China was a net importer in 2018 for the first time in more than 30 years of at least seven key rare earth elements — including praseodymium, used in magnets, and yttrium, used in ceramics.
BEIJING (Reuters) – China, which is the leading global producer of rare earth elements (REEs), emerged as the biggest importer of rare earth elements in 2018. The REEs find there use in EVs, defence applications, wind turbines, consumer electronics to name a few.
China has for years been the world’s biggest rare earths exporter, sending shipments overseas of more than 53k tonnes in 2018, up four per cent YOY, but the emergence of China being a top importer as well is a surprising development.
The country imported 41.4k tonnes of rare earth oxides and oxide equivalents in 2018, up 167 percent YOY, as a crackdown on unlawful production reduced domestic output, according to a report by consultancy Adamas Intelligence.
The global rare earths mining and processing is supply is dominated by China. As per market research, it is estimated that around 90% of the world’s rare earth production is from China. However, with the mentioned crackdown by Chinese authorities, including the mining of ionic clay deposits in Southern China for environmental reasons, combined with increasing domestic demand for electric vehicles (EV), China has witnessed a decline in the exports of rare earth materials. China has now commenced importing additional rare earth concentrate from offshore sources in order to satisfy domestic demand.
While China is reducing the export of rare earths, the demand for rare earth elements like Nd and Pr are expected to rise, creating a gap between the demand and supply. This is expected to open up opportunities for rare earth companies outside China
Rare earth elements like Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy) are active ingredients for permanent magnets which are used in powering many electric vehicle motors. The combination of Neodymium and praseodymium (NdPr) is commonly used in many rare earth magnets.
As per Lynas Corporation Limited (ASX: LYC), a leading rare earths producer, the demand for NdPr is forecast to accelerate from 2021.
Roskill, a highly experienced research and consulting company, has estimated that within the next five years, NdPr market will double in size and its prices will increase by over 50%.
One of the major drivers for the increasing rare earth demand is automotive market demand, both in terms of technology incorporated into the vehicles manufactured and production quantity.
Lynas, in its 2018 annual report, had noted that energy-efficient, green and luxury vehicles entail significantly more rare earth materials during the manufacturing process than regular motor vehicles. The market price of rare earth materials is influenced by rare earth market traders’ expectations of the demand for green and luxury vehicles as opposed to actual daily demand for vehicles under discussion.
Various Australian companies have identified the inherent structural demand and have started taking major steps to gain from this opportunity.
For comparison, an ASX snapshot of listed REE companies appear below:
Opportunity for Krakatoa Resources: Krakatoa Resources Limited (ASX: KTA), a rare earth explorer in western Australia, subject to grant, intends to is rapidly develop its recently acquired highly prospective Mt Clere Rare Earth Project.
Overview of Mt Clere Rare Earth Project: In June 2019 quarter, Krakatoa Resources Limited acquired 100% interest in the Mt Clere Rare Earth Project which is believed to contain multiple targets, including REE and thorium in enriched monazite sands.
Till now, several exploration programs have been completed on the project. BHP who were not looking for rare earths at the time reported following observations:
- BHP sampling delineated numerous highly prospective areas for thorium and REE mineralisation:
- substantial monazite (with mineral abundances exceeding 50%) identified in a significant number (>20%) of pan concentrate stream sediment samples;
- Monazite concentrates can contain up to 70% REE after physical upgrading, primarily cerium (Ce) and lanthanum (La) as well as significant concentrations of neodymium (Nd), praseodymium (Pr), and samarium (Sm). The thorium (Th) content is also high, ranging from 4% to 12%;
- The distribution of REE within the monazite remains untested;
Astro Mining NL, which was also not looking for REEs at the time, revealed some important observations:
- Extraordinarily high monazite (up to 48%) was independently confirmed in heavy mineral concentrates taken by Astro Mining NL;
- The extremely high levels of thorium are apparent in the airborne radiometric imagery, form prime targets for Chinese-type ion adsorption clays;
- Heavy mineral concentrates also included very high zircon (up to 60%), ilmenite (up to 29%) and leucoxene (up to 20%);
The REE prospectivity of the project was further confirmed by All Star Minerals Plc, which unveiled following observations:
- Heavy mineral concentrate produced from alluvium returned up to 0.46% Ce, 0.25% La, 0.12% Th, 1.4% Zr and 9.9% Ti;
- Numerous REE anomalies returned in limited shallow auger drilling, including sample EBA052: 1050ppm Ce, 660ppm La, 112ppm Pr, 360ppm Nd and 43ppm Sm.
The structural demand for REE from green tech, coupled with a change in global export dynamics augurs well for companies like Krakatoa Resources, which is potentially set to benefit from the demand surge.
Stock Performance: At the market close on 23 August 2019, KTA’s stock was trading at a price of $0.022 with a market capitalisation of around $2.97 million.
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