Valuing Rare Earth Companies, page-24

Another aspect of comparative valuation of REE companies that makes it difficult is the extent to which a company applies downstrean processing.
The extents are (I am still getting my head around all this and so open to feedback):

1. basic version - sell a TREO concentrate (no separation of elements and naturally occurring mineral forms included)
2. initial processing - process the ore for MREC (Mixed Rare Earth Carbonate) (create carbonate versions of the ore contents, some chemical processing involved) - LYC will be doing this at their new WA facility
3. separated oxides (each REE is separated out and refined as an oxide) - LYC do this at their Malaysian plant using MREC as an input
4. elemental products (pure elements are produced, usually metals but sometimes alloys with REE oxides as input) - ASM is doing this at their Korean metals processing plant
5. produce end user products like magnets from the elemental products - so far as I know, there is no ASX company doing this

The further down the list a company operates, the higher the capital cost for processing and hence the higher the valuation of its EV to REE basis will be.
Initially, I was somewhat puzzled by the very high comparative valuation for ASM even though its SP has been savaged over the past 6 months or so. Then I realised that ASM with its metal processing facility in South Korea is actually operating at level 4. We also need to allow for a higher valuation with LYC than say PEK or VHM which are starting with MREC outputs (to be followed later with Refineries that create RE oxides).
ILU and ARU are signing of-take agreements with some REE explorers to obtain TREO for downstream processing and so there are ASX companies that will be operating at level 1 (these should have the lowest valuations of EV to TREO).
So, there is no simple comparative model for REE companies and I will need to incorporate a much wider range of quantitative factors than I am used to doing for precious metals (companies often give an Au or Ag equivalent figure but I have not found this approach with REE companies). Not only do we have a plethora of elements, each with its own price, but we also have the various stages of downstream processing to consider.