Rare earths investment is driven by long-term demand
\nDemand could hit 7x current levels in just 17 years
\nExplorers now have a much higher understanding of REE project development
\nASX juniors reaching for success<\/p>\n
\u00a0<\/p>\n
Companies with the minerals to prove up rare earths (REE) projects are looking increasingly likely to end up in the winner\u2019s circle these days, yet there\u2019s still a struggle to secure investment in the short term.<\/strong><\/p>\n Not to worry though, because a new wave of REE explorers with a much better understanding of how to develop these projects are coming to the fore, which we\u2019ll lay out in this, Part 1<\/strong> of our REE Survival Guide<\/strong> series.<\/p>\n \u00a0<\/p>\n There\u2019s a huge amount of upside to getting REE projects online, as governments around the world aim to drive the diversification of supply chains for technological advancements and clean energy goals.<\/p>\n The International Energy Agency says demand for REEs is expected to reach three to seven times current levels by 2040<\/a>, driven by EVs, wind turbine production and other technological advancements.<\/p>\n \u00a0<\/p>\n Source: International Energy Agency.<\/p>\n \u00a0<\/p>\n Yet because production outside China has traditionally been \u2013 to put it bluntly, rare \u2013 it\u2019s led to a lack of understanding of REE projects from investors in the West, leaving explorers screaming harder than most mining hopefuls for the backing they require to develop deposits.<\/p>\n It\u2019s also been regarded as a relatively niche set of commodities to mine too, due to a shortfall of people with the right experience to navigate the exploration and development of REE deposits.<\/p>\n That\u2019s been changing at pace.<\/p>\n \u00a0<\/p>\n Not without their struggles<\/a>, REE producer Lynas (ASX:LYC)<\/strong><\/a> and developer Arafura\u00a0Resources (ASX:ARU)<\/strong><\/a> are two examples of companies outside China that have been ahead of the pack in recent years.<\/p>\n It took LYC about two decades and lots of ups and downs to become the $6bn market-capped miner they are today. In 2015 the company was worth just $3m.<\/p>\n Its MD Amanda Lacaze, who\u2019s steering the company\u2019s Mt Weld REE project in WA, says the success of developing an outside-China industry is important for all of us<\/a>.<\/p>\n \u201cThe main game is China, right? That is our competition,\u201d Lacaze told our Stockhead<\/em> Josh Chiat at the annual Diggers & Dealers<\/em> conference in Kalgoorlie last year.<\/p>\n \u201cFor the rest of us, our success is going to be about building this outside-China industry. Otherwise, we simply produce material that ends up going into China for finishing and further value-adding.\u201d<\/p>\n Arafura believes it\u2019s well on its way to emulating LYC\u2019s success with its $1.6bn Nolans neodymium-praseodymium (NdPr) operation in the NT, which once developed, is pegged to produce 4,400tpa NdPr for the next four decades.<\/p>\n The explorer started focusing on Nolans\u2019 NdPr endowment in 2008. It\u2019s been a long and arduous journey for both of them, yet global pivots away from Chinese production and processing as well as growing demand have changed the landscape for juniors.<\/p>\n \u00a0<\/p>\n Those lessons are quickly being learned and Stockhead<\/em> spoke to Heavy Rare Earths (ASX:HRE)<\/strong><\/a> exec director Richard Brescianini who says he sees a wave of ex-China REE explorers beginning to realise exactly how to prove up deposits into production with lower capex and higher returns.<\/p>\n \u201cWe\u2019re fast getting to the point where we have a very high level of understanding without having to go into pre-feasibility or other studies which can be expensive early on in the discovery phase,\u201d Brescianini says.<\/p>\n He reckons there\u2019s three classes of REE projects to consider when looking to invest.<\/p>\n \u201cThere\u2019s some who are just sort of starting out and they\u2019re just starting to drill some holes, trading on the fact of showing the market they\u2019ve got a great intercept \u2013 and granted there\u2019s some excitement to that,\u201d Brescianini says.<\/p>\n \u201cThen there\u2019s the class of projects that have a resource in place already and any further drilling would likely just be to get the reserves under control, but it\u2019s probably best not to do that until you understand the metallurgical process of your deposit \u2013 that\u2019s where we are at the moment.<\/p>\n \u201cAnd that\u2019s really the bottom line for us. We have a large resource and substantial growth potential for turning those resources into reserves assuming that our metallurgical process can deliver something viable.\u201d<\/p>\n He\u2019s alluding to HRE\u2019s flagship 159Mt Cowalinya REE project \u2013 which we\u2019ll talk about soon.<\/p>\n \u201cThe third are those that are really showing good progress \u2013 particularly in the emerging clay space, particularly in Brazil where they are advancing and showing good progress in metallurgy and advancing quickly to scoping and PFS studies,\u201d Brescianini says.<\/p>\n \u201cYou\u2019ve then also got a bunch of hard rock explorers already knocking on the door of financing.<\/p>\n \u201cAt the end of the day, it all comes back to capital and operating costs, the ability to recover REEs and how to suppress the impurity elements in processing to produce a rare earth carbonate.\u201d<\/p>\n \u00a0<\/p>\n Brescianini says he also values transparent reporting, management experience and a strategy in place to mitigate difficult calls that may need to be made as companies develop their projects.<\/p>\n \u201cInvestors have got to take a look at that and say what are the chances they\u2019ve actually got something that\u2019s viable on their hands that then allows them to raise more money to go out and do, say, more drilling or to start feasibility studies,\u201d Brescianini says.<\/p>\n \u201cAs an example, to build a greater resource inventory that demonstrates that they can produce something over a 30 or 40-year period because of the throughput required, you\u2019re going to need some big, big tonnes sitting out there to justify raising more money.<\/p>\n \u201cAll these different classes of deposits at different points of the value chain means there\u2019s no shortage of choices for investors.\u201d<\/p>\n \u00a0<\/p>\n Brescianini is charged with progressing the development of Cowalinya near Norseman, WA \u2013 a clay-hosted deposit with a 159Mt @ 870ppm total rare earth oxide (TREO) resource that within it contains valuable magnetic rare earth oxides (MREO) such as NdPr.<\/p>\n The company has nearly completed crucial metallurgical testwork which recently showed \u201cexcellent\u201d MREO extraction to leach as high as 92.3%, and acid consumption as low as 3.8kg\/t.<\/p>\n HRE says once all results are in, the data will lead to larger-scale piloting and commercial analysis of Cowalinya.<\/p>\n Explorer DY6 Metals (ASX:DY6)<\/strong><\/a> just completed geological programs at its Salambidwe REE-niobium project in southern Malawi and sees an \u2018enticingly large target\u2019 after expanding the Western Zone to ~1,700m in length and the Eastern Zone to ~1,500m.<\/p>\n Results from a 128 soil and 386 rock chip sampling program<\/a> returned up to 1.21% TREO and 0.12% niobium and DY6 is now in the process of defining priority targets from within those zones for drill testing.<\/p>\n The company is also exploring its flagship Machinga, where eight diamond drill hole results showed an average of 29% heavy rare earths in TREO<\/a> within a strongly mineralised hydrothermal breccia system.<\/p>\n Stay tuned for Part 2.<\/p>\n \u00a0<\/p>\n\n \ufeff<\/span><\/span>\u00a0<\/p>\n At Stockhead, we tell it like it is. While Heavy Rare Earths and DY6 Metals are Stockhead advertisers, they did not sponsor this article.<\/em><\/p>\n This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.<\/em><\/p>\n <\/span><\/p>\n The post REE Survival Guide \u2013 Part 1: Rare earths explorers are getting smarter \u2013 here\u2019s what to look for<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Sustained market demand and a lack of expertise<\/strong><\/h2>\n
Lessons from the past<\/h2>\n
Searching for value<\/h2>\n
Running a tight ship<\/h2>\n
Explorers looking to do it right<\/h2>\n