Rare Earths in Australia

- March 9th, 2021

Although it’s home to producer Lynas, the land down under only accounts for some 3 percent of the world’s rare earth reserves.

Rare earths are elements vital to the modern technology age. The 17 elements grouped as rare earths are found in batteries, magnets, lasers, fibre optics, battle tanks, satellites, guided missiles and wind turbines — and that’s just to name a handful of applications.

By Australia’s own account, the land down under only accounts for some 3 percent of the world’s rare earth reserves — well behind China, the global superpower of the rare earths supply chain.

But there is a global focus on Australia as a rare earths player, and China is part of the reason why. Not because China was hungry for rare earths in the same way it is for all the other commodities Australia sells — but because of a trade dispute between China and Japan.


 

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The rise of Australian producer Lynas

Rare earths have been mined in Australia since 2007, but in 2010 China and Japan engaged in a bitter dispute over fisheries and trawling activity in the East China Sea.

The disagreement saw China, which at the time mined over 93 percent of global rare earths output, halt exports of the minerals to Japan, which needed them for its heavy and high-tech industries.

While the dispute between China and Japan eventually simmered down — as far as any dispute with China can — Japan started to look elsewhere for rare earths in a bid to diversify its purchases.

Enter: Australia. Japan found and poured money into a domestic company called Lynas (ASX:LYC,OTC Pink:LYSCF), which before then had been a small player sitting on a rich deposit of the obscure minerals. Its mine, Mount Weld, was operational, but it was very much small fry.

It’s worth noting that China had an interest in Lynas even prior to Japan. Lynas, which to this day markets itself as “the only producer of scale of separated rare earths outside of China,” was almost gobbled up by the Chinese before the Japanese ever came knocking.

In 2009, state-owned China Non-Ferrous Metal Mining offered AU$252 million for a 51.6 percent stake in Lynas, but the offer was quashed by Australia’s Foreign Investment Review Board on the grounds of concern for non-Chinese buyers.

Australia’s current rare earths production

Since then, Australia has never left the playing field when it comes to rare earths.

In 2019, Australia produced 21,000 tonnes of rare earths, making it the fourth largest producer behind China, and the recent additions of the US and Myanmar. Don’t be fooled, however — every country that isn’t China is a long way behind the Asian nation. China was responsible for 132,000 tonnes of rare earths in 2019, and remains the preeminent producer globally.

While there are more players on the field, Australia has skin in the game regardless, as the trade war between the US and China from 2018 onwards saw the powers that be in the US turn their attention to Australia — a steadfast military ally.

 

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The US has long regarded its dependence on foreign imports of critical minerals as an Achilles heel, and through 2019 and 2020 it sought to bring Australia into its camp, even going as far as signing a critical minerals agreement in 2019.

For its part, Australia loves the attention. As an economic and diplomatic tool it has sought to play up its role as an alternative to China for buyers the world over. That said, the economic indicators for rare earths are hard to gauge, given there’s no set trade mechanism and most deals are done in private.

The future of rare earths in Australia

Lynas remains the primary producer in Australia, but as recently as 2019, Dabid Grabau, who is senior investment specialist for resources and energy at Austrade, boasted that Australia has “anywhere between four and six potential or near shovel-ready projects covering large parts of the country, spanning from Western Australia across New South Wales.”

Companies with projects in the pipeline are operators like Australian Strategic Metals (ASX:ASM), which is developing the Dubbo project in Central New South Wales, Arafura Resources (ASX:ARU,OTC Pink:ARAFF) with the Nolans project in the Northern Territory and both Northern Minerals (ASX:NTU) with Browns Range and Hastings Technology Metals (ASX:HAS) with the Yanginana project in Western Australia.

Given that all the above projects are in the exploration and development stages, it goes without saying that if they come to fruition, rare earths in Australia will be a bright sector to pay attention to. It’s economics 101 to buy a product from a diverse range of suppliers, and as buyers around the world seek alternatives to China, Australia will be front and centre as an enticing option.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Scott Tibballs, currently hold no direct investment interest in any company mentioned in this article.

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