Rare Earths Miners
Here are three ASX rare earths stocks:
Operator of the Mt Weld mine in Western Australia, Lynas is an established producer, and is looking to expand its processing capacity into the US.
Owner of the Nolans project in Northern Territory, Arafura is notable for promising one of the only ore to rare earth oxide projects outside of china, promising production in 2025.
A Mineral sands producer looking to diversify its resource potential, Iluka is already an established Zircon/titanium producer, which is now building a plant to process rare earth deposits it already owns in Western Australia.
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WHAT ARE RARE EARTHS AND RARE EARTH OXIDES AND WHY ARE THEY IMPORTANT?
Rare earth permanent magnets are essential components for two of the fastest growing industries, hybrid and electric vehicles, and wind power.
In an electric motor, a rare earth magnet makes it lighter, cheaper and longer range whereas in a wind turbine, it provides critical strength and heat resistance.
Other usages are wide and varied and include medical equipment such as MRI machines, fighter jets and missile systems.
They’re used to produce permanent magnet materials, catalytic materials, luminescent materials, polishing materials and hydrogen storage materials.
Although there are 17 metals, a third of their usage and the fastest growing portion, comes from the magnet metals neodymium and praseodymium (also known as NdPr), as well as rare earth metals such as terbium and dysprosium.
Rare earths are critical minerals for manufacturing electrical equipment such as EVs, medical equipment and wind turbines. They are often sold and processed as rare earth oxides, or in the more raw Mixed Rare Earth Carbonate (MREC), which is a combination of several rare earths, which needs to be processed later.
What makes a Rare Earth Miner a good investment?
The market for NdPr should be in a supply deficit over the coming decade* due to strong demand and a lack of supply due to the 5+ years it takes for a new mine.
The miner Iluka, stated that demand for magnet metals (Nd, Pr, Dy and Tb) is expected to grow almost by over 300% over the next 15-20 years from 87k tonnes last year to 280k tonnes by 2040.
This assumes EV sales growth and wind power demand grows at 12% a year, which requires an additional 100k of magnetic power a year for EVs, 50k tonnes a year for wind power and 45k tonnes a year combined for industrial applications, consumer electronics,, defence and many more.
For context, Lynas (LYC) NdPr production was 5,880 tonnes last year, which it plans to almost double by FY25 – see note below.
* Data from Commodities Research Unit
PRICE DRIVER: HURDLES FOR A COMMERCIAL DEVELOPMENT
Rare earths are not strictly rare in the earth's crust. However, finding rare earth deposits that can be mined and processed economically is challenging. Deposits and rare earth projects can be complex and capital intensive. Environmental safeguards can be crucial as some deposits contain radioactive materials.
This is a double-sided sword for rare earth stocks, as while it makes it harder for new projects and companies to start production, it also ensures that ones already past these hurdles, or with a clear sightline to production are highly valued.
China currently accounts for around 65% of mined rare earth materials and nearly 95% of processed rare earths. This is a big concern to global supply chains, putting them at risk to possible bans or restrictions by China on exports.
This dominance underpins the momentum behind developments. There is a huge exploration and project generation push, particularly in North America, Australia and Africa. However, this will take time (see previous price driver).
MORE ABOUT RARE EARTH ELEMENTS
There are 17 rare earths in the periodic table, 15 of which are known as the Lanthanide series plus scandium and yttrium.
They are categorized into two groups, the light rare earth elements, which include lanthanum through to gadolinium (atomic numbers 57 to 64) and the heavy rare earth elements, which covers terbium through to lutetium (atomic numbers 65 to 71).
The principal rare earths used in permanent magnets include Neodymium (Nd) and Praseodymium (Pr), which are both light rare earths and account most of Lynas’s sales by value.
The remaining the less abundant Dysprosium (Dy) and Terbium (Tb), are heavy rare earths. The rare earth element Neodymium (Nd) is the strongest known magnetic substance.
Rare Earths Market Investor Takeaway
There are many players looking to take part in the rare earths market, but most are early stage. We cover Lynas (LYC), which is one of the few rare earths companies in the world in production, outside China.
The earlier stage developers are progressing at different paces and we will be covering the more investable of these stocks in future reports. This is very much a case of picking winners on deep analysis.
Rare Earths Video
Watch our latest video with Richard Hemming & Peter Chilton discussing rare earths and why they are so important for the next generation of investing.
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