Red Metal Banter, page-434

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bhadly

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26/03/24

20:19

Post #: 73071058
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Originally posted by Big Poppa Pump: ↑

@bhadly Chinese rare earth production is set by quotas from the CCP, which then ultimately sets prices based on supply and demand. So the CCP decide what rare earth prices are going to be, and it seems to be in their interest to lower prices to kill off Western projects at FID (including ARU, HAS, ASM). Below recent Chinese quotas from LYC quarterly report showing in 2023 they ramped up well above the ~7% demand annual growth rate for NdPr (= oversupply).

I don't believe current prices are being considered by the market when valuing rare earth projects. LYC has a consistent production cost of $43 USD/kg NdPr based on their past three quarters (not including downtime during Q2FY24), so are just breaking even at current prices and that doesn't include huge and recurring exploration, development and sustaining CAPEX costs. Their market cap is $5.4B and LYC has never paid a dividend (even when NdPr was $150 USD/kg through 2022).

MP materials has a cash break even cost around $60 USD/kg NdPr based on their most recent two quarters. Their market cap is $3.7B AUD.

I am not sure what forward average NdPr prices the market is using to value these companies, but it doesn't appear to be <$60 USD/kg NdPr.

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Thank you for the explanation BPP.

It does make sense that China would seek to kill off western supplies of rare earths, but they would have to be careful not to cut their own profits too much I suppose.
A waiting game here as usual .

RDM Price at posting: 17.0¢ Sentiment: None Disclosure: Held
2 Upvote

0 Great analysis

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