Overview of Lynas’ Financial Achievements

Lynas Rare Earths Ltd. (ASX: LYC) recently unveiled its financial statistics for the fiscal period culminating on 30 June 2023. The firm’s financial year was marked by significant operational feats, most notably setting new benchmarks in concentrate and NdPr production during the latter half.

• The revenue stood impressively at AUS$739.3 million with EBITDA and NPAT making up 51% and 42% of this total, respectively.
• CEO Amanda Lacaze, while applauding the company’s recent achievements, pointed out that the past fiscal year, though robust, did not eclipse the monumental market highs of FY22.
• Highlighting the company’s commitment to growth and future projects, Lynas dedicated $595 million to capital endeavors, concluding the year with a formidable cash reserve of AUS$1,011.2 million.

Projects at a Glance

1. Kalgoorlie Rare Earths Processing Facility: Having witnessed extensive construction throughout the year, only the waste gas treatment segment remains pending. Unexpected expenses have nudged the project’s budget to an estimated $730 million.
2. Mt Weld Development: Launched in March 2023, this project continues to advance seamlessly, remaining firmly on its timeline.
3. Lynas’ Venture into the U.S.: Strengthening its global presence, Lynas clinched a collaboration with the U.S. Department of Defense, focused on erecting the Heavy Rare Earths component of their Texas-based processing facility. Financial commitment from the U.S. Government is pegged around US$258 million.

Symbiotic Government Collaborations

Lynas has strategically forged partnerships worldwide to bolster the rare earths supply chain:

• A nod from the Australian Government came with an award of AUS$20 million in June 2023.
• March saw the Japanese Government infuse AUS$200 million via Japan Australia Rare Earths B.V. (JARE).
• A significant contract from the U.S. Government worth US$258 million was finalized in August 2023.
• In Malaysia, while Lynas procured a license renewal valid for three years starting February 2023, it came with stipulations, leading Lynas to take the judicial route.

Expert Perspective: Jack Lifton’s Observations

Renowned analyst Jack Lifton cast a discerning eye over the report, highlighting a few areas of concern:

• Lifton expressed reservations about the company’s projected costs, particularly emphasizing the unexpected doubling in the estimate for the Lynas U.S. venture as quoted by the Department of Defense.
• Lifton’s scrutiny extended to the credibility of Lynas’ costing, especially when it came to American projects.
• The Kalgoorlie initiative drew attention too, with its budget swelling by 50%, a figure Lifton deemed notably high.
• On the Malaysian front, Lifton underscored Lynas’ challenge – the prohibition against processing radioactive material. With the Kalgoorlie initiative aimed at purifying the ore of thorium and uranium before its Malaysian journey, Lifton probed the readiness of the project, questioning its ability to meet the January 2024 deadline for shipments.

While Lynas Rare Earths Ltd. certainly celebrates a year of notable achievements, the meticulous observations and questions raised by experts such as Lifton emphasize the importance of thorough scrutiny, foresight, and transparent communication in ensuring sustained growth and stakeholder trust.

Australia’s Lynas Rare Earths Limited (ASX: LYC), the premier producer of rare earths outside China, finds itself at a crossroads as it navigates geopolitical and industry shifts. The company’s future in Malaysia remains uncertain as Kuala Lumpur reviews its stance on operations resulting in radioactive by-products. Notably, Malaysia’s operational advantages lie in its strategic location and lowered production costs, offering a competitive edge over alternatives in Texas. The latter location, although attractive, poses challenges like potential “rare earth tourism.”

In the backdrop, Lynas has seen its revenues drop due to declining rare earth prices. The recent quarter reported a fall to A$157.5 million (US$104.85 million) from A$294.5 million in the same period the previous year. However, this figure still surpasses their pre-2021 revenue marks.

Meanwhile, in the United States, Lynas is gearing up to strengthen its footprint. With the backing of the U.S. Department of Defense (DoD), Lynas USA LLC will construct the Heavy Rare Earths component of the Lynas U.S. Rare Earths Processing Facility in Texas. The updated contract with the DoD promises reimbursement for all valid construction costs. Furthermore, the U.S. Government has increased its contribution to the project from an initial US$120 million in June 2022 to approximately US$258 million.

This Texas facility is designed to bolster the U.S. rare earth supply chain, integral for both defense and commercial sectors. Once completed, it will be the only large-scale producer of separated Heavy Rare Earths outside China. Lynas has acquired a 149-acre site in Seadrift, Texas, for this endeavor, strategically located close to infrastructure, skilled labor, and potential customers. The new site also offers room for future expansion, possibly introducing downstream processing and recycling to forge a circular supply chain.

Aiming to be operational by FY2026, the Texas facility will primarily source its feedstock from the Lynas Mt Weld rare earths deposit and the Kalgoorlie Rare Earths Processing Facility in Western Australia. However, it remains open to processing from other potential sources in the future.

Amanda Lacaze, Lynas’ CEO, expressed her enthusiasm for the Texas venture, emphasizing its role in Lynas’ growth strategy. She highlighted the plant’s uniqueness as the first of its kind outside China and lauded Lynas’ position as the sole commercial scale source of separated rare earths outside China. This U.S. plant signifies a global shift towards establishing a sustainable and eco-friendly rare earths supply chain, reducing dependence on Chinese suppliers.

Lynas Rare Earths Limited (ASX: LYC) (“Lynas”) recently announced some positive news that the Malaysian authorities have advised that their license to import and process lanthanide concentrate is now valid until 1 January 2024, effectively a 6-month extension to get their Malaysian rare earths unit in line with environmental requirements.

Meanwhile, Lynas continues to oppose the Malaysian government’s ‘new’ rules and is working on alternate facilities in Western Australia. Should the Malaysian situation not be resolved then Lynas has a backup plan. The announcement stated:

“The licence variation allows the Lynas Malaysia cracking and leaching plant to continue to operate until 1 January 2024 and will remove the requirement for a shutdown at the Lynas Malaysia plant prior to 1 January 2024.”

At the heart of the issue is that the Malaysian authorities say the cracking and leaching plant generates radioactive waste. Lynas argues that they are meeting the conditions as per their original agreement with the Malaysian government. Lynas stated:

“Lynas had applied to the MOSTI Minister for the removal of the conditions which limit operations at the Lynas Malaysia facility as they represent a significant variation from the conditions under which Lynas made the initial decision to invest in Malaysia.“

We will have to wait until January 1, 2024, to see what happens next regarding Lynas operating its cracking and leaching plant in Malaysia.

Lynas’ Kalgoorlie Rare Earths Processing Facility is in the final stages of construction, feed to start this quarter (Q4/FY23 – Ending June 30)

Lynas has been rapidly building a backup rare earths processing facility in Kalgoorlie, Western Australia. Lynas stated that the facility “has now entered the final phase of major construction activities, dry commissioning activities have commenced in certain parts of the plant, target feed on date for the Facility in Q4 FY23.”

Lynas plans to use rare earths carbonate feed from their Mt Weld Mine to feed the new Kalgoorlie rare earths processing facility once complete (noting a ramp-up period applies). The product would then be shipped to Malaysia for final processing.

FIGURE 1: Lynas’ under construction rare earths processing facility in Kalgoorlie Western Australia

Lynas achieved record NdPr production in Q3/FY23 (Ending March 31)

In Q3/FY23 Lynas produced 4,348 tonnes of total rare earths oxide and a record 1,725 tonnes of Neodymium-Praseodymium (“NdPr”). This resulted in A$237.1 million of revenue for the quarter. The chart below shows Lynas’ revenue trending slightly higher over the past 2 years on the back of solid production and prices.

FIGURE 2: Lynas’ last 2 years Total Rare Earth Oxides (“TREO”) production volumes and sales revenues

USA LRE and HRE facilities update

The USA Light Rare Earth (“LRE”) and Heavy Rare Earth (“HRE”) facilities plan to be able to process both light and heavy rare earths.

Lynas has secured a greenfield site in an existing industrial zone in Texas, further progressed the detailed engineering design, and engaged a preferred U.S. Engineering, Procurement, Construction, and Management (“EPCM’) contractor.

Tesla plans to use non-rare earths motors in their next generation vehicle

Lynas CEO, Amanda Lacaze, stated in the Q3, FY 2023 earnings call:

“The neodymium iron boron [NbFe] magnet technology is the most energy efficient, because it is the lightest motor, and over the life time of the vehicle it gives you the best efficiency… …and it has the lowest CO2 emissions… …more are choosing NbFe technology than the alternative… …today we find that demand still is ahead of our ability to service everyone who would like to buy Lynas NdPr… …the current (price) softness is very much about internal China dynamics… …but we at Lynas remain very confident of the long term trend and we know that the Chinese rare earth firms share that confidence. We remain committed to growing to meet the market and that’s one of the reasons why our ambitious capital investment plan continues.”

Closing remarks

Lynas is very well positioned in 2023 with A$1.12 billion in cash (as of March 31, 2023) and is on target with its expansion plans.

The 6-month Malaysian extension also means that Lynas’ rare earths production can continue uninterrupted, at least until January 1, 2024. At that point, the Kalgoorlie facility should hopefully be operating smoothly and ramping up production and offer an alternative should the Malaysia cracking and leaching plant need to be shut down on January 1, 2024.

Lynas Rare Earths trades at a market cap of A$6.82 billion and a PE ratio (TTM) of 12.39.

Recent press reports suggest that China might ban export to the US of rare earth-related products and technologies, particularly magnets, in response to the US decision to restrict exports of chipmaking technology to China. Japan and the Netherlands have signed on to these restrictions, but so far. the EU has not. Perhaps part of the EU delegation visit to Beijing is designed to cool tempers and avert a broader “trade war.”

I suspect they must be smiling in Beijing today at the degree of alarm these articles have produced. But let’s take a collective breath and look at the potential consequences from a couple of angles and see if it makes geopolitical sense. After all, the Chinese are nothing if not pragmatic.

Rare earth magnets

Let’s begin with magnets, the single most important product. China does not have a monopoly on production and arguably is not even making the best quality magnets. Bonded neodymium (neodymium, iron, and boron or “NdFeB”) magnets are made in Japan, Korea, the Philippines, Thailand, Germany, the UK, and the US (albeit in small quantities) in addition to China. Rare earths (“RE”) oxides are converted to metals in Vietnam and Thailand, as well as the UK. NdFeB alloys are made in Vietnam, Thailand, Japan, Germany, and the UK. The highest-performance sintered magnets in the world are made by Shin-Etsu in Japan. Hitachi is a close second. TDK Corporation is close behind. The Chinese magnet producers always try to close the gap in performance with the Japanese. 

All of this suggests that, from this angle at least, global sourcing could work around a Chinese product ban.

Rare earths refining

What about refining? Rare earths currently are refined in Malaysia by Lynas Rare Earths Ltd. (ASX: LYC) (although some recent political difficulties there for Lynas suggest that might change in the near future), in Estonia by Neo Performance Materials Inc. (TSX: NEO), in France by Solvay SA (ENXTBR: SOLB) and in Japan by Shin-Etsu (TSE: 4063) and Mitsui (TSE: 8031) subsidiaries.

The technology to refine both light and heavy rare earths is well known outside of China. The organic extractants to separate REEs were all imported into China for decades and are still produced by non-Chinese companies (Solvay, Albright & Wilson, and a collection of Japanese).

So, alternative sources also exist for refining, although China does remain the processing giant by output, accounting for approximately 85% of refining activity.

Returning to Chinese pragmatism, and its history of avoiding making the second mistake twice: the rare earth embargo China imposed in 2010 against Japan led to an important defeat for China in 2015 at the WTO, an organization China continues to view as useful to its strategic ends. Having a ruling already in place that export quotas violate trade rules imposes a significant constraint on history repeating itself.

US perspective

From a purely US perspective, however, the refining question is troublesome and Washington knows it. The sole rare earth mining company operating in the US, MP Materials Corp. (NYSE: MP), currently sends its output to China for processing. That issue will change in a couple of years, since MP, with partial funding from the Department of Defense, has begun work on a processing facility near its operations. Australia’s Lynas Corp is building two new processing facilities in Texas, one for Light Rare Earths and another for Heavy Rare Earths, also with US Government (“USG”) funding assistance. Two other processing facilities reportedly are under consideration, one in Arkansas and yet another in Texas.

Thus, the processing issue is a real vulnerability for the US, as MP could not swiftly pivot to send its output to one or more of the existing processing facilities cited above, even if those would have space to accommodate additional flow on an urgent basis, which they might not.

From this perspective, China still has a means by which to “strike” the US if that truly were its intention – and perhaps it is. Interestingly, Presidents Xi and Putin met recently: one can wonder what sort of “economic penalties” against the US that Mr. Putin might have floated to a Chinese leader potentially irked by various recent US moves, including luring Taiwan SemiConductor to establish a huge factory in Arizona (visited by President Biden in March) or the potential ban of TikTok currently being bandied about in DC. Or – most irritatingly of all – the USG funding the growth of rare earths processing capability in the US.  I would add that Washington needs to feel an equal sense of urgency and commitment to building more rare earth mines in the US to ensure secure sourcing of the minerals needed to transform the economy.

Rare earths and the automotive industry

Finally, let’s look at a concrete example of an industry whose future seems irrevocably tied to access to rare earths – the automotive industry. Pat Ryan, Chairman and Chief Executive Officer of Ucore Rare Metals Inc. (TSXV: UCU) contributed:

“In the automotive world there are three primary markets, Europe, North America and the Far East. Risk mitigation in each of these markets is more important now than ever before, including the sourcing of critical metals, as supply chains must be independent of each other and shift from high dependency to diversified, sustainable, circular and innovative solutions.

This is absolutely necessary so that individual markets, including North America, are secure, costs can be understood and managed by OEM’s and jobs created in the market where products are sold. Threats or posturing are just that, and never forget that decade after decade North America has been successful because of its innovation, openness and entrepreneurial ideas. That is a point of reference and confidence and with a global energy transition upon us, the sense of urgency is more paramount than ever.“

Final thoughts

So generally speaking, I can’t share the current alarm. Not while so many other more subtle and effective means remain available to China if it really wants to make problems for the US economy. After all, the problem with a ‘nuclear bomb’ is that once used, it’s impossible to contain the fallout.

Dynamic Reading – Is this the prodigy of today’s AI Report Writing phenomenon? I have been asked to write my thoughts on the latest news about potential rare earths technology bans from China. The first reference I received was written by Shunsuke Tabeta, a staff writer for Nikkei Asia: China weighs export ban for rare-earth magnet tech

The second reference I received was written by Jingyue Hsiao of DIGITIMES Asia, Taipei. This was in response to the Nikkei Asia news: A rare earth war simmers as China reportedly to impose export ban

I then received the preparatory title of a response from one of the InvestorIntel journalists: “What happens next if China bans rare earths technology needed to process rare earths and to make high-performance magnets”.

Lessons from the past

Got me thinking about how people’s reading styles, capabilities, and mental processes appear to be controlling how they understand the reading matter and therefore influence the way they report or comment. Reminded me of a few years back when my granddaughter wasn’t achieving at high school.

I purchased National Geographic subscriptions for us both and commenced a weekly telephone hook-up routine. We took turns investigating each article, with one being the interviewer developing the questions and the other, being the interviewee who had to answer the questions. Who, What, When, Where? With those satisfactorily answered you could then ask the key question: Why? Look at what this does. It focuses the mind to search for factual information BEFORE you look for answers that may be swayed by things such as bias, agendas, or less well-informed previous interactions. It also aids in memory retention.

Unpacking the articles

Look at the Nikkei headline: “export ban”. The DIGITIMES headline reads: “Rare earth war”. The InvestorIntel “What happens next”. These all point to and highlight the differences in the author’s history, experience, and understanding of the topic or their editorial bent.

I thought back and my favorite primary school teacher came to mind. She used these Who, What, When, Where, and Why prompts when I was learning to read. No, not read but understand. So Mrs. long-since-forgotten surname, thank you for your skills. But, I’ll lay claim to the Dynamic Reading title. BTW, it’s about now I’m expecting some hi-tech whiz kid to jump in and say that this tool is similar but opposite to the AI report writers that aggregate multi-article “Who, What, When, Where, and Why” information. Strange place the past!

So I’ll use Dynamic Reading to get to my response to the articles.

What is really being written

Note already the difference in the What. Banning Rare earth magnet technology versus Rare earth elements. So, do I have enough to comment? To provide a Why? Well, not from that information, I need more.

The DIGITIMES Asia article cites Quartz as reporting that China is trying to defend its dominance in rare earths by increasing investments at home and abroad. This position is not supported by the Off-Market Sale of the East China Exploration (ECE) Group of their holdings in Arafura Resources Ltd. (ASX: ARU). Especially since Arafura is well progressed on its Nolans Project development schedule. And then Lynas Rare Earths Ltd. (ASX: LYC) is very well developed on their North American value-adding schedule.

To be honest, I have always had difficulty in developing an overview of how China aggregates and controls the Rare Earth business in China. Although the quotas and technology strategies appear to be working well on paper (their paper), it is not without some resistance from the regions that want more self-governance over their resources. Go no further than looking at the resource development battle between the light rare earths in Baotou, the heavy rare earths in Guangzhou, and the historic separation plants around Nanjing.

My conclusions

My take? Well, I would question: Is the news real or not? Is it part of a grander plan? I am sure that China can see the many developments occurring outside of China. And I am sure that China sees the projected growth in rare earths that are needed and coming from developing towards a Net Zero Carbon future. And I am sure that China must acknowledge that its pre-eminent position is not so much as under threat but that it will lessen as the whole of the world looks to resource development for a global benefit.

So, my feelers are out for more information. Difficult though these days and especially now that TikTok bans are muddying the relationships. Let’s just hope for everyone’s future that China’s People’s Liberation Army (“PLA”) venture into the Straights of Taiwan is not on, or part of, any strategic China agenda.

Oh, my granddaughter? She went from the bottom quartile of her class to be in the top 10%. And is now running her own business. Simply by being taught how to read.

In this InvestorIntel interview, Tracy Weslosky talks to Critical Minerals Institute’s Chairman Jack Lifton about “an existential crisis for the North American automotive industry.” Speaking about the upcoming Critical Minerals Summit (#CMS2023) to be held from June 14 to 15 at the National Club in Toronto, Canada, Jack says that the summit will focus on the current supply and demand situation of critical minerals for the electric vehicle industry. He adds, “This is one not to miss.”

Jack also discusses Energy Fuels Inc.‘s (NYSE American: UUUU | TSX: EFR) recent acquisition of a rare earth and heavy mineral project in Brazil and he provides an update on Lynas Rare Earths Ltd.’s (ASX: LYC) rare earths processing plant in Malaysia.

He goes on to provide an update on the current lithium market and how automakers like General Motors are investing in lithium companies to support their electric vehicle production and Piedmont Lithium (NASDAQ: PLL | ASX: PLL) just signed a purchase order and $75 million equity deal with LG Chem, Ltd. (KOSE: A051910).

To access the full episode, click here

Don’t miss other InvestorIntel videos. Subscribe to the InvestorIntel YouTube channel by clicking here.

About The Critical Minerals Institute

The Critical Mineral Institute (CMI) is an international organization for companies and professionals focused on battery materials, technology metals, defense metals, ESG technologies and practices, the general EV market, and the use of critical minerals for energy and alternative energy production. Offering an online site that features job opportunities that range from consulting roles to Advisory Board positions, the CMI offers a wide range of B2B service solutions. Also offering online and in-person events, the CMI is designed for education, collaboration, and to provide professional opportunities to meet the critical minerals supply chain challenges.

The industrial manufacturing illiterates who populate the political and academic communities in North America and Europe don’t ever seem to notice, much less address, the core problem facing the non-Chinese rare earth industries, the lack of a skilled workforce at all levels.

The sport of bashing mining and processing of critical minerals has now essentially destroyed the American academic world’s support of mining and chemical process engineering. At the same time the cultural derogation of the mining profession in America has not made modern mining attractive to the young workers who can be trained to operate complex and dangerous if mishandled, mining equipment in extreme environments, frequently subsurface, in which mining is carried out.

Kathleen Conlon, the Chairwoman of Australian Lynas Rare Earths Ltd. (ASX: LYC), the non-Chinese world’s most advanced large miner/processor of rare earths said, just this week, that even in mining-friendly Australia “…with a rare earth boom gathering pace across the globe, the board [of Lynas] is acutely aware that we operate in a highly competitive market and that the specialized skills of our team are in high demand in the rare earths and other minerals processing industries.” Her point being that even in mining friendly Australia, where Lynas, alone, is spending more than 500 million dollars on enlarging its capacity to mine rare earths and to process the ore, there are not enough unengaged and experienced miners and engineers.

America’s blind elevation of social justice to the pinnacle of academic studies combined with its worship of “credentials” over proven experience and skill in STEM subjects has reduced America’s ability to rapidly respond to China’s fait accompli in monopolizing the rare earths’ industries.

It will take a generation of dedicated education and training to reconstruct an American and European critical minerals mining and processing industry.

The Chinese did it from scratch by utilizing Western academia and the Western mining industry. Our professors, our engineers, and our site managers trained the Chinese to do a world class job.

Does the West have the stomach and the brains to recreate, at home, the human basis of support that the mining and processing industries need to exist, much less to be competitive?

Time is running out.

“US Futures are down across the board, with no new economic data or major earnings expected. Investors are looking to the August jobs report, scheduled for Friday, as they weigh up how big a rate hike could be coming from the Fed in September.

Last week saw equity markets close the last week on a down note, as all three major U.S. indexes sold off sharply for their worst closes in months after Federal Reserve Chairman Jerome Powell said the central bank would continue fighting inflation with rate increases. Don’t expect much in the way of a reprieve in early trading as we get the day under way.” – Kevin Thomsen, Morning Chatter for August 29, 2022

Friday was an intense day of speculation and discussion in the rare earths sector. With breaking news early AM with Agreement to acquire strategic shareholding in Neo Performance Materials and cornerstone investment in Hastings by Wyloo Metals, Christopher Ecclestone put out a piece on InvestorIntel titled Neo Performance and Hastings – Will Wonders Never Cease? — that was followed later that day, with a second announcement Neo Performance Materials Announces $67.5 Million Bought Deal Treasury Offering of Common Shares.

Allow me to remind you that Constantine Karayannopoulos will be the luncheon speaker at the Critical Minerals Institute‘s summit scheduled for Wednesday, November 9, 2022.

This morning, we see indicators that the uranium sector has interest, we coincidentally have a headline story written by Jack Lifton titled Are we slaves to Russian uranium processing? It seems we are in the right place at the right time as we start out the InvestorTalk.com schedule this week with 2 uranium companies… followed by an antimony story on Thursday.

InvestorTalk.com line-up for this week:

• 9-9:20 AM EST, Tuesday, August 30, 2022 — InvestorTalk.com with John Cash from Ur-Energy Inc. (NYSE American: URG | TSX: URE), click here to register
• 9-9:20 AM EST, Wednesday, August 31, 2022 — InvestorTalk.com with Dev Randhawa from Fission 3.0 Corp. (TSXV: FUU | OTCQB: FISOF), click here to register
• 9-9:20 AM EST, Thursday, September 1, 2022 — InvestorTalk.com with Christopher Ecclestone from Molten Metals Corp. (CSE: MOLT), click here to register

Now for some highlights from the Week-in-Review for the week of August 22-26, 2022 —

The Top 10 Trending Columns on InvestorIntel.com for the last 30-days include:

1. Nano One’s cathode materials are inventing the zero-emission battery future
2. Announcing the Launch of the Critical Minerals Institute for Companies and Experts Focused on Electric Vehicles, Green Energy and Secure Supply Chains
3. The King of Tin is Alphamin
4. Rare earths expert Alastair Neill on Vital Metals
5. Lynas Bets $500 Million on Rare Earths Market Expansion
6. Zentek sets its sights on treating skin conditions as it expands potential uses for its ZenGUARD graphene coating
7. Eye on the price of uranium, Cameco brings crown jewel back into production and Ur-Energy is set to go.
8. Molybdenum – securing a domestic supply of the vital but underappreciated mineral
9. A titan of titanium – with a big HAMR
10. Valeo Pharma’s Steve Saviuk talks about the US$40M non-dilutive financing from Sagard Healthcare Partners

InvestorIntel Columns to REVIEW:

• August 26, 2022 – Neo Performance and Hastings – Will Wonders Never Cease?
• August 25, 2022 – The Dean’s List – Part 6: What cobalt companies could benefit from Canada’s commitment to critical minerals?
• August 24, 2022 – dynaCERT puts its carbon emission reduction technology to the test
• August 23, 2022 – Mining our way to the Green Revolution
• August 22, 2022 – Musk Twitter Deal, Predatory Short Selling Takes a Hit and Rethinking Greenland Rare Earths in this Week-in-Review….
• August 22, 2022 – Greenwashing – It’s not easy pretending to be green

ii8 System News Releases for the Week in Review for August 22-26, 2022:

• August 26, 2022 – West Red Lake Gold Closes $4,100,000 Flow Through Financing
• August 26, 2022 – Neo Performance Materials Announces $67.5 Million Bought Deal Treasury Offering of Common Shares
• August 26, 2022 – Agreement to acquire strategic shareholding in Neo Performance Materials and cornerstone investment in Hastings by Wyloo Metals
• August 25, 2022 – Awakn Life Sciences Signs Agreement with a Leading Drug Development Company to Deepen IP Moat for Its Lead Program
• August 25, 2022 – Rackla Metals focuses on Tombstone intrusive related gold
• August 25, 2022 – dynaCERT Advances its Verified Carbon Standard Application with Verra
• August 25, 2022 – Completion of Institutional Placement
• August 24, 2022 – Westward Gold Completes Turquoise Canyon Anniversary Payment
• August 24, 2022 – Molten Metals Corp. Announces Formation of Strategic Advisory Board
• August 24, 2022 – Bald Eagle Announces Exchange Approval for Name Change to Hercules Silver Corp. and Provides Exploration Update
• August 23, 2022 – Molten Metals Samples 39.4% Antimony (Sb) and 9.69g/t Au, at Tienesgrund, Slovakia
• August 23, 2022 – TrustBIX Inc. Announces June 30, 2022 Third Quarter Financial Results
• August 23, 2022 – Auxico Signs Offtake Agreement for Tin Concentrate from the Massangana Tin Tailings Project in Brazil
• August 23, 2022 – DOE Funds Next-Generation Rare Earths Processing Research Collaboration
• August 23, 2022 – Silver Bullet Mines Corp. Updates on Washington Mine in Idaho
• August 23, 2022 – Nano One Receives C$1.8M towards SDTC Milestone 4 and Granted 2 Patents
• August 22, 2022 – Hemostemix Announces Closing of UNIT Private Placement
• August 22, 2022 – Hudson Resources And Neo Performance Materials Sign Agreement On The Sarfartoq Rare Earth Element Project In Greenland
• August 22, 2022 – dynaCERT to Equip the City of Timmins with Winterized Carbon Emission Reduction Technology

Lynas Rare Earths Ltd.‘s (ASX: LYC) August 3 announcement that it will invest an additional $500 million to rewrite its own already aggressive growth plan is risky, sure, but then, when it comes to rare earths, what isn’t? Managing Director Amanda Lacaze appears to be reading the demand-pull market for Lynas’ main products, neodymium (Nd) and praseodymium (Pr), as further accelerating, despite some hits to the “green” economy from the war in Ukraine. There are sound reasons supporting such a view, including the commitments by EU auto manufacturers to cease all gasoline production by 2025 and recent (surprising) political developments in the US, especially passage of the CHIPS Act (supporting redevelopment of a US-based semiconductor industry) and the current Inflation Reduction Act (also known as Build Back Better in disguise) likely to be approved this week by the House of Representatives and signed quickly by President Biden.

Lynas is particularly well-positioned to benefit from this latest legislation as it already has two agreements with the US Department of Defense for construction of two separation plants: a $30 million light rare earths plant (deal signed in January 2022) and also in June a $120 million deal for a heavy RE plant. This in addition to Japan’s ongoing demand, a not insignificant factor as Lynas self-identifies as controlling 80% of that market.

So, if all looks positive on the demand, where are the risks? Well, unvarnished success will require the split-second timing of a juggler. Expanding output at Mt. Weld should be a green light: the deposit and its characteristics are well known and should present few obstacles to an experienced team (with the usual caveats about the weather which these days can be a real Devil).

But, there is a problem with Malaysia. Despite winning an unprecedented two EcoVadis awards, political and public concerns about radioactive materials led the Malaysian government to refuse to extend Lynas’ cracking and leaching permits. (ESG Comment: this goes to show how history haunts even companies who had nothing to do with previous problems, and how hard it can be to gain and retain trust.)

Lynas announced in February of this year that it has received Ministerial approval for its Kalgoorlie rare earth processing facility, clearing the way for construction to begin. This new facility will strip and store the radioactive elements (uranium and thorium) and then ship the “clean” material to Malaysia for final processing. Thus the timing issue. If the processing plant can be constructed in record time with no unexpected issues, it could dovetail nicely with the increased output from the mine. Otherwise, lower through-put or possibly storage of mined materials could be necessary, providing a cost hit. And even if the timing is impeccable, there will be some increased product cost due to shipping to and processing at Kalgoorlie and then onwards to Malaysia.

Nonetheless, kudos to Lynas for a bold move, going for market share in a booming market with positive political signals and economic momentum. As Christopher Ecclestone said to InvestorIntel: “Lynas just goes to show that it is a doer when so many others are just talkers in the Rare Earth space.”

MP Materials Corp. (NYSE: MP) emerged from the Chapter 11 of Molycorp and is the only producing rare earths mine in the USA. At one time the in the 1990s it was producing upwards of 40% of the world’s rare earths.  MP has a current market cap of US$5.6 billion, which puts it slightly ahead of Lynas Rare Earths Ltd. (ASX: LYC), which is the biggest producer of separated rare earths outside of China. Combined their market caps exceed the annual revenue of separated rare earths globally.

MP has made some interesting news this year. Q1 revenues of US$166.3 million which is 50% of their revenues from all of 2021. This is due to the high pricing of Neodymium (Nd) and Praseodymium (Pr) in Q1 of this year. Based on Roskill’s report of 2015, MP’s content of NdPr is 16.3% of the total volume. This may vary a little but it is likely to be the two elements that set the pricing for their concentrate as the balance of the materials are of little value. Looking at a basket price, NdPr will account for 93-94% of the total value, assuming all elements were sold which is doubtful as the Chinese have lots of the remaining elements, especially Cerium and Lanthanum. Gross margins in Q1 2022 were 88%, up from 81% in 2021, but I expect this will fall for the balance of the year as NdPr prices are now 20-25% lower than Q1 peaks. Either way, MP is poised to improve its Net Income to US$168.4 million. MP has done a good job in their sales price to China for their concentrate. I calculate they are getting somewhere in the range of 40-50% of market value, which is high versus traditional pricing for concentrate which I have seen at 25-30%.

In April a definitive supply agreement was announced between MP Materials and GM to supply rare earth alloy and magnets for GM’s EV program. This is significant as it would restore NdPr rare earth metal, alloy and magnet production. The USA does produce Samarium Cobalt magnets but these are typically used in military applications. There is no indication on what technology will be used to produce the metal, which in China is a messy process. Planned capacity is 1,000 metric tonnes of NdFeB magnets. This will require 280-300 tonnes of NdPr. The previous Molycorp plant was designed to produce 20,000 tonnes of REO of which NdPr would account for over 3,000 tonnes.

This does leave the question as to where MP will sell the remaining NdPr. Europe has one metal/alloy producer and one magnet producer, and Japan is the other logical market, but Lynas owns 80% of the Japanese market and has a shorter supply line. What is left is China. Also to supply other US car producers MP would have to expand capacity, and it is not clear what limits or exclusivity GM has with MP Materials.

The challenge is that the original plant was designed as a single train of 20,000 tonnes per year. Nowhere in China is there a single train much larger than 5,000 tonnes per year (TPY). Lynas built four 5,500 TPY trains. This allows flexibility should there be issues like reduced demand during COVID where one or two trains can be shutdown to allow matching with demand, or if one train has operational issues. I would expect that MP, with the input from Shenghe Resources (a related party of MP whose ultimate parent is Shenghe Resources Holding Co., Ltd., a rare earth company listed on the Shanghai Stock Exchange, and as of its March 31, 2022 quarterly report, a buyer of MP’s rare earth concentrate that accounted for more than 90% of MP’s product sales), will reconfigure the plant to be more flexible. Also MP, like anyone else, will not go from zero to 20,000 TPY overnight. There will be a qualification process and time to acquire accounts so multiple trains makes sense as one penetrates a market as they can be brought on as the business grows.

The other news was that the US Department of Defense (DOD) granted MP $35 million to build a heavy rare earths at Mountain Pass. I find this interesting as Mt. Pass has 98.6% of its content in light rare earths. This would mean at a run rate of 20,000 TPY the total output of the heavy rare earths would be 280 TPY. The only real valuable heavy rare earths are Terbium (Tb) and Dysprosium (Dy) which would total about 10 TPY combined. At today’s pricing, which for Tb is high, in my opinion, this plant would generate revenues of $10-11 million per year.

Overall MP has been doing well – selling concentrate to China. What will happen to profits as they move downstream only time will tell.