, working to develop alternative routes to market for these products.
“Generally, global industrial supply chains are being disrupted due to trade-related tensions between the USA and China, Japan and Korea, and other geopolitical events. And the traditional routes for technology metals and materials are likely to change substantially over the coming years.”
“Well for starters, we think the company’s Nolans project in the NT has the potential to become a world-class neodymium-praseodymium (NdPr) operation.
“Concurrently, we can leverage our global supply chain network to assist Arafura in finalising commercially binding sales agreements. And the company’s management on the ground can focus on securing the final government approvals.
“From a due diligence standpoint, we think Arafura has an ambitious but achievable production plan across the rare earths value chain, from compound chemicals to rare earth metals.
“We also like that it’s located in the Northern Territory, and that the project encompasses the full supply chain at site from mining, processing and refining to oxides.
“This is an ambitious project that could supply 5-10 per cent of the world’s demand for NdPr oxide when in full production.
“From our perspective, that gives Talaxis flexibility and increases the ways in which we can leverage our extensive network in the field to add value.”