China now produces 80% of the world’s neodymium-praseodymium output, a combination of rare earth metals vital to the manufacture of high strength permanent magnets.
These magnets are used in drivetrains of electric vehicles (EVs), so the expected EV revolution will require growing supplies from rare earth miners.
Every EV drivetrain requires up to 2kg of neodymium-praseodymium oxide — but a three-megawatt direct drive wind turbine uses 600kg. Neodymium-praseodymium is even in your air-conditioning unit on the office or home wall.
But, according to some forecasts, China will in the next few years need to become an importer of neodymium-praseodymium — and, as it stands, Australia is the country best positioned to fill that gap.
Thanks to Lynas Corporation (ASX: LYC), the country is already the world’s second largest producer of rare earths, although it still only generates a fraction of China’s output. But, there is much more to come.
Four Australian companies have very advanced rear earths projects, where the focus is on neodymium-praseodymium as the key output. Three of those are located within Australia and the fourth in Tanzania.
In addition, we have Northern Minerals (ASX: NTU) with the much sought-after heavy rare earth elements (HREE), dysprosium and terbium, dominating its rare earths suite at the Browns Range project in Western Australia
Of the other players, the US has the Mountain Pass mine, but that relies on China for processing its output.
There are various other North American projects, but none are what might be regarded construction-ready.
India, Vietnam, Brazil and Russia produce modest quantities; there is an operating mine in Burundi, but none of these have the capability to create a national industry with critical mass in the short term.
Northern Minerals had to mothball its Browns Range pilot plant in WA on a temporary basis due to the state’s travel restrictions imposed in light of the COVID-19 virus, but the company has been producing a saleable product.
Alkane Resources (ASX: ALK) is focusing more on gold these days and plans to demerge its Dubbo technology metals project once the current stock market turbulence subsides. The operation will then trade separately as Australian Strategic Metals.
Dubbo is construction-ready: it has all of its key federal and state approvals in place and Alkane is working with Zirconium Technology Corp (Ziron) of South Korea to build a pilot clean metals plant in Daejeon, South Korea’s fifth largest city.
Dubbo’s deposit is 43% zirconium, 10% hafnium, 30% rare earths and 17% niobium. The company’s rare earth priority is neodymium-praseodymium.
Hastings Technology Metals (ASX: HAS) has its Yangibana project, located north-east of Carnarvon in WA. It has its commonwealth environmental clearances for an open pit mine and processing plant.
Hastings plans to be in production by 2022 with an annual output of 3,400t of neodymium-praseodymium. This, plus dysprosium and terbium, is intended to produce 92% of the project’s revenue.
Hastings has been negotiating a 10-year offtake deal with Germany’s Schaeffler, a manufacturer of metal products, but these talks have been delayed by the COVID-19 virus’ impact on the German auto industry. There have also been discussions with ThyssenKrupp and a Chinese offtake partner.
Arafura Resources (ASX: ARU) began life on the ASX in 2003 as an iron ore play but soon changed course once it had acquired the Nolans project in the Northern Territory.
Now, it expects Nolans to have a 33-year mine life and produce 4,335t of neodymium-praseodymium per annum.
The company said it is the only operation in Australia to have approval for mining, extraction and separation of rare earths, including handling radioactive waste.
The company is targeting Japan for its sales of neodymium-praseodymium offtake and has an option of 19 hectares of land in England’s Teesside to build a refinery.
The Teesside site is fully permitted and now the company is just waiting for its mining licence to be issued by the Tanzanian government, the final regulatory requirement for the Ngualla project.
While Arafura has signed memorandums of understanding with two Chinese offtake parties, its recent presentations have stressed its “customer engagement” is targeted at neodymium-praseodymium users not aligned with the ‘Made in China 2025’ strategy, which is Beijing’s blueprint that would see the country 70% self-sufficient in high-tech products five years hence — and a major step toward global domination of technology manufacturing.
Arafura and other companies are well aware that China exerts control over most of the global rare earth supply chain — and Australia along with the US and other allies recognise the threat posed by China’s ability to deter non-China projects getting off the ground.
Beijing subsidises rare earth operations so the producers can control prices — and the Chinese companies can stay in business while non-China companies cannot operate in a loss-making environment.
Neodymium-praseodymium sales are dominated by the Shanghai-listed China Northern Rare Earth Group, one of the six state-controlled enterprises that run the mining of rare earths in China.
While individual companies figure out at what they level they could break even and make a profit, the finance providers tend to be more conservative.
Neodymium-praseodymium prices are currently just under US$40/kg (A$61/kg), but industry figures estimate it will need something closer to US$60/kg (A$92/kg) to release the capital injections needed to develop projects.
In fact, even in the middle of the COVID-19 panic, China managed to rev up its rare earth production, with March exports up 19.2% year-on-year at 5,541t — the highest monthly figure since 2014.
Lynas also had a solid delivery figure in March. Over the first quarter, its rare earth oxides output totalled 4,465t.
China shut down much of its rare earth industry for all of January and part of February due to the spread of the virus.
“Market participants are patiently waiting as nobody has a clear understanding of what the future holds at this point,” Peak advised shareholders in late April.
“Furthermore, it is understood that at the current pricing levels the Chinese rare earth industry is barely operating at any profits,” it said.
Prices for the various rare earth elements vary, representing market needs. At present, the world is plentifully supplied with lanthanum and cerium; with others, not so much.
Below is a January prices snapshot — individual numbers will have moved a little one way or the other, but the numbers show the considerable variation in valuations. All prices are US$ per kg.
Lanthanum oxide – 1.69 Cerium oxide – 1.65 Samarium oxide – 1.79 Yttrium oxide – 2.87 Ytterbium oxide – 20.66 Erbium oxide – 22.60 Gadolinium oxide – 23.68 Neodymium oxide – 41.76 Europium oxide – 30.13 Holmium oxide – 44.48 Scandium oxide – 48.07 Praseodymium oxide – 48.43 Dysprosium oxide – 251.11 Terbium oxide – 506.53 Lutetium oxide – 571.10
Post time: May-20-2020