From the frozen hills of Greenland to the outback of Australia a rush has restarted for rare earths, a family of metals essential in electric vehicles (EVs) and renewable energy systems.
Sidelined for much of the last 10 months by the Covid-19 pandemic the re-awakening of interest in rare earths has seen leading producers and explorers enjoy sharp share price rises along with forecasts of a doubling in the price of some rare earths.
The investment case for rare earths has traditionally been based on the need to break the near-monopoly control of the industry held by Chinese producers.
That concern remains a factor, especially for European and U.S. car makers who need long-life magnets made from two of the metals, neodymium and praseodymium, in their increasing output of EVs.
But the new price-driving factor is a developing shortage, even from China, caused by confidence in the start next year of strong global economic growth and a lack of investment in exploration and mine development.
A measure of investor interest can be seen in robust investor support this week for a $22 million (A$30 million) capital raising by an Australian company planning to develop a rare earth mine in Greenland.
The funds will be used by Greenland Minerals to accelerate work on its Kvanefjeld rare earth project in the south-east of the island which is an autonomous territory of Denmark.
Increasing confidence in the mine development plan of Greenland Minerals has seen the company’s share price double since mid-year.
It’s a similar story at Lynas Corporation, an established Australian producer of rare earths and the biggest supplier of the metals outside China.
Since slumping to mid-March low of 75c (A$1.02) Lynas has risen by more than 250% to $2.65 (A$3.64), partly because it has resolved an impasse with the government of Malaysia over the treatment of rare earth ore and partly because of rapid growth in demand for non-Chinese supplies of the essential metals.
UBS, an investment bank, is confident that demand for EVs will trigger a substantial increase in rare earth prices over the next few years, especially for neodymium and praseodymium (commonly traded as NdPr) which could double from $50/kilogram to $100/kg by 2024.
To meet rare earth demand in EVs, which require about five-times as much rare earth material as vehicles with a combustion engine, an estimate which means the supply for NdPr needs to triple by 2030.
“We do not think the market has created sufficient incentives for supply growth to triple by 2030,” UBS said in a research note on Lynas.
“We estimate that an incentive price for NdPr is approximately $60/kg. Prices have been below this level for most of the past nine years, averaging $41/kg.”
“Rare earth projects have had a troubled history, they generally lack financing and can take up to five years to develop and ramp up.”
UBS said growing demand for EVs and their heavy use of rare earths would shift the NdPr market into deficit by 2023 when the price could reach “a fleeting peak of $100/kg.”
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