Brazil was the place to be during the week for ASX-listed rare earths companies.
Like the rest of the rare earths stocks, they got a lift from China extending reporting requirements for exports of rare earths metals and oxides against a backdrop of recent curbs on other metals critical to the green revolution.
China currently dominates global rare earths supply and demonstrated back in 2010 in a territorial dispute with Japan that it is prepared to withhold supplies to make a point.
In more recent times, it has wielded its dominance of the semiconductor metals germanium and gallium, and the battery anode material graphite, in a tit-for tat response to the US restricting its access to semiconductor chip manufacturing equipment.
The extension of China’s export reporting requirement did not exactly fire up prices for rare earths but it did serve as a reminder to the world that there is a risk to supplies for the critical magnet metals from an unhealthy reliance on a dominant supplier.
It means both industry and governments around the world will remain focussed on encouraging new non-China supplies to come forward, just as Japan did with its backing of ASX rare earths leader Lynas (LYC) after its 2010 scare.
More particular to the rise of interest in the Brazil-focussed stocks on the ASX during the week was the circulation of terms for the IPO of the simply named, and Gina Rinehart-backed, Brazilian Rare Earths (BRE).
At the issue price of $1.47 a share in the $50m IPO, BRE will have a market cap of $315m, with Rinehart’s Hancock Prospecting holding about 6%. BRE comes to market with an inferred mineral resource of 510.3Mt at 1,513ppm.
But unlike the other Aussie players in Brazil with a focus on ionic-clay hosted rare earths, BRE’s resource is split across 25Mt of high-grade monazite sands grading 10,022ppm, and the remainder of the ionic-clay type averaging about 1,000ppm.
While the monazite sand resource is a point of difference, the buzz around Brazil is its emerging status as probably the most important source of ionic-clays, with their attractive low capex and opex, outside of China. It could take China on.
BRE’s implied $315m market cap allowed investors to do the “comps” with the ionic-clay players on the ASX – Meteoric (MEI), Alvo (ALV) and Viridis (VMM), the latter in a trading halt pending the conclusion of a capital raising.
They are at different stages, with Meteoric the most advanced with a maiden resource of 409Mt at 2,626ppm announced earlier this year. The grade is off the charts for ionic clay deposits, so the company was always going to fare well in a comparison with BRE.
Although not as advanced, Alvo and Viridis also benefitted from the “comps” because of their currently modest market caps of $25m and $60m respectively.
By the by, Brazil does not have a mortgage on the capability to build an ionic clay response to China’s grip on the rare earths industry.
Back here in Australia, Australian Rare Earths (AR3) has a 186Mt resource grading 712ppm in the bag at its Koppamurra project in South Australia.
It has also set an “exploration target” of 340Mt to 3.1bt grading 510ppm to 780ppm. In pursuit of that target, it has just kicked off a 30,000 aircore drilling program.
The grade is not up there with the Brazilian projects mentioned above. But there is clearly a multi-decade project in the offing, particularly when the twin impacts of forecast supply deficits and the push for non-Chinese supply sources take hold in a big way.
Best of all, it is in Australia. AR3 last traded at 19.5c for a market cap of $30 million.
