Rare Earth Elements (REE) prices are sky-rocketing, reaching levels last seen during the 2011-boom. Back then, it became obvious to the Western world that the Chinese dominance in the REE sector needs to be broken to ensure a reliable source for the future.
Only now are governments in the US, EU and Australia starting to act and providing funding for REE projects to accelerate new sources coming online in the next years, when a dramatically widening supply shortfall is anticipated.
While global demand for the rare earths has better than doubled in the last decade, the only successful new REE miner in the last 17 years is Lynas Rare Earths Ltd. This point highlights how challenging it is to produce REEs economically, while at the same time, it underscores the opportunity for new potential producers. MP Materials Corp. and Energy Fuels Inc. are currently very active in developing the ability to process downstream to separated oxides, which at this time does not exist in North America.
The expectation is that there will be considerably greater domestic demand for new supplies of REE feedstock in the next few years, as these facilities are developed. The US government recently awarded $35 million USD to fund MP Materials‘ plans for the construction of a commercial-scale HREE (Heavy Rare Earth Elements) separation facility for its Mountain Pass REE Mine in California.
In 2012, about 130,000 EVs were sold worldwide. Today, that many are sold in a single week.
Growth has been particularly impressive over the last 3 years and considering recent record-high gas prices at the pump, global EV adoption is poised to accelerate even faster than analysts have forecasted prior to the conflict in the Ukraine.
However, if supply for rare earths can‘t keep up with demand over the next years, the recent semiconductor shortage in the automotive sector has shown how many billions of dollars in lost revenue need to be taken into account again, hampering the EV adoption on a global scale.
“No doubt, the global race towards electrification continues. And the speed is accelerating, quickly making previous targets seem outdated, particularly in Europe. In upcoming months, it will be up to the European Parliament and the EU Member States to take the next step by confirming, and possibly further tightening, the 2035 phase-out target for combustion engine vehicles, as suggested by the European Commission, as well as adjusting the 2025 and 2030 interim targets so that they are more in line with current market trends and the longer-term trajectory. In China and the United States policymakers will not hold still and are expected to closely monitor the political decisions in Europe while updating their own electric vehicles’ targets.” (Source: ICCT, March 2022)
A single EV requires around 1 kg of rare earths for its motor magnets, representing just 0.05% of the car‘s total cost. These high-performance magnets are a small but critical part of an EV as it can‘t run without it! Global EV sales more than doubled to 6.6 million in 2021 (~9% of global car market). To produce 1 million EVs, ~600,000 t NdPr oxide are required.
The urgency for non-Chinese EV manufacturers to secure supply of rare earths has never been higher. Over the last years, governments around the world were not shy of setting ambitious e-mobility targets. Only now have some governments started to act and provide funding to REE development companies in an effort to speed up new supply.
“The European Commission targets 30 million zero-emission vehicles by 2030 and aims for 60 GW of offshore wind by 2030 and 300 GW by 2050 as it seeks to steer countries away from fossil fuel-based energy and transport. On average, an offshore turbine requires up to 232 kg of Neodymium-Praseodymium per megawatt (NdPr/MW), which means that by 2030, the EU excluding the UK would require about 13 thousand tonnes of NdPr, and by 2050, 69.6 thousand tonnes only for wind turbines.”
According to “Rare Earth Permanent Magnets” (US Department of Energy, February 2022): “Due to the significance of the rare earth magnet supply chain, efforts have been made by various government agencies to support the development of a more resilient supply chain and encourage additional domestic production. Domestic rare earth mining has increased in recent years, and new domestic separation of rare earth concentrated into individual rare earths is expected in the near future. Potential new domestic metal refining and magnet production are also being planned, though this new production is a little farther away. While these developments are promising, they may not be sufficient to eliminate vulnerabilities and build a resilient supply chain, especially given expected growth in demand.”
“Scarce supply of raw materials for electric cars could slow the transition from fossil-fuel burning vehicles to electric ones, Mercedes-Benz (DAIGn.DE) Chief Executive Ola Kaellenius said in an interview with German paper Die Zeit on Wednesday. “The industrialization of mines and refinery capacities may not progress as quickly as demand increases. Should that happen, it would only delay e-mobility, but not prevent it,” Kaellenius said.”
According to “Energy transition metals poised for uneven, explosive run higher” (Reuters, June 2021): “Buoyed by powerful demand expectations as the world moves away from reliance on fossil fuels, prices of many industrial metals rocketed, but future price rises are likely to be limited to a select few energy transition ingredients… “Energy transition metals will take off big time, but not all at the same time,” Wood Mackenzie analyst Julian Kettle said… Magnets made with neodymium and praseodymium (NdPr) are used in wind turbine generators and electric vehicle motors. Electric vehicles made without rare earths are less efficient as the battery pack needs to be about 30% larger to cover the same distance, analysts say. CRU analyst Daan de Jonge sees the energy transition lifting demand and prices for NdPr over coming years to levels that incentivise new projects…”
According to “Rare earths markets to remain in deficit until 2030” (MiningNews, January 2022): “Canaccord is now forecasting a market deficit for rare earth magnets until 2030, compared to previous forecasts for balanced conditions. This revision is driven by an increase in electric vehicle sales… Canaccord has increased its forecast for electric vehicle sales in coming years, with sales now forecast to increase by 18% per year between 2021 and 2024. The investment bank expects electric vehicles to comprise 45% of the market by 2030… Demand from magnets will also be boosted by the construction of wind turbines, Canaccord said.”
Who‘s Next in the West?
On February 22, US President Joe Biden announced $35 million USD in funding awards to MP Materials Corp. (NYSE: MP; market capitalization: $8.9 billion USD) to support the construction of a commercial-scale processing facility for HREE (Heavy Rare Earth Elements) at the Mountain Pass REE Mine in California. In a separate contract awarded in December 2020, the US Department of Defense committed $9.6 million USD to MP Materials’ Stage II optimization, a project underway to restore LREE (Light Rare Earth Elements) processing capabilities to Mountain Pass. In late 2021, MP Materials estimated its market share at 15% of global REO demand. With a record 2021-production of 42,413 t REO (in concentrate), the subsequent separation of HREE and LREE took place in China. Backed by the recent federal funding, MP Materials is making accelerated progress on its mission to restore the full rare earth supply chain to the US.
The Lynas Corporation [ASX: LYC; market capitalization: $9.2 billion AUD], based in Australia, manages the only complete supply chain outside of China. However, with its only processing plant in Malaysia, a critical component is subject to somewhat unpredictable foreign governance. To “diversify [its] industrial footprint” Lynas is currently constructing a second processing plant in Australia and has received more than $30 million from the U.S. DoD to support processing plant construction in Texas.” (Source)
On March 11, the European Raw Materials Alliance (ERMA) announced to support Mkango Resources Ltd. (TSX.V: MKA; market capitalization: $90 million) with securing financing for the development of a rare earth separation plant to be located in Poland: “This plant will be supplied with rare earth carbonate originating from Mkango’s Songwe Hill primary deposit of rare earth elements in Malawi, Africa. The plant will also be able to process other materials supplied by third-party providers thus acting as a future European Hub for rare earth elements separation.“ At PuÅ‚awy, a phase-1 production of 2,000 t NdPr oxide annually is expected. The Songwe Hill REE Deposit hosts 21 million t @ 1.41% REO (Measured & Indicated; ~95% of which at a depth of less than 160 m below surface of the hill) and 27.5 million t @ 1.33% REO (Inferred) at a Base Case 1% REO cut-off grade (2019).
On March 16, Australian Prime Minister Scott Morrison announced $243 million AUD in fresh grants for Australian projects that will source and refine critical minerals, including rare-earth metals – key manufacturing ingredients in the renewable energy economy. Projects funded by the Federal Government’s Modern Manufacturing Initiative (MMI) include $30 million AUD to Arafura Resources Ltd. (ASX: ARU; market capitalization: $457 million AUD) and the construction of a rare earth separation plant for the Nolans REE Deposit (56 million t @ 2.6% REO in Measured & Indicated + Inferred). With its $91 million AUD separation plant, Arafura plans to produce 2 final rare earth products for export: 4,440 t NdPr oxide and 470 t mixed middle-heavy rare earth (SEG/HREE) oxide annually. Arafura notes that “analysts forecast a supply gap that represents 109% of global supply today and is in excess of 11 Nolans Projects”.
On February 14, the leading Chinese rare earth company Shenghe Resources Holding Co Ltd. agreed to acquire (for $39 million AUD) Appian Pinnacle Holdco Ltd.‘s 19.9% minority stake in Peak Rare Earths Ltd. (ASX: PEK; market capitalization: $156 million AUD): “Shenghe is a large Chinese rare earth group with operations spanning mining and beneficiation, refining and separation, as well as alloy and metals production. Its international interests include a ~8% holding in MP Materials Corp., a 90% holding in Vietnam Rare Earth Co. Ltd., and a 9% holding in Greenland Minerals Ltd. Shenghe is listed on the Shanghai Stock Exchange and has a market capitalization of ~$4.9 billion USD.“ Peak‘s Ngualla REE Deposit in Tanzania hosts resources of 214 million t @ 2.15% REO and reserves of 18.5 million t @ 4.8% REO with plans to produce 37,200 t REO annually in concentrate at a grade of 45%
On February 2, the Australian government agreed to provide a $140 million AUD project financing loan to Hastings Technology Metals Ltd. (ASX: HAS; market capitalization: $469 million AUD). Its Yangibana REE Deposit in Australia hosts 16.7 million t @ 0.95% REO in reserves (Proven & Probable) and 27.42 million t @ 0.97% REO in resources (Measured & Indicated + Inferred) with plans to produce ~15,000 t mixed carbonate annually by 2024, having signed MOU offtake agreements with Qiandong Rare Earths, China Rare Earth Holdings, and Baotou Sky Rock Rare Earth.
In December 2021, China merged 3 state-owned REE companies to increase pricing power and efficiency, establishing China Rare Earth Group Co. Ltd., the largest move of its kind in the world. Based on 2021 data, the new group will have 52,719 t of mining quota (31% of China’s total) and 47,129 t of smelting quota (29% of China‘s total). The new megafirm will account for about 62% of heavy rare earth supplies nationally and have enhanced pricing power of key rare earths. China believes the minerals have been trading for “cabbage prices”. Under the new merger, “prices are expected to be rationalized“.
Canada‘s first rare earth processing facility looking for mixed REC feed stock: In August 2021, the Saskatchewan Research Council (SRC) provided an update that the construction of the first stage of its Rare Earth Processing Facility in Saskatoon (Saskatchewan), which includes a Monazite Processing Unit (MPU) and a Solvent Extraction Unit (SXU), is underway:
“SRC is continuing to make progress with the Facility‘s design and the procurement of the highly specialized plant equipment. The MPU is expected to be operational ahead of schedule, in early 2023. The fully-integrated Facility is expected to be operational by mid-2024. In July 2021, SRC procured up to 800 tonnes of monazite concentrate from Indústrias Nucleares do Brasil (INB), S.A., in Brazil from their mine and processing facility. The monazite concentrate will arrive at SRC in the spring of 2022 and will be used as a feedstock for the MPU, once operational. SRC continues to source additional preconcentrated monazite globally prior to the MPU commissioning. SRC’s Facility will require 3,000 t annually of monazite concentrate on a 90 per cent basis (equivalent to 60 per cent Total Rare Earth Oxide). However, SRC would like to secure a stockpile of feed in advance of commissioning.“
The conversion of REE ore to individual REE products is done in 2 main stages: The first is the concentration of ore to mixed REC. The second is the more complex separation stage that converts mixed REC to commercial pure-grade REEs. The SRC facility will address both stages of REE processing.
In August 2020, the Government of Saskatchewan announced $31 million in funding to SRC‘s facility. Premier Scott Moe stated: “Saskatchewan’s new Rare Earth Processing Facility will be a catalyst to stimulate the resource sector in Saskatchewan and across Canada, providing the early-stage supply chain needed to generate cash-flow, investment and industrial growth of the sector. It will also help ensure the competitiveness of Saskatchewan as we focus on our economic recovery and grow our province over the next decade.”
Based in Beatrice, Nebraska, Rare Earth Salts Separations and Refining LLC, is another potential customer, having requested samples of Commerce Resources‘ mixed REC product. Backed by government funding, the company uses “a proprietary patented technology to efficiently separate the rare earth elements in a cost-effective and environmentally friendly process,“ according to its website which also states: “Rare Earth Salts is a privately held industrial and applications technology company focused on the separation and refining of all sixteen rare earth elements to high purity from various feedstocks worldwide.“
Another potential processor of a mixed REC is Energy Fuels Inc. (NYSE: UUUU; market capitalization: $1,6 billion USD), aiming to initially process 2,500 t monazite annually with its permitted White Mesa Mill in Utah, however looking for at least 15,000 t annual monazite feedstock.
“The European Commission considers rare earths to be amongst the most resource-critical raw materials: they are of highest economic importance and at the same time feature a high supply risk. They play a vital role in the industrial economy of Europe, that is, in traditional sectors as well as in emerging ones, including aerospace and defence. In 2019, about 130,000 t of rare earth permanent magnets (Nd-Fe-B) were produced worldwide which corresponds to a market volume of about €6.5 bn. 94% of these magnets were produced in China, reflecting a very high production concentration (which is, in fact, found across all rare earth value chain steps, from mining to recycling). Today, there is a 1,000 t production capacity left in Europe competing with 16,000 t of Chinese magnets imported each year. In addition, rare earth magnets are increasingly imported as part of motors and generator assemblies and products. Despite a growing market, the EU magnet production capacity is not fully utilised today and is rather serving specialised niche applications. This is due to the fact that European producers can hardly compete in terms of prices with Chinese magnet makers, because there is a lack of a level-playing-field... In fact, after decades without investment into the rare earths industry in the Western hemisphere, China has gained a monopoly in rare earths, which is very hard to compete with in a free market. There is a lack of, i) supply chain diversification, market driven competition, and resilience against supply shocks; ii) supply chain transparency and a clear definition of sustainability standards; iii) industrial capacity to implement an EU Circular Economy of rare earth materials; and iv) strategic investments aiming to benefit from a growing materials market to create economic growth and new jobs in Europe, i.e. jobs directly related to the rare earth magnet and motor value chain as well as indirect jobs secured downstream.”
„Die Europäische Kommission betrachtet Seltene Erden als einen der ressourcenkritischsten Rohstoffe: Sie sind von höchster wirtschaftlicher Bedeutung und weisen gleichzeitig ein hohes Versorgungsrisiko auf. Sie spielen eine entscheidende Rolle in der industriellen Wirtschaft Europas, sowohl in traditionellen Sektoren als auch in aufstrebenden Bereichen wie Luft- und Raumfahrt und Verteidigung. Im Jahr 2019 wurden weltweit etwa 130 000 Tonnen Seltenerd-Permanentmagnete (Nd-Fe-B) produziert, was einem Marktvolumen von etwa 6,5 Mrd. EUR entspricht. 94 % dieser Magnete wurden in China hergestellt, was eine sehr hohe Produktionskonzentration widerspiegelt (die tatsächlich in allen Stufen der Wertschöpfungskette von Seltenen Erden, vom Abbau bis zum Recycling, zu finden ist). Heute gibt es in Europa noch eine Produktionskapazität von 1 000 Tonnen, die mit 16 000 Tonnen jährlich importierten chinesischen Magneten konkurriert. Darüber hinaus werden Seltenerdmagnete zunehmend als Teil von Motoren und Generatoren sowie in anderen Produkten importiert. Trotz eines wachsenden Marktes ist die Magnetproduktionskapazität der EU heute nicht voll ausgelastet und dient eher spezialisierten Nischenanwendungen. Dies ist darauf zurückzuführen, dass europäische Hersteller preislich kaum mit chinesischen Magnetherstellern konkurrieren können, da es keine gleichen Wettbewerbsbedingungen gibt... Tatsächlich hat China nach Jahrzehnten ohne Investitionen in die Seltenerdindustrie in der westlichen Hemisphäre eine Monopolstellung bei Seltenen Erden erlangt, die in einem freien Markt nur schwer zu konkurrieren ist. Es mangelt an i) Diversifizierung der Lieferketten, marktorientiertem Wettbewerb und Widerstandsfähigkeit gegenüber Versorgungsengpässen; ii) Transparenz der Lieferkette und eine klare Definition von Nachhaltigkeitsstandards; iii) industrielle Kapazitäten zur Umsetzung einer EU-Kreislaufwirtschaft für Seltenerdmetalle; und iv) strategische Investitionen, die darauf abzielen, von einem wachsenden Materialmarkt zu profitieren, um Wirtschaftswachstum und neue Arbeitsplätze in Europa zu schaffen, d. h. Arbeitsplätze, die in direktem Zusammenhang mit der Wertschöpfungskette von Seltenerdmagneten und -motoren stehen, sowie indirekte Arbeitsplätze in nachgelagerten Bereichen.
“The EU should strategically invest in the rare earths value chain and become world leader in the Circular Economy of rare earths. To enable this, improved intelligence in the rare earths magnets and motors value chain is required as a sound basis for decision making, that is, for political and industrial leaders, investors as well as for consumers. Many primary rare earth sources around the world have been identified and investigated over the past 10-15 years, but the results of such studies have been published in various locations and it is time consuming to try to compile key information about them on a comparable basis. Europe hosts several occurrences, some of which are currently being investigated. In particular, the quantity (resource and reserve tonnages) and quality (resource and reserve grades of individual REEs) of mineralisation, and the key technical and economic assumptions (e.g., processing recoveries, price and cost assumptions) are of critical importance when assessing primary rare earth sources.”
According to Reuters (February 24, 2022): “[MP Materials Corp.] said its realized price for rare earth oxides (REO) soared 148% to $10,101 per metric tonne square in the quarter… Currently, MP lightly processes rare earths it extracts from California’s Mountain Pass mine and ships the material to China for separation into various rare earth metals because there are no U.S.-based options. The U.S. government has funded the Las Vegas-based company in part to help bring processing back to the country, where the rare earths industry had its genesis in the mid-20th Century.”
According to ERMA (March 11, 2022): “Securing critical raw materials for the European market is the main goal of the European Raw Materials Alliance (ERMA). The current issues with Europe’s dependency on oil and gas clearly show the importance of diversification of value chains across all strategic industries for the production of green energy… Neodymium and praseodymium are key components of permanent magnets used in electric vehicles, wind turbines and many electronic devices and prices for Nd / Pr oxides have risen by 85% and 135% respectively over the last 12 months… This cooperation and support with securing financing is one of the first projects resulting from ERMA’s strategic initiatives securing rare earth elements for European industry. A first action plan entitled “Rare Earth Magnets and Motors: A European Call for Action” was issued in September 2021. This report outlines current and projected European demand for Rare Earth Elements and steps which should be taken to secure their supply. The PuÅ‚awy project is addressing several critical issues highlighted in the report.”
According to Quartz Media (March 7, 2022): “Last month, a price index from the Association of Chinese Rare Earth Industry hit a historic high, breaking 430 – roughly double where it was a year ago… One kilogram of neodymium oxide, for example, now costs around 1100 yuan ($173), up from around 686 yuan ($108) last March… Analysts predict the upward trajectory will continue through the year.”
Stephan Bogner
Contact
Rockstone News & Research
Stephan Bogner (Dipl. Kfm., FH)
Müligässli 1, 8598 Bottighofen
Switzerland
Phone: +41-71-5896911
Email: info@rockstone-news.com
Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any commodities. The author holds no direct interests or financial instruments related to the mentioned commodities or companies. All views and forecasts reflect the state of knowledge at the time of publication and are subject to change. There is no guarantee that future developments will occur as described. Investing in commodities involves risks. Independent advice from a licensed financial advisor is strongly recommended.
