Stock prices explode as rare earth rush is restarted

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From the frozen hills of Greenland to the Australian hinterland, a scramble has resumed for rare earths, a family of essential metals in electric vehicles (EVs) and renewable energy systems.

Sidelined for much of the past 10 months by the Covid-19 pandemic, the renewed interest in rare earths has seen major producers and explorers benefit from sharp rises in stock prices as well as forecasts of doubling of the price of certain rare earths.

The investment case for rare earths has traditionally been based on the need to break the quasi-monopoly control of the industry held by Chinese producers.

This concern remains a factor, especially for European and American automakers who need long-life magnets made from two of the metals, neodymium and praseodymium, in their growing production of electric vehicles.

But the new price-determining factor is a growing shortage, even from China, caused by confidence in the start of strong global economic growth next year and a lack of investment in mining exploration and development. .

A measure of investor interest can be seen in strong investor support this week for a $ 22 million (A $ 30 million) capital raise by an Australian company planning to develop a rare earth mine in Greenland.

The funds will be used by Greenland Minerals to speed up work on its Kvanefjeld rare earth project in the southeast of the island which is an autonomous territory of Denmark.

Growing confidence in Greenland Minerals’ mining development plan 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 largest supplier of metals outside of China.

Since falling to a mid-March low of 75c (A $ 1.02), Lynas has risen more than 250% to $ 2.65 (A $ 3.64), in part because ‘It has resolved an impasse with the Malaysian government over rare earth ore processing and in part because of rapid growth in demand for non-Chinese supplies of essential metals.

UBS, an investment bank, is convinced that the demand for electric vehicles will lead to a substantial increase in the prices of rare earths in the coming years, especially for neodymium and praseodymium (generally marketed as NdPr) which could double from $ 50 / kilogram to $ 100 / kg by 2024.

To meet the demand for rare earths in electric vehicles, which require around five times more rare earths than vehicles with combustion engines, an estimate that means the supply of NdPr must triple by 2030.

Insufficient incentive

“We don’t think the market has created enough 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 around $ 60 / kg. Prices have been below this level for most of the past nine years, averaging $ 41 / kg. “

“Rare earth projects have had a turbulent history, they typically lack funding and can take up to five years to develop and grow. “

UBS said the growing demand for electric vehicles and their intensive use of rare earths would cause the NdPr market to run short by 2023, when the price could reach “an ephemeral peak of $ 100 / kg.”

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