Last week I looked at Australia’s two rare earths producers, Lynas Rare Earths (LYC) and Iluka Resources (ILU). This week, I look at the three companies that are best positioned to be Australia’s next producers, with VHM the front-runner, in my view.
- VHM Limited (VHM, 27.5 cents)
Market capitalisation: $60 million
One-year total return: –48.6%
Three-month total return: n/a
Analysts’ consensus target price: $1.15 (Stock Doctor/Refinitiv, one analyst)
VHM is proposing to develop its wholly owned $337 million Goschen critical minerals project, in the Loddon-Mallee region of north-western Victoria, which shapes as one of the lowest-capital-cost rare earth projects in Australia. In February, VHM prepped investors to expect first production from the phase one stage at Goschen in about late 2025, with financing, licensing and permits by end of 2025.
87% of Goschen’s rare earth minerals basket value will be derived from the “big four” rare earth elements – neodymium, praseodymium, dysprosium and terbium – all of which are high-demand ‘critical’ rare earths used in permanent magnets for electric vehicle traction motors, and wind turbines supporting the decarbonisation of the economy. The Goschen deposit also contains zircon and titanium, which are also listed on the Australian and US critical minerals lists.
VHM has a resource estimated at 892 million tonnes, and a reserve estimated at 210 million tonnes, with grades of 3.7% total heavy minerals (THM), 21.7% zircon, 9.7% rutile, 8.2% leucoxene, 3.5% monazite and 0.6% xenotime. The project has at least a 20-year mine life.
The company is planning to begin development in the December quarter of this year, pending finance and approvals, of an initial 1.5 million tonnes-a-year operation using a modular plant, expanding to 5 million tonnes-a-year two years later. Pre-production capital costs for stage one are forecast at $160 million; stage one is expected to produce 4,300 tonnes a year of rare earth mineral concentrate and 69,000 tonnes a year of zircon/titania heavy mineral concentrate, at operating costs of $77 million per year.
Then in Stage 2, commencing in year four, production is slated to lift to 9,000 tonnes a year of rare earth mineral concentrate and 134,000 tonnes a year of zircon/titania heavy mineral concentrate.
Last year, VHM signed its first binding offtake agreement from Goschen, to be supplied to Singapore firm Shenghe Resources, which owns a number of rare earths-processing subsidiaries across Southeast Asia. The binding offtake is for 6,400 tonnes a year of rare earth minerals concentrate, and 100,000 tonnes of zircon/titania heavy minerals concentrate products, each roughly 60% of forecast annual production from the Goschen project, for an initial three-year term.
In addition, in August 2023, VHM made a significant discovery of high-grade rare earths and mineral sands deposits within the Nowie prospect area, 22 kilometres north of the proposed Goschen treatment plant. The maiden Nowie mineral resource estimate includes 6.4 million tonnes at 6.1% THM, contained in near-surface, high-grade deposits.
- Arafura Rare Earths (ARU, 16.5 cents)
Market capitalisation: $407 million
One-year total return: –36.5%
Three-month total return: –7% a year
Analysts’ consensus target price: 22.5 cents (Stock Doctor/Refinitiv, three analysts)
Arafura Rare Earths is developing its Nolans mine and refinery project, located 125 kilometres north of Alice Springs in the Northern Territory. The mineral resource at Nolans is estimated at 56 million tonnes at 2.6% total rare earths oxide (TREO) and 11% phosphate, yielding an ore reserve (that portion of the mineral resource that can be mined economically using today’s assumptions) of 29.5 million tonnes at 2.9% TREO, and 13% phosphate.
Nolans’ endowment is such that over an initial mine life of 38 years, Arafura projects production of 4,440 tonnes of NdPr a year – which would represent 4% of the world’s NdPr (neodymium and praseodymium) by 2032 – and 573 tonnes of samarium-europium-gadolinium/dysprosium and terbium (SEG/HRE, or heavy rare earths) a year, augmented by almost 145,000 tonnes a year of phosphoric acid as a by-product. On the company’s base-case projections, that would result in US$610 million of rare earths sales revenue a year, backed by US$79 million a year of phosphoric acid sales revenue. Arafura’s studies use NdPr prices of US$133–163 a kilogram – more than double current prices.
The light rare earths NdPr (an oxide of neodymium and praseodymium) will be the backbone of the Nolans production. These metals are used in the manufacture of magnets found in electric vehicles (EVs) and wind turbines. Rare earths are also used in the guidance systems of high-tech weapons to steer missiles and bombs towards their targets.
In a common refrain, Arafura points out that about 90% of global NdPr is processed in China, and the balance has largely been secured by Japan; and as I wrote last week, China is suspected of engineering a two-thirds fall in the NdPr price over 2022—2024. That leaves US, European and Korean EV and wind turbine manufacturers highly vulnerable to a market dominated by just one country – and desperate for another, more reliable source.
The heavy rare earths product could be toll-processed in Canada, in a plan that outlines the pathway to separate dysprosium and terbium oxides, essential elements for high-performance magnets, from Arafura’s NdPr oxide production. By integrating dysprosium and terbium into the supply chain, the partnership reinforces Arafura’s commitment to delivering a comprehensive rare earth magnet product solution for customers.
In December 2024, Arafura and Nolans were acknowledged as a Materials Security Partnership (MSP) initiative, highlighting the geopolitical push to secure a globally diversified rare earths supply chain. The MSP represents 14 like-minded countries and the European Union (EU), whose aligned aim is to secure a reliable and ESG-credentialed global rare earths supply chain from projects like Nolans.
Arafura has done well so far with its offtake strategy, signing deals that cover 58% of expected production: the company is keen to have 80% of its production secured in offtake agreements, but it is deliberately leaving a gap open to prioritise offtakers that may also become cornerstone investors. The key customers that are underwriting the first phase of the Nolans ramp-up include South Korean EV maker Hyundai and European wind turbine group Siemens Gamesa. The company says “advanced negotiations” continue with Tier 1 customers and global original equipment manufacturers (OEMs), which cover well more than (133% of) the total offtake target.
Arafura has done a great job assembling more than US$1 billion in debt funding, backed by a funding package of US$533 million from the Australian government, which led the way for international export credit agencies to follow. On the equity side, Hancock Prospecting – the private company controlled by Gina Rinehart, Australia’s richest person – is the largest shareholder in Arafura, with an 8.6% stake.
The company is still busy trying to secure full funding. From the time Arafura makes the final investment decision (FID), the company says it would expect to be producing rare earths concentrates within 37 months. That places production in about 2028 – just when there is expected to be a major NdPr supply gap.
- Hastings Technology Metals (HAS, 31.5 cents)
Market capitalisation: $57 million
One-year total return: –46.5%
Three-month total return: –60% a year
Analysts’ consensus target price: 35 cents (Stock Doctor/Refinitiv, three analysts)
Hastings Technology Metals is developing the Yangibana rare earths project in Western Australia’s Gascoyne region, aiming to become a major producer of rare earth elements, particularly NdPr oxide.
The Yangibana project is fully permitted for first rare earth concentrate production in the first half of 2025. Once operational, the Yangibana Project will support production of around 3,400 tonnes a year of NdPr for use in rare earth magnets, over its initial 17-year mine life.
Yangibana has a current mineral resource of 29.93 million tonnes at 0.93% TREO, and an ore reserve of 20.93 million tonnes at 0.90% TREO, supporting an expected mine operating life of at least 17 years. The deposit boasts one of the best percentages of NdPr to TREO in the orebody of any deposit around the world, averaging 37% over the life of mine and up to 52% in some areas of the deposit.
Hastings plans to develop Yangibana in two stages, with Stage 1 focused on the mine and beneficiation plant to produce a rare earth concentrate. The mining operations at Yangibana will comprise open pit mining, including conventional drill, blast, load and haul, with an estimated ore feed of 1.1 million tonnes per annum into the processing plant. The mined ore will be processed through a circuit of crushing, grinding, floatation, tailings and handling, with an output of up to 37,000 tonnes a year of rare earth concentrate at 27% TREO.
In Stage 2, a hydrometallurgical plant will be constructed which will process the concentrate from Yangibana into an intermediate product called a mixed rare earth carbonate (MREC), through a process of cracking, leaching, precipitation and drying.
Once completed, the plant will have an output of up to 15,000 tonnes a year of MREC at 59% TREO, to be shipped to customers for further downstream processing into NdPr oxides, which are then metallised and alloyed before being made into a permanent magnet. The Yangibana project is fully permitted for first rare earth concentrate production in the first half of 2025.
More recently, the rare earths focus has been sweetened by a potentially major discovery of niobium pentoxide, which could add niobium to the product mix: niobium is emerging as a key metal for technology, with its ability to make steel lighter and stronger, and can be used in high-tech alloys and for faster recharging of lithium-ion batteries. In September, the company reported a measured and indicated niobium pentoxide resource of 6.74 million tonnes at 2,305 parts per million for 15,501 tonnes of niobium pentoxide.
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