Never a dull day in the world of rare earths
As they say in Ireland if you don’t like the weather just wait a while. The same is true in the rare earths industry.
Myanmar has just announced that it will close it border to rare earth exports to China. The rationale for the closure is claimed to be due to environmental damage and conflicts with unregulated operations, traditionally run by Chinese operators. This closure comes on the heels of China announcing it would reopen the border in late October after closing it in May of this year. Myanmar deposits are similar to south China clay, the only real source of heavy rare earths globally. The original closure earlier this year came after mixed rare earth carbonates of over 9,000 tonnes were exported to China in the first 5 months of 2019. The closure led to a rise in RE prices, particularly Terbium and Dysprosium, key elements in the production of rare earth magnets. Terbium rose from $467/kg to over $586 (26% up) and Dysprosium went from over $221/kg to almost $293 (32% jump). Interestingly, and not surprisingly, prices fell once China reopened the border. It does take some time to filter the supply impact through the system, especially at this time of year with the holidays and the Chinese New Year early next year, which is a traditionally slow time of year in rare earths.
Reports indicate that in 2018 Myanmar exported around 25,000 tonnes of mixed rare earth concentrate to China. According to Adamas Intelligence this would represent almost one-third of the world’s production of Terbium and Dysprosium so any disruption in this source will have consequences for the high end rare earth magnet market.
Lynas is back in the news again.
Last week their shares rose by over 25% on the news reported by Reuters of a possible deal with the US Army to invest in a US based commercial rare earths production facility. The potential deal with the U.S. is in response to the possible retaliation by the Chinese for the current trade war: Lynas has significant support from Japan with both financial backing and off-take agreements in place.
The initial plan would see Lynas in a joint venture with Texas based Blue Line Corp. to set up separation facilities. Since Lynas only processes Lanthanum (La), Cerium (Ce), Praseodymium (Pr) and Neodymium (Nd) in Malaysia, it would be logical for Lynas to send the balance of their rare earths otherwise known as SEG concentrate (short form for Samarium (Sm)/Europium (Eu)/ Gadolinium (Gd) concentrate) to the new facility they are building in San Antonio.
Get our daily investorintel update
The real value here is in the Terbium (Tb) and Dysprosium (Dy) content along with the Gadolinium (Gd). Currently the only market for the SEG is China as they process SEG from the north and are the only real producer of heavy rare earth elements (HREE) in the world presently (97% control). By doing this with Blue Line, Lynas will be able to capture the full value of the Tb and Dy market internally.
Based on their output target of 600 TPY of Nd and Pr in the near term, this could generate additional revenues for Lynas of 5-10% or higher, depending on the Tb and Dy content in the SEG. Also, the throughput in Kuantan LAMP plant will also dictate the output of SEG Lynas has indicated their deposit is moving away from Mt. Weld into the Duncan deposit which has a higher HREE content.
Lynas shares were back down today with the news that Lynas failed to get Malaysia approval for raising their processing limit. A slight setback, Lynas did not receive approval to expand its processing limit for 2019 so its production will be similar to 2018. This also will limit the output of SEG. In the Lynas announcement it notes that “the regulator provided an additional list of reports and management plans that the regulator now requires in order to reconsider the application.” This expansion is necessary for Lynas to maintain its stated goal of a 20% market share of Nd and Pr globally.
Alastair Neill is the President of Trinity Management, a consulting company specializing in business development activities in rare earths, specialty metals and start-up of technology-based ... <Read more about Alastair Neill>