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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Jack Lifton on the effect of COVID-19 pandemic on the rare earths sector

“All producing mines have been at a standstill. Mines are extremely touchy about health and safety. Before anybody goes into a mine, they are drug tested because the mines do not want anybody who is drunk or high on a drug to go underground and endanger lives. When something like COVID occurs, they add that too. I am sure they are testing anybody who is going underground.” States critical materials expert Jack Lifton, in an interview with the Technology Metals Show hostess Tracy Weslosky.

Jack went on to advise on what people should do in the current market situation and where the rare earths market is heading.

To access the complete interview subscribe to the Technology Metals Show and get exclusive access to member only content through this exclusive site! Or Log-In Here for the latest conversations, debates, updates and interviews with the leaders, thought leaders and investors focused on issues relating to sustainability in the critical materials sector.

For more information on the Technology Metals Show email us at info@technologymetals.com or reach us direct at +1 (416) 546-9233




The U.S. rare earths saga continues…

Put simply, the US produces minimal rare earths, while China produces 70.59% (in 2018). This is important as rare earths are used as components in most electronic devices, electric vehicles, wind turbines, and the aerospace and defense industries. They are essential to our modern society, and the US depends on China’s exports.

Global rare earths production is dominated by China (in red)

Global rare earths production is dominated by China (in red) Source: Statista

The US’ only domestic rare earths producing mine is California’s Mountain Pass rare earths mine, owned by MP Materials. And for now, it sends its ore to China to be processed. MP Materials say they will kick-start their own processing operation by the end of 2020 and produce about 5,000 tonnes of two popular types of rare earths annually: Neodymium (Nd) and Praseodymium (Pr). In 2008 remaining reserves (using a 5% cut-off grade) were estimated to exceed 20 million tons of ore that averages 8.9% rare-earth oxides. Another two processing operations in the US are expected to open in mid 2022.

Before we can move forward we need to review the past

Since 1985 China has steadily grown its rare earths production. While other countries shunned the dirty production of rare earths China embraced them, realizing the world’s reliance on rare earths and hence their strategic importance. By the 1990s and 2000s China’s rare earth production dominance grew to the point of today. China has ~ 40% of global rare earth deposits but produces over 70% of global production, or ~120,000 metric tons of rare earth a year. In comparison, the world’s second largest supplier, Australia, produces ~ 20,000 metric tons.

Rare earths significant events timeline

2006-10 – China imposed rare earths quota limits on production and exports, as China wanted to be sure that they had enough supply for their own technological and economic needs. The 40% reduction in quotas in 2010 caused a severe rare earths price spike to begin. It also motivated manufacturers to move to China in order to be sure to get supply.

2010 – China and Japan clashed over a territorial dispute in the East China Sea. As a result, China halted shipments of rare earths to Japan, disrupting the supply chain for major manufacturers like Toyota and Panasonic.

2010 – The U.S. Department of Energy reported a possible shortage of five rare earth elements (dysprosium, neodymium, terbium, europium and yttrium).

2010 – The Rare Earth Supply Technology and Resources Transformation Act of 2010 was passed in the USA. The legislation’s goal was stated (p 133): “To provide for the re-establishment of a domestic rare earth materials production and supply industry in the United States and for other purposes.”

2010-11 – Rare earths prices spike as Chinese export quotas take effect. Prices quadrupled in 2010, then doubled again over a 4 month period in H1, 2011.

2012/13 – China announced new rare earth export quotas for the start of 2013; however the export quota was still significantly higher than the actual amount of rare earth exports, therefore, there was no impact. High rare earth prices also encouraged illegal mining in China further oversupplying the market.

2011-13 – New illegal supply from China and new supply from Lynas Corporation’s Mount Weld mine and others helped the market to re-balance. Rare earth prices subside.

2014-15 – In 2014 the WTO ruled against China, which led China to drop the export quotas in 2015.

2015 – US company Molycorp Inc. (owned the Mountain Pass rare earth mine in California) filed for bankruptcy in June 2015. The bankruptcy was as a result of a 2014 restructuring (a large debt burden and heavy capital expenses) and lower prices in the China-dominated market. It was subsequently purchased by its largest creditor Oaktree Capital Management and was reorganized as Neo Performance Materials.

2019 – Chinese newspapers talk of a possible China retaliation to US tariffs on Chinese goods. On May 28 The Global Times, tweeted: “Based on what I know, China is seriously considering restricting rare earth exports to the US.

2019 – The United States has again decided not to impose tariffs on rare earths and other critical minerals from China.

May 2019 – Pentagon seeks funds to boost U.S. rare-earth production as fears over China supply mount.

June 2019 – The Rare Earths Industry Association was launched in Brussels. The group has 12 founding members from nations such as the UK, Germany, France, the Netherlands, Japan and China. A key goal of the group is supporting transparency across the supply chain.

June 2019 – China rare earth prices soar on their potential role in the trade war.

Rare earth prices spiked in 2011 when China introduced export quotas

As you can see in the rare earth index chart below the index rose spectacularly from July 2010 to June 2011; then fell equally as spectacularly from mid-2012 to 2014. The large price fall devastated the industry resulting in a huge contraction in the number of rare earth miners. In mid-2019 the US-China trade war and the concern of a ‘possible’ China rare earth US export ban caused prices to jump. Any further threats of a China export ban of rare earths will no doubt send prices much higher.

Rare earth prices spiked in 2011 when China introduced export quotas – Source

The US rare earths market blows itself up

In the period between 2010 and 2019 there have been numerous calls for the US to develop its own rare earths industry. In 2010 the US Department of Energy released a report titled “Critical Materials Strategy”.  Several of the rare earths were discussed. For example on page 122 of the report they state in regard to neodymium: “Limited near-term flexibility for increasing global supply, despite stockpiled supplies…. Demand for Nd-Fe-B magnets is likely to exceed producer’s ability in the short term….. Predominantly produced in China, which has instituted significant export quotas and tariffs on REEs for resource conservation and environmental regulatory reasons. New mines in Australia, Canada and the United States will provide additional supply, but are subject to strict permitting processes and environmental regulations.” The later has been a contributory factor to a lack of new supply from these countries, and hence the problems of today where China dominates the industry.

Yet 10 years later nothing has changed. No new US rare earth mines.

The EV boom will cause a new demand surge for some rare earths

The electric vehicle (EV) boom will cause a new wave of rare earth demand especially for Neodymium (Nd) and Dysprosium (Dy), as they are commonly used components in electric vehicle motor magnets. As the EV boom takes off (especially post 2020) demand for these key rare earths will surge.

Rare earths demand set to surge 655% in a 100% EV world

If electric vehicles continue to boom then the demand surge expected for the ‘magnet rare earths’ neodymium (Nd) and praseodymium (Pr) will be huge (see chart below). Dysprosium [Dy] is also sometimes used to make permanent magnets. As a result these magnet rare earths are forecast to go into deficit as the EV boom takes off.

Rare earths demand set to surge 655% in a 100% EV world

Source: UBS

Conclusion

The brutal rare earth price falls post 2011 has significantly contracted the number of rare earth juniors. This means any recovery in pricing will be favorable to the few rare earth juniors that survived the past decade’s turmoil.

Fast forward to the current era of supply insecurity (exacerbated by the US-China trade war) and it no longer looks wise to rely on one country (China) to be your source of rare earths supply. The only other major source of supply is Australia’s Lynas Resources who are already heavily contracted and send most of their material to Japan. In fact, the US has rare earths listed as critical materials, yet have done nothing to secure supply.

China still controls the vast majority of the global rare earth industry and hence controls the supply chain critical to producing high tech electronics, especially those using magnets. Once again China’s dominance of the sector makes the world very vulnerable to any China export ban or supply disruption.

It makes no sense for the US to be so reliant on rare earths from China. In fact, the US is very vulnerable to a China ban on rare earths as the US imports most of their rare earths from China, either directly or indirectly as end products such as magnets, electronics, or electric motors. As the era of electric vehicles takes off demand for rare earths will also explode. What will happen if China refuses to sell rare earths to the US? The US nuclear industry is currently asking the same question with regard to Russian sourced uranium.

Thanks to US Senator Lisa Murkowski and the Rare Earth Supply Technology and Resources Transformation Act of 2010, the US government did recognize the need to “provide for the re-establishment of a domestic rare earth materials production and supply industry in the United States”. But what action was taken to make this happen. US environmental and permitting rules make it very difficult to start a new rare earths mine in the US today.

With renewed rare earth supply concerns during the US-China trade war, the question remains when will the US wake up and secure supply to critical materials such as the rare earths. The breaking news discussed above gives hope that the US may have finally started some action to secure supply of critical elements such as the rare earths. Perhaps the US has woken up at last!




They’re back — The Rare Earths Sequel Returns with a Vengeance.

A tidal wave of performance in today’s rare earths market reminded me of the release of JAWS in 1975 — no one really saw this coming.

Here’s a snapshot for you:

The Pentagon news conference told us nothing new. We know we are dependent on the Chinese for rare earths but for some reason today’s news spurred undeniable action worthy of action.

If you missed the Bloomberg story that got the market running, click here

I asked leaders in the rare earths industry to respond to this Bloomberg article. This CEO asked for anonymity and wrote: “The silliness drums are beating. On the article (WSJ?) suggesting that Apple will be crippled as a result of a rare earth embargo: How can these idiots write nonsense like this? i-Phones are made in Donguan (By Foxconn from Chinese and Japanese components, including vibration motors (made by NIdec in Shenzhen with magnets made by Daido in Suzhou with powders made by us in Tianjin) and capacitors made by Murata in Kyoto with Dysprosium made in Jianyin…So how will an embargo of RE exports to the US hurt Apple again?”

Another CEO wrote: I believe the article summarizes the situation quite well. The threat of disruption appears to be ever closer to becoming a reality…am wondering if only oxides will be subject to the restriction, if implemented.” — Tracy Moore, Canada Rare Earth Corporation

Not to be outdone, Reuters just added their illustrious sizzle on the Pentagon press conference an hour ago, click here

Arguably experts ourselves in that we owned watched these mysterious metals go from being the source of being for a dirty dozen in 2009 to nearly 700 companies in less than 12-months flat, and then back down – to the original players in less than 3 years, we have a particular soft spot for what one of our editors (Jack Lifton) renamed the Technology Metals.

One friend called me today and said: “I cannot believe that Company X traded millions of shares today!”

My response was: “I can. Because I remember when that same stock, now less than a quarter skyrocketed to nearly $10.”

During our decade of following rare earths, we have learned that no one can ever agree if there are 15 or 17 rare earths. We have also learned that the companies that have the magnet metals such as neodymium, dysprosium or praseodymium they have an industry cult following. And then there are those who enjoy the discussion of rare earth separation processes as an unquestionable sign of intellectual superiority, and finally if you want to sound really cool you should be able to sound impressed when a company touts that their rare earths have more “heavies” (heavy rare earth elements or HREEs) than “lights”.

At the end of the day, the facts are simple – the investors are hoarding to the technology metals today. The real question now — is will this interest in sustainability return tomorrow? We will see.

Here are some charts, we were watching today…

Critical Elements Corp. (TSXV: CRE | OTCQX: CRECF)

Avalon Advanced Materials Inc. (TSX: AVL | OTCQB: AVLNF)

Alkane Resources Limited (ASX: ALK | OTCQX: ANLKY)

Search Minerals Inc. (TSXV: SMY)

Lynas Corporation Limited. (ASX: LYC)

Canada Rare Earth Corp. (TSXV: LL)

Ucore Rare Metals Inc. (TSXV: UCU)

Northern Minerals Ltd. (ASX: NTU)

Arafura Resources Limited. (ASX: ARU)

Texas Minerals Resources Corp. (OTCQB: TMRC)




Search Minerals CEO on the trending rare earths market

March 26, 2018 – “In the rare earths market we are excited again because interest is starting to come back. We are in an increasing trending market, especially electrification of vehicles is leading it. The permanent magnet space is what we are really in with our key components of our rare earth deposit would fuel that industry of the permanent magnets.” states Greg Andrews, President, CEO and Director of Search Minerals Inc. (TSXV: SMY), in an interview with InvestorIntel’s Jeff Wareham.

Jeff Wareham: Greg, you are in rare earths in Newfoundland. I am going to start with this. What is happening in the rare earths market? 

Greg Andrews: In the rare earths market we are excited again because interest is starting to come back. We are in an increasing trending market, especially electrification of vehicles is leading it. The permanent magnet space is what we are really in with our key components of our rare earth deposit would fuel that industry of the permanent magnets.

Jeff Wareham: North America is basically out of the rare earth business. Do you guys think you can change that? 

Greg Andrews: Absolutely. Every day that we wake up we are looking to see how we can get to our bankable feasibility study. Yesterday we wanted to drill our Deep Fox Property. We released our assay results to confirm the geological footprint that FOXTROT has. Deep Fox was compelling because of the higher grades and bigger surface expression. We are excited that we may have worked towards 2 resources in our district concept and that will help support that. 

Jeff Wareham: You are in Newfoundland, but you are actually in Labrador, which may give people the impression of being somewhat remote. That is not my impression.

Greg Andrews: No. One of the key things in the rare earth space is to get the operating cost down, the capital cost down. We are in great infrastructure. Where our mine, our FOXTROT deposit is 12 kilometers from the town of St. Lewis, which already has a deep-sea port for infrastructure. A road runs right through our property. We have power that we just need to put in and move 12 kilometers down the road. Our Deep Fox project that we are just working on is 2 kilometers. It is in close proximity that we are working in with the environmental use and the infrastructure.

Jeff Wareham: I have had a little bit of experience with it. How are you finding Newfoundland to work with?

Greg Andrews: It is fantastic; the support that we have from everybody, from the governments down. We are just starting our environmental impact statement process so we are meeting with Canadian CEAA and providence to get the baseline studies. We will start with that. They work together cohesively as a team to make sure they want to see the projects through the proper environmental, which we will be transparent and work with all our stakeholders to get it there for our bankable feasibility that we will need.

Jeff Wareham: Good stuff. Investors have already seen great drill results this year. What else should we be watching for?

Greg Andrews: The drilling was only 3 holes out of 500 meters out of 2,000 so we are looking to complete our 2,000. We will start that in May and June. If we have our positive results we are looking to expand that to 4,000 meters and try to catch up Deep Fox with our FOXTROT resource and have two resources at the same level of PEA discussion…to access the complete interview, click here

Disclaimer: Search Minerals Inc. is an advertorial member of InvestorIntel Corp.




Professor Kingsnorth on the ‘Real State’ of the Global Rare Earth Market

December 21, 2015 — Professor Dudley J. Kingsnorth of Curtin Graduate School of Business and Executive Director of Industrial Minerals Company of Australia Pty Ltd in an interview with InvestorIntel Publisher Tracy Weslosky discuss the rare earth state of the union for 2015. Dudley starts with: “I’ve got a very long-term positive view of the rare earth market and I’ve got grey hair to prove it here. There is a slide that I’ve sent you which indicates that over the last 50 years the rare earth industry has grown by a factor of 30, a gross of 30 over 50 years. That’s very significant.” From discussing overall market growth for the rare earth industry to the processing technology race – Professor Kingsnorth provides a thorough update on not only where we are today, but where we are heading tomorrow.

Tracy Weslosky: Well, Dudley I’d love to start by just commenting on an email you sent me about the, Levelling the Rare Earth Playing Field written by Alastair Neill. You wrote to me by saying, I believe that we all have something to contribute. Rare earths are complex. I do not believe that there is a silver bullet or that one person has all the right ideas. Many are common to each of us while some have a better understanding of a given issue or consideration. So, I would just love to start with the Levelling the Field column and your response to this please Dudley.

Dudley J. Kingsnorth: I thought it was a very good start and as I said, when we look at any project, rare earth project, it’s like the industry itself, it’s fairly complex. There’s many issues that need to be considered before one invests or considers promoting a rare earth project. I think Alastair’s given us a great start. I look forward to identifying a few issues today that I see are important. Undoubtedly other people are going to put other considerations forward to you. I think before Christmas we’re going to have a very complete picture of how we should assess rare earth projects.

Tracy Weslosky: Okay. Well then, let’s just start right there. What issues would you like to bring up immediately?

Dudley J. Kingsnorth: The issues that I would like to bring up immediately are mineralogy and the processing, capital costs and the size of the project.

Tracy Weslosky: Okay. Well, it’s been way too long since you’ve spoken to us at InvestorIntel so we’re delighted to have you. The resource market of course has been very challenged over the last year or two. Can you tell us about the state of the union for rare earths? I was looking at your slide and you were saying that rare earth production was actually up for 2014. Can you give us a bit of an overview?

Dudley J. Kingsnorth: Tracy, I’ve got a very long-term positive view of the rare earth market and I’ve got grey hair to prove it here. There is a slide that I’ve sent you which indicates that over the last 50 years the rare earth industry has grown by a factor of 30, a gross of 30 over 50 years. That’s very significant. I think what we’ve got to be very careful of is not get bogged down by the present problems that we have. Look to the future. Think positive. So whereas today we’re faced with very large amount of illegal production from China and very low prices, I do believe that we should solider on and it won’t be too long before there’s some opportunities for many of those projects out there that are being evaluated at the moment…to access the complete interview, click here




InvestorIntelReport: Precious Metals Surge … with a Uranium Chaser

chaserThose who had expected the Greek election results to make bigger waves were disappointed when that tsunami’s wave failed to travel very far and faded away as an impetus for global markets after a few days. It doesn’t mean it’s gone as an influence but like Ebola seems to be a contagion that is now geographically constrained. The week ended with the new government pretty much saying it didn’t care what the Germans wanted vis a vis austerity so a showdown is on the cards.

Meanwhile with the Swiss revaluation fading in investor’s memories and without a Greek drama, the gold and silver prices both started to give back ground and understandably so… they had moved too far and too fast on not enough solid footing. Oil continued in a weak mode and base metals investors (or bargain buyers.. not clear which) finally cottoned on that low oil is good for base metal prospects. While these didn’t exactly jump, they stopped falling and started to firm..the star was uranium which had a good week (relatively speaking).

Currencies are the thing to watch… and I don’t mean the Euro. The collapse (no other word for it) of the Canadian and Australian dollars has brought quite a number of benefits for domestic miners in those countries with the oil price decline being icing on the cake in the cost-saving department. With the recent gold/silver price strengthening it’s a triple benefit for those mining those metals. I suspect the upturn in the commodity currencies shall start soon and that will probably not be welcome amongst Central Banks that would prefer a long period of lower currencies to help boost domestic economic activity. However they go to low and they start importing inflation (though not in energy prices…phew). Then interest rates have to go up, which crimps growth, but attracts speculators back into the currencies. With both currencies at around 77-78cts to the USD, defensive action must be nearing.

The stellar performance of the month (excuse the bad pun) was Star Minerals, which we expounded upon here last week in an article. It is the up and coming mine-to-market Manganese battery story run by the team that built up Great Western last decade. Star’s up-move was a startling 50%. In the absence of news we are tempted to ascribe this move to our analysis. However looking at the moves for the broader universe it seemed to be a week of extremes with only a few stocks making small moves and a lot making sizeable jumps, both up or down. Alkane was unchanged for the week but that concealed the fact that it had been a good performer for the month up 18% during January.

Sentiments in the Rare Earth space were all over the place with Rare Element Resources and Tasman both down over 10% and Ucore up by 13% in the last week of the month. There was no specific news to prompt either to go down and indeed Ucore had some promising drill results confirming its deposit to be open at depth. Graphite had a weak patch with Zenyatta giving back 10.7% to end the month unchanged from where it began 2015. It was not alone though as the whole graphite sub-space was off the boil.

One of the more inexplicable moves for the month was Largo’s drop of 30% (down 6.25% in the final week). An operational update during the month showed production was doing well so this down-move looks like it comes from residual bad sentiment towards the steel sector for which Largo’s Vanadium output is an important component in alloys.  We would note though that the decline is Vanadium prices over the last twelve months has been relatively small compared to the brutal decline in iron ore prices.

One of the very strongest movers was Carlisle Goldfields which rose by 43% over the month DESPITE having a stock rollback which some minority shareholders had griped about. It seems management was right and the complainers were wrong. The other gold play on our watchlist, Chesapeake Gold, added 16% during January. In silver plays, Levon Resources also had a good month, rising by 13.4%.

We suspect the price declines say less about the stocks that were hit during the month and rather more about the dramatic shift in investor focus to the long becalmed precious metals space where gold’s move during the month put every other mining sub-space in the shade.

Note from the Publisher: Daniel Carlson’s ongoing commentary, or should I say walk-on as an interim editor on The Calandra Report last week seemed to make a difference, with $AMSE up +37.80%, and of course, one of my favorite InvestorIntel weekly column’s — Clausi’s Takeover Targets, made a difference in GTA Resources, as identified takeover target $GTA was up +22.22% for the week. On the graphite sector, I noted a sizable increase in interest again for clients, and 2 led the week: Alabama Graphite Corp.’s $ABGPF +18.45% & ALP +13.33% and Graphite One Resources Inc. $GPH up +13.33%. Not to be left in the dust, let’s credit lithium play Neometals $NMT up +18.18% for the week….more being emailed to InvestorIntelReport members this morning….

If you want more, including market sector numbers and the Top 15 most read articles of the week, log-in to InvestorIntelReport or the full copy should be in your inbox within the next hour or so. If you’re not a member? Click here to become one.