Why simmering geopolitics favour rare earth supply diversity
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Integral but simmering away in the background, like a pot of boiling water on pasta night, it can take a boilover for geopolitics to attract proper investor attention.
At that point it’s potentially too late. The chance to avoid a messy clean-up, or capitalise on an opportunity, has likely already passed.
But those with attention to detail will tell you the visual and audible signs of a boilover are usually there before it happens.
As steam and bubbling are tell-tale signs of a pot that could overflow, mineral strategy and rhetoric can be used to gauge how a nation is feeling about its material supply chains.
Boy, there’s plenty of steam around rare earths supply chains right now.
From the US to the EU to Australia, rare earths – the group of 17 obscurely named metals increasingly important to the high-powered magnets and technologies of tomorrow – are topping the list of critical mineral priorities.
One only needs to look at the most recent rhetoric out of the Quad nations meeting, where the US, Japan, India and Australia came together for an in-person summit and agreed to a partnership to secure critical infrastructure.
That meeting resolved to connect Australian raw materials and processing capabilities with end users in the ally nations – with rare earths highlighted as a priority.
According to US think tank the Center for Strategic and International Studies, China currently provides more than 85 per cent of the world’s rare earths supply.
That’s a lot of supply chain control any country to have, but especially which has shown a willingness in recent years to impose trade sanctions and tariffs in response to geopolitical disagreements.
Rare earths, according to Reuters, are used in EV batteries, advanced ceramics, computers, DVD players, wind turbines, car and oil refinery catalysts, monitors, televisions, lighting, lasers, fibre optics, superconductors and glass polishing.
Some are essential to military equipment like jet engines, missile guidance systems, antimissile defense systems, satellites, and night vision devices.
With one nation supplying 85% of the world’s feed, the implications of the geopolitical pot boiling over would be significant.
It also creates a great deal of opportunity for those who can provide alternate avenues to supply the rare earths market.
That’s demonstrated on the ASX by Lynas Rare Earths (ASX:LYC) – the world’s second largest producer of separated rare earths outside of China from its Mount Weld mining and concentration plant in WA and its refining facility in Malaysia.
But there are a number of rare earths plays on the ASX exploring and developing rare earths projects which could broaden supply and ease the rare earths strain.
Stockhead took an explorative dive into some of the companies looking to do just that.
In Australia, Arafura Resources (ASX:ARU) is developing the significant Nolans Neodymium-praseodymium (NdPr) project in the Northern Territory – a shovel-ready asset on which a final investment decision is expected to be made in the second half of 2022.
The project’s supply chain significance is evident through support from the NT and Federal governments – most significantly conditional debt facilities offered to ARU via the North Australia Infrastructure Fund and Export Finance Australia.
This week, Bloomberg reported Arafura had engagement from European manufacturers to supply metal directly to them.
Speaking to Stockhead, Arafura general manager sales and marketing Lloyd Kaiser said Australian REE projects had significant advantages against their international peers.
“The advantage of rare earth plays in Australia is our access to the supporting mining and metallurgical industry which is mature and highly skilled,” he said.
“While China is the undisputed global leader in rare earth processing technology, the experience with complex processing technologies present in Australia is second-to-none, and advancements in technology in addition to our baseline of knowledge and experience can be easily leveraged into new rare earth projects.
“Complementing that, Australia has very high environmental, social and governance standards which are increasingly important to our customers across the world.
“Coupled with a robust legislative environment plus strict regulation and enforcement, Australia is in the top echelon of jurisdictions to feed into the rapidly growing rare earth market.”
Also looking to leverage Australia’s competitive advantage is RareX (ASX:REE), which holds the Cummins Range REE project where a diamond drilling campaign was recently extended on the back of positive results which significantly increased the scale of the project.
Northern Minerals (ASX:NTU) is another major rare earths player in the region, having spent 11 years developing the advanced Browns Range project from which it is now producing a mixed rare earth carbonate product at a large pilot plant.
Meanwhile, Hastings Technology Metals (ASX:HAS) recently raised $100 million to advance its flagship Yangibana rare earths project, where first output of a mixed rare earth carbonate product is expected in 2023.
Also in WA’s north is Red Mountain Mining (ASX:RMX), currently exploring the Mt Mansbridge where RC drilling is planned for October.
Rare earths were first detected at Mt Mansbridge’s ‘Mansbridge’ prospect during exploration by BHP in the 1980s, and RMX has worked to expand on this target in recent times.
Much of the rare earths supply chain noise is coming out of the US, and with good reason.
The nation will need to diversify supply of the critical minerals to ensure its prosperity should the hypothetical pot boil over.
Aptly named American Rare Earths (ASX:ARR) acquired the La Paz rare earths project in Arizona last year – a project which already has a 170 million tonne resource – and is building on the scale of the project through a program of drilling.
The company also recently detected high-grade rare earths in sampling at its Halleck Creek rare earths project in Wyoming – a great sign for a US-based rare earths play.
Speaking to Stockhead, managing director Keith Middleton said the political rhetoric out of the nation in recent years boded well for those with projects in the US.
With rare earth elements a significant input metal for new technologies from military applications to wind farms, Middleton said the country had woken up to the importance of strategic domestic supply.
“Americans have realised they don’t have supply chain security in this space,” he said.
“They have very little, if any, domestic production, and they have very little if any onshore processing.
“That leaves them wholly reliant on others, with the government advancing its trillion-dollar green energy revolution where many of the solutions will require significant amounts of rare earths.”
Another company which has potential to impact the US rare earths space is Hyperion Metals (ASX:HYM) – owner of the Titan heavy mineral sand project which has broad ambitions in the titanium space.
Testwork at Hyperion’s sprawling Titan project in Tennessee last month confirmed the potential for a high-value heavy and light rare earth product to be produced from monazite and xenotime minerals.
The company is working with Energy Fuels under an MoU to evaluate the supply of rare earth minerals from Titan to the latter’s White Mesa mill in Utah while also evaluating a potential collaboration which it says could result in an integrated mine-to-market rare earths supply chain.
There’s certainly lessons to be had from the Chinese experience in developing its substantial hold on the rare earths sector, and a look at Ionic Rare Earths’ (ASX:IXR) Makuutu project in Uganda highlights this.
Makuutu is one of the world’s last large-scale undeveloped ionic adsorption clay deposits in the world – the type of mineralisation exploited in southern China, which is commonly considered to among the cheapest and most readily available sources of heavy rare earths.
Africa has a large role to play in diversifying the rare earths supply chain, according to Ionic managing director Tim Harrison, with its mineral endowment set to supply rare earth feed streams.
Harrison said the Chinese example, where miners don’t typically refine where they mine, was one which the company was exploring.
“I think there’s a lesson for us there if we’re looking at developing rare earth capacity in Western jurisdictions, we need to look at what’s been done well in this industry as well as others,” he said.
“Rare earth separation and refining requires a lot of installed infrastructure driven by the economies of scale, like low-cost power, availability of natural gas, high quality reagent supplies, and readily available technical service networks usually within highly developed chemical or industrial complexes.
“Close proximity to ports and transport infrastructure is also important.”
Ionic is in the process of a scoping study on a refinery, including a location analysis assessing a range of factors and potential partnerships which would enable it to produce the best possible output for its end users and shareholders.
The companies mentioned above are some among many exploring the rare earths space at present. A comprehensive list of ASX-listed rare earths stocks published by Stockhead in June can be found here.
With supply chains in focus, those in the rare earths space will be looking to take some of the heat off an industry of increasing importance in the months and years to come.
Helping to get the mix just right – al dente, if you will – without the pot boiling over could hold riches unseen for those who are able to do so.
At Stockhead we tell it like it is. While Hyperion, Ionic, Lotus, Hastings, Red Mountain, RareX and Arafura are Stockhead advertisers, they did not sponsor this article.