Monsters of Rock: Rare earths market is at inflection point, Lynas says

Lynas Rare Earths (ASX:LYC) managing director Amanda Lacaze says a drive to reduce emissions will be a boon for rare earths, ramping up growth estimates in the market the miner’s product to 10% a year.

Speaking to shareholders at the company’s AGM following a record FY2021 that saw Lynas post a 9x increase in profit to $157 million on the back of strong pricing for its flagship neodymium-praeseodymium product.

Lacaze is bullish on the outlook for rare earths, saying key markets in permanent magnets, catalytic converters and EVs are reaching inflection points as governments and businesses face more pressure to reduce carbon emissions.

“We’ve revised our estimates to an average 10% annual growth rate from previous year it was about seven and a half per cent. And of course, there will be a matching demand for dysprosium-terbium.

“All of this is off the back of consumer demand for things like electric vehicles.

“Electric car sales rose by 140% in Q1, 2021. The auto-cat market growth is driven by global vehicle sales, which are forecast to grow between eight and 10%.

“And what we’re finding is the demand for catalysts from the automotive and the MCC sectors is back to pre-COVID levels.”

Lacaze said the Chinese market for permanent magnets, which improve the energy efficiency in industrial equipment would need 5000t of extra NdPr each year.

That’s the equivalent of Lynas’ Malaysian processing plant, the largest producer of NdPr in the world outside China.

“So in addition to EVs and wind energy, permanent magnet technology is now strongly promoted in China in the steel, cement and machinery markets, because it provides 20-40% energy savings,” Lacaze said.

“China is expected to remain dominant in the magnet industry consuming about 5000 tons more NdPr each year, that’s you know almost the equivalent of our plant in Malaysia every year.

“As the electric motor power increases, so does its temperature. And so therefore, for the high performance magnets, you need more Dy and Tb as well.”

Western economies need to diversify manufacturing

After decades that have seen their manufacturing sectors decline against the rise of lower cost, larger scale production in Asia, Lacaze says Western economies are beginning to recognise the need to diversify their supply chains.

Nowhere is this more stark than in rare earths, one of the fields of critical minerals places like the USA , EU and Australia want more control over to ensure supply against the dominance of the Chinese market.

Lacaze said Lynas would be well placed to “win more than others” due to its role as the only producer of separated rare earths “of scale” outside China.

“Most people would know that governments around the world have intensified their efforts in relation to securing rare earths supply for industry,” she said.

“There’s a whole variety of reasons for doing this, not just the strong consumer demand. But the pandemic has demonstrated that it’s not just geopolitics that disrupt supply chains.

“The pandemic has also caused many Western governments who gleefully outsourced manufacturing to East Asia 20 years ago, to reassess whether that really is economically the best and most sensible thing to do.

“So the result is that there is a significant focus now on how to really underpin modern manufacturing in western economies.”

Lynas is moving some of its own activities out of Asia and into Australia with the construction of a $500 million downstream processing plant in Kalgoorlie, due to open around mid-2023.

According to figures presented at Lynas’ AGM, while 60% of all rare earth oxide mining takes place in China, 87% of processing is conducted there while 91% of all rare earths metals are produced in China and 94% of permanent magnets.

At just 5% Japan is the only competing market.

“The Chinese have been very good at moving down that value chain and insourcing the production of the finished goods,” Lacaze said.

“And so I think this is certainly in our discussions with various governments, is they’re recognising that they need the economic firepower, particularly coming out of the pandemic for strong manufacturing industries.

“And that means that they need supply chains outside of China.”

Lynas Rare Earths share price today:

Rinehart and Ellison join forces to create new iron ore export hub

Gina Rinehart’s Roy Hill and Hancock Prospecting will team up with Chris Ellison’s Mineral Resources (ASX:MIN) in a bid to open up a new iron ore export facility in Port Hedland.

MinRes has been waiting for approvals for the South West Creek berth, which would open up the development of its Marillana and Opthalmia iron ore deposits.

The proposed mines are joint ventures with Brockman Mining (ASX:BCK), which shot up 12.2% today on no news.

Hancock Prospecting outlined its plans for a number of new iron ore developments both at its own 1Bt-plus Mulga Downs deposit and through subsidiary Atlas Iron in its annual report on Friday, in which Rinehart’s company posted an eye-watering $7.3 billion profit for FY2021.

MinRes, Hancock and Roy Hill have entered an agreement to jointly investigate the development of a facility at the Stanley Point Berth 3, in which Roy Hill would develop and operate the project including a rail haulage and port services.

MinRes boss Chris Ellison said the deal will unlock stranded assets in the Pilbara as the company seeks to transition from higher cost production to low cost, long life assets.

“We are pleased to have entered into the Port and Rail Agreement with Hancock and Roy Hill,” he said.

“This partnership and infrastructure sharing is the first of its kind in the Australian resources industry and would enable significant value to be unlocked for MRL in a sustainable manner.

“Our long-stated strategy is to transition from short-life, high-cost mines to lower-cost, long-life operations underpinned by innovative infrastructure solutions. Developing our stranded assets will provide additional growth for MRL’s unique mining services build-own-operate model.

“We’re delighted to have reached this agreement which builds on our long and strong relationship we have with Hancock.

“We look forward to working with Hancock, Roy Hill, PPA and the State Government to progress this project which would help unlock stranded assets in the Pilbara and would create thousands of jobs for West Australians for years to come.”