Over recent years, the so-called “critical minerals” – minerals considered essential components in the trend to “decarbonisation,” the transition to clean-energy and the burgeoning electric vehicle (EV) industry – have been a huge theme in mining. Within the critical minerals area, the 16 rare earth elements are a particularly exciting subset.
The rare earth metals – which are actually not all that rare, geologically – are used in the manufacturing of many electronic products that power the global economy, including smartphones – a single smartphone contains eight different rare-earth materials – as well as electric vehicles, aircraft engines, and wind turbines. They are crucial to making the high-tech permanent magnets that are essential for electric motors, batteries, lasers, robotics and wind-power generation. The global push for net-zero carbon emissions through the adoption of electric vehicles (EVs) and renewable energy (particularly wind turbine) installations is driving demand for rare earths.
The 16 rare-earth metallic elements comprise neodymium, praseodymium, dysprosium, lanthanum, cerium, promethium, samarium, europium, gadolinium, terbium, holmium, erbium, thulium, ytterbium, lutetium and yttrium. Scandium is also included in manly lists of rare earths, but its geological occurrences and chemical properties differ from the rest.
The rare earths are divided into the “light” and “heavy” rare earths, based on their atomic number. The light rare earths are neodymium, praseodymium, lanthanum, cerium, and samarium; these elements typically comprise approximately 85%—90% of rare earth resources. The “heavy” rare earth metals make up the balance and are much less abundant.
It’s a fascinating market, because China dominates rare earth elements production, as it does for most of the ‘critical minerals,’ and the western nations are desperate for other sources. Rare earths have become a political pawn.
China accounts not only for 70% of all rare earth extractions, but also 87% of all processing, including virtually all the “heavy” rare earths, dysprosium and terbium. Through production quotas, regulations on domestic rare earths mining, smelting and trading, and bans on exporting technologies for rare earths processing, China has a tight grip on the global supply chain. China manipulates the price of the key rare earth material for making powerful magnets, NdPr (an oxide of neodymium and praseodymium), and was suspected of engineering a two-thirds fall in the NdPr price over 2022—2024. The prices remain a war between expected future demand growth, geopolitical tensions and Chinese government actions and production trends.
It’s a huge dilemma for the companies trying to bring deposits to production, and the investors trying to get ahead of this curve. Western governments are showing that they are prepared to intervene in the market, too, by providing funding to develop an industry that is independent of China.
What’s certain is that the market will grow. Research firm Fortune Business Insights estimates that the total value of the global rare earths mining industry will almost double from US$2.8 billion in 2021 to $5.5 billion in 2028, at a combined annual growth rate of 10%. This should eventually lift the prices of rare earths. Figures from data platform Statista estimate that the value of NdPr, for example, will increase from around US$54 a kilogram at present to $77.50 in 2025. NdPr prices are up about 14% so far in 2025, and up about 24% so far in financial-year 25.
In the first of a two-part series, let’s first take a look at Australia’s rare earths producers. Next week, I’ll look at which companies might become Australia’s – or the ASX’s – next rare earths producers.
- Lynas Rare Earths (LYC, $7.19)
Market capitalisation: $6.7 billion
12-month total return: 18.3%
3-year total return: –10.3% a year
Expected FY26 dividend yield: no dividend expected
Analysts’ consensus target price: $7.65 (Stock Doctor/Thomson Reuters, 15 analysts), $8.75 (FN Arena, two analysts), $6.88 (FN Arena, six analysts)
Lynas is the undoubted flagship of the Australian rare earths sector, mining rare earths at its world-leading orebody at Mt. Weld in Western Australia, which began production in 2007. An ancient collapsed volcano, Mt Weld is one of the largest and highest-grade rare earths deposits in the world, and has plenty of potential to grow as further exploration is conducted: last year, Lynas announced it had almost doubled the Mt Weld mineral resource, from 55.4 million tonnes to 106.6-million tonnes, at a grade of 4.12% total rare earths oxide (TREO), while the ore reserve (that portion of the mineral resource that can be mined economically using today’s assumptions) lifted 63%, to 32 million tonnes at 6.44% TREO. Those numbers support a mine life of more than 20 years.
Lynas Rare Earths is in a great position in the global market, being the biggest non-Chinese producer of rare earths, at a time when it is becoming crucial for western economies to secure supplies. Rare earth concentrates produced at Mt Weld are shipped to Malaysia for separation into rare earth oxides (sold under long- term contracts), and a mixed heavy rare earth concentrate (shipped to China for processing). In November 2024, Lynas opened a processing plant in Kalgoorlie – Australia’s only downstream rare earths processing facility – which enables the company to shift rare earth carbonate production from Malaysia to Australia.
The company’s main product is a mix of the “light” rare earths neodymium-praseodymium (NdPr), sold mainly to Japanese customers, and used in high-tech magnets for batteries and wind turbines, consumer electronics, robotics, appliances and medical devices. There are “light” and “heavy” rare earths, based on their atomic number: the light rare earths are neodymium, praseodymium, lanthanum, cerium, and samarium. These elements typically comprise approximately 85%—90% of rare earth resources. The “heavy” rare earth metals make up the balance and are much less abundant.
Mt Weld also contains the heavies, and this year, Lynas will produce two new heavy rare earth (HRE) products for the first time, with a new process at its Lynas Malaysia metals processing plant producing separated dysprosium and terbium for the first time, complementing Lynas’ existing light rare earths product range. First production of SEGH, a mixed heavy rare earth compound containing mixed samarium, europium, gadolinium, holmium, dysprosium and terbium is expected in the middle of the year, enabling Lynas to break into the heavily controlled Dy/Tb market; dysprosium is used mainly in alloys for neodymium-based magnets, while terbium is used in solid state devices and low-energy lights. (In the 2024 Mt Weld resource upgrade, the amount of contained dysprosium oxide increased by 92%.)
Lynas is also building two rare earths separation plants in the US, both of which will receive material directly from Kalgoorlie. The first plant will be a “light” rare earths metals plant equipped to produce about 5,000 tonnes of rare earths products per year, including about 1,250 tonnes of NdPr, while the second plant, will handle “heavy” rare earths. The US projects are co-funded by the US Department of Defense (sic), which tells you how keen the US is on having a non-Chinese supply option. The US has not had Rare earths separation capability for several years, and the co-funded Lynas plant will ensure the country has a secure domestic source of high quality rare earth materials: security of supply is an essential foundation for the renewal of downstream specialty metal making and permanent magnet manufacturing in the US, which the Trump administration (and the Biden administration before it) is determined to establish.
Last month, Lynas reported a net profit of $5.9 million in the first half of 2024-25, down from $39.5 million and falling well short of analyst forecasts for $32.2 million. Revenue rose by 8% to $254.3 million, mainly due to a 22% jump in NdPr production, but a lower average price hurt the profit. Lynas is heavily leveraged to the NdPr market.
Lynas has built an excellent position in the global rare earths market, standing-out as a major producer outside China; longer-term its US operation, in particular, should be a game-changer, opening it up to US buyers desperate for a non-Chinese source, let alone one located in the US. Lynas has a long mine-life, excellent processing capabilities, a good, broad product range (especially with its promising new expansion into the Dy/Tb market) and a strong balance sheet (a net cash position of $112 million at the end of the December 2024 half.) Longer-term, Lynas has very good prospects, but in the shorter term, analysts are very divided: price targets for LYC range from $5.50 (Citi) to $7.95 (UBS). The rest of 2025 could be rocky for Lynas Rare Earths, but it looks like a long-term buy, for when it is eventually producing about 12 000 tonnes a year of NdPr.
- Iluka Resources Limited (ILU, $4.08)
Market capitalisation: $1.7 billion
12-month total return: –39.8%
3-year total return: –25.1% a year
Expected FY26 dividend yield:
Expected FY23 (December) dividend yield: 2.3% fully franked (grossed-up, 3.3%)
Analysts’ consensus target price: $5.40 (Stock Doctor/Thomson Reuters, ten analysts), $5.58 (FN Arena, five analysts)
Better known as a mineral sands producer – it is a leading global producer of zircon and high-grade titanium dioxide feedstocks like rutile and synthetic rutile – Iluka Resources had a brainwave in 2020. It had always known that rare earths were contained in the mineral sands monazite and xenotime, which it previously mined at its mothballed Eneabba mine in Western Australia, and that it could produce them from stockpiles at Eneabba. The Eneabba stockpile contains monazite and xenotime, produced as by-products from Iluka’s Narngulu mineral processing plant and stored since the early 1990s.
Simple reclamation allowed the company, in the September 2020 quarter, to ship demonstration samples of a rare earths concentrate containing neodymium, praseodymium, dysprosium, terbium, cerium and lanthanum, to world markets. From the original idea to address the problem of what to do with large stockpiles of monazite, Iluka has committed to building a fully integrated – that is, mining, processing, and refining – rare earths refinery at Eneabba, with a strategy to capture greater value through the full supply chain.
Iluka got a $400 million loan through the Australian government’s Critical Minerals Facility, which will finance part of the $1.8 billion refinery expansion (government support was critical to the final investment decision on Eneabba in 2022). By entering the rare earths market, Iluka can diversify its revenue streams and capitalise on the growing global demand for critical minerals. Detailed earthworks began at Eneabba in the final quarter of 2024; all major infrastructure (power, water, gas, roads, rail) is in place; and the project is on track for commissioning in 2027, with first commercial production expected in 2028.
Eneabba will also take 30,500 t of total rare earth oxides with significant quantities of dysprosium and terbium, from Northern Minerals’ Browns Range project, located in the East Kimberley region, over an initial eight-year mine life, representing the majority of its Browns Range’s first-stage production – this deal is subject to Browns Range getting off the ground.
Iluka’s rare earths downstream strategy could be a big boost to the company’s revenue, profits and valuation, but progress is in the early stages – and analysts do see risks because ILU has little experience in technical process of producing rare earths. It is crucial that Iluka methodically de-risks the rare earths project, through achieving everything it promises.
From 2% of Iluka’s revenue in the last five years, analysts at Macquarie see rare earths moving to 16% over the next five years, with Eneabba becoming close to 40% of Iluka’s net present value (NPV).
In the company’s long-term favour is the fact that both its mineral sands and rare earths products are very much critical minerals, despite the short-term weakness in pricing. Shareholders are entitled to be disappointed in the two-thirds fall in the ILU share price since mid-2023, but the mineral sands market is improving, Eneabba is proceeding and the outlook for Iluka from here is cautiously promising.
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