Lynas positioned well with increased market attention on rare earths.
As most investors already know, rare earths are not really rare. Despite this it is hard to find large scale rare earth projects at economic grades, the CapEx to get a new rare earth project into production can be very costly, and rare earth projects typically take a long time to go from discovery to production. This means new supply is constrained. Furthermore China dominates rare earth production, with about 80% market share.
On the demand side the electric vehicle and clean energy boom is causing a large increase in rare earths demand, in particular for neodymium (Nd) and praseodymium (Pr) – the magnet metals. Rare earths already play a critical role in the electronics, automotive, environmental protection, and petrochemical sectors. Industry analysts expect demand in key end use markets to grow well ahead of global GDP, creating strong demand for rare earth materials.
Examples of products using rare earths
- Wind turbines. NdFeB magnets enable direct drive wind turbines technology providing better electrical yield, reduced maintenance and improved reliability (no gear box).
- Automotive catalysts. Cerium-based new technology enables Lean NOx Trap – a very compact catalytic system that allows diesel compact cars to match with NOx emission regulation
- Hybrid electrical vehicles. A fast growing segment which contributes to controlling pollution at its point of emission.
- Electric Vehicles (EVs) (magnets for electric motors). NdFeB magnets enable substantial weight reduction contributing to overall energy savings and reduction of CO2 emission. A key growth area for the rare earths industry is the use of permanent magnets (using neodymium (Nd) and praseodymium (Pr)) in the electric motors of EVs. Each EV uses ~ 1 to 3 kilograms of rare earth permanent magnets, of which ~33% is contained rare earth oxides, or about 1kg on an EV.
Lynas Corporation Limited (ASX: LYC) is an Australian integrated producer of rare earths from mine to customer. Lynas owns the Mt Weld rare earth mine which is one of the world’s highest grade rare earths mines, and the Mt Weld Concentration Plant, both located 35 km south of Laverton in Western Australia.
Lynas Corporation’s Mt Weld rare earth mine in Western Australia
Lynas Advanced Materials Plant (LAMP)
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Lynas also owns the Lynas Advanced Materials Plant (LAMP) which is an integrated manufacturing facility, separating and processing rare earths materials, located near the Port of Kuantan in Malaysia. The LAMP produces NdPr oxide, Ce carbonate, Ce oxide, LaCe carbonate and LaCe oxide, and SEG oxide. LAMP is now supplying rare earths products to customers in Japan, China, Vietnam, South Korea, Europe and North America. The company’s Japanese customer base continues to grow strongly and currently represents about 60% of all sales.
Rare earths are impacting us by already playing a pivotal role in greenhouse gas reduction through their unique application in automotive catalytic converters, electric vehicles, wind turbines, and energy efficient compact fluorescent light bulbs.
Many analysts see 2019 and 2020 to be the years when the investment world wakes up to the rare earths story of growing demand and constrained supply, in particular for the battery rare earths NdPr driven by demand from the EV boom.
Lynas is in a unique position of being the only rare earth miner and producer globally that operates completely outside of China. This gives them a rapidly growing demand from OEMs to secure reliable (non-political) supply of vital rare earths, essential in the new green economy. There has been some environmental challenges with their Malaysian plant that still need resolving, but overall Lynas looks to be a strong global rare earth producer with generally solid production volumes in key rare earths. In fact, Lynas is the second largest NdPr producer in the world.
Lynas Corporation Limited is headquartered in Australia; and has a market cap of A$ 1b.
Matthew Bohlsen holds a Graduate Diploma in Applied Finance and Investment (similar to CFA), and a Graduate Diploma in Financial Planning. He has 30 years ... <Read more about Matthew Bohlsen>