A couple of days ago Pensana Rare Earths Plc (LSERE, ASXM8) advised that they had appointed the Wood Group to undertake a study into the establishment of an integrated rare earth processing facility in the UK ("the Wood Group Study") with a view to creating the world's first sustainable magnet metal supply chain. This is excellent news for the UK and Pensana Rare Earths.
One site they should consider is the UK’s largest enterprise zone (the Humber). This zone is already the centre of operations for UK blade manufacturing, offshore pre-assembly and service. It provides space for numerous UK (and some European) offshore equipment manufacturers and supply chains.
It is said that 80% of all North Sea offshore wind farms and 60% of the entire European market for renewable energy is within 12 hours reach of the Humber. There is a deep-water port at Able Marine Energy Park, Port of Grimsby and there are rapidly growing operation and maintenance centre’s for the offshore wind industry.
Siemans have already invested heavily in the Humber Enterprise zone site, the German turbine manufacturer together with Associated British Ports invested £310m in a new offshore wind blade factory. Siemans Gamesa recently unveiled its next generation model. Its offshore wind turbine blade plant has already provided the blades for the largest farm to be built (and will for its successor) Hornsea One and Hornsea Two. The new 14MW direct drive turbines will use 108M long blades and the turbines will require over 7 tonnes of permanent magnets each. This confirms that there will be no shortage of demand, there are many more wind farms to be built...
All of this would tie in nicely with Boris Johnson’s £50bn UK offshore wind revolution and Pensana’s desire to build a UK rare earths processing facility. Boris aims to quadruple UK wind capacity to 40GW by 2030. UK demand for rare earth metals can only increase, the financial markets are already starting to appreciate this with the sharp increase in rare earth companies market capital across the world. Pensana should be in pole position to ensure a cost-effective supply to UK industry, ensuring the UK is not held to ransom by China who presently control all the other processing facilities.
Should the Wood Group Study recommend that Pensana build its facility within the Humber Enterprise Zone (or similar) the benefits would include; job creation, security of magnet supply, tax breaks and government support plus excellent transport links (shipping and rail). There are also enhanced capital allowances which are available to business(es) making large investments in plant and machinery.
All of these factors would be hugely advantageous to Pensana should it decide to go ahead. The financial commitment for such a facility would be huge and Pensana will need all the support it can get. Perhaps also, there will be pollution concerns but the prospect of creating and owning one of the only major rare earth facilities outside of China is too big an opportunity to miss. One thing is certain, you cannot guarantee continuity of supply if you are reliant on one country for processing.
Will there be competition? Well yes, the US have already stated they will assist MP Materials (privately owned) with funding as well as Australia’s Lynas Corp to develop rare earth separation facilities in California and Texas that will rival China’s.
Could such a facility be built in Africa – yes of course, there would be less environmental concerns, cheaper labour etc. but you would be at the mercy of Chinese (built and owned) infrastructure and the instability of government and economic policy.
As an aside, MP Materials could be an interesting investment play, they are expected to list on the New York Stock Exchange (NYSE) later this year under the ticker MP. The company stated it was “poised to become the Western champion of rare earth magnetics, onshoring a critical sector that will power a sustainable future.” No doubt Tesla and EV manufacturers would be interested in securing a rare earth supply source nearer to home.
Pensana have a switched-on management team who should be able to make the most of any opportunity that falls its way, let’s hope the Wood Group Study is of the same opinion and recommends the building of the rare earth facility in the UK. Remember, the Humber Enterprise Zone is very well positioned to serve the UK and European markets.
Regards D1
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