Chinese control (monopolise) most of the sourcing of rare earth oxides and secondly the refining and conversion to magnets - a lot of the time vertically integrated.
What this means is that even if end user demand in the magnets and therefore the price of magnets were increasing, they can simply cop the same rate for the refined and or MREC and make the margin on the magnet making. This is almost identical to what happened with lithium when there was less transparency and less alternatives for the hydroxide and carbonate conversion and then creation of batteries.
I guess you can surmise that by market pricing transparency and the effect when one monopolises an area. Page4/5 of the IXR presentation delineates this.
Now that's if you think there's funny business is the pricing mechanisms. Noting that the Magnet price has been fairly steady which would suggest supply side is increasing. (see below)
The other thing to consider is that the supply and demand curve of lithium is simply different to that of REO supply. China clearly has some flex currently to meet global demand but forecasts are at this stage suggest 2023 is probably when the deficit becomes hard to maintain. chinese production via hardrock (LREE dominant) projects has risen from ~87ktpa in 2017 and has been increasing by 10-15ktpa each year.
The kicker is that the Chinese IAC project production has been flat - and the Myanmar imports have been growing to meet extra demand for HREO (Dy and Tb). That import quota exceeds china's quota for HREO mining.
It should not be overlooked that ~40% of all REO supply is from recycling. To which china owns 99% of. When it comes to REO supply it's far easier, less capital intensive to build more modular recycling capability as opposed to sourcing the raw materials from mines which can take 5-7years to develop from discover to production. This is why the magnet recycling arm of IXR is very overlooked. I do believe IXR will be looked at as more a refiner/recycler than it will be for Makuutu - but a 50Y+ supply of the materials (exploration targets) from the front end is the way that IXR can completely decouple china from the supply chain.
Recommend reading the investor presentation - contains a lot of this information with cited references from various places. It's probably slightly more credible than being simply read as my opinion.
In short, china has been ramping Hardrock production internally over last 5 years to meet demand for LREO (Nd,Pr) whilst IAC production for HREO (Dy, Tb Y,) is flat. Imports from Myanmar have filled the gap.
With cChinese IAC's deposits depleting and imports from Myanmar at capacity its the HREO's that will get pinched the hardest. Whilst NdPr is forecasted to be in deficit by 2023 - 98% of REO in development are selling NdPr based baskets and thus these are the most likely to get developed to fill that gap. Whilst there remains no substantive long term supply for Dy,Tb,Y etc with a handful of exceptions (NTU for example is a Dy biased project). Those hoping to run their own sep/refinery plant will need 3rd party stocks to make it viable - you need to have HREO biased basket to base and build a refinery on it. It's why Lynas's proposal to build one is a little fraught with risk. I can't see the by-product from the mine being able to underpin a HREO sep plant own.
Looking forward to the progress here but being mindful that Makuutu is just 1 piece of the puzzle. Magnet recycling is a 99% addressable market within china - that's a hell of a lot of REO products making their way back into the supply chain that never come from a mine. IXR tapping into that and then supply their own product from mine to refinery is equally as appetising.
my 2c
SF2TH
IXR Price at posting:
3.9¢ Sentiment: None Disclosure: Held
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