What a big week it’s been in rare earths, to verbal the once popular AFL broadcaster Eddie McGuire.
It is difficult to think back to a week that provided more excitement for one commodity than the past five business days have for companies promoting their stocks of dysprosium, terbium, neodymium, praseodymium and so on.
In fairness, according to the true believers, the excitement has been steadily building – even if investors haven’t necessarily been listening.
This all changed for good with some extraordinary share price movements that suggest investors believe rare earths are truly heading for rarefied air.
Check out this cross-section of ASX stocks – Northern Minerals (ASX: NTU) reached 7.1¢ during the week, its highest since late 2021. Rare earths newcomer St George Mining (ASX: SGQ) shot to 16.5¢, its best since late 2020. Arafura Rare Earths (ASX: ARU) ticked to 44.5¢, its best since early 2023, while Australian Strategic Materials (ASX: ASM) hit $2, its highest since mid-2023 – and promptly raised some cash.
And at the top of the rare earths food chain Lynas Rare Earths (ASX: LYC) hit $21.56, a level not experienced since 2011, while Iluka Resources (ASX: ILU) reached $9.28, a two-year high.
Lynas’ market capitalisation of $20.5 billion today almost covers the combined market values of retail household names JB Hi-Fi (ASX: JBH), Dan Murphy’s parent Endeavour Group (ASX: EDV) and Flight Centre Travel Group (ASX: FLT).
The macro picture driving the rare earths evolution has been clear for some time though the past week added another layer of insights.
There was the escalation in the war of words between Donald Trump and his Chinese counterpart, Xi Jinping, amid a threat of 100% tariffs.
And then there was the so-called Rudd Ramp, where some of the ASX-listed critical minerals proponents blabbed about their engagement with Australia’s ambassador to the US, Kevin Rudd, as a surefire thing of US and/or Australian government support to come. The Rudd
Ramp will surely trigger a re-interpretation of Chatham House Rules.
The focus on the Rudd Ramp, of course, is related to this week’s planned meeting in Washington between Trump and Australia’s prime minister, Anthony Albanese.
What is undeniable is that China’s absolute control of the supply chain for rare earths, which are vital in clean energy technologies, advanced defence systems, medical applications and humanoid robotic, is increasingly causing grief in the Western world.
Northern Minerals’ Browns Range heavy rare earths project
Efforts are underway to establish new, non-Chinese supply chains. But establishing these new supply chains is expensive and not (yet) backed by underlying commodity prices.
For all the talk about the “want” for these new supply chains, the capital markets – which struggle to incorporate “strategic value” into their spreadsheet models – are yet to fully swing into action and adjust their returns metrics to allow funding for the plethora of mines and process plants on the drawing boards.
Prior to the past week’s share price runs, many of the proponents were facing capital costs for their projects of up to four times their market capitalisations.
The intervention of governments is slowly changing the investment landscape.
While Australia-based rare earths players are awaiting more details on the Federal Government’s critical minerals strategic reserve, there are hopes it will involve something akin to a commodity floor price to complement an increased government willingness to provide debt funding.
The Trump Administration’s intervention in strategic minerals – whether in rare earths producer MP Materials (NYSE: MP) or in Thacker Pass developer Lithium Americas (NYSE: LAC) – is seen as a potential blueprint for government involvement in developing these new supply chains. As an aside, oft forgotten is that Deterra Royalties (ASX: DRR) has a royalty over Thacker Pass, which one would think has been derisked by the US Government’s support of the project.
Amid the crystal-ball gazing and fortune cookie reading of what will happen next, it is worth looking at two ASX rare earths stocks – Northern Minerals and St George.
Northern Minerals has been working on its 100%-owned Browns Range heavy rare earths project, in the east Kimberley region of Western Australia, for more than a decade.
There have been various iterations of project planning though the focus today is very firmly on pursuing a mine development that can supply xenotime concentrate laden with dysprosium and terbium to Iluka’s under-construction rare earths processing plant at Eneabba, also in Western Australia.
Northern Minerals released a much-anticipated definitive feasibility study into Browns Range last month. Among the flood of information contained in the DFS, a few highlights were:
- Browns Range is genuinely world-class and one of the most advanced heavy rare earths development opportunities in the Western world;
- Browns Range can account for about 8% of current global dysprosium/terbium supply;
- The pre-production cost including contingencies is $592 million, compared to Northern Minerals’ current market value of $470 million;
- Northern Minerals has a clear path to processing and therefore market, with its binding supply agreement with Iluka; and
- The internal rate of return jumps from 12% to 21% if you believe in the fast emergence of a non-China premium price for rare earths.
Northern Minerals is working towards finalising funding for Browns Range’s development and will be watching events in Washington this week with interest.
One of the rare earths highlights of last week was contributed by St George, once famous for some incredibly high-grade but small-scale nickel sulphide discoveries in Western Australia’s Goldfields.
Drilling at St George’s rare earths-niobium Araxa project
Today, St George’s focus is firmly on its 100%-owned Araxa rare earths-niobium project in Minas Gerais, Brazil. Araxa is next door to CBMM’s world-leading niobium production centre.
If St George supporters are to be believed, Araxa is akin to the Pilbara iron ore projects abandoned or overlooked by Rio Tinto and BHP that were used by Fortescue to start one of Australia’s greatest wealth-creation stories.
On Monday, St George announced an eye-popping $72.5 million equity raising that included a $22.5 million contribution from Gina Rinehart’s Hancock Prospecting. Consider, for one moment, that St George’s market value was about $72.5 million just four months ago – today it is $500 million.
Rinehart’s interest in rare earths is well-understood – her other investments include stakes in MP Materials and Lynas, so St George is in great company.
What her longer-term ambition for the Hancock rare earths portfolio is remains unclear.
In the meantime St George says it is fully funded right through to the drill and study phase to get Araxa – which already boasts a world-scale rare earths and niobium mineral resource – to a final investment decision phase.
One thing in this uncertain world is clear – there will be no rarity of rare earths news.
For investors, the challenge will be to sort the doers from the talkers.
