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The Post-COP26 World Looks To Australia For Future Non-Chinese Rare Earths Production

To achieve U.N. climate change management goals the world needs to shift rapidly to clean energy, and that means we need to build or secure, reliable sources of rare earths. While the USA and Canada have made some progress in this direction, Australia will also be needed to play a key role.

When looking at a chart of rare earths reserves by country, China shows the largest reserves followed by Vietnam, Brazil, Russia, India, and Australia, in that order. The USA is ranked 8th and Canada is outside of the top ten. Given Australia’s stellar track record as a reliable supplier of raw materials, it should not be surprising to know that the West is looking towards Australia to step up production of rare earths, especially those needed to support the surging cleantech sectors of electric vehicles, wind energy, and solar energy.

ClearWorld.us says it well, stating:

“Renewable energy development relies upon sufficient quantities of rare earth minerals, specifically neodymium, terbium, indium, dysprosium, and praseodymium. These are used in the production of solar panels and wind turbines. If the world is to meet the greenhouse gas emissions targets sought in the Paris Climate Agreement the availability of these minerals must increase by 12 times by 2050.”

(Emphasis by the author.)

Rare earths are key elements in the cleantech revolution

Australian listed rare earths companies:

Producers

Lynas Rare Earths Limited (ASX: LYC) (“Lynas”)

Lynas is the second largest neodymium and praseodymium (“NdPr”) producer in the world. Lynas owns the Mt Weld rare earth mine, which is one of the world’s highest grade rare earths’ mines, and the Mt Weld ORE Concentration Plant, both located in Western Australia. Lynas also owns the Lynas Advanced Materials Plant (LAMP), which is an integrated manufacturing facility, separating and processing rare earths’ materials in Malaysia. The Lynas 2025 growth strategy encompasses plans to build the Kalgoorlie Rare Earths Processing Facility (cracking and leaching) in Australia and an LRE/HRE separation and specialty materials facility in the USA. Lynas trades on a market cap of A$7.3 billion.

Iluka Resources Ltd. (ASX: ILU) (“Iluka”)

Iluka is a relatively new (April 2020) producer of rare earths at their Eneabba Project in Western Australia. Iluka intends to ramp to selling 50,000 tpa of a 20% monazite-zircon ore concentrate for further processing offshore. Iluka has an offtake agreement for 50,000 tpa. Iluka is working on developing a Phase 2 of the Eneabba Project which involves investigating techniques to beneficiate and purify the monazite to an 80% concentrate for sale further down the value chain. Iluka is mostly known for being an Australian heavy mineral sands, zirconium and titanium, producer. Iluka trades on a market cap of A$3.5 billion.

Vital Metals Limited (ASX: VML) (“Vital”)

Vital recently began mining ore at its Nechalacho’ Mine in Canada’s Northwest Territories (NWT), with commencement of ore processing at Vital’s, under construction, Saskatoon cracking and leaching facility expected to begin in 2022. The Nechalacho Mine is a high grade, light rare earth (bastnaesite) project with a world-class resource of 94.7Mt at 1.46% REO (measured, indicated and inferred). Nechalacho’s North T Zone, which is being mined by Vital, hosts a high-grade resource of 101,000 tonnes at 9.01% LREO (2.2% NdPr). Vital has a non-binding MOU with Ucore Rare Metals Inc. for the supply to it of a mixed rare rare earth carbonate, beginning H1 2024. Vital Metals trades on a market cap of A$250 million.

Explorer/Developers (in alphabetical order):

Arafura Resources Limited (ASX: ARU) (“Arafura”)

Arafura 100% own the Nolan’s Bore rare earth project 135kms from Alice Springs in the Northern Territory, Australia. Arafura states: “The Project is underpinned by low-risk Mineral Resources that have the potential to supply a significant proportion of the world’s NdPr demand. It is a globally significant and strategic NdPr project which, once developed, will become a major supplier of these critical minerals to the high-performance NdFeB permanent magnet market.”

The deposit contains a JORC 2012-compliant Mineral Resources of 56 million tonnes at an average grade of 2.6% total rare earth oxides (TREO). 26.4% of the total rare earths contained are  NdPr. The Project is supported by Export Finance Australia (EFA), and the Northern Australia Infrastructure Facility (NAIF), via non-binding letters of support for a proposed senior debt facility of up to A$200 million and A$100 million respectively. Arafura is looking to raise further funds to get the project started. Arafura recently stated: “The momentum with offtake discussion has enabled engagement to expand to include the options for strategic investment as part of the Nolan’s project funding.” Market cap is A$379 million.

Australian Rare Earths Limited (ASX: AR3) (“AREL”)

AREL is progressing in the exploration of a significant deposit of valuable ‘clay-hosted’ rare earth elements, located at their Koppamurra Project spread over ~4,000km²  of tenements in South Australia and Victoria. Past exploration of the Koppamurra region has shown it contains mineralization containing the rare earth elements neodymium, praseodymium, dysprosium and terbium. The Koppamurra Project is an ‘ionic clay’ rare earth opportunity with a 2021 JORC Inferred Mineral Resource of 39.9Mt @ 725ppm TREO. AREL trades on a market cap of A$98 million.

Australian Strategic Materials Ltd. (ASX: ASM) (“ASM”)

ASM owns the Dubbo Rare Earths Project in NSW, Australia. The Dubbo Project is a 100% owned ‘construction ready’ poly-metallic and rare earths project with potential to become a key global supplier of specialty metals and rare earths. ASM’s goal is a “mine to metal” strategy to extract, refine and manufacture high-purity metals and alloys, supplying directly to global technology manufacturers. Market cap is A$1.92 billion.

Northern Minerals Limited (ASX: NTU)

Northern Minerals own the Browns Range heavy rare earth minerals project in Western Australia. Northern Minerals has built a pilot plant to test a number of deposits and prospects that contain high-value dysprosium and other Heavy Rare Earths (HREs) such as yttrium, hosted in xenotime mineralization.

The Company states: “Northern Minerals is positioned to become the world’s first significant producer of dysprosium outside of China. Accounting for 60% of the Browns Range Project’s (the Project) revenue, dysprosium is the key value driver of the Project and is at the core of Northern Minerals’ marketing strategy. With a high value, high purity, dysprosium rich product, the Company is set to become a long term and reliable supplier of dysprosium and other critical heavy rare earths to world markets.” Market cap is A$339 million.

Peak Resources Limited (ASX: PEK)

Peak Resources 75% owns the Ngualla Tanzania rare earth project, which the Company states is one of the world’s, largest and highest grade, undeveloped rare earth projects. The Ngualla Project has ore reserves of 18.5 million tonnes at 4.8% REO; 22% of the total mineral resource is NdPr, with an expected 26 year life of mine. The Project is currently at the funding stage having completed a BFS in 2017. The BFS summary details are here. About 90% of the Project’s revenues will be coming from NdPr. Peak Resources state: “Operating cost of US$ 34.20/kg NdPr* Oxide, demonstrating potential to be the world’s lowest-cost fully integrated rare earth development project.” Market cap is A$135 million.

Closing remarks

With rare earths demand set to grow strongly this decade as the world moves towards cleaner energy and technology, investors would be wise to take a second look at the rare earths sector.

Australian critical minerals projects were recently in the news after the Government announced that they would receive an A$2 billion boost (via a loan facility), to support the sector. This bodes well for the Australian rare earths junior miners to join Lynas as producers. Stay tuned as this sector looks set to shine this decade.




InvestorIntel’s Top 10 Trending List for November 2021

In this InvestorIntel video, Tracy Weslosky lists InvestorIntel’s Top 10 Trending articles and videos on InvestorIntel.com for the last 30 days. You may find this quite interesting as this Top 10 list provides an indicator of what market trends our audience is finding interesting.

Presently trending #1 on InvestorIntel.com is Frederick Kozak’s take on the top 5 rare earths companies for 2021. Our Australian Editor Matthew Bohlsen’s coverage on the Australian Government’s extension of a $2 Billion loan facility for the critical materials industry is trending #2 followed by an update on Lynas Rare Earths Limited (ASX: LYC) trending #3. Appia Rare Earths & Uranium Corp. (CSE: API | OTCQB: APAAF) is presently trending #4 with their article written by Dean Bristow titled – Biden, the Chinese raw material hunt and the ‘massive’ monazite results of Appia Rare Earths & Uranium. Trending #5 is Tracy Weslosky’s update on Neo Lithium Corp.‘s (TSXV: NLC | OTCQX: NTTHF) acquisition by China’s Zijin Mining Group.

Here is the complete list of InvestorIntel’s Top 10 Trending Articles and Videos on InvestorIntel.com for November 2021.

  1. The Top 5 Rare Earths Companies for 2021 https://bit.ly/3shB8X4
  2. Australian Government extends a $2 Billion loan facility for the critical materials industry https://bit.ly/3AX4gqv
  3. Lynas Rare Earths, making record profits and growing to meet the EV demand https://bit.ly/3m65cSW
  4. Biden, the Chinese raw material hunt and the ‘massive’ monazite results of Appia Rare Earths & Uranium https://bit.ly/3lKR82m
  5. China pays full value for Neo Lithium, the bull market has arrived. https://bit.ly/3Fxco3w
  6. Byron King’s Top 5 “Outstanding” Yukon Gold (and Silver) Mining Names https://bit.ly/2WFj9yL
  7. North American Rare Earth Juniors Consolidate Capabilities to Advance Towards a Total Domestic Supply Chain https://bit.ly/3bai3ia
  8. Cesium, A Critical Metal and an Opportunity for Avalon Advanced Materials https://bit.ly/3ByGhOu
  9. U.S. nuclear power generation at historical heights as investors buy uranium https://bit.ly/2XlRrY0
  10. Canada’s Voyageur Pharmaceuticals Breaking a Chinese Monopoly https://bit.ly/3usOgdb

To watch the full video, click here




Lynas Rare Earths, making record profits and growing to meet the EV demand

While the lithium-ion battery boom for EVs is getting most of the headlines, investors should not forget about the rare earths. The most valuable rare earths, neodymium (Nd), praseodymium (Pr), and dysprosium (Dy) are those used in the permanent magnets used in electric motors, key components in electric vehicles, EVs.

As shown on the graph below, China neodymium (Nd) prices are up 73% the past year as demand for the rare earth permanent magnet material continues to grow. Praseodymium (Pr) prices and dysprosium (Dy) prices are also on the rise.

Neodymium 5 year price chart

Source: Trading Economics

Lynas Rare Earths Limited (ASX: LYC) (“Lynas”) is the second largest NdPr [The trade term for the neodymium-praseodymium blend, which is the standard item of trade in the rare earth magnet raw material production industry], producer in the world. Lynas owns the Mt Weld rare earth mine, which is one of the world’s highest grade rare earths mines, and it operates there also the Mt Weld Ore Concentration Plant, both located in Western Australia.

Lynas has recently drilled up to 1 kilometer deep at Mt Weld discovering addititonal  carbonatite below the current rare earth open pit mine. Lynas stated: “The current exploration drillhole has ended in visible coarse grained REE mineralisation. First pass geochemical assay results, microscopic petrology, and mineralogical study reports are expected by November 2021 and the drilling report is expected to be completed in December 2021.”

Lynas also owns the Lynas Advanced Materials Plant (LAMP), which is an integrated manufacturing facility, preparing and separating the mixed rare earths from Mt. Weld into individual rare earth materials, located in Malaysia. In recent legal news, Lynas announced that: “….on 28 July 2021 the High Court of Malaysia at Kuala Lumpur dismissed the judicial review proceedings commenced by the anti-Lynas activists seeking review of the processes followed by the Government of Malaysia in reaching the August 2019 decision to renew Lynas Malaysia’s fourth operating licence. Lynas has received a notice of appeal by the anti-Lynas activists. Lynas intends to defend the appeal.”

In company news, Lynas recently announced a record net profit after tax of A$157 million for the 2021 financial year (July 1, 2020 to June 30, 2021). The profit was partly as a result of higher rare earths production, but mostly due to stronger rare earths pricing. Lynas stated: “Despite the global shortage of semi-conductors which affects all industries and in particular, the automotive industry, the NdFeB market is experiencing very strong growth, supporting the demand for NdPr and the Heavy Rare Earths’ blend produced by Lynas”

Lynas’ rare earth products (notably NdPr) are seeing strong demand and rising prices

Source: Lynas Rare Earths FY 21 results presentation

Latest progress at Lynas as part of their 2025 growth strategy

  • Kalgoorlie Rare Earths Processing Facility (Australia) – Lynas is currently progressing their new Kalgoorlie Rare Earths Processing Facility, where site works have commenced and orders have been placed for all long lead time items. Fabrication of the five kiln shell sections is now complete. The final Environmental Review Document (ERD) has been submitted to the Australian EPA for the Kalgoorlie Project.
  • LRE/HRE separation & specialty materials facility (USA) – Lynas has completed the Phase 1 detailed engineering and design work for a Heavy Rare Earths (HRE) separation facility in the USA, and it has been submitted to the US Government. The U.S, DoD is now conducting a merit evaluation of the submission. Lynas is progressing with site studies and planning for the American  integrated Rare Earths Separation Facility.

Lynas current facilities and 2025 growth strategy

Source: Lynas Rare Earths FY 21 results presentation

Closing remarks

Lynas Rare Earths is performing very well, buoyed by strong rare earth prices. Most analysts are forecasting a strong decade ahead for rare earths based on growing demand for the powerful rare earth permanent magnets used in electric motors in the automotive, aerospace, and appliance industries.

Lynas is steadily working towards achieving its 2025 growth strategy of developing new facilities to enlarge its capacities for rare earths processing and separation in Australia and the USA.

Investor interest in Lynas remains strong, because it is the largest non-Chinese based rare earth permanent magnet raw materials’ producer. Lynas trades on a market cap of A$6.4 billion. It is certainly one to follow as it makes steady progress towards achieving its 2025 growth target.




As Market Focus on Rare Earths Intensifies, Search Minerals Proceeds on Path to Production

Rare earth’s producing miners in the West are very rare as China dominates most of the rare earths production. Two exceptions are both trading with US billion-dollar market caps – They are MP Materials Corp. (NYSE: MP) (US$6.24 billion) and Lynas Rare Earths Limited (ASX: LYC) (US$3.92 billion), with  Today’s company trades on a market cap of just US$55 million.

[Note from the Publisher: The breaking news yesterday Energy Fuels and Neo Performance Materials Announce Contract Signing and Launch of Commercial Shipments of Rare Earth Product to Europe in Emerging U.S.-Based Rare Earth Supply Chain confirms these 2 companies as players in the rare earths supply chain. And Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) market cap is  roughly CAD$1B and Neo Performance Materials Inc. (TSX: NEO) is CAD$615M according to Yahoo Finance at 945 AM EST.)

The Company has a plan to be ready to build their full-scale rare earths processing plant by the end of 2023 and once complete become a North American rare earths producer (potentially by about 2025 provided all goes well). Prior to reaching full scale production, the Company plans to operate a demonstration plant in 2022.

The Company is Search Minerals Inc. (TSXV: SMY | OTCQB: SHCMF) (“Search”). Search controls properties with rare earths in three areas of Labrador, Canada. These are:

  • The Port Hope Simpson (PHS) property (flagship)
  • The Henley Harbour Area in Southern Labrador
  • The Red Wine Complex located in Central Labrador, plus some recently agreed acquisitions

Search Minerals flagship Port Hope Simpson (PHS) property includes Foxtrot, Deep Fox, Silver Fox, Awesome Fox, and Fox Meadow

Next steps (2021) at Port Hope Simpson – Foxtrot/Deep Fox updated PEA by Dec. 2021

The Preliminary Economic Assessment (PEA) of the Foxtrot Resource showed an estimated after-tax NPV10% of C$48 million and an after-tax IRR of 16.7% over a 14-year mine life. Start-up CapEx was estimated at C$152 million representing an after-tax payback of 4.4 years.

Search plans to do an updated PEA by December 2021 to include both Foxtrot and Deep Fox. Deep Fox will add to the existing PEA due to increasing the resource size and it has up to 15% higher grades than Foxtrot. The updated Foxtrot/Deep Fox PEA will double the past PEA production rate (increase production rate to 2,000 tonnes per day), increase recoveries from the optimized pilot plant process, increase revenue from higher grades at Deep Fox, extend mine life with material from Deep Fox and Foxtrot to a central processing facility, and decrease costs with reduced reagents. The impact of all of this is expected to potentially improve the PHS (Foxtrot/Deep Fox) Project economics significantly.

Beyond this, there is plenty of potential to further grow the Resource estimate and economics in the Feasibility Study, as Search also has 3 more advanced prospects (Silver Fox, Awesome Fox, and Fox Meadow) and 20+ potential prospects at PHS. Silver Fox has had some exciting “very high occurrence of zirconium and hafnium“. Project CapEx and OpEx should also be attractive as there is existing infrastructure, a scalable processing plan, technical simplicity, and open pit mining. A local workforce and Search’s patented mining process (lowers environmental and reagents costs) should also help reduce costs.

Search has already achieved a dedicated pilot plant, proving an ability to generate high purity, refinement-ready product at a low scale. Added to this there are MOUs signed with Saskatchewan Research Council and USA Rare Earth for further refining collaboration.

Next steps (2022, 2023) – Demonstration plant in 2022 and full-scale production plant construction ready to begin in late 2023

Search’s master plan includes building a demonstration plant in St Lewis in 2022 as well as an Environmental Impact Statement (EIS) for Foxtrot/Deep Fox.

In 2023 Search intends to complete their permitting, a BFS, and commence raising capital to build a full-scale processing plant commencing by the end of 2023. All going very well that can potentially lead to Search commencing rare earth production in 2025 or shortly thereafter.

It should be noted that in the mining industry, unless governments act to support and speed up the process, permitting and funding can drag on for some years. The good news here is the Canadian and US governments finally appear motivated to support (perhaps via faster permitting and low rate loans) a local rare earths supply chain.

In news announced on June 24, 2021, Search was selected to participate in the Government of Canada Accelerated Growth Service Initiative. This provides Search with “coordinated access to Government of Canada resources” as Search continues to move quickly to production.

Search Minerals Strategic Plan – 2021 to 2023

Source: Company presentation

Closing remarks

Search Minerals has big plans in the rare earths sector. The road to production for junior miners carries plenty of risks and usually involves stock dilution increasing the market cap, especially when raising initial project CapEx. One plus for Search Minerals is their Canadian location, as US and Canadian governments are showing increasing interest to help support rare earth projects.

If successful Search Minerals (US$55 million market cap) can begin to follow in the giant footsteps of Western rare earth majors MP Materials (US$6.24 billion) and Lynas Rare Earths (US$3.92 billion). As you can see successful Western rare earths miners command very significant size market caps.

Investors will need to ‘search’ for their patience cap and be prepared for a long ride, but the potential rewards for success can be excellent. Stay tuned.




Jack Lifton on Rare Earth Supply Chains and Value Chains

Rare earth sector analysts have finally recognized that a project’s place in a total supply chain is very important to its economic viability. Before a junior mining deposit goes into (usually expensive and time consuming) development into a producing mine there must first be an evaluation of what possible product(s) of that mine are demanded by the next step in the supply chain and what price(s) they may bring when the mine begins production. Most such evaluations are at best extrapolation and at worst pure speculation due to unpredictable commodity price cycles. Even for producing mines like MP Materials Corp. (NYSE: MP) and Lynas Rare Earths Limited (ASX: LYC) their places in the total supply chain differentiates them from each other because of the different value of their current respective delivered products.

The sale of rare earth permanent magnets brings a majority of the revenue in the total rare earth products supply chain. But no non-Chinese company has ever been vertically integrated from a mine to a magnet maker. The closest that a Western owned company (Canadian) has come to being a total rare earth permanent magnet supplier is Neo Performance Materials Inc. (TSX: NEO), which has everything (in the total rare earth permanent magnet supply chain) but a mine. Neo Performance sells rare earth products (oxides and chemicals) as well as rare earth enabled products (e.g., magnets) and has been consistently profitable with revenues exceeding $500,000,000 per year. This year, 2021, Neo will shortly begin taking delivery from America’s Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) of 70 tons per month of clean mixed rare earth carbonates (MREC) extracted from domestic American monazite. Energy Fuels is the first American company to produce rare earth concentrates free of radioactive elements and interfering ions in at least 25 years. The MREC can be put into solution directly at Neo’s European rare earth separation plant and fed into the system as a pregnant leach solution (PLS). Thus, Neo Performance can deliver to its customers downstream products, such as separated oxides, metals and magnet alloy powders and bonded magnets (made at its Thailand operations) that are produced by a total rare earth supply chain with no Chinese involvement.

Energy Fuels reports that its monazite extraction/purification system to produce clean MRECs is profitable. MP says that its bastnaesite ore concentrates now sold exclusively to China’s Shenghe Resources are profitable. Lynas says that its in-house separated rare earth oxides are sold at a profit. For rare earth juniors, the successful (I.e., profitable) sale of ore or clean mixed rare earth carbonates is the key metric and few of them succeed.

The total rare earths’ (enabled products) supply chain has the following composition:

  1. Mining,
  2. Extraction of the rare earths from the mining concentrates and the preparation of a clean, pre-PLS, mixed rare earths product,
  3. Separation of the mixed rare earths into individual oxides and blends,
  4. Manufacturing of chemical products, such as phosphors and catalysts, and of individual metals and alloys forms, and
  5. Manufacturing of rare earth permanent magnets from rare earth alloys.

Historically mining companies have done steps 1,2, and sometimes 3, while specialized smaller companies have done steps 4 and 5 as separate ventures.

The rare earths’ value chain is not the same as the supply chain. It is very difficult to make money mining, extracting, or even separating mixed rare earths into individual rare earths and blends. Lynas, for example, has become profitable by reducing the costs of separation to where they are comparable to those of the Chinese. Lynas’ monazite ore body is much richer than, for example, MP’s bastnaesite or even that of China’s Bayan Obo. Lynas is now profitable selling individual rare earth salts and blends, but it has taken a decade and $2 billion to reach this point, and the company’s survival was actually due to long term low interest loans from a Japanese government agency designed solely to give Japan a backup to Chinese sourcing.

MP Materials is today only an ore concentrate producer, and its original capital needs were only to re-open a relatively recently closed large-scale well-run mining and ore concentrating operation. MP basically acquired some $2 billion of sunk costs for about 1% of that. The real challenge now is for MP to (attempt to) match the Lynas model, and deliver separated rare earths and blends just as the original Molycorp did until 20 years ago. I am told that Molycorp II’s Project Phoenix ran first just before the bankruptcy, but I only get silence when I ask if it was running economically and efficiently. I am very skeptical about MP’s announcements that they will be separating rare earths at Mountain Pass in 2022 if by that they mean economically and efficiently.

Lynas has never advanced beyond separation in the supply chain, and I have never heard it said that they plan to do that or want to do it. The Lynas 22,500 tpa operation in Kuantan, Malaysia, took seven years and $1.3 billion to begin commercial operation, and it is limited to processing monazite to extract and separate light rare earths only. If Lynas chooses to build a light rare earths separation plant in the USA as has been announced I suspect it will take 2 to 3 years to build and burn-in and that if it is to be a 5000 tpa system as announced, and that it will cost far more than $60 million on a greenfield site in Texas.

Project Phoenix was to be a 20,000 tpa system. It never ran commercially even though well over a billion dollars was expended on it over a four-year period. It is extremely unlikely that Project Phoenix can be resuscitated and brought into profitable operation in just one year, if ever.

Molycorp II, in its attempt to vertically integrate bought the rare earth permanent magnet alloy making operations of Santoku, America, in suburban Phoenix, Az. In 2011 for $17 million. Within two years the operations were shut down as the necessity to buy Chinese metal as feedstock made profitability impossible.

Energy Fuels is buying monazite concentrates and removing the uranium and thorium as well as non rare earth elements in its existing White Mesa uranium mill in Utah. Less than $2 million was needed in additional equipment to give the mill the capacity to process 2500 tpa of monazite to recover the contained 55% of total rare earths.

Neo Performance can distribute costs across its almost total in-house supply chain. It can thus maximize profits in its highest margin end-use products. MP is literally a start-up beyond the mine, and the jury is out on its potential for success. Lynas’ operations were designed by former Solvay chemical engineering managers with the longest continuous experience in rare earth separation in the world. The chemistry chosen for Kuantan was that proven by experience and use by Solvay, China. Neo Performance Materials is the successor in interest to Neo Materials, which was founded in the 1990s and is helmed today by one of its original founders. Neo Materials perfected the bonded rare earth permanent magnet and is today the supplier of 80% of the world’s supply of them.

Energy Fuels has been in business since the late 1980s, and is America’s sole licensed uranium mill and thorium storage site. From the inception of the plan to process monazite until commercial operations took just one year. Uranium is purified by solvent extraction, and Energy Fuels has more than 500 man-years of experience with solvent extraction. The company is doing a scoping study on a dedicated rare earths solvent extraction system and has been awarded a contract by the US Dept of Energy to study the separation of rare earths derived from coal and phosphate-acid residues.

MP and Lynas are the largest, rare earth miners outside of China. Lynas and Neo Performance are the largest processors of rare earths to separate them by solvent extraction outside of China, and Energy Fuels is the sole producer of clean mixed rare earth carbonates in the Americas.

I am watching the following juniors: USA Rare Earths, Rare Element Resources Ltd. (OTCQB: REEMF), Vital Metals Limited (ASX: VML), and Appia Energy Corp. (CSE: API | OTCQB: APAAF).

The next five years will be the critical time for the development of a domestic American or European total rare earth enabled products supply chain. Canada is at a crossroads; it may build a domestic supply chain anchored on mines and going downstream with licensed European separation, metal and alloy making, and magnet making, or it may build a trans-Atlantic one with the EU.

The game’s afoot.




The Top 5 Rare Earths Companies for 2021

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!




The 600 pound gorilla in the room – welcome, Lynas Rare Earths

In the rare earths space, it is the 600 pound gorilla, but we mean that in a positive way. Investors familiar with rare earths will know this, but for those of you just coming to learn about the company, it is one of only two producers of scale of separated rare earths outside of China and is the second largest in the world.

Welcome to the “new Lynas” Corporation, officially renamed “Lynas Rare Earths Limited” (ASX: LYC) on December 1, 2020. Listed on the Australian Securities Exchange, the company has a market capitalization of approximately AU$3.3 billion. The company’s share price hit an all-time high on December 4, 2020 as the market pays close attention to this industry leading company. Lynas ADRs can also be found on the US OTC, trading under the symbol LYSDY.

What a difference a year (or three) makes. It was just 2017 when the company consolidated its shares on a 1:10 basis, after five challenging years in the rare earths market when the company was on the verge of going bust. Recall that the global rare earths’ price bubble collapsed in 2014 on the back of a negative World Trade Organization decision against China. A global industry had all but been decimated and lowest cost production and industry dominance was now Chinese.

Except for Lynas. The company mines rare earths in Western Australia at Mt. Weld, which is one of the world’s highest grade rare earths mines. The mined ore is concentrated at the Mt. Weld concentration plant and sent for further processing to Lynas Malaysia’s Advanced Material Plant near Kuantan, Malaysia where the facility, commissioned in early 2013, produces separated rare earth oxide products for sale to customers in Japan, Europe, China and North America. Currently, the most valuable product produced at the plant is praseodymium/neodymium (NdPr), used in magnets.

With the increasing interest in all things electric and electronic, rare earths have again come to the fore. Specifically, because so many things need electric motors (more than 140 small electric motors in the average automobile – electric and hybrid electric vehicles use even more small electric motors and larger traction motors), global demand is increasing.

We have known about this for a long time and the world is only now (again) starting to pay attention. Because of previous global price increases and the subsequent price collapse in the rare earths, China arguably has the world’s most complete rare earth industry chain. This means in order to make full use of the rare earths mined in various countries, miners must come to China for processing. China produces approximately 80% of the world’s rare earths but can only supply about 30% of the raw ore.

This is a problem, because the digital transformation is unstoppable – there could be as many as eight rare earths metals in your smartphone and who can’t wait to get the next latest and greatest device? However, companies using rare earths for our end-use products are becoming focussed on supply chain resilience and suppliers who are closer to home (also a strategic decision). This was also recognized by US President Trump, who signed an executive order at the end of September 2020 declaring a national emergency in mining in an effort to jump (re)start the domestic industry.

Ahead of the curve, management of Lynas had already recognized this and despite being a global leader in rare earths, in 2019 put into action “Lynas 2025” – a plan to grow production and create a new rare earths processing centre in Western Australia. In addition, also in 2019, the company announced a Memorandum of Understanding to develop a rare earths processing facility in the United States. To be located in Texas, Lynas and the company’s partner announced in April 2020 that they will receive “Phase 1” funding from the U.S. Department of Defense (DoD) for planning work for the construction of the facility. Initial plans are to process ore at the facility from the company’s mine at Mt. Weld and it was announced that in July, 2020 the companies signed a contract with the US DoD for detailed design of a heavy rare earths processing facility.

As goes the rare earths industry, so goes Lynas and in August 2020, the company successfully raised AUS$425 million in new equity to fund future and ongoing activities in Australia and Malaysia, giving the company an even stronger balance sheet to finance future growth plans and maintain an industry leading position in the rare earths space. At year-end June 30, 2020, the company had positive working capital of approximately AUS$84 million plus a loan of AUS$164.9 million.

The world absolutely needs more rare earths to supply a seemingly unquenchable demand for new and evolving products. The rare earths supply chain has been dominated by China, but refreshed interest in strategic and domestic supply has caused the world to re-evaluate the current rare earths supply system. Despite a number of new and promising startup rare earths companies, Lynas continues to be the global leader. Does it belong in your portfolio?




Jack Lifton on MP Materials (Molycorp) Return

“Molycorp spent $1.8 billion to redevelop the (Mountain Pass) mine and vertically integrate that output through a separation plant to salable, separated rare earths products. It didn’t work. At the end they were not able to operate the separation plant, Project Phoenix, and the company shutdown because it ran out of money.” States critical materials expert Jack Lifton, in an interview with the Technology Metals Show hostess Tracy Weslosky.

Jack went on to say, “Two years later a company that became MP Materials purchased the mine and the refinery project from the bankruptcy trustee and they began to operate it as a mine. In the last 12 months that mine has produced 50,000 tons of rare earths concentrate containing 12,000 tons of rare earths included in which are about 2000 tons of magnet metals, neodymium and praseodymium, which could make 6000 tons of magnets.”

In the interview Tracy and Jack discussed some of the challenges awaiting MP Materials in becoming a vertically integrated domestic rare earths company. Jack also provided an update on Lynas and explained how it will be affected as MP Materials progresses with its plan.

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The Rare Earths Market in Review – June 2020

“I think Energy Fuels is serious about going into the rare earths business. What I was told is that they are going to begin by selecting a rare earths mineral produced in the United States…” States critical materials expert Jack Lifton, in an interview with the Technology Metals Show hostess Tracy Weslosky.

In the interview Tracy and Jack discussed some of the major news in the rare earths space for the month of June. Jack also commented on Lynas and shared his view on Alkane’s plan to demerge their poly-metallic and rare earths holding company Australian Strategic Materials Limited (ASM).

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As Chinese rare earths’ stock prices rally, pressure rises for the rest of the world…

Rising US-China tension has resulted in some rare earths’ stock prices rising sharply, particularly those in China. Given the recent US moves to introduce critical materials legislation it seems likely that the non-Chinese rare earth stocks will also rally strongly this year, particularly if the new bills and financial support are passed.

Let’s start with a recap of the recent US support highlights for rare earths:

The ORE Act focuses on six critical materials – Rare earths, scandium, lithium, cobalt, graphite, and manganese. The Critical Mineral Exploration and Innovation Act directs the U.S.G.S. to complete updated resource assessments for each critical mineral. It has been reported that there will be a focus on rare earths and other so-called strategic minerals.

Then just last week rare earths expert and Technology Metals Show host Jack Lifton stated exclusively to InvestorIntel: “The US Defense Department has announced last week that it will seek $1.7 billion for rare earths purchases in the 2021 National Defense Authorization Act that means the budget for fiscal 2021. In addition they will ask for another $300 million (a total of $2 billion), for rare earths for specialized weapons which they name as hypersonic missiles…”

Given all of the above proposed support to the rare earths sector, it is abundantly clear that the US is now finally moving rapidly to secure critical rare earths supply, particularly from US deposits, where possible. Current rare earths producers and listed rare earths stocks stand to be beneficiaries. Especially if they have US rare earths projects, but quite likely any non-Chinese rare earth juniors that can achieve funding and production should find very strong western demand for their products. Most of the western world is now looking to diversify their supply chains especially after the trade war and COVID-19 problems of the past 2 years.

Some rare earth miners with US projects include:

  • MP Materials (private)
  • Rare Element Resources Ltd. (OTCQB: REEMF)
  • Texas Mineral Resources Corp. (OTCQB: TMRC)
  • Ucore Rare Metals Inc. (TSXV: UCU | OTCQX: UURAF)

Some miners with US rare earth processing potential include:

  • Energy Fuels Inc. (NYSE: UUUU | TSX: EFR) recently stated their White Mesa Mill in the USA could be used in future for rare earths processing.
  • Lynas Corporation (ASX: LYC) has received US support for a planned US rare earths processing facility.
  • Peak Resources (ASX: PEK) plan to have a US rare earths processing facility.

Some rare earth miners with Canadian projects include:

Some rare earth miners with Australian projects include:

Rare earths are vital ingredients for modern technology

Rare-earths-are-vital-ingredients-for-modern-technology

Closing remarks

The massive recent news of two new rare earth/critical materials related Acts and a proposed “US$2 billion towards rare earths in 2021”, appears to have been somewhat missed by the market. The Chinese rare earths stocks have already bounced leaving the potential rest of the world rare earth miners to play catch up.

News flow in future months should continue to be extremely promising for the rare earths sector following on from the tremendous news from the last few weeks.

Investors should not wait too long as any further increased US-China tensions, threats of China supply loss, or passing of rare earths related Bills, will likely send non-Chinese rare earth miners stock prices higher.