Rare Earths Industry Review

Reach Markets is holding a Rare Earths Summit and have written Rare Earths for Investors – an Industry Review on the current state of play and where to from here.

Watch the Rare Earths SummitRead Industry Review Part 1
Carlo Ambesi
Carlo Ambesi


In our Rare Earths Summit series, we have invited fund managers, analysts and industry insiders to give their views on rare earths, how to identify potential investment opportunities and what investors should be aware of.

Watch the Rare Earths SummitRead Industry Review Part 1


Following on from the first part of this review, where we delved into what rare earths are, their place in net zero ambitions and geopolitics, key ESG considerations and supply/demand factors – this second part sits down with industry experts to ask them the critical questions that investors should consider when analysing rare earths companies.

We sat down with Dylan Kelly, rare earths veteran and Head Mining Analyst at Terra Capital, John Forwood, CIO of Lowell Resources Fund, Roscoe Widdup, Co-Founder and Portfolio Manager of T8 Capital, and Gavin Lockyer, CEO of Arafura Rare Earths.

The report breaks down the different types of rare earths deposits, the advantages and disadvantages of each, the challenges in development and financing situation surrounding it, key ESG considerations to factor in, how the experts are forecasting their rare earths prices and the supply/demand that factor into it, Australia’s position in the sector and which projects they are interested in. So without further adieu….

Terra Capital’s Dylan Kelly provided the lay of the land, stating: “Broadly we are concerned with the rare earth minerals Monazite, Bastnasite and Ionic Clays. The bulk of rare earths come from Hard rock and Mineral Sand deposits which are made up of Monazite and Bastnasite and tend to be extremely complex metallurgically as well as capital intensive. Ionic clays are less abundant but have a far simpler process method that is also capital light. Due to the high barriers to entry, we prefer incumbent producers that are proven and profitable (Lynas). We are interested in ionic clays as it could be a disruptive process method that upends conventional Monazite and Bastnasite methods.”

He didn’t sugar coat it: “Bastnaesite, monazite and xenotime typically require an extremely complex pyrometallurgical flow sheet that uses considerable heat, acid and other reagents to successfully recover.”

To be clear, Dylan has limited interest outside the development of ionic clay deposits. There was a time when he had some interest in hard rock, but the barriers to entry remain extremely high. He provides an example: “I used to have a view that Hastings could come into production because they had a very high concentration of NdPr, and a process flowsheet that could upgrade well in a concentrate, and had relatively realistic plans of producing a mixed rare earth carbonate. Only going down two steps of the value chain (concentrate, carbonate) was something that I thought could work, and it explains why they were able to get some funding for it. But our economic thesis became hard to justify as capital costs increased considerably. In addition, it appears they may now only fund the first step of a concentrate, without significant additional funding.” On top of the overall complexity of perfecting rare earths production, some of the factors he attributed these difficulties to were inflationary pressures, remote location and recent price weakness.

Dylan also shared his thoughts regarding mineral sands deposits, stating that: “Recovering rare earths from a monazite feedstock has been done in the past, but it is very capital intensive, and extremely complex in terms of flow sheet and process. So I think the way that the federal government has funded Iluka and their Eneabba operation, which is set up to take third party concentrate feed, is quite sensible because they’ve done it before, they’ve got a stockpile of monazite nearby and they’ve got a sensible, well funded strategy to get this up and running”.

Specifically referring to monazite he stated that it “typically comes with elevated levels of thorium and uranium, which can become problematic to remove as well as transport. Combining these difficulties with the extra regulatory approvals that need to be received can make it a challenging venture, only adding to the litany of technical hurdles present when getting these things up and running.”

As a geologist, Lowell Resources Fund’s John Forwood has a thorough understanding of mineralogy, and has selected his preferred type of deposit, which is the same as Dylan’s: “Lowell Resources Fund is invested in a couple of clay projects due to clay type deposits’ potential for relatively easy exploration and attractive metallurgy. We know about the ionic clay projects in China and how extremely simple the metallurgy is. Unfortunately I understand that the REE recovery process in China can be extremely environmentally damaging, they are able to basically go to the top of the hill and pour acid over the exposed clays, before then collecting the runoff down the bottom and processing that. It apparently creates a terrible mess, but it shows you just how easy the metallurgy is, and I think that metallurgy, and waste management, is definitely the most important aspect of rare earth production.”

He places a lot of weight on the clay deposit that the rare earths industry is watching closely: “There’s only one ionic clay project in development in the Western world – Brazil’s Serra Verde, which is in private hands. There’s very little public information about it, but I’ve heard that it’s basically in commissioning, so hopefully we may hear some news about that in the next few months.”

John hasn’t ruled out hard rock deposits entirely: “Lowell has some interest in hard rock deposits. There’s a lot of exploration going on right now for carbonatites, and whether or not they contain niobium and other magnet rare earths is of interest to us.”

There are quite a few good looking mineral sands projects that are getting ready for development, but like the market – John wants to see some in action: “We haven’t done a lot of work on mineral sands, and I know there’s a number of projects here in Victoria – but the market is really saying ‘show me’ that you can produce a saleable product economically from those projects.”

Arafura Rare Earths’ Gavin Lockyer described the company’s Nolan’s deposit in the Northern Territory: “Our deposit is hosted in a phosphate rock, so we’ve got a heap-leaching process at the front end which frees up the rare earths for further downstream processing. Most other deposits don’t have this phosphate process in their flow sheet. The geology of rare earths deposits are very different – there is a lot of time required for piloting and testwork to prove up the flow sheet and “chemistry set”, before you even think about going into a feasibility study. It’s one of the reasons these projects take so long to develop – you can’t just go into an engineering firm and ask them to build a gold plant that they’ve built countless times before for projects with similar head grades and strip ratios.”

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.

In discussing the challenges of developing a rare earths project, Dylan asserts that Lynas’s many years of trouble should serve as a warning for all developers and investors. He stated: “I think it should demonstrate to everybody just how big the moat is in this sector, and what the barriers to entry are. In today’s terms you need north of $2.0 billion Australian dollars and 10 years to bring a project into production. At that sort of cost and time to first cash flow, only the most heroic price assumptions can get the economics stack up. So I think those barriers put a lot of projects on the back burner, and force developers to upend their plans to produce separated oxides.”

Dylan made his point abundantly clear: “For a junior from a standing start, to go full vertical integration from mine to concentrate to carbonate  to oxide, the probability of success is less than 1%.” However, when discussing the scenario’s companies face when they settle for going further upstream, he didn’t paint a pretty picture either: “While that’s the only pathway forward I can see for hard rock and mineral sands developers, the economics of selling concentrate and carbonate involve significantly reduced revenue streams. You’re only receiving 30% of the rare earth element value in concentrate and this only increases to 65% when processing that into a mixed carbonate – while the only way to capture the full upside is with the separated oxides. So to produce the concentrate, you would have to do so at a very low capital intensity, and a very very low capital cost. As a standalone project, I think the economics of it are always going to struggle.”

Venturing further downstream to produce higher value products isn’t ideal for all developers. John highlighted this by stating: “Iluka is building a downstream processing plant in WA, but it seems their processing costs might be quite high. One potential hard rock developer said that they could sell their concentrate to Iluka but they would be charged more for processing the concentrate than they would actually be paid for the concentrate itself, so the economics of these sorts of arrangements are still to be proven”.

Until Serra Verde fully ramps up, questions about the costs of ionic clays will still have some unanswered questions: “You’ve got to have cheap tailings disposal and waste treatment, and there hasn’t been a lot of work done on that end of things in most projects. These ionic clay ores might be worth $20-$30 bucks a ton in situ, and you’ve got to extract the metals out of it and do the whole mining treatment and waste disposal process for less than that, which is a significant challenge.”

Aiming for large scale at the outset of operations might not be the best option for developers: “I don’t know exactly what the inflection point will be, but some projects might be able to be developed at a relatively small scale, and keep the capex pretty low. Lindian is planning on starting at 400 thousand tons per annum of ore treatment, and if they kept going at that pace they’d have 100’s of years of mine life making some pretty nice money. It sounds like they’ve got fantastic metallurgy, and they’re projecting to be making a margin over 100% in terms of kilograms per ton of concentrate. So starting small can really work in a developers favour.”

Gavin stated that: “I think the biggest challenge for this industry is that most of the projects being developed outside of China are being done so by small cap companies, who have capital requirements that are sometimes many multiples of their market cap. However, this problem exists within a much larger opportunity that has been borne out of very little development being undertaken by the rest of the world in recent years. The only non-Chinese producer of rare earth oxides outside of China is Lynas, and so it’s a great breeding ground for Arafura to get into production when you combine this factor with a market that is growing exponentially as a result of all the technological advances that are increasing demand for rare earths.”

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 Kelly outlines the stark differences between development opportunities for different deposits: “I think the ionic clays have a relatively clear path to development and financing from risk capital via equity markets. But the landscape hard rock I can only see a funding path forward via the explicit backing of a state. To date, I think the various governments have been sensible in allocating capital to the sector. The state needs to get behind an incumbent who has a proven capacity to produce and do so profitably. Not back a speculative upstart. Think about what Japan did with Lynas 1.0, it was given an unequivocal funding back-stop because the country needed to diversify its supply, so they underwrote a long tenor, low rate and covenant light debt facility. This is what got that project over the line. Iluka’s debt facility for $1.2bn is of a similar ilk. Hastings once raised a line of credit from Germany. Without the backing of a state I think conventional hard rock/mineral sands projects will be challenged.”

A lot of Gavin’s time has been spent shoring up the perfect type of financing for Nolans, and has a thorough understanding of the landscape: “There are a lot of projects that likely won’t go into development due to the current NdPr price – many of them need a price of about US$100/kg. We are currently in the project financing stage, and in terms of the debt aspect of financing we are tapping into options like the Critical Minerals Facility through Export Finance Australia, along with indicative support from the Northern Australian Infrastructure Facility. We also have direct lines of credit from Export Development Canada and Euler Hermes Aktiengesellschaft in Germany, which are both linked to our offtake agreements with companies. So liquidity on the debt side of things is quite abundant in this market, and we’re quite fortunate there. On the equity side of things, we want to make sure we have strategic players involved that fit our model. We’re also starting to see the realisation in capital markets around the seriousness and longevity of green technologies and the world heading towards net zero, so a lot of fund managers are now starting to look at what projects and what companies to invest in that are actually heading towards that. So you’re finding a lot of the funds are exiting from fossil fuels and looking at investing into the rare earths space.”

It’s not an easy job to line up funds, as Gavin characterised it by stating: “Putting together the funding packages for these projects is incredibly complicated. It’s not like a gold project where you can take a bankable feasibility study to a Macquarie type lender, who can give themselves security by hedging the gold. The only way to hedge at the moment would be a Chinese offtake partner, and they are not considered bankable offtakes. So arranging financing becomes a long and arduous process, that we are now at the tail end of.”

John again highlights that getting to proof of concept at a respectable enough scale is a worthwhile endeavour before expanding, and making use of all government incentives to do so is essential: “There’s lots of money potentially out there from government grants, including from the Critical Minerals Fund in Australia and the Department of Defence out of the US, as well as equivalent facilities in Europe. So starting small and getting grants is a worthwhile strategy, there’s potential to at least get into pilot scale, demonstration scale, even small scale commercial production, without having to significantly dilute shareholders.”

“If Western governments want non-China supply, who’s actually going to pay to keep some of these projects open during times of rare earth price weakness? It hasn’t happened in the past, projects have just shut down.”

Dylan describes the idea of trying to forecast rare earths pricing as nearly impossible, with one of the reasons being that there are no reliable market balances as well as an absence of marginal cost analysis. He states that: “You’ve got the interplay of 15 different elements, each with their own supply demand dynamics. Supply is dominated by an oligopoly of Chinese state owned enterprises which are highly secretive. The market is small, illiquid and opaque as well as having no standard quality specifications.”

However, he uses China’s dominance of the industry to his advantage as much as possible. “We look to get a sense of what margins from the likes from the various listed China market participants like China Northern and Shenghe. While the accounts are dubious, you can roughly derive prices and unit cost trends.”

There is quite often upside and downside that cannot be accurately forecasted from visible supply and demand factors, as John states: “Pricing is one of the big risks in rare earths, because China can push down the prices if they’re worried about competition coming into the market, which they certainly have done in the past. The opposite can also happen, where the West’s supply chain fears are realised in the format of Chinese restrictions of rare earth sales to non-Chinese offtakers, which can send prices through the roof.”

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.”

Dylan recognises the strategic merit in Australia’s production of rare earths, but doesn’t think it necessarily make sense economically: “Having vertical integration with mined concentrate, carbonate, and separated oxides in Australia with Iluka is effectively leading the charge in terms of ticking all the boxes from a strategic perspective around western aligned country production. However, that comes at an obscenely high cost both in capital as well as operating, energy prices are astronomical and the cost of doing business is just ridiculous. Bringing Australian projects into production is going to have somewhat marginal economic returns because of this cost backdrop.”

Gavin is emphatic about Australia’s strategic position: “We’re producing a rare earth oxide, and the only company doing that outside of China right now is Lynas. The main reason for this is because turning rare earths into a magnet requires processing the oxide into an alloy, then a metal and then a magnet – all of which can be done outside of China. If you’re only producing a concentrate or a carbonate, it has to go to China for separation – which makes our project  and Australia strategic to the West.”

He sees the merit of going downstream to avoid falling victim to industry pressures: “We’ve seen Hastings revise their downstream plans and revert to producing a concentrate. At the same time, Iluka has been making some noise in terms of needing feedstock for their plant that is in commissioning, and so in response China has been increasing the price of monazite concentrate in order to entice Hastings type projects to sell to them rather than Iluka. These types of tactics are why we’ve got separated products, to take our product outside of the Chinese supply chain, which gives our customers a diversified supply chain that is  completely removed from China.”

Gavin also believes there aren’t many good alternatives to Australia for the supply the West needs: “Permitting in America is a problem in itself, it can take on average between 12 to 15 years just to get something permitted. Unless that significantly changes, I can’t see the US leapfrogging Australia anytime soon. There is a lot of potential in Africa if some of their deposits get promoted by governments internally, and it’s a region where China can apply pressure and funding to fast track development. But in terms of what the customer wants, they want to make sure that they’re sourcing material from responsibly and ethically sourced organisations. Australia has a strong mining and processing reputation, with all the appropriate bells and whistles of ESG to hang off of, so Australia really does have an opportunity to become the preferred supplier of rare earths to anybody outside of China. That’s certainly what the Australian government is trying to achieve through their critical minerals facility.”

John also shares the view of Australia’s strategic position: Australia is a significant player right now through Lynas. There’s really only Lynas and MP Materials as producers outside of China and Myanmar, with Serra Verde in Brazil looking to come online soon. The next cab off the rank in Australia is likely to be Iluka, and then there could be VHM following behind them. So Australia is shaping up to be an even more significant player in the non-Chinese market.”

In regards to Arafura Rare Earths and Hastings, John Forwood stated: “Look, those projects are real and have great potential to get into production, depending on REE prices. However, they’ve been on the starting blocks for so long, the timing for commercial production is a risk.”

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 Widdup shares his thoughts on how to take exposure in rare earths: “T8’s approach to investing in rare earths is the same as our approach to investing in other critical raw materials (commodities). We seek exposure to commodities with attractive fundamentals (e.g. growing demand, constraints to new supply and therefore a high likelihood of deficits and higher prices over the medium term); where our analysis suggests there is considerably more upside than downside to the commodity price (stage of the cycle is important); and where we have a different view to consensus. We never forget that all commodities are cyclical (even when there are structural or secular forces at play).

Where our analysis supports taking exposure, we do so by investing in a publicly listed producer. This clearly adds another dimension of reward and risk on the basis that producers of a commodity are naturally ‘leveraged’ to that commodity price primarily due to their profit margin (which moves by a greater proportion than the commodity price itself). Investing in a producer also introduces idiosyncratic (company-specific) risks.

For these reasons, we typically invest in ‘industry leaders’ while aiming to minimise idiosyncratic risk factors. Ensuring the stock has sufficient liquidity to be able to reposition is also a critical factor and not negotiable.

So, the liquid choices for us in rare earths are Lynas and MP Materials. In our view, when comparing the two, notwithstanding a range of different risk factors, the key stock-specific risk is country risk and in this respect Lynas carries considerably higher risk related to its processing operations in Malaysia. In contrast there is more of a sense that you’re investing in USA Inc. with MP Materials.”

Dylan places a certain level of rationality into investing in existing producers who have a proven track record: “I think what does sound sensible and can be a unique way to play it, is to simply back the incumbents in the market, such as Lynas, who are in production and have been doing so for several years. They have demonstrated the ability to produce and recover, while doing so economically.”

Discussing the region in Brazil that Serra Verde is in, he states: “I think that everything in that region is exciting. The grades, the potential high recoveries and early met test work in terms of what they’re indicating does paint a pretty good picture. We recently visited Meteoric Resources a few weeks ago, we discovered that the whole Caldera of the deposit is mineralised, and they’ve effectively pegged the best ground with higher grades and high recoveries across the key suite of NdPr, Dy and Tb. Meteoric has something quite special, its large resource of 409 million tonnes means it has scale potential as well as being extremely high grade at 2600ppm versus other clay projects at 1000ppm. The resource has expansion potential as it has only been drilled to a relatively minimal depth by auger holes, but they’ve now got diamond drilling pushing basement mineralisation from five to seven metres and 15 to 30 metres in a lot of instances. So that existing resource is quite large, and as it grows they’re finding grade, and they’re prioritising accordingly – so in my mind that’s a project that is particularly worth watching.”

John’s Lowell Resources Fund is invested in Alvo Minerals (ASX: ALV), which is exploring an ionic clay deposit in Brazil, right near Serra Verde. Recent metallurgical test work confirmed the ionic clay nature of the deposit, while revealing magnetic rare earth recoveries that averaged 60% for Nd, 57% for Pr, 37% for Dy and 48% for Tb after 30 minutes of leaching at ambient temperatures. Overall recovery was 56%, while the maximum level of recoveries achieved was 89% for Nd, 86% for Pr, 53% for Dy and 69% for Tb – which averaged out to 83%. It is expected that these results can be increased with higher acidity.

Describing the results as encouraging, John stated: “At a pH of 4, which is a relatively modest acidity level, they’re getting recoveries in excess of 50% for the key rare earth elements, which is a good start to getting it into a solution using ammonium sulphate.”

This whole Brazilian region is shaping up excitingly, with John stating: “Brazil is emerging as the possibly the premier location for ionic clay rare earths in the world. There’s Meteoric (ASX: MEI), where tonnage is not a problem at all and initial metallurgy is looking really strong. LRT is in Alvo, which is on the same geology as Serra Verde. There’s been somewhere between US$800-US$1 billion spent on that project, and I guess it’s a big black box that needs to be ticked over the next 12 months. Alvo has a very modest market cap, and it arguably holds the other half of the Serra Verde deposit –  so we really like that one.”

Taking it back home, John points out that: “In Australia, one that’s very interesting is ABx down in Tasmania. We’ve had a number of discussions with the company, and they have a modest deposit with metallurgy that potentially looks really good. Everyone does think that Tasmania is really hard for mining, but they’ve got a bauxite deposit that’s almost sitting right on top of the rare earths, and they said to me just the other day that they’ll be mining and shipping that in the new year. If they can get a mining licence for bauxite, then they can potentially get a mining licence for the rare earths that are in the same area. They don’t have big tonnage, but it’s not about the tonnage – it’s about the grade, the metallurgy and the waste disposal.”

Venturing across the world to an area where he also has experience, John observes that: “Africa is very interesting, and should start to garner more attention once there is more stability in East Africa, which is endowed with carbonatites. You’ve got tropical weathering in places like Tanzania, so I’m expecting to see some interesting projects emerge there. Ionic Rare Earths is well down the track in Uganda, but they’ve sort of morphed their business a bit into magnet recycling in Ireland, which is quite separate to the actual clay deposit they’ve got.”

Ultimately for John, there is one place that really has his focus: “For me, Brazil is probably the number one area that is emerging at the moment.”

When it comes to analysing explorers and developers, there are a few key points that Gavin reckons investors should think long and hard about. He stated “The first thing to look at is the jurisdiction – where is the resource located and what political risks are associated with that. The second thing would be to assess if it’s a jurisdiction that has strong government backing through financial support, which Australia has through organisations such as Export Finance Australia and the Northern Australia Infrastructure Facility. On the resources side, light rare earth deposits should be well endowed with NdPr, because there are a lot of projects out there that don’t have a high percentage of it – and they will have very large operating costs, simply because of the large amount of acid that will need to be used on the MREC in order to separate them. Finally, long mine life, of which we are fortunate to have 38 years, is essential to attracting major offtake partners to branch away from their existing supply chain. They want longevity, and are usually planning production at least five years out.”


Hard rock, mineral sand and ionic clay deposits have drastically different characteristics, and each have their positives and negatives. Ionic clays are emerging as resources that are relatively cheap and easy to process, but there is a lot riding on Serra Verde proving it can be done economically outside of China, while being environmentally sustainable.

Australia has a lot to offer through hard rock deposits with the likes of Lynas and Arafura, and its eager mineral sands developers could become a reliable source of rare earths – but it will require a lot of flexible financial support from the government, as has always been the case. Iluka is off to a great start in this regard, and hopefully development ready projects can learn from them while also responsibly deploying federal funding.

Rare earths remain susceptible to volatile price swings that are due to supply and demand metrics, as well as China’s influence in the sector. They appear to have found a supported bottom for now that will restrict a lot of new projects from coming into production, and the powerful net zero transition demand drivers appear to be converging with a lack of supply that has been brewing for decades.

Contributors to the Summit

Jim Rogers
Jim Rogers

Investor and Financial Commentator

Dylan Kelly
Dylan Kelly

Terra Capital

John Forwood
John Forwood

Lowell Resources Fund

Graham Howard
Graham Howard

VP Minerals

Roscoe Widdup
Roscoe Widdup

Triple Eight Capital

Gavin Lockyer
Gavin Lockyer

Arafura Resources

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