America has lit a fire under the rare earths market. Now ASX juniors want Australia to do the same

ASX rare earths explorers and developers have been buoyed by a US Government deal that could send prices through the roof.

The Trump Administration has lit the match that could kick off the next rare earths boom. Pic: Getty Images

• Rare earths miners are hopeful of higher prices thanks to a US Government deal with California miner MP Materials

• Floor price of US$110/kg for NdPr could drag ex-China rare earths prices higher

• Developers and explorers want Australia to follow suit and provide floor pricing to build ex-China supply chain

In the weeks ahead of the Federal Election, the Albanese Government launched its "Trump Card", to get miners onside and float a carrot in the face of the US Administration in a bid to allay the threat of tariffs.

A $1.2 billion commitment to build a critical minerals stockpile, leveraging the geological miracle of WA with its bounty of lithium, nickel and rare earths, was proposed as a way to support a set of industries beaten down by Chinese market control and manipulation and give the US access to something it dearly wants.

Like so many political commitments it was wishy-washy. What would go into that stockpile was unclear.

Lynas (ASX:LYC) boss Amanda Lacaze declined last month at a media huddle in Perth to say whether the company had been in negotiations about selling material to Canberra from its Mt Weld mine near Laverton, or what price it may chase.

But a shot in the arm was delivered by the Americans themselves last week, which could set prices for any similar initiative the Aussie Government wants to roll out.

MP Materials, the US$7.4 billion owner of the US' only rare earths operation at Mountain Pass in California, inked US$400m in equity investments from the Department of Defense as part of a multi-billion dollar public-private partnership that will make the Pentagon a 15% shareholder in the New York listed company – a 52% gain on Thursday already putting the taxpayer in the money.

Contained within that deal were loans to expand and construct new and existing magnet production plants and, crucially, a 10-year arrangement to buy or stockpile oxides from Mountain Pass at US$110/kg NdPr oxide.

Even with prices in China surging in response to the news, that clocks in at roughly double the Chinese market price once value-added tax is removed. If ex-China pricing rises to meet that signal, the key circuit-breaker to kick-off stalled rare earths developments – ending low prices resulting from overproduction in the Middle Kingdom – could be triggered.

Argonaut's Jon Scholtz and George Ross said the deal could provide guidance for future offtakes in Australia, such as for the Iluka Resources (ASX:ILU) Eneabba Refinery in WA, which is being supported by close to $2 billion of cheap Canberra debt.

"We view this move as a positive which solidifies the US rare earth magnet supply chain. Of our covered, LYC has upside from the US Plant (separate heavies) which would fill the last remaining gap in the US supply chain," they said in a note on Monday.

"While this provides precedent for ILU’s Eneabba facility and potential offtakes with the Australian government for a strategic stockpile."

Developers rejoice

The MP Materials news unsurprisingly sent a whole host of rare earths stocks flying on Friday.

READ: Monsters of Rock: Crazy US government rare earths deal puts rocket under sector

And even more ASX companies are now stepping out with calls for more support for western rare earths supply.

"China’s price manipulation of rare earths has halted the development of dozens of otherwise viable projects globally and hurt the bottom line of companies such as Lynas," Victory Metals (ASX:VTM) CEO and executive director Brendan Clark said.

"It’s not that the demand isn’t there it’s that the economics have been artificially crushed to maintain China’s dominance.

"That strategy has worked for a long time, but this kind of US Government backed partnership is exactly what is needed to break that control."

VTM owns the North Stanmore project in WA's Gascoyne region. It's already built strong ties with the US Government despite being based in Australia.

The project, which promises to deliver critical metals including heavy and light rare earths, gallium, scandium and hafnium for the defence, semiconductor, auto and energy sectors, has already received a letter of intent for a US$190m funding package from the US Export-Import Bank.

With System for Award Management approval this week it is now able to throw its hat in the ring for further support and engagement with the Pentagon and other US Government departments.

Clark said he was pleased by the level of US involvement to date, and expects to see more news in the pipeline.

"I predict you will see more of these types of announcements especially for the more critical rare earths like dysprosium and terbium," he said.

Others, like Red Metal (ASX:RDM) boss Rob Rutherford, have called for Australia to mirror the policy direction from the DoD.

His company owns the Sybella project near Mt Isa in north Queensland and he thinks the Australian Government should work with nations like South Korea and Japan to set up subsidised intergovernmental supply chains.

“It is now up to other manufacturing nations like South Korea, Japan, Europe and even Australia to invest in expanded magnet capacity with REO supply guaranteed with similar price flooring mechanisms," he said.

“I strongly believe the Australian Government should jointly fund and build magnet plants in these resource-poor manufacturing nations, government to government, on the provision they utilise Australian raw REO materials."

Excitement brews in Brazil

While the DoD has set its focus on the sole domestic operation in the United States – something that lead to big price gains since Friday for ASX stocks in the immediate vicinity like Dateline Resources (ASX:DTR) and Locksley Resources (ASX:LKY) (both continued climbing ~12% on Monday) – other jurisdictions could stand to benefit.

The key exploration jurisdiction open to the West for rare earths outside the US and Australia is Brazil, where explorers are trying to prove up "China-style" clay-hosted rare earth deposits.

Developers have been seeking to align their exploration and resource compilation efforts tailored to commodities the US desperately wants for its defence and tech markets.

Alongside rare earths, that also includes critical minerals like gallium, a key component in semiconductor chips also subject to controls from Beijing.

One of those is Axel REE (ASX:AXL), which is aiming to compile a maiden resource of both gallium and rare earths at its Caladão project.

"As countries seek to diversify away from China’s dominance, rare earths jurisdictions like Brazil, with strong resource endowments and a growing appetite for foreign investment, are rising in global importance," AXL's Pat Volpe said.

"Our Caladão Project is particularly well placed in this emerging landscape. With high-grade magnetic rare earths mineralisation, and more importantly exceptional at surface gallium content, Axel’s portfolio is aligned with the very materials now being prioritised by US and allied governments.

"Gallium, in particular, is rapidly gaining attention for its role in semiconductors and 5G infrastructure, yet global supply is almost entirely controlled by China. Projects like ours can play a meaningful role in reshaping that balance.

"This US investment will likely trigger a broader reassessment of how and where the world sources its critical minerals."

Demand strength

Others think it says as much about the demand side as it does supply chains.

Demand for rare earth metals could lift from 93,000t in 2023 to 169,000t by 2040, according to the International Energy Agency.

RareX (ASX:REE) managing director James Durrant says the MP investment highlights how important rare earth elements are to the defence sector.

With investment in defence budgets increasing, more REE magnets will be required to fuel growing drone and airforce fleets, along with other military tech and weaponry.

RareX owns the Cummins Range project in WA's north, a large deposit consisting of rare earths and phosphate, with high grade hits also of scandium and gallium.

But it is also leveraged to any supply deals Iluka makes, with the junior collaborating with the mineral sands producer to potentially pick up the Mrima Hill project Kenya, where rare earths enriched material would be mined and then shipped for processing at Eneabba.

Durrant says "diversification is always key for competition and supply security".

"If the Americans are doing this, will the Australians follow? There's already Australian Government debt, but will they go into the equity space?" Durrant asked.

"Could DoD equity see itself here in Australia, also, as part of 'domestic' supply chains?

"Does it trigger a bifurcated market? And how does that translate to the costs of products with Non Chinese magnets? Magnets are only a small proportion of product cots.

"Could the West set a rare earth pricing policy globally or multilaterally?"

The possibilities are seemingly endless.

Originally published as America has lit a fire under the rare earths market. Now ASX juniors want Australia to do the same