Japan lays claim to Aussie rare earths as race for critical minerals continues

• Lynas gets support from long-time Japanese backers in global race for rare earths supply
• Experts ponder impact of Tesla’s reversal on rare earths motors
• Miners tumble after US rate concerns following Fed char Powell’s comments

 

Japan has extended a deal that gives it priority rights to rare earths from Lynas’ (ASX:LYC) operations in Australia and Malaysia, providing a $200 million investment that will help bank roll its growth ambitions.

It comes amid a global race to upscale production of the commodities, best known for their use in permanent magnet motors within electric vehicles.

Also used in wind turbines, the commodities, especially neodymium and praseodymium are considered key for the transition from fossil fuels to renewable energy.

Lynas is the largest supplier of separated rare earths outside of China, the dominant player in the global supply chain.

As such it’s had interest from plenty of markets, including the US, where the Department of Defence is backing heavy and light rare earths plants to be operated by Lynas.

But Japan was an original backer of the company through a long term loan. In the latest update of the partnership between Lynas and Japan Australia Rare Earths, a special purpose vehicle of Japan’s Organization for Metals and Energy Security and Sojitz, JARE will provide the $200m and forego repayment of a historic US$11.5m interest payment dating back to 2016.

It will subscribe for ordinary shares in Lynas as part of the arrangement, which will give the Japanese market priority supply rights over Lynas’ growth tonnes to 2038.

Lynas plans to produce 12,000t of NdPr annually from 2025 through an expansion of the Mt Weld mine near Laverton.

Should its annual production be under 9600t of NdPr, the Japanese market will get priority over 7200t of NdPr as long as there is no opportunity loss for the miner. At production of over 9600t, JARE will be able to negotiate for a higher allocation if its demand exceeds the 7200t level.

It will also get priority supply of up to 65% of the dysprosium-terbium produced from Mt Weld, subject to agreements with the US Government, and Lynas will consider in good faith priority supply to the Japanese market of the other 35% of heavy rare earths from Mt Weld feedstock.

 

Will Tesla plans hurt rare earths players?

Tesla’s call that it wants to remove rare earths from the next generation of vehicles rolled out by the Elon Musk led EV company sent shudders through rare earths markets last week.

According to IDTechEx, it has been the dominant motor since the roll out of the Model 3 in 2017, when Tesla shifted from induction motors that use copper or aluminium cages on their rotor.

Last year the firm said over 80% of the EV motor market used permanent magnet technology. PM Motors are considered more power dense than induction motors, which have been used by manufacturers like Audi and Mercedes.

“We won’t know the exact details of the new design or the materials used until a later date, but it will be interesting to see if (and can) the rest of the EV market follow suit,” IDTechEx said.

“Tesla alone dropping rare earths could make an impact on overall demand, but if other automakers adopt a similar strategy, this could be a big market shift to a more sustainable and less price-sensitive alternative to rare earth magnets.”

Some analysts, like Adamas Intelligence, say the long term impact of such a shift by Tesla on the rare earths market could be muted, as Stockhead’s Reuben Adams this week reported.

“In 2022, Adamas Intelligence data indicates that passenger EV traction motors were responsible for 12% of global NdFeB magnet consumption,” Adamas says.

“Of this 12%, Tesla was responsible for 15% to 20%, making its overall contribution to global NdFeB magnet demand (excluding micromotors, sensors and speakers) just 2% to 3%.

“Looking forward to 2035, Adamas forecasts that global demand for NdFeB magnets will triple while global production will only double, constrained by long lead times to bring online new rare earth oxide production.

“In relation to the magnitude of the expected supply gap, a 3% to 4% drop in demand by 2035 would go virtually unnoticed.”

Lynas, meanwhile, is struggling through an arduous appeal to extend cracking and leaching of rare earths concentrates at its Kuantan plant in Malaysia past a July 1 deadline after losing a bid to change its licence conditions.

The company is stockpiling inventory to try avoid a production shortfall if it cannot ramp up a new $575m plant in Kalgoorlie quick enough.

 

Lynas Rare Earths (ASX:LYC) share price today:

 

 

 

And on the markets

The less said the better.

Materials fell 1.12%, outpacing the ASX 200’s broader 0.77% loss as Jerome Powell’s hawkish rate rise rhetorics sent gold investors running for the hills.

Energy stocks? Even worse, tumbling a rough 4.24%. With thermal coal prices more than halved this year, that was led by Whitehaven Coal (ASX:WHC), which briefly threatened to drop below $7 for the first time since August.

 

 

Monstars share price today:

 

 

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