EDITOR: | January 8th, 2021 | 21 Comments

The Top 5 Rare Earths Companies for 2021

| January 08, 2021 | 21 Comments
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Looking ahead into 2021 (click here for the 2020 Year-in-Review in the Rare Earths market), first a quick review of 2020. Year-end 2020 market capitalization for the rare earths companies in the table below shows combined across all 26 companies listed, there was a total of almost CAD$17 billion of market value at year-end. Three companies (MP Materials, Lynas Rare Earths and Iluka Resources Limited) dominated this statistic and accounted for almost CAD$13 billion (approximately 75%) of the total value, making them all 600-pound gorillas – you can see the breakdown below:

Companies Ranked by Market Capitalization

 

Top Five Rare Earths for 2021

It would be too easy to simply pull off the top five companies by market cap from the table above. However, it is not just about market capitalization, despite one commonly held belief (the “efficient market hypothesis”) that market capitalization is the sum total of all factors and accounts for everything known and unknown.

In fact, there are many other factors to consider. Inefficiencies in the market have demonstrated this point, as have other unknowns, which when brought to light, can cause a material change in share price (up or down). For example, despite the significant size of Iluka, their demerger of the company’s former royalty business, Deterra Royalties, resulted in a significant reduction in share price and valuation.

So who do we really, really like for 2021? Our top five is below. Your picks may differ:

Number 1: (tied) Lynas Rare Earths (LYC: ASX) and MP Materials (NYSE: MP)
Number 2: Australian Strategic Materials (ASX: ASM)
Number 3: Neo Performance Materials (TSX: NEO)
Number 4: Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR)

Number 1 (tied): Lynas Rare Earths (LYC: ASX) and MP Materials (NYSE: MP)

Lynas Rare Earths is only one of two companies in the world who have rare earth processing capacity that is not located in China. Other companies are looking at significant investments to build more global processing capacity, but this will take time and hundreds of millions (if not billions) of dollars, never mind that ore supplies that are currently under contract to be processed in China. Lynas also recognizes this and has announced construction of additional rare earths processing centre in western Australia. Note that all of the Lynas processing capacity is currently located in Malaysia. Recall the issues that Lynas had before the facility was fully commissioned. While there is no reason to suspect future problems, we all know of the ongoing societal unrest in the country.

MP Materials is a recent return of the Mountain Pass rare earths mine to the space. The only rare earths mine in the US was recommissioned in 2017 after a storied history (anyone remember Molycorp?) of corporate intrigue and insolvency. Clearly, the public markets love the idea of Mountain Pass and management’s Stage II and Stage III plans, as the share price has rocketed to levels at which some analysts are calling a massive short. However, let your runners run, as MP Materials is one beneficiary of the US Government’s determination to create a strategic critical metals reserve and MP Materials is in the game. A significant knock on the Mountain Pass mine however is that it produces none of the heavy rare earths, which are so critical for all of our technology nowadays. Secondly, the company is currently sending its’ production to China for processing – problematic until the company can fund and deliver on their stated future expansion plans.

Number 2: Australian Strategic Materials Limited (ASX: ASM)

Created by a corporate demerger completed in July 2020, ASM came out of Alkane Resources as the company’s directors sought to unlock shareholder value in the then-combined gold/rare earths company. The value creation has been very successful, with ASM’s share price up by 400+% at year-end. The 100%-owned Dubbo rare earths project has been progressing very well, first under Alkane’s guidance and recently in the stand-alone entity. With a resurging interest in the rare earths, investors are really getting interested.

A differentiating and key success factor for ASM is their strategy to take a larger part of the value chain to include production by ASM and partners of specific metals. It is more of a “mines to manufacturer” of critical metals than some other rare earths companies are targeting. Recent milestones include successfully producing a neodymium iron boron (NdFeB) alloy from a ferro-neodymium (FeNd) permanent magnet alloy which was also produced by ASM – no small feat. The company is certainly proving their technological capabilities! ASM is moving along a well-planned timeline to have the Dubbo rare earths mine in production in later 2023, including project financing which is expected to be concluded around mid 2021.

Number 3: Neo Performance Materials (TSX: NEO)

You can have the best project in the world, the cheapest extraction costs and be in the best markets, but the secret of every successful company boils down to just one thing – it is only ever about the people. In the case of Neo, I am of course referring to the fact that world-renowned rare earths executive, Constantine Karayannopoulos, took the helm as President and CEO at Neo in July 2020.

Notwithstanding, Neo has many things going for it, including the only other rare earths processing facility in the world that is not in China (it is located in Estonia). In addition, the company has 11 manufacturing facilities around the world and is a world leader in innovation and the production of permanent magnet powders, through its Magnaquench business unit. Neo has also been touted as a takeover target for MP Materials, as several Neo assets were once part of Molycorp, but with Neo’s prospects, it is likely that the shareholder base would demand a massive premium to approve that transaction.

Number 4: Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR)

Similarly a big picture thinker, CEO Mark Chalmers was a key participant in the drive for the establishment of a critical materials reserve of up to 35 strategic metals to be created in the US. Part and parcel of this is the company’s 100% owned While Mesa Mill, which is licensed for 8 million pounds U3O8 per year and can process 2,000 tons of ore per day and is the only conventional uranium plus vanadium processing facility in the US. More importantly, in just nine months, the company pivoted to the rare earths sector and will be producing a rare earths concentrate from monazite ore sourced in the US. This will require only minor processing adjustments within the White Mesa Mill with relatively minimal capital costs, with first product expected to be produced in Q1/21.

Going forward, Energy Fuels is engaged with a number of leading rare earths industry experts across a broad spectrum to advise the company on the rare earths segments including a technical agreement with Neo Performance Materials, a US Department of Energy contract (along with Penn State University) for the recovery of rare earths from coal. The company is also working with noted rare earths industry expert Jack Lifton.

Your next top companies are…….?

It is going to be very interesting to see what happens outside of the top five. Names to watch include Arafura Resources, Vital Metals and especially Pensana Rare Earths, with a shout-out to Appia Energy, Search Minerals and RareX Limited for reasons I will be writing about shortly. We are not a fan of Greenland Minerals for a couple of obvious reasons….both country related.

Good luck and hang on – it’s going to be a very interesting year!


Editor:

Frederick Kozak is a Professional Engineer with extensive oil and gas, and international business experience and has more than 25 years involved in capital markets ... <Read more about Frederick Kozak>


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Comments

  • Edwin J. Brunori

    Send me more info about these stocks mainly Appia energy

    January 8, 2021 - 10:58 PM

  • M spencer

    Very interesting.would like to know more about REE and ARU in the way of your thoughts and future .

    January 9, 2021 - 2:36 AM

  • R D

    Good artical

    January 9, 2021 - 7:49 AM

  • Surendra Dahima

    Liked the article.

    January 9, 2021 - 9:21 AM

  • Bruce Barron

    ASM is on the pink sheets as assmf on the American markets. I have followed this stock for 6 months or better and still no show in .US markets. There are no stock offerings. Why and how does this happen? Thank You.

    January 9, 2021 - 10:27 AM

  • Geraldo Eduardo Cardoso Rodrigues

    Muito boa a reportagem sobre terras raras. Veio esclarecer vários fatores e várias informações e interpretações.

    January 9, 2021 - 10:47 AM

  • William Woodward

    What about northern minerals?

    January 9, 2021 - 4:55 PM

  • David Coulston

    I wonder how many back pockets have been filled with shares for being able to get Lynas into Kalgoorlie with this Rare Earth separation plant that is being constructed adjacent to an Aboriginal community and Kalgoorlie Central ,similar to the deal with NRMA and Thrifty Rentals 2 Million Dollar ,25% share sellout for just One Dollar. And all done by the same ex Collingwood player.

    January 9, 2021 - 8:54 PM

  • marko pavlicevic

    More infos

    January 10, 2021 - 3:01 AM

  • Paul

    Rare Element Resources has great potential.

    January 10, 2021 - 5:43 AM

  • Kenneth Conway

    Very interested in having updates on Tare Earths

    January 10, 2021 - 5:58 AM

  • Rare Earths Investor

    Thanks for writing –

    ‘Some would argue that both the present and potentially a lot of future gains for ASM and MP have already been factored into the spectacular recent price jumps. IMHO, both are highly speculative with MP dependent on getting further direct support from the new US admin (via DoD)’ and ASM needing more S. Korean strategic support, including more clarity re., offtakes into which new value chain. Energy Fuels is facing the real possibility of environmental opposition from NGOs including indigenous, over their uranium existence, never mind that Biden’s arrival will only add to the fervor of such opposition.

    Lynas (I hold) is, IMO, likely to do well over the long term regardless of the pathway that the ROW RE sector may take, and there are several of these avenues. Which one is taken will become clearer as we progress through 2021 and on.

    January 10, 2021 - 9:48 AM

    • Frederick Kozak

      Thanks for the thoughtful comment – you have hit on some of the things that weigh on the minds of rare earths companies around the world.
      Sadly, politics globally have a lot to do with the current rare earths situation, but you can’t disregard the back-room discussions that are likely ongoing. 2021 is going to be “interesting” year but suffice to say that the rare earths industry is changing for the better

      January 11, 2021 - 11:01 AM

  • Seraphine Rodrigues

    Thank you

    January 10, 2021 - 2:23 PM

  • Jeremy Robinson

    Need to correct RareX MCap. Is approximately 50m.

    January 11, 2021 - 8:15 AM

    • Frederick Kozak

      Thank you Jeremy – updated (darn Excel…or is it the user…!?!)

      January 11, 2021 - 1:48 PM

  • Bill

    Jeremy, I am new to the rare earth sector and have been reading and learning about the Ashram deposit that Commerce Resources has. (ticker CCE) I do not see the company listed in your TOP RARE EARTH Companies list. Their NI 43 – 101 report shows that their rare earth minerals (Pr, Dy, Tb, Nd) are of high magnetic value plus their acid spar by-product can produce acid grade fluorspar which in turn can be used to produce hydrofloric acid. Energy Fuels is about to test their samples to see if the White Messa mill is capable of processing the material. What do you think of the company; CCE?

    January 12, 2021 - 11:47 PM

    • Bill

      Sorry, I meant Frederick. I just finished talking with my friend, Jeremy and that name was stuck in my head. lol

      January 12, 2021 - 11:57 PM

  • François

    You may have missed the most important REE play outside China. No mention of the recycling of neo-magnets or non polluting extraction of REE feeds or mining sludges among other things. A company is about to open the worlds first REE recycling plant outside China and you don’t mention it ! Geomega

    January 15, 2021 - 2:29 PM

  • George Lavercombe

    I was Very interested in your report

    January 18, 2021 - 8:56 PM

  • Bill

    Opinion for API and CCE. Like to read your report.

    January 21, 2021 - 3:16 AM

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