Rockstone's Blog emphasized in 2016 that Commerce Resources Corp. and other REE companies were well positioned for strong REE demand growth going forward (2016 and forward). The 12th International Rare Earths Conference hosted by Metal Events Ltd. presented in 2016 an overview and update on all the market metrics regarding REEs, including information on the few remaining active projects in the REE industry.
First, conference speakers clearly outlined that actual REE demand and usage has increased at a robust CAGR (compound annual growth rate) over the past 6 years. This is in stark contrast to the most obvious aspect for the REEs over the same time period, that being their falling prices. As it was opined, prices for several key REEs appear poised for a strong rebound to more sustainable levels over the medium to long-term.
Secondly, the overwhelming consensus is that demand will continue to increase at a robust CAGR, especially with respect to the magnet feed rare earths, principally neodymium (Nd) and praseodymium (Pr) but also dysprosium(Dy), and terbium (Tb).
Thirdly, although considerable research has been completed over the past 6 years to identify economically viable substitutes for magnet feed REEs, none have been found, excepting for the partial substitution using cerium (Ce), which is also an REE. Moreover, cerium as a substitute produces inferior results, thus, limiting its usage. Further, besides the fact that it is widely accepted that there are no viable substitutes for the heavy REEs in permanent magnets, with prices back down to current levels, there is no incentive to look for substitutes anymore.
Additionally, given the forecasted supply of Ce and lanthanum (La) to the market, driven by the production of Nd and Pr for permanent magnets, there has been significant research and development focused on new applications for those specific REEs. These include Ce-Al alloys for the aerospace industry as well as polyvinyl chloride (PVC) stabilizers using Ce and La to protect and prevent degradation of the PVC.
The last several years have seen a massive paradigm shift in the REE market, which only a few predicted and were positioned for - that being, the declining use of REEs in the phosphor market (Eu, Tb, Y) and the persistent push to engineer out, or limit, the use of Dy and Tb in rare earth permanent magnets. This in effect has relegated those projects whose economics are primarily driven by the heavy REEs of Dy and Tb to the back seat, as it is the light REEs, specifically Nd and Pr, that continue to have, and are forecasted over the long-term to have, the fastest growing market. This is also a market that is continually developing new applications for the permanent magnets that these REEs are essential for. And thus, perhaps of greatest significance to the rare earth industry over the near, mid, and long-term, is the developing and expanding applications built on the foundation of rare earth permanent magnets. Two of the most prominent include magnetocaloric chillers (refrigerator units), and industrial robots. Such emerging applications, specifically refrigeration, have only recently begun to forge their market penetration (currently <1%), where others such as industrial robots are poised for explosive growth.
For 2016, the International Federation of Robotics notes a Robot Density (# of multipurpose industrial robots per 10,000 persons employed in manufacturing industry) for China of 49, whereas Singapore and South Korea are 398 and 531 respectively, thus, highlighting the room for considerable growth. Adamas Intelligence is forecasting the annual industrial robot shipments to China to increase from 68,500 units in 2015 to 505,000 units by 2025, for a staggering CAGR of 22.1%. This equates to an additional annual rare earth permanent magnet demand of more than 8,000 tonnes by 2025. When coupled with magnetocaloric chillers, Adamas forecasts that rare earth permanent magnet demand will grow by more than 14,000 tonnes by 2025 from only those 2 applications alone.
Alternatively, in terms of a reasonable expectation that may have a greater psychological meaning than fundamental economic importance, it was claimed that Tesla Motors will move to replace their AC induction motor, which does not use REEs, to a permanent magnet motor that requires rare earth permanent magnets. Although cheaper, the AC induction motor is larger, heavier, and less efficient resulting in more draw on the lithium ion battery pack, when compared to a permanent rare earth magnet motor. Apart from Nikola Tesla having invented the first AC induction motor, Tesla Motors likely chose the induction motor over the permanent magnet motor due to the existing REE prices when their first electric vehicle was developed (Model S). As REE prices have fallen, the market fundamentals are now positioned for a long-term sustainable REE pricing environment where the benefits of rare earth permanent magnet motors far exceed the elevated cost compared to the AC induction motor currently relied upon.
Overall, REEs form the foundation of the high-tech industry and the accompanying global "green revolution" to reduce greenhouse gas emissions along with lithium, and it is expected that we will now see price appreciation for the REEs. Depending on the market analyst, current global demand is estimated at 130,000-150,000 tonnes REO per year, with magnet feed REOs, primarily neodymium (Nd) and praseodymium (Pr) and to a lesser extent terbium (Tb) and dysprosium, comprising the dominant growth market at 6-12% CAGR.
The dominant economic driver for the Ashram Rare Earth Deposit of Commerce Resources Corp. is the magnet feed REOs due to a unique and well-balanced REO distribution focused on those key REOs. When compared to major global producers, the Ashram Deposit's MHREO Zone resource has the highest magnet feed REO distribution at 24.7% LREO: Nd+Pr and HREO: Tb+Dy combined. The heavy REO focused rare earth deposits promoted so heavily during the bubble of 2011-2013 are yesterday's news. Today, and for the foreseeable future looking decades ahead, the deposits anchored with the magnet feed REOs are best positioned for stock price breakout, and ultimately production.
A Rare Earth Market Inflection Point?
• Leading analysts are forecasting a 3-7% CAGR for REO demand out to 2025 (195,000-280,000 tonnes REO per annum). This will be highlighted by the explosive growth of rare earth permanent magnets (Nd, Pr, Tb, Dy) in applications such as refrigeration and industrial robots, as well as PVC stabilizers (La, Ce) and specialty alloys (Ce-Al) for other LREE.
• Many individual REO prices remains significantly higher than they were pre-bubble (pre-2009) and now appear to have bottomed from their 5-year decline, giving further credence to an upward breakout.
• Numerous market analysts forecast a neodymium oxide price of $60-90 USD/kg for sustainability over the long-term, which is considerably higher than where it is today ($35-40).
• China continues to progress with its rare earth industry consolidation and its clampdown on illegal production that has depressed the overall REO pricing environment. As supply is removed from the market, prices will gain upward momentum.
• It is widely believed that Chinese rare earth companies are losing money, and losing money is certainly not part of a sustainable business model.
To put this more into perspective, one only needs to look at the price/demand paradox of the rare earth market today, where REO demand has continued to increase while REO prices have fallen. This is clearly unsustainable, and as the consensus is overwhelmingly in favor of long-term robust demand growth, the prices of REO (moreover the magnet feed REO) are poised for a sustainable breakout to the upside for the long-term.
Rockstone emphasized Commerce Resources Corp.'s Ashram Rare Earth Project as his top pick in the rare earth industry. The deposit's unique and well-balanced REO distribution affords them greater market flexibility, and is anchored by those rare earths that have the strongest market fundamentals over the near, mid, and long-term.The project is located in a great jurisdiction, is large, of good grade, and hosts a simple rare earth mineralogy that has been demonstrated upgradeable into high-grade mineral concentrate (>45% REO) comparable to producers that is of high recovery (>75%). No other rare earth project in development can process their material as effectively as that done with Ashram, and this has led to the Ashram Project having the lowest projected OPEX in the space based on their PEA.
Rockstone concluded that the inflection point is nearly upon us, and thus, the opportunity is now and with Commerce Resources Corp.[This prediction needs to be checked in subsequent news releases].
Read on ......
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