Peak positioned to capitalize on explosive EV marketplace over next decade
The electric vehicle (EV) market is beginning to move far quicker than many first anticipated, and the shift is strongly reflected in the associated metals’ prices. Lithium and cobalt have been climbing for some time now, but we are finally seeing movement on neodymium / praseodymium (NdPr) oxide; between November 2016 and June 2017, a 32% increase in spot prices has been recorded, prompting Peak Resources Ltd. (ASX: PEK) (“Peak”) to push ahead with the permitting stage of their Ngualla rare-earth element (REE) deposit in Tanzania.
This month, Tesla will release their Model 3 vehicle, or at least the first 30 units. Elon Musk has stated that production will be stepped-up throughout the year until the company is producing 20,000 vehicles per month by December. The Model 3 has been reportedly pre-ordered by over 450,000 people so far, pretty much guaranteeing its initial success and cementing the need for reliable supplies of the component parts. NdPr, being an ideal material for the manufacture of permanent magnets, represents a key ingredient in our cleantech future and is likely to experience a considerable price surge over the next five years as the cultural shift towards new modes of transport reach tipping point.
We’ve known this was coming for some time, but markets tank and wannabe producers began dropping like flies. Heck, even established big-guys were dragged under by the obstinate downward trend that refused to abate in the face of hype-fuelled overproduction, but we now have a situation in which plenty of material will be required, with very few players left producing them. This is what puts companies such as Peak in a great position looking forward; not only did they survive the bottomed-out metals markets of recent history, but they are in possession of one of the lowest-cost REE deposits in the world thanks to repeated efforts to reduce operating costs.
The team are now in possession of a bankable feasibility study (BFS) and an environmental certificate that will allow them to make progress on the permitting of Ngualla, which is now expected to produce 2,420 tpa of NdPr oxide at greater than 99% purity. Impressively, Peak originally stated that it would cost $118 million per annum to run the plant in 2014, but this has been reduced to only $83 million as stated in the BFS, making the project one of the most attractively costed resources currently in existence.
Operating at $34.20/kg NdPr oxide means that, on an equity financed project, more than $20 million per annum margin could be achieved on the NdPr oxide product alone, even at today’s low spot prices. Further to this, the company identified a significant opportunity to develop a fluorspar product from the same resource, and although NdPr will likely bring in around 90% of the project’s income, including the ability to produce fluoride products alongside REEs will ensure the project is never short of custom.
Peak have proposed off-site processing in Teesside, England, to take advantage of existing advanced processing technologies, solid infrastructure and a skilled workforce. The company aims to coincide the development of Ngualla with the still-recovering value of REEs, but with EV changeover targets being brought forward as far as three years, we could be looking at an explosive marketplace over the next decade, particularly as President Trump continues to take umbridge with materials mined in the far-east. China itself has been ramping up imports of REEs over the last few years, a sure sign that there are a rising number of potential customers waiting at the end of Peak’s impeccably-timed launch of Ngualla.