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Australian rare earth explorers struggle to capitalize on decade-high spend

Australian rare earth miners face communication and financing issues in capitalizing on a flurry of exploration spending and making the country a producing powerhouse as it already is with lithium and iron ore.

Australia is the world’s third-largest producer of rare earth elements behind China and the US, but it holds nearly double the reserves of the US, according to 2022 data from the US Geological Survey. Last year, Australian lanthanides exploration spending hit its highest level since 2013 and accounted for 40% of the global total, according to S&P Global Market Intelligence data.

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Top Australian player Lynas Rare Earths Ltd. is starting feed at its Kalgoorlie plant in the fourth quarter and expanding production at Mt Weld by 50% by 2025, and Arafura Rare Earths Ltd.’s Northern Territory Nolans project is due online in 2025.

“As we’ve seen with lithium, we certainly have the ability to rack it up and start producing more,” Dean Tuck, managing director of Dreadnought Resources Ltd., told S&P Global Commodity Insights. “It wouldn’t take much for Australia to be in the top two [behind China].”

‘Lack of initiative’

Amid a strong drive by countries outside China to diversify critical minerals supply chains, explorers at a May 10 rare earths investment panel in Perth, Australia, warned of lingering financing issues for rare earths, which are not publicly traded and have complex supply chains.

“We are very grateful for the role the federal government is playing, but are slightly taken aback by the lack of initiative to get smaller projects like us up and going quicker in this critical phase,” said Alwyn Vorster, Hastings Technology Metals Ltd.’s interim CEO.

“We see all the right signals from senior government leaders” that they recognize the severity of supply chain vulnerabilities, Vorster said. “What we are not yet seeing is the investment market following that.”

“The Australian government offers a wide range of support measures including grant programs to support critical minerals, including rare earths projects,” a spokesperson from Australia’s Department of Industry, Science and Resources said in a statement.

Hastings received A$220 million from the Northern Australia Infrastructure Facility and could receive up to A$100 million from Export Finance Australia for its West Australian Yangibana project, which is expected to deliver first product by January 2025.

Cost blowouts

Capital cost blowouts of up to 40% are common across the industry, according to Vorster, who is close to clarifying a funding solution to the market.

Explorers need to tell the market “a bit more pointedly which projects early on actually have a chance to go into production,” said Tuck, whose company confirmed a high-grade rare earth discovery at the Yin deposit within its Mangaroon project in Western Australia in July 2022.

Mark Major, CEO of Krakatoa Resources Ltd., told the panel that while “everybody reports total rare earth oxides, it’s not about that.” The concentrations of the four key elements, neodymium, praseodymium, terbium and dysprosium, are key because most of the 17 rare earth elements do not make any money, Major said. Krakatoa Resources made a significant clay-hosted rare earth discovery at Mt Clere in Western Australia in 2022.

Voltaic Strategic Resources Ltd. is determined not to “go in guns blazing with super-impressive drill campaigns,” CEO Michael Walshe told the panel. The company found a big mineralized clay-hosted rare earth system in March at the Western Australian Paddy’s Well project.

“There are so many companies on the [Australian Securities Exchange] now claiming to have found clay-hosted rare earth systems,” Walshe said in an interview. “In practice, only a small fraction of them would be truly ionic deposits, which means it will leach under low-acid conditions. If it’s not ionic, you’ll need a huge amount of acid, which is not practical, economic or environmentally friendly.”

Capitalizing on critical mass

Australia can be a global rare earth player of influence “once we get a critical mass. It’s just a matter of working together in a collegiate manner and looking where we can get economies of scale, power infrastructure and the right technology to help that happen,” Andrew Muir, managing director of Caprice Resources Ltd., told Commodity Insights.

Downstream processing shared infrastructure would unlock projects that are emerging in Western Australia, Tuck told the panel.

Iluka Resources Ltd. Chairman Rob Cole told the company’s May 10 annual general meeting that its Eneabba rare earth refinery in Western Australia “has been designed specifically with the size and capability to process a broad range of feedstocks provided by third parties.”

Mount Ridley Mines Ltd. is “taking a Kevin Costner view that ‘if you build it, they will come'” regarding the region, technical manager David Crook told the panel, referring to the movie “Field of Dreams.”

“We’re saying if it’s big enough, you’ll get it right. There are billions of tons out there … across the whole southwest coast of Western Australia,” Crook said.


Source: S&P Global

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