February 17th, 2023 | 17:05 CET
Rare earth revolution instead of China dependency: BYD, Auxico Resources, American Lithium
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
BYD - In a good starting position
The fact that BYD is now active almost worldwide, manufactures modern e-cars and is well positioned in the home storage business for PV systems is also thanks to the Chinese central government in Beijing. There, people have always thought in terms of five-year plans. They are also aware that some goals require even more time. While 15 to 20 years ago, Germany first provided subsidies for a booming solar industry, only to hand it over to the new competition from the Far East in the international price war, decision-makers in China had long since set their sights on electric cars and other future technologies.
Today, China is so well positioned in many raw materials that it determines the markets. According to the US Geological Survey, China's share of rare earths was still 61% in 2021 - and the trend is downward. Nevertheless, companies like BYD benefit from available and, above all, cheap raw materials. The share price rose by around 7.7% in the past month alone. In the future, companies like BYD should continue to benefit from their technological superiority and good access to raw materials. However, the risk factor is customers' growing desire for transparency - where the rare earths that go into BYD's batteries come from could be of interest from an ESG perspective and soon become a malus for companies like BYD.
Auxico Resources: Cash flows and prospects from rare earths
While companies worldwide are advancing promising rare earth projects, Canada's Auxico Resources can already deliver. Auxico operates in Colombia, Brazil and the Democratic Republic of Congo, where it is advancing three rare earth projects. In Congo, production is already underway, and soon the Company plans to export between 500 and 1,000t of rare earth per month. In Brazil, Auxico has access to tailings from tin production and estimates the rock there at 30 million tons. Currently, the Company is in the process of validating the rare earth deposits as part of a NI 43-101 resource report. The goal is to process 2,500t of this material daily as soon as possible.
The resource report can also be accepted as collateral by banks and improve the chance of obtaining loans. "We have already visited the on-site deposits, conducted a preliminary geological review and assessment, and prepared a processing plan and technical and preliminary cost estimates. This project will be a focus of the Company in 2023," President and CEO Frederick Kozak said in an interview published around the turn of the year.
Auxico's third project is in Colombia on the Orinoco River. The Company expects an initial resource estimate for this project by mid-year. In addition to rare earths, Auxico also expects to find notable tin deposits. "In addition to the potential tin deposits on our property, we have a commercial joint venture with a company from Colombia that is already collecting exceptionally high-grade tin (+65%) and working with local artisanal miners. We believe we will be able to deliver the first tranche of tin concentrate for sale in early 2023," Kozac says, emphasizing the importance to the Company of this second source of cash flow after the Congo rare earth sales. By mid-2024, the CEO believes he will also be able to deliver from Colombia and Brazil, which would significantly increase Auxico's attractiveness as a trading partner: "Thanks to the various sources from different regions, we could become attractive to many customers. Nobody else has such diversified sources of monazite that are not already controlled by China," Kozac said. The stock was trading much higher about a year ago. Anyone interested in rare earths should have the share on their radar.
American Lithium: The stuff dreams are made of
The desire of many companies in the industry for reliable sources of supply for rare earths could trigger a stock market boom that already exists around lithium. At the beginning of January, American Lithium's share price soared by more than 100% within a few weeks. Most recently, a small consolidation set in. However, this does not detract from the great interest in lithium projects. Only two weeks ago, General Motors acquired a stake in Lithium Americas, a competitor of American Lithium. After American Lithium announced promising economic key data around its Tonopah lithium claims project at the beginning of February, investors hope for a similar development.
There will also be dynamic price movements around lithium shares in the coming months. However, rare earths, which are essential around electronics, batteries, renewable energy and defense, also remain in demand. Canadian company Auxico Resources is already providing cash flows from the sale of rare earths. By mid-2024, the Company plans to deliver from three regions, which could make it a very reliable partner for the industry. The share is exciting despite - or perhaps because of - the current low price.
Conflict of interest
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