Rare Earths, Lynas And Hastings
By Greg Peel
Jack Lifton has had more than 50 years experience in the global automotive, heavy equipment, electrical, electronic, mining smelting and refining industries. His background includes sourcing, manufacturing and sales of platinum group metals, rare earth compounds and specialist ceramics used to make catalytic converters, oxygen sensors, batteries and fuel cells. Lifton is an expert in analysing supplies of a wide range of "minor metals", including the rare earths. This week Resource Investor interviewed Lifton on the current state of the global rare earth metal market.
The following is a summary of what Lifton had to say.
Last year's rare earth element (REE) bubble was an anomalous speculative blip and today the market is going through a shakeout. Junior miners were coming to fruition at the time and most were overvaluing their projects "something fierce". The bubble has since burst, which has a lot to do with China repositioning itself in the market. The reality is that of some 250-260 globally listed companies claiming REE production potential, it appears only one ? Molycorp in the US ? is in current production. The valuations of others are "coming back down to earth".
Some 90-95% of remaining junior miners will be wiped out. [This is commonly held opinion, and not sensationalist.] Investors should note there is no "single" REE market. Different REEs are used for different purposes and while there is a market for a handful of critical REEs, for at least half of all REEs there is no "market" at all given minimal consumption. For many REEs, production exceeds demand and will continue to do so for the foreseeable future.
There are only five critical REEs which have individual markets. Neodymium is one, given it is the most important REE used in permanent magnets, while the others are heavy rare earth elements (HREE) including europium, terbium, dysprosium and yttrium. Yttrium is not strictly a REE on a periodic table basis but is included by association. Now that general REE prices are correcting to "reasonable" levels, investors are coming to understand the importance of these individual metal over other REEs. [And many metals are labelled as REEs even though, like yttrium, strictly they are not.]
It is important to understand this distinction because many assume all REE prices must collapse, but in truth these critical REEs will remain in strong demand and prices will be supported. There is no significant production of the critical REEs outside China. If both Molycorp and Australia's Lynas Corporation ((LYC)) reach full production potential by 2015, as their guidance suggests, about 60kt of new REE production will hit the market. However only 13% would be neodymium and none would be HREEs.