Today we take a look at the magnetic rare earths sector and two leading rare earth companies and what we can expect in 2024 and beyond.

The magnet rare earths prices have fallen in 2022 and 2023

The magnet rare earths sector was hit hard in 2023 with China’s Neodymium (Nd), Praseodymium (Pr), and Dysprosium (Dy) prices falling as the global economy and EV demand slowed.

Neodymium prices came crashing down in 2022 and 2023 as demand slowed after the 2021 growth rate boom in EV sales – Now at CNY 530,000/t

Source: Trading Economics

Global plugin electric car sales grew by 108% in 2021 causing a huge spike in EV metal prices. Then in 2022, the growth rate slowed to 56% at a time when supply of most EV metals surged. Finally in 2023, the growth rate slowed further to an estimated 28%, resulting in further price decline for the magnet metals such as neodymium.

Demand for the magnet rare earths in electric motors is driven by multiple sources with electric vehicle sales being a key driver. (90% of EV motors use rare earth magnets)

Source: MP Materials company presentation

Will the magnet rare earths prices rise in 2024?

The answer to this question will largely depend on recovery in China and the global economy driving increased demand for EVs, wind turbines, and other magnets used in various industrial applications. Given the most recent trend globally has been towards future interest rate decreases (notably in the USA and China), it bodes well for a recovering consumer and hence demand. This may take a good part of 2024 to flow through with excess inventories across many sectors still needing to be worked off. If we get a strong pickup in EV demand (>40% YoY increase) in 2024, then the magnet rare earths sector woes could soon disappear.

China’s December 2023 EV sales give some hope as they jumped to a record 945,000 units, achieving a superb 47% YoY growth rate.

Lynas Rare Earths Ltd. (ASX: LYC) (“Lynas”) update

The big recent Lynas news (announced December 7, 2023) is that the first feed of material from the Mt Weld Mine has been introduced into the new Kalgoorlie Rare Earths Processing Facility in Western Australia, leading to first production and ramp-up of the Facility. A great achievement for Lynas, especially given that the Kalgoorlie Rare Earths Processing Facility is Australia’s first value-added rare earths processing facility. Lynas stated:

The Lynas Malaysia plant is currently shutdown as works to increase downstream processing capacity are completed. Production will recommence in January 2024. Mixed Rare Earth Carbonate (MREC) from the Kalgoorlie Rare Earth Processing Facility will be progressively introduced to the Lynas Malaysia plant commencing late in the March quarter and increasing as the controlled ramp up of the Kalgoorlie facility is progressed.…“

Once their expansions are completed, Lynas intend to increase their production capacity to 10,500tpa NdPr (Neodymium-Praseodymium). Lynas produced 6,142t of NdPr in FY 2023.

2024 will see the Mt Weld Mine expansion and further work on Lynas’ US Rare Earths Processing Facility Project targeted to be operational by July 2025 – June 2026.

Lynas is expanding its rare earths mining and processing capabilities through to 2025/26

Source: Lynas company presentation

MP Materials Corp. (NYSE: MP) (“MP Materials”) update

MP Materials owns and operates the Mountain Pass Rare Earth Mine and Processing Facility in California, USA. In the past MP Materials had to ship their concentrate to China for processing; however, they have a target to bring this back to the USA.

Their target is to grow their mine output by 50% over the next four years and to build separation capacity in the USA with annual production of 6,000 tpa NdPr oxide. The third stage of their plan is to build a greenfield production facility in Texas targeting ~1,000tpa of finished NdFeB (Neodymium Iron Boron) magnets. They already have General Motors (NYSE: GM) as a foundational customer.

MP Materials is working towards Stage II and Stage III of their plan to bring rare earths processing and magnets production to the USA

Source: MP Materials company presentation

Closing remarks

2024 should see a year of consolidation for the rare earths sector as some experts are telling me. Some forecasts are for NdPr supply deficit to begin as early as 2024; however, this will largely depend on China demand, the global economy, EV sales, and new NdPr supply hitting the market.

The two Western magnet rare earths leaders Lynas and MP Materials (and some other key players) are progressing their plans to further build a western supply chain and should be largely complete within the next 2-4 years if it goes to plan. This all supports the building of an end-to-end Western rare earths and magnets sector this decade. Stay tuned.

The rare earths necessary for the manufacturing of the magnets needed for the type of electric motors that can drive electric cars fall into two categories, the basic critical permanent magnet rare earths, neodymium (Nd) and praseodymium (Pr), and the critical, critical rare earths necessary for that purpose, dysprosium (Dy) and terbium (Tb). Without the addition of Dy and/or Tb to the alloy based on NdPr (a natural mixture called didymium) the magnetic material produced will not be able to maintain its (magnetic) strength at the high operating temperature and cycles of heating and cooling experienced daily by the electric drive motors to be used in EVs.

Unfortunately, while rare earth bearing deposits with NdPr contents of 16% to 25% of the total of rare earths contained are fairly well known, such deposits do not contain more than a “trace” of Dy and Tb. Dy and Tb, therefore, were laboratory curiosities until almost the end of the twentieth century when large areas of the formations known now as ionic adsorption clays were discovered in southern China’s Jiangxi Province. These, at or near, surface formations are the result of the natural weathering (dissolution) of rare earth bearing granites by tropical (warm) rains, creating, after a few hundred thousand centuries, “deposits” of porous clays in which the rare earths have been chromatographed (partially separated) by atomic number.

The lower atomic numbered rare earths such as cerium and lanthanum are barely present in these clays. They do have substantial distributions though of the basic critical magnet rare earths, Nd and Pr, and surprisingly and luckily, the highest relative concentrations of the higher atomic numbered rare earths, such as Dy and Tb, known anywhere. In addition, the rare earth elements are “adsorbed” on the clay particles; not chemically bound, so that they can be extracted from the clays by a simple wash of the common agricultural chemical, ammonium sulfate in water solution.

The clays in China are processed “in situ,” i.e, in place, by pumping an ammonium sulphate solution through the clay and then collecting the solutions in downstream plastic tanks where the rare earths are then precipitated as water insoluble carbonates or oxalates for transport to a processing plant where they are separated from each other and ultimately become part of alloys that can be magnetized and can maintain their magnetization at high temperatures. These ionic clay formations containing, in China, perhaps 300-1000 ppm of rare earths were the only commercial sources known for the heavy rare earths until quite recently when similar deposits in southeastern Asia in line with those in China were discovered.

In particular, Myanmar, formerly known as Burma, has significant ionic adsorption clays bearing rare earths. But China has acquired the rights to all of those that are being mined in Myanmar today, perhaps to exhaustion, with the output going exclusively to China. So too, with the ionic adsorption clay deposit known as Serra Verde in Brazil. This is a very good clay deposit, and it is scheduled to produce 2000 tpa of NdPr and 200 tpa of DyTb annually. But like Myanmar, all of this material will go to China.

Enter now, Appia Rare Earths & Uranium Corp. (CSE: API | OTCQX: APAAF), and its PCH discovery in Brazil. This looks to be a true ionic adsorption clay with, perhaps, the highest known total adsorbed rare earths concentration, so far discovered, of all or the majority ionic adsorption clay on this planet. The juniors have now descended upon Brazil, and announcements of deposits of “heavy rare earths sourced from ionic adsorption clays” are the flavor of the month. I still think we may be looking, in the case of Appia’s PCH deposit at the best ionic adsorption clay deposit in the Americas in the sense that it can be easily extracted with legacy in situ processing. It is a key discovery that, if properly developed, will benefit greatly the EV industries of North America and Europe. There are few sure things in life, I admit, but this is likely to be one of them. 

For those who want to argue that the Appia deposit is a mix of adsorbed rare earths and microcrystalline (chemically, covalently, bound rare earths) I will counter that it is the total cost of extracting the critical rare earths and the efficiency of that extraction that matters. Some of the “ionic clay” deposits require an acid leach after the aqueous leach to extract sufficient magnet rare earths; some of the “deposits” are simply too low a grade or the mix of magnet and non-magnet rare earths is skewed in favor of non-magnet rare earths. From the data that Appia has published, I believe that PCH is a major, economic, deposit with a very high recoverable grade of heavy magnet rare earths, and as such it is a key deposit for the re-development of a non-Chinese rare earth permanent magnet industry.

The world of rare earth permanent magnet manufacturing just received a jolt of excitement. A new announcement from the Department of Defense has revealed a significant investment in a domestic manufacturing plant, a move that holds implications not just for defense, but also for the wider commercial sphere.

For context, it’s worth noting that for years, the German company Vacuumschmelze (VAC) had a sales office in Kentucky via a company named E-VAC Magnetics, LLC (E-VAC). Primarily a marketing office, E-VAC was linked with home building projects but was also known for marketing VAC’s magnet products. And now, in a surprising twist, the Department of Defense has invested a whopping $94.1 million in E-VAC to bring to life a rare earth permanent magnet manufacturing plant right here in the U.S.

But there’s more to this story.

It’s customary for the Department of Defense’s grants to predominantly target American-owned and operated businesses. Enter Lynas Rare Earths Ltd. (ASX: LYC), an Australian company currently producing rare earths, which applied for a grant to build a heavy rare earths’ separation plant along with American company Blue Line Chemicals, a processor of rare earth products, in Texas. The dynamics of this partnership and grant allocation remain somewhat enigmatic. The essential detail here is that a non-manufacturing entity like E-VAC has secured this grant, and behind the curtain orchestrating the moves is VAC, a reputable manufacturer of these rare earth permanent magnets vital for automotive EVs.

A telling point is the recent order from General Motors (NYSE: GM) to VAC: a requirement for 1000 tons of magnets per year to be delivered beginning mid-2025. This order aligns intriguingly with the announcement that the new E-VAC manufacturing facility, bankrolled by the Department of Defense, is set to be operational by 2025. Given that the factory’s projected capacity is 1500 tons annually, it’s compelling to infer that General Motors might source its order from this very plant.

Still, there’s a broader implication to this move.

Defense doesn’t invest in consumer markets. Its core mandate is national security. The F-35 fighter jet, for instance, is believed to use substantial quantities of rare earth permanent magnets. This means the primary output from the E-VAC facility might be earmarked for defense purposes, with consumer needs taking second place. The scenario painted here is a deliberate strategy by the Department of Defense to ensure a domestic supply chain that meets both defense and commercial requirements.

However, a pressing question arises: where will the raw materials for these magnets come from? As of now, no U.S. entity manufactures these in quantities that a 1500-ton factory would demand. The primary Western supplier today is LCM of England, but its output is a mere fraction of this requirement.

This move by the Department of Defense is historic. It represents the first significant announcement of a large scale commercial rare earth permanent magnet factory in North America, since Magnequench was sold and moved to China nearly 25 years ago. But as this initiative takes shape, stakeholders will be keenly watching to determine the origins of the raw materials and the supply chain dynamics that this factory will engender.

In a recent interview between InvestorIntel’s Jack Lifton and Melissa Sanderson, President of North America and Director at American Rare Earths Limited (ASX: ARR | OTCQB: ARRNF) (“ARR”), they discussed the exciting discovery in Wyoming of a potentially rich deposit of the magnetic materials, neodymium (Nd) and praseodymium (Pr) and offered an update on the rare earths industry.

Melissa began with an explanation that while the exploration is still in its early stages, ARR plans to fast-track the analysis process with ALS Labs. Outlining the challenges in the development of such a project, Melissa was consistent in ARR’s commitment to start production at Halleck Creek within a 5-to-7-year timeframe, provided there are no significant objections during the permitting phase.

Jack and Melissa also discussed geopolitical elements in the rare earths’ landscape. Despite potential shifts in the White House and its policy approach to mining and natural resources, Melissa expressed optimism. She referenced an unprecedented bipartisan agreement on the Hill. On one side, the left is driven by the demands of climate change and the pursuit of a more sustainable economy. On the other, the right is focused on national security and the reduction of dependence on foreign entities like China.

plans to fast-track the analysis process with ALS Labs. Outlining the challenges in the development of such a project, Melissa was consistent in ARR’s commitment to start production at Halleck Creek within a 5-to-7-year timeframe, provided there are no significant objections during the permitting phase.

Jack and Melissa also discussed geopolitical elements in the rare earths’ landscape. Despite potential shifts in the White House and its policy approach to mining and natural resources, Melissa expressed optimism. She referenced an unprecedented bipartisan agreement on the Hill. On one side, the left is driven by the demands of climate change and the pursuit of a more sustainable economy. On the other, the right is focused on national security and the reduction of dependence on foreign entities like China.

Lifton concurred with Sanderson, noting that although the U.S. could never be entirely self-sufficient in these essential materials, they could rely on countries such as Australia and Canada for supply. He also voiced his belief that the U.S. market for rare earths would remain a sellers’ market due to the demand. To access the complete interview, click here

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About American Rare Earths Limited

American Rare Earths (ASX: ARR | OTCQB: ARRNF | FSE: 1BHA) is a leading explorer and developer of rare earth elements with a strong focus on developing sustainable and cost-effective extraction and processing methods. The company’s projects, including Halleck Creek in Wyoming, La Paz in Arizona, and Searchlight in Nevada, hold significant potential to become major rare earth production sites in North America.

To know more about American Rare Earths Limited, click here

Disclaimer: American Rare Earths Limited is an advertorial member of InvestorIntel Corp.

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This presentation may contain “forward-looking statements” within the meaning of applicable Canadian securities legislation. Forward-looking statements are based on the opinions and assumptions of the management of the Company as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein.

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“Neo Performance Materials’ organization today is the closest that North America has yet come to a totally vertically integrated rare earth permanent magnet supplier. Now, the company has acquired and is moving to bring a significant rare earth deposit in Greenland into production. When that occurs, it will be the first company outside of China, ever, to be a totally vertically integrated manufacturer of rare earth permanent magnets. We should all be watching Neo Performance as if our (self-sufficient and secure) independent economic lives depend on it.” — Jack Lifton, Co-Chairman, Critical Minerals Institute

Neo Performance Materials Inc. (TSX: NEO) (“Neo”) produces specialty materials that incorporate specialty materials that are mostly rare earth based, but also include other technology metals, such as gallium and cobalt, all of which are necessary in its feature product, bonded rare earth permanent magnets. Neo is the only company in the world that operates dual supply chains inside and outside of China for rare earth elements (REE) separation and REE advanced materials. Neo owns the only operating commercial rare earth separation facility in Europe, located in Estonia. Neo operates globally with sales and production across 10 countries.

Neo’s advanced materials are essential components of many of the world’s fastest growing cleantech applications

Source: Neo company presentation

Neo’s growth plans and acquisitions

Neo continues to grow and expand its business and now has several projects in the pipeline.

These include the following:

1. Growth of Neo’s existing operations – Magnequench (a global leader in bonded neodymium-iron-boron (NdFeB) magnetic powders and magnets), Chemicals and Oxides, and Rare Metals (gallium, indium, rhenium, tantalum, niobium, and hafnium).
2. An EU Magnet Manufacturing Plant with ground breaking in June 2023 and planned production of sintered rare earth magnets in Estonia to begin in 2025.
3. Controlling interest (90%) in newly acquired SG Technologies Group Limited (“SGTec“), one of Europe’s leading advanced, specialty manufacturers of rare-earth-based and other high-performance magnets.
4. Various rare earths supply chain projects and agreements – Sarfartoq Project exploration license in Greenland, Yangibana Project in Australia (the owner Hastings Technology Metals Limited (ASX: HAS) is Neo’s largest shareholder so a supply arrangement looks highly probable, Koppamurra Project in Australia non-binding MOU for off-take of potentially 50% of the planned production of mixed rare earth carbonate, supply agreement with Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR) (from USA) of mixed REE carbonate.

Q1 2023 Financials weaker due to weaker pricing dynamics

Some investors may have been disappointed that Neo’s Q1, 2023 financials were weaker than a year earlier. Consolidated revenue was US$135.5 million in Q1, 2023, compared to US$166.3 million for the same period in the prior year.

However, it needs to be factored in that the key magnet rare earths prices have fallen heavily over the past year (neodymium is down 50.21%).

Looking on the positive side Neo still has a very healthy balance sheet with cash and cash equivalents of US$145.7 million (as of March 31, 2023) and Neo generated positive net cash of US$12.2 million in Q1, 2023.

The fall in neodymium prices in the past year is fairly similar to the lithium price fall. Both had a huge run-up, then slower China EV sales in early 2023 sent prices crashing as manufacturers chose to wind down inventory and delay purchases until prices were back at low levels. All of this bodes well for some stabilization of prices now and potential to move higher from here if demand accelerated in H2, 2023.

Investors can listen to the Neo Q1, 2023 earnings call here. Neo’s President & CEO Constantine Karayannopoulos discusses the causes for lower magnet rare earths demand (China property slowdown, higher interest rates impacting negatively on wind farms, China EV sales slowdown) and the impact of lower rare earths pricing and the Company’s growth plans. He says “I believe we are nearing the end of that restabilisation” in rare earth prices. Meaning the rare earth price falls are near the end.

Neodymium 10 year price chart

Source: Trading Economics

Closing remarks

Neo has just weathered a challenging past few quarters caused mostly by rare earths price declines as China EV sales slowed and manufacturers reduced inventory. Despite this Neo finished Q1, 2023 in a very strong cash position and continues to make progress on their growth plans.

As the macro picture hopefully starts to improve in H2 2023, especially for China EV sales, Neo should once again be a winner of the macro trend of increased global use of the magnet rare earth products and the specialty rare metals, that are all needed to drive the cleantech revolution.

Neo Performance Materials trades on a market cap of C$377 million.

With all the talk of on-shoring, near-shoring, friend-shoring, or whatever is the popular term this week, it’s easy to lose sight of the fact that most commodities are global in nature. I know I’ve become fixated on North American solutions when it comes to critical materials and rare earths but that’s a somewhat myopic view. There are plenty of countries out there, near and far, that we consider our friends and who may or may not have cost advantages that overcome any incremental transportation fees to compete in our domestic market. Thus, we shouldn’t fall into the trap of thinking that just because the U.S. Inflation Reduction Act, and other similar legislation, look to limit parts of the world from contributing to “made at home” solutions, as perhaps, North American miners and explorers aren’t necessarily the best option.

One such example is Hastings Technology Metals Limited (ASX: HAS | OTCPK: HSRMF), a Company engaged in the exploration, development, and mining of rare earths and specialty metals in Western Australia. This Perth-based company is primed to become the world’s next producer of neodymium and praseodymium concentrate (NdPr). Hastings’ flagship Yangibana Project (which comprises a mine and beneficiation plant at the Yangibana site, and a hydrometallurgical plant at Onslow), in the Gascoyne and Pilbara regions of Western Australia, contains one of the most highly valued NdPr deposits in the world with NdPr:TREO ratio of up to 52%. The Project is permitted for long-life production, with offtake contracts signed and debt financing in an advanced stage. The first product to ship is targeted for H1/2025. Hastings also owns and operates the Brockman project, Australia’s largest heavy rare earths deposit, near Halls Creek in the Kimberley.

Earlier this month, the Company increased the mineral reserves at the Yangibana Project and it now has JORC-compliant Proved and Probable Ore Reserves of 20.93 million tonnes at 0.90% TREO which includes a 37% component NdPr, making it one of the largest and highest-grade rare earths projects in the world. The company has made significant progress in advancing the project over the past few years, with a Pre-Feasibility Study completed in 2018 and a Definitive Feasibility Study (DFS) completed in 2020. The DFS confirmed that Yangibana is a highly viable project, with low operating costs and strong economic returns.

But where I find this story gets interesting is all the various financial dealings that Hastings is involved in. More than half of ~A$400 million of total debt financing required for the Yangibana Project has been secured from the Northern Australia Infrastructure Facility (NAIF), which recently increased its financial support to A$220 million with a 12½-year tenor. Hastings also completed a Two-Tranche Placement to raise A$110 million in new equity to progress the Yangibana Project in October 2022. Nothing unusual about these two deals but here’s the one that intrigues me. On October 14, 2022, the Company announced the completion of the acquisition of an approximate 19.9% shareholding in Neo Performance Materials Inc. (TSX: NEO) for an aggregate price of C$134.6 million. The acquisition was funded by a A$150 million cornerstone investment in Hastings by Wyloo Metals.

It would appear that the management team at Hastings does not doubt that this mine is moving forward. The NEO acquisition provides Hastings with a strategic stake in NEO and exposure to the global downstream processing of rare earth materials into magnets, critical components of environmentally friendly products such as electric vehicles and wind turbines. Additionally in October (seemingly a very busy month for the Company), Hastings signed a non-binding offtake Memorandum of Understanding (MOU) with Solvay, a French-based global leader in Materials, Chemicals, and Solutions. The deal outlines the intent of both parties to enter into a binding commercial offtake agreement for the supply of Mixed Rare Earth Carbonate (MREC). Under the agreement, the supply of an initial 2,500 tonnes per annum of MREC will be sent from Hastings’ Yangibana Project to Solvay’s plant in La Rochelle, France. Deals like this might explain why NAIF was comfortable increasing its financial support for the project.

Lastly, it’s worth mentioning that Hastings has implemented rigorous environmental and social sustainability standards to ensure that its operations are in line with international best practices. This commitment and transparency were recognized with an exceptional ESG risk rating by Morningstar Sustainalytics with Hastings ranked 4th out of 159 companies rated in the Diversified Metals Mining subindustry category and placed 9th out of 193 companies in the Diversified Metals industry category. Hastings also undertook an EcoVadis assessment and achieved 68/100 which placed the company in the top 5% of companies assessed. This has not only helped the company attract investment from socially responsible investors but also win recognition for its efforts.

Hastings Technology Metals looks ready to take on the rare earths supply market and become a force to be reckoned with. The Company had A$172.2 million in cash and equivalents as of December 31, 2022 and seemingly no issues raising additional capital as needed. Agreements are in place for ~70% of production for the first 10 years and there is still plenty of blue-sky exploration upside to further expand the resource at Yangibana. It appears I need to start looking past my own backyard for resource opportunities that are world-class.