You only need to go back a few years and you could count the ASX rare earth companies on one hand.
Lynas, Northern Minerals, Alkane, Arafura, Peak are a few of the names from back in the day that are now considered the ‘old hands’ of the industry. In a sector dominated by China, getting investor interest in weird and wonderful commodities that nobody could pronounce was forever a challenge. Broker meetings often started with a 20 minute geochemistry lesson on what Praseodymium (Pr) and neodymium (Nd) are, and why they are important commodities for future looking technologies.
Step forward to 2023 and investor news platforms like miningnews.net and Stockhead are filled with stories of companies acquiring and drilling a new REE project somewhere globally. At a quick glance, there are over 40 ASX explorers, developers and producers out there pushing their REE credentials.
So what are rare earths?
The rare earth elements are a set of 17 lustrous silvery-white soft heavy metals that are nearly indistinguishable from each other. They have very similar chemical properties, however it is their electronic and magnetic properties that make them unique and invaluable for niche applications including high tech computing, defence applications, microchips, lasers, glass, magnetic materials, and industrial processes.
The list of 17 rare earth elements includes Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Promethium (Pm), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium (Ho), Erbium (Er), Thulium (Tm), Ytterbium (Yb) and Lutetium (Lu) in addition to Scandium (Sc) and Yttrium (Y).
Rare earth magnets are a key growth market with increasing demand from EV motors leading the charge. Even a small amount of a particular rare earth added to the magnet can significantly improve its properties.
China is the largest producer of rare earths with 70% of world production in 2022, according to the US Geological Survey. Most of the Chinese production comes from ionic clays, with in situ leach the preferred extraction method. This dirty process involves pumping acid and other toxic liquids into the clay beds and groundwater where it absorbs the rare earths. These are then pumped out again and treated on the surface to recover the metals.
As well as trying to eliminate these types of polluting activities, end users and Governments around the world have started a concerted push to expand production beyond China to reduce China’s dominance in the market. The US Government and European Commission have both included rare earths in their lists of critical minerals, with significant funding to be devoted to new sources of production ex-China.
Are all rare earth deposits the same?
In short, no. Just like with different gold, nickel or copper deposits, rare earth deposits come in a range of sizes and flavours. Add in differences in value, recovery and market size for each rare earth element and the picture for investors is quite murky.
Following is a very high-level ready reckoner for those looking at rare earth results and trying to work out if the results are good, bad or indifferent.
Broadly, rare earth deposits can be grouped into hard rock or clay deposits (kind of like the spodumene pegmatite vs brine analogy for lithium projects.
As you would expect, hard rock deposits (such as Lynas’ Mt Weld, Northern Minerals’ Browns Range and MP Metals’ Mountain Pass mine) need higher grades to form an economic deposit due to the higher costs of crushing and processing. Typically, these deposits will have grades in excess of 5% TREO to be economic.
Conversely, clay-hosted rare earth deposits are often close to the surface in material that can be freely dug up and processed. This feature means that grades of a few thousand ppm TREO can be valuable, particularly if the deposit is widespread and can be bulk mined.
Can deposits and results be measured just on a TREO basis?
This is where rare earths become increasingly difficult for investors. TREO is short for Total Rare Earth Oxides and is essentially the sum of the grades of the various rare earths in the sample.
Unfortunately, using this ‘total’ grade may obscure the fact that the sample contains a higher proportion of rare earths that either have lower value or have very small demand from customers. Grouping rare earths into a basket combining elements that can fetch $30,000/t with others that go for $500/t has the potential to mislead investors.
The main economic rare earths are praseodymium and neodymium, both used in rare earth magnets. Whilst they do not fetch the highest prices, they have a strong (increasing) market demand and are considered a relatively safe bet when prospects contain a significant proportion of these elements.
On the heavy rare earth end of the spectrum, dysprosium and terbium also have strong markets in EVs and medical imaging, so prospects that contain these elements in abundance may be worth further interest.
If a company doesn’t break out its REE components, either individually or including a subset of ‘magnet rare earths’, it might be a sign that the REE basket is being filled up with a range of low value elements.
So, where to for rare earths over the coming years?
Just as lithium has had a strong run over the past few years, there are market commentators that see other critical minerals used in EVs, including rare earths, manganese and graphite, as being set to have a strong run over the coming years.
There is plenty of jostling for position by companies seeking Government funding for project development and whilst not all of these projects will get off the ground or succeed operationally, there is enough demand for these elements for investors to have good choices for investment.
The spoils are there for the taking, investors just need to do their research to sort the wheat from the chaff.
White Noise communications is provided a fee for service working with companies which may have exposure to commodities mentioned in these articles. All articles are the opinion of the author and are not endorsed by, or written in collaboration with, our clients.