TORONTO (miningweekly.com) – Supply of rare-earth metals, particulary those classified as 'heavy' rare earths, will remain “strained” over the next four years, Mackie Research Capital said in a report this week.
Analyst Matt Gowing said he expects to see rising consolidation in the industry, as senior mining companies and Chinese entities move to acquire development firms with attractive projects, as they near production.
“We expect consolidation in the space to become a recurring theme as mining companies look to acquire companies with abnormally large resources, as well as companies with expertise and technology in building and operating rare-earth separating facilities,” Gowing wrote.
He expects China, the biggest consumer of rare-earth metals, will play a big role in the industry consolidation.
“It is our understanding that China has in the past approached companies like Molycorp and Lynas regarding potential takeover bids,” Gowing commented.
“We expect China to continue to look for opportunities to improve its resource asset base to feed its growing economy.”
Gowing noted that rare earths are an “integral” input, with little or no substitutes, although they are generally a small component of the total cost to produce a specific product. This implies that manufacturing companies are likely to swallow increases in rare-earths prices relatively easily.
There are a number of new rare-earths mines being planned or developed. However, Mackie expects the supply will remain strained “even after incorporating a very generous assumption that these new rare-earth mines will come on- ine on schedule and meet their production goals”.
Rare-earth metals are used in a growing number of high-tech applications, including in hybrid cars, wind turbines and electric bicycles.
China is the biggest producer, at more than 90% of global supply, but has been putting curbs on export volumes. It consumes more than 60% of its current rare-earth production, Gowing said.