Stockhead: A quick punter’s guide to Aussie rare earths stocks

A new class of rare earths explorers have emerged - and they could deliver pay dirt to Aussie investors.

Firms are out there digging deep to find rare earths. Probably not like this.

China’s total dominance in the rare earths industry has been identified as a major problem by other major global powers.

Data suggests that about 95% of the world’s heavy rare earths come from China and neighbouring Myanmar. All that production is effectively funnelled through China’s downstream industry, then used domestically or exported overseas.

In 2009, prices shot through the roof when a diplomatic dispute saw China unofficially block rare earth exports to Japan.

There’s been a lot of talk about establishing downstream processing ex-China, but at the moment it is mostly talk and not a huge amount of action, says Ionic Rare Earths (ASX:IXR) managing director Tim Harrison.

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“I don’t think anyone has any real appreciation how much time it takes to build substantial heavy rare earths separation and refining capacity.

“This is what the Chinese have been able to develop over the last 30 years – an immense understanding and competency that we are going to try and replicate in a short space of time.

“To be able to do that is going to require a substantial amount of capital.”

Investors should primarily be focused on the magnet rare earths – neodymium, praseodymium, dysprosium and terbium, Harrison says.

“While there are potentially many sources of neodymium and praseodymium, (NdPr) there is very, very little potential for substantial supply of dysprosium and terbium,” Harrison said.

Rare earth permanent magnets are a crucial component in wind turbines and in the drive train of hybrid and electric vehicles.

There’s a couple of kilos of rare earths magnets in every EV, and about a tonne in every MW of power produced by wind turbines.

It is the next decade when we will see demand get a little out of control, driven by a projected seven-fold growth in electric vehicles. On top of that you have a forecast eight-fold growth in the offshore wind turbines sector over the next nine years.

By 2030, demand of magnet REOs is forecast to exceed supply by 40%.

ASX small caps on the rise

These explorers represent the new class of rare earths players.

IONIC RARE EARTHS (ASX:IXR)

Market Cap: $262 million

Ionic’s ‘Makuutu’ project in Uganda is shaping up as one of the lowest cost rare earths operations in the world.

The project represents one of the last large-scale undeveloped ionic adsorption clay (IAC) deposits globally.

IAC deposits – like the ones exploited in southern China — are commonly considered to be some of the cheapest and most readily accessible sources of heavy rare earths.

AMERICAN RARE EARTHS (ASX:ARR)

Market Cap: $173 million

The stock has been flying since acquiring the La Paz rare earths project in 2020, and more so since the US has flagged stronger intentions to end its dependency on China for rare earths.

First drilling at the Arizona project since 2012 was designed to build on an existing 128 million tonne resource, and it has done so several times since.

RAREX (ASX:REE)

Market Cap: $60 million

RareX just started receiving the final batch of drill results for its 2021 diamond drilling program at the ‘Cummins Range’ rare earths project in WA, designed to grow the current resource.

The deposit already hosted a JORC-2012 compliant inferred resource of 13Mt at 1.13% total rare earths oxides, for 147 million kg. But in November, exceptional high grades intercepts were reported, and REE hit the jackpot again in January, when multiple intercepts came in well above the resource grade.

And with it went the REE share price, up 40% in a day to 14c.

The drilling program was expected to take 3-4 months to complete but it’s continuing through April. Basically, this thing keeps getting bigger.

RED MOUNTAIN MINING (ASX:RMX)

Market Cap: $14 million

WA explorer Red Mountain is sampling three priority heavy rare earth targets at the ‘Mt Mansbridge’ project.

The project in the East Kimberley region has a high concentration of dysprosium and terbium, giving it a higher basket content of high-value heavy rare earths.

LOTUS RESOURCES (ASX:LOT)

Market Cap: $386 million

Lotus’ main focus is the ‘Kayelekera’ uranium project in Malawi which cost just $US50m to get up and running. In February, Lotus reported a 23 per cent increase in resources at the project.

Then a couple of weeks ago, drilling at its Livingstonia prospect – 90km from Kayelekera – expanded mineralisation by up to 250 metres.

Yep, that’s a quarter KM on the existing resource limits. An updated Mineral Resource Estimate is expected in June.

AUSTRALIAN RARE EARTHS (ASX:AR3)

Market Cap: $54 million

The Aussie explorer joined the bourse on July 1 last year, doubled on debut, tripled a month later and is now back trading at a still respectable 125% higher than its opening price of 30c.

Its Koppamurra project in South Australia and Victoria “is Australia’s largest prospective ionic clay hosted rare earth element deposit”, the company says.

This content first appeared on stockhead.com.au

The views, information, or opinions expressed in these articles do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in these articles.

At Stockhead, we tell it like it is. While Arafura, Ionic, Red Mountain, and RareX are Stockhead advertisers, they did not sponsor this article.

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