Mining Magazine > Panorama > Race for rare earths

E&Y noted that a forecast shortfall in the supply of rare earths has "sparked a race to reap the rewards", but warned "it is a high risk race, with only a few destined to succeed".

China, which accounts for 97% of global rare-earths production, is curtailing exports. This, combined with increasing demand, means a supply shortfall is expected for up to the next five years.

Michel Nestour, a director in E&Y's mining and metals team, said the market is crowded, with a large number of projects aiming to fill the estimated supply gap. The team has examined 19 advanced rare-earth projects from eight countries, and showed that speed to market, financing strategy and choice of minerals will be critical to their success.

"While mining is inherently risky, the rare-earths sector is particularly complex and capital-intensive, with uncertain demand projections, complex metallurgy and ore-grade considerations, and infrastructure challenges", according to Mr Nestour.
The E&Y report noted that "the number of players has mushroomed quite significantly due to the recent spike in prices and many are now jostling to get projects through feasibility and into production. Those that get into production first are more likely to capture the current price premiums, with the market likely to be very sensitive to future increases in supply."

As a result, Mr Nestour advised management "to consider a planned and well-thought-out approach to how the project can be funded for subsequent stages". Management need "to consider whether a full exit strategy might be preferable now to avoid being left behind".