Dylan Kelly highlighted that: “Hard rock and mineral sands require pyrometallurgy, large amounts of energy, huge amounts of acid and reagents – and typically requires hundreds of processing stages of solvent extraction and ion exchange. Ionic clays, on the other hand, require a simple three step method that’s almost agricultural in terms of simplicity via leaching in ammonium sulphate, which is relatively abundant and low cost.”

When discussing the grades of hard rock deposits, Dylan references a data set of the world’s rare earth resources of 150 deposits with an average grade of 2.0% TREO. He delved into it, stating “Mt Weld’s resource grade pre depletion was 8.8%. For me, you would have to see grades well north of Mt Weld to get seriously interested in developing another deposit. However, most deposits by their nature are going to be less than the average grade, keeping in mind that rare earths are very abundant in the Earth’s crust, more abundant in a combined sense than lithium is – so the deposits are everywhere.”

In terms of ionic clay deposits and the high stakes of Serra Verde’s success in Brazil, Dylan stated that: “The whole industry is going to have to watch that development quite carefully to see how that progresses. They’re being quite secretive in terms of how much information they provide to the market more broadly because there is Chinese involvement downstream. It’s going to be a pretty big operation and if it succeeds – I think it’s going to set the scene for a strategic shift in terms of the feedstock of new projects over the next 10-15 years.” The simplicity of ionic clay processing is truly astounding when compared to hard rock and mineral sands. As Dylan puts it, you can “dig it up, dump it in a column and leach it, recover it in three stages with some filtration, and then effectively return the clay back to where you found it. A good way to think of it is with a 1,300ppm deposit at spot prices, you’re looking at around $13 of material in each ton of ore, and costs to mine and process that would be around $12/ton. At MEI’s grade, they have a value of around $30/ton, and Serra Verde have about $20/ton, so you would expect both to be making quite healthy margins.”

When analysing rare earths companies, Dylan has a golden rule: “You’ve got to see the met work, it’s the most complicated of the whole process. This stuff is everywhere and everyone is saying they’ve got a fantastic deposit, but the ability to process it is a completely different story. Just based on the massive failures we’ve seen in the past of Molycorp and Lynas 1.0, you can’t underestimate the importance of that stuff. You need to see full simulation piloting and a massive scale with huge representative samples in order to get confidence this is going to work.”

There are drastic differences in the grades of the various rare earth deposits, as Lowell’s John Forwood explained: “Hard rock has the obvious advantage of being higher grade, and Lindian (ASX: LIN) has got some great grades. It’s my understanding that they’re going to be producing a gravity concentrate that they think they’ll be able to sell – but the proof will be in the pudding.”

He continued: “The thing about ionic clays is that they’re generally super low grade. In terms of grade equivalent to a gold deposit, and of course accounting for a bit of variance depending on the ratio of individual rare earths, when you’re talking about 800ppm, it’s definitely less than 0.5g/t gold equivalent in situ – so you’ve really got to have super cheap mining and processing and waste disposal. A lot of them do have cheap potential mining costs because they’re close to surface with almost no strip ratio, but you’ve also got to have very cheap processing, which is possible. However, when you’ve got all these companies talking about using hydrochloric acid and bringing pH’s down to 2, I just think that’s going to make the capex and operating costs way too high for, for example, an 800ppm deposit to be economic at these current price levels.”

It’s not just about the rare earths in mineral sands projects, as John highlights: “In a mineral sands project, it’s usually going to be the price of zircon that really drives your economics. Terbium for REE deposits is a bit like zircon for mineral sands deposits. The terbium price has still been fantastic lately, so if you can find something that’s got a relatively higher proportion of terbium in it then it becomes a much more attractive deposit.”

The global rare earths sell off that has shocked markets over the last few months may have finally found a base, and could be gearing up for another steady push upwards. NdPr prices have improved to US$63/kg after bottoming out around the US$55/kg mark, which is expected to be a support level which triggers large producers to step in and buy physical supply.

UBS holds a longer term price outlook of US$95/kg and expects a recovery over the next 2-3 years to reach this target. Their rare earth analysts expect to see a US$75/kg NdPr price by the end of the year.

More broadly, global total rare earth oxide (TREO) demand is expected to grow at 6% CAGR all the way through to 2035, driven primarily by the permanent magnet sector. This is forecast to be 5 times the amount that China can supply.

Roscoe’s T8 Capital has a rigorous ESG analysis process, and he explains the results from its application to MP Materials: “As mentioned earlier, MP Materials faces a range of ESG risks which are associated with historic contamination, waste containment and water access. Pleasingly, our bottom-up assessment of MP Materials’ ESG processes and controls identified innovations including implementation of a closed-loop tailings and concentrate dewatering method that enables recycled water to satisfy approximately 95% of water demand. Further, the disposal of dry tailings within lined impoundments minimises the risk of groundwater contamination. In terms of areas with the potential for improvement, we note that MP Materials is a relatively young company (only founded in 2017), so benchmarking it to its wider extractive industry peers identified scope for improvement. These areas include ESG related disclosure and reporting as well as alignment with global responsible mining, tailings, and net zero standards. We expect to see MP Materials make progress in these areas over time.”

Dylan highlights that a lot of the environmental atrocities occurring in Myanmar are difficult to overcome due to the controlling interests and motives at play. Many of these operations are militarily controlled and have Chinese influence, and appear to be churning volumes of low cost material. Compliance with ESG standards in terms of properly treating tailings, fully recovering used acids and reagents, rehabilitating the land and paying people well – it’s going to cost more, too much more than what western consumers are willing to pay. So as far as ionic clays go, at this stage there could be hope that if things go well enough in Serra Verde, could become an environmentally friendlier, substantial source of rare earths. However, Dylan notes that “I don’t think they’re going to be able to displace the heavy rare earth production from Myanmar anytime soon, mostly because we haven’t found many deposits that are well endowed with the heavy variety – ionic clays in Brazil tend to be light rare earths.”

As a developer, Gavin has first hand experience in tackling the critical ESG issues. He stated: “We have selected an emissions reduction pathway to support our net zero 2050 commitment, which includes the building of a solar farm. We’re currently measuring wind speed, velocities, directions and sustainability out at site to figure out if wind generation technology is suitable. Environmental performance and sustainability are certainly part of our mantra, and part of what our customers are expecting. Our ability to deliver a responsibly mined and processed product to our offtake partners goes a long way to marrying our product to their ESG requirements.”

He continued: “We’ve done a lot of piloting and lab test work, exploring new equipment in line with our goals to become a net zero producer of rare earths by 2050. We’re using the latest designs and technologies wherever possible, and our sustainability plan includes scope one, two and three emissions, including any emissions that arise from the use of our phosphate product.”

Highlighting another special aspect of Nolans, Gavin stated: “One of our main differentiators is that we’re doing processing at a single site. All mining waste, including processing residues, will be dealt with on site and then the site will be rehabilitated. We’re not moving material around from Australia to Malaysia, or from the US to China, and then moving the resulting waste into another jurisdiction.”

A lot of the flowsheets of prospective ionic clay developers involves backfilling processed tailings into the pit, but again, John highlights the suitability of this isn’t entirely certain: “One of the big things, from my understanding about ionic clays, is materials handling and what you do with the tailings. Some of the clays can turn to sludge, and then what do you do with it? Most of these projects are hoping to have sufficient economics to be able to make it worthwhile to safely put the waste back into the mined out void – but it’s yet to be proven that some won’t just end up with a big pool of sloppy mud.”

Radiation from ores ready for processing and stockpiling can still be an issue, as John states: “Radioactivity in the ore is a significant factor, and it’s obviously been a major issue for Lynas. In mineral sands for example, Iluka have been stockpiling their monazite for many years until it became potentially economic to treat it, so it hasn’t been a major problem for them to just bury it in trenches and retrieve it when the time is right.”

The global rare earths sell off that has shocked markets over the last few months may have finally found a base, and could be gearing up for another steady push upwards. NdPr prices have improved to US$63/kg after bottoming out around the US$55/kg mark, which is expected to be a support level which triggers large producers to step in and buy physical supply.

UBS holds a longer term price outlook of US$95/kg and expects a recovery over the next 2-3 years to reach this target. Their rare earth analysts expect to see a US$75/kg NdPr price by the end of the year.

More broadly, global total rare earth oxide (TREO) demand is expected to grow at 6% CAGR all the way through to 2035, driven primarily by the permanent magnet sector. This is forecast to be 5 times the amount that China can supply.

Dylan brought up a chart that shows rare earth imports by type into China over time. He stated that “If you look at that historically, there are a few different things at play. In the first instance, your concentrate or mixed carbonate is the rudimentary very early stage, sort of higher up the value chain product, and down the end an oxide or metal is the highly value added process. What we can see over time is that producers of the raw material have effectively gone downstream, and China is importing more and more finished goods as opposed to processing it themselves.”

Dylan pointed out the correlation between spikes and drops in prices and the disruption or resumption of feedstock coming from Myanmar, but he noted that the market expects the recent supply disruptions to normalise, stating that: “They’ve invested huge amounts of capital in both mining and intermediary processing, and it’s a key sort of feedstock. If you’re producing domestically in China, you’ve got very strict permits in terms of what you can process and treat. One way to circumvent that process is if you import the raw feedstock and have permitting capacity to effectively dump the tailings from it. It’s a great feedstock from Myanmar because you’ve got limited radioactive nuclides in the process, huge volumes of materials that can easily be excavated – and a ready made market.”

He continued observing the trends in supply, stating: “What we’ve seen in recent years, and what is putting pressure on prices now, is thorium ore or monazite concentrate that’s been stockpiled in old mineral sands operations around the world. Volumes from several unknown entities sprung up overnight thanks to the latest price rise which incentivized its transportation. But I would expect that volume to taper off as prices have retreated towards US$60/kg NdPr.”

However, he notes that this supply can be turned on and off relatively quickly, so rapid responses from the market when prices rise and fall are to be expected – the only issues being the radioactivity requiring a customer who is comfortable with transporting and processing it. It could be an abundant source of rare earths, as Dylan stated: “If Iluka has been sitting on a stockpile for thirty years, that tells you probably where every other mineral sands mine has it as well.”

Gavin is very excited about the current and future demand profile of rare earths, stating that: “At the moment, the major use of rare earth magnets is the auto sector, but that’s not just electric vehicles – its autos in general, because you’ve got seats, windscreen wipers, steering, brakes that are all electrified and use little rare earth magnets. The other major driver of demand is of course off-shore wind turbines, but where I think a lot of analysts aren’t picking up potential demand growth is robotics, where the rapid advancement of AI is going to result in far more applications with robotics and on a shorter timeline than previously anticipated. ”

He recognises the odds are weighed against prospective suppliers by China’s influence in the sector: “The supply side has been continually constrained by lack of capital investment into the sector. It’s a very opaque market where China dominates the pricing mechanisms, it is not like copper traded on the LME or gold – it’s a contract market and China basically sets the price. Every time a competitor or somebody like Lynas or us starts to make noise about getting close to production, you start to see the underlying commodity price start to fluctuate outside of its normal curve.”

In regards to the volatile price swings that rare earths have seen over the past three years, Gavin stated that “It’s 100% manipulated, without a doubt, and I wouldn’t be the only person in the industry to say that we know the cost of production of China Northern, the largest rare earth producer in the world, is significantly higher than where the current spot prices are – which just doesn’t make sense in a free market economy.”