Australia’s rich minerals inventory has been a scene of successful speculation ever since the beginnings of the country’s first stock exchanges, which sprang up on the goldfields of Ballarat, Bendigo, Charters Towers and Kalgoorlie. Resources “specs” have made – and lost – a lot of money for investors in the past.
Australia mines, or hosts deposits of, just about everything mineable. In recent years, a range of less-traditional metals have been added to the country’s production, as modern usages have been opened up for the likes of lithium and graphite, on the back of their application in batteries used in electric cars and utility storage. But coming along behind them are a range of metals from the more obscure areas of Australia’s periodic table: the new-age metals, such as praseodymium and neodymium, which are used to make high-strength magnets and other products essential for a range of technologies.
The poster stock for this resurgence has been Lynas Corporation, which has brought its rare earths deposit at Mt Weld in Western Australia into production. (“Rare earths” is the term for a group of 17 metallic elements, which share many common properties.) Mt Weld is one of the largest rare earths deposits in the world, and the highest-grade rare earths mine. After a near-death experience in 2015, Lynas has almost broken through to profitability, and should mark that milestone this year.
Most of Lynas’ production is neodymium and praseodymium (NdPr), which are driving the rare earths market: NdPr is the main input material for the high-powered permanent rare earth magnets required for the growing demands of electric vehicles, wind power turbines and robotics.
Lynas is not alone on the ASX in owning NdPr resources, but it is the first Australian company to market. Here are several more rare earths hopefuls I’m watching on the ASX. These are highly speculative scenarios, with no guarantees that the projects will enter production – despite their highly attractive projections.
1) Arafura Resources (ARU, 11 cents)
Market capitalisation: $63 million
Arafura Resources owns what it describes as one of the world’s largest neodymium and praseodymium deposits, at its wholly owned Nolans project, 135 kilometres north of Alice Springs in the Northern Territory.
Nolans received environmental approval from the Northern Territory government in January and is close to a final investment decision, which is expected by the end of the year, following similar approval from Canberra. Nolans will be a $700 million project that will mine the neodymium and praseodymium and transport concentrate to an offshore refinery for final chemical processing into high-value rare earth products,
The project is supported by a mineral resource of 56 million tonnes at a grade of 2.6% total rare earth oxide (TREO), containing approximately 382,000 tonnes of NdPr oxide. The project is forecast to produce 14,000 tonnes of TREO a year, including 3,600 tonnes of NdPr oxide a year, over a mine life of more than 30 years. The flagship product will be a high-purity NdPr oxide product for advanced magnet and magnet alloy customers. Arafura says Nolans is capable of meeting up to 10% of global demand for NdPr, with forecast operating costs are in the lowest quartile of world producers.
The project will also produce a high-purity mixed middle-heavy rare earths (SEG/HRE) carbonate product, a high-purity lanthanum oxide product, a cerium hydroxide product, and will also produce a marketable phosphate by-product, that will be suitable for the granular fertiliser market, or upgraded to a higher-value phosphate product.
2) Hastings Technology Metals Limited (HAS, 28 cents)
Market capitalisation: $199 million
Hastings is developing its Yangibana rare earths mine and processing plant in the Gascoyne region of Western Australia. The processing plant is expected to commence production of mixed rare earth carbonate (MREC) in late 2019. Hastings has completed both beneficiation and hydrometallurgy pilot plants, in the process producing MREC samples that were high in NdPr content.
Hastings’ MREC will be capable of being further separated and refined to produce a number of individual rare earth oxides outside of Australia. Hastings estimates an annual production quantity of 15,000 tonnes of MREC. The company has had good success signing off-take agreements for this production: in August 2017, it signed an off-take memorandum of understanding (MoU) with Chinese company Baotou Sky Rock to sell 2,500 tonnes of MREC a year from Yangibana. It followed this agreement the next month with agreements with two other Chinese companies, China Rare Earth Holdings and Qiangdong Rare Earth Group, to take 2,000 tonnes and 1,500 tonnes of MREC a year respectively. Then, in February, German steel multi-national ThyssenKrupp signed a deal to take 5,000 tonnes of MREC a year. All of these agreements are conditional on Hastings actually starting operations and production – but they’re very nice to have in place.
3) Peak Resources (PEK, 4.5 cents)
Market capitalisation: $28 million
Peak Resources owns the Ngualla rare earths deposit in Tanzania, which it describes as one of the world’s largest and highest-grade undeveloped neodymium and praseodymium projects. Peak intends to mine the rare earths through an open pit, use a straightforward flotation process on-site to make a high-grade concentrate, and ship that to its proposed Tees Valley solvent extraction plant in the north-east of the UK, to make rare earths products – thus becoming a fully integrated producer with its own refining capabilities.
The company’s bankable feasibility study (BFS), released in April 2017, said the superior physical attributes of the Ngualla orebody, combined with the unique advantages of the Tees Valley refinery, will make it the lowest operating and capital cost project of any comparable rare earth developer. Peak says it would break even at a NdPr price of US$32.24 a kilogram, compared to recent (March) prices in the range of US$54.75/kg–US$58.50/kg. The company says it intends to produce 9,290 tonnes a year of Rare Earth Oxides (REO) equivalent, which is about half that of Lynas’ production. The ore reserve of 18.5 million tonnes at 4.80% REO for 887,000 tonnes of contained REO is sufficient to support a mine life of 26 years.
Peak Resources is, however, quite some way away from mining. Its location in Tanzania became a big problem for it last July, when the Tanzanian government introduced new mining laws that require the government to own at least a 16% stake in mining projects in the country, as well as increasing royalties tax on minerals. In January, new regulations took force under which Tanzania made it compulsory for foreign-owned mining groups to offer shares to the government and local companies, but the extent of this stake is not yet known.
In April, Peak told the stock exchange that it had met with the responsible minister, who had “stressed that the government is keen to work with investors like Peak and to allay their concerns regarding the new legislation. He also stated that further regulations to be released in the near future are aimed at giving more clarity to investors on the implementation of the current legislation.” A new Tanzanian Mining Commission has been sworn in, which should allow for the approval of Peak Resources’ Ngualla Licence. The company is currently in a trading halt, pending an announcement.
4) Greenland Minerals and Energy (GGG, 8.5 cents)
Market capitalisation: $94 million
Greenland Minerals and Energy owns the Kvanefjeld rare earths project in southern Greenland, which boasts the largest JORC (Joint Ore Reserves Committee)-compliant rare earths deposit in the world. The resource of more than one billion tonnes contains 11.1 million tonnes of rare earth oxide (REO), as well as the world’s sixth-largest deposit of uranium, at 593 million pounds of uranium.
The April 2016 (and updated) feasibility study assigns Kvanefjeld a net present value of US$1.59 billion, with an internal rate of return of 43.4%: project financing costs are US$831.9 million and the project has a payback period of five years. That certainly would position Kvanefjeld as a long‐life, low cost and large‐scale producer of rare earth elements, including neodymium, praseodymium, dysprosium and terbium. Based on an ore reserve of 108 million tonnes, the project has an initial mine life of 37 years – but that ore reserve only represents about 10% of the resource estimate.
On the marketing side, Greenland Minerals has a strategic partnership with major shareholder, Chinese rare earths group Shenghe Resources Holding Company, a multi-billion dollar integrated rare earth mining, beneficiation, separation and downstream processing business. The two parties intend to develop both the rare earths and uranium aspects of the project.
The updated Environmental and Social Impact Assessments for the Kvanefjeld project will be completed in June 2018. Greenland Minerals and Energy will have to convince both the Greenland and Danish governments that the project is environmentally safe and should proceed: at this point, the company is confident that the approach taken is thorough, rigorous, and will provide confidence to regulators and stakeholders that Kvanefjeld can be developed and operated effectively without risk to the environment, workers and local communities. GGG, and potential investors, will be banking on the fact that Kvanefjeld can provide long‐term opportunity and benefits – especially local employment – to Greenland society, at a time when demand for magnet rare earth elements and prices are increasing.
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