Playing on clay courts, a tip for rare earth mineral investors

Natalie Chapman

If you are an investor trying to smash out higher returns on your investment portfolio you may have a small part of it allocated to speculative playing in ASX-listed minerals explorers.

If so, you may have noticed that in recent months the volley of breathless announcements from rare earth explorers about discovering an ionic adsorption clay (IAC) deposit on their tenements.

While it may be tempting given all the hype to try and quickly hit a winner, investors need to first fully understand the ground they are playing on.

So, what exactly are rare earths and what is all the hype about IAC deposits about? You may remember studying the periodic table during school science lessons. Rare earths are a group of elements, most of which are found in the second bottom row of the table.

Rare earths are not so rare. But they can be hard to find in concentrations that make it economic to extract

They are actually abundant in the earth’s crust, but it is ‘rare’ to find them in concentrations significant enough for them to be extracted profitably.

Rare earths like praseodymium, neodymium, terbium and dysprosium are in huge global demand because their unique magnetic properties make them essential in the making of electric vehicles, mobile phones, computers, wind turbines, speciality alloys and aerospace guidance systems.

Hard court versus clay court

Most of the world’s rare earth elements (REEs) are currently extracted from ‘hard rock’ deposits. Extracting REEs from such deposits requires a lot of blasting, processing with harsh chemicals and dealing with radioactive waste.

This makes hard rock projects expensive to establish and operate. The proponents of clay projects tout various advantages over hard rock projects, saying its much simpler and cheaper to extract REEs from clays.

But what the investor needs to realise is that not all clays are created equal. What will make or break a clay deposit is how much of its truly ‘ionic’.

Clay deposits develop by the weathering of certain REE-rich rocks or minerals under warm, humid, slightly acidic conditions in subtropical zones. The REEs move down into the clay as REE ‘ions’ (charged atoms) which are loosely attached or ‘adsorbed’ onto clay material.

These REE ions can be removed or ‘desorbed’ through simple leaching with, for example, a benign salt solution with a pH of just 4 (which is about the same acidity as apple juice). These are the true IACs that companies hope they have found.

But the REEs can also mix with other mineral particles to form a ‘colloid’ (where two or more substances are mixed together, but not chemically combined). The REEs can still be separated but the need for stronger leaching makes it more expensive to do so.

What companies don’t want to discover is that most of the REEs in their clay deposit are still trapped within weather-resistant minerals. Extracting these REEs is likely to be uneconomic because it would require much harsher and expensive processing.

This means that companies need to do a lot of work studying and testing their deposit to clearly understand how much of its ionic, colloid or mineral, before investors get too excited by announcements about the size of a deposit a company says it has found.

Light and heavy rackets

Investors should also understand how companies generally categorise or describe the REEs in their deposits.
Companies usually report REE content as rare earth oxides (REO) because that is the form in which they are most often sold.

Companies will refer to Light Rare Earth Oxides (LREOs) and Heavy Rare Earth Oxides (HREO). However, these groupings – relate to the atomic weighting of the REEs (remember your periodic table).

They also like to boast about their ‘Magnetic’ Rare Earth Oxides (MREO) – the above-mentioned praseodymium, neodymium, terbium and dysprosium – because they are the ones in big demand and/or have the highest prices. The MREOs are actually a mix of both LREEs and HREEs.

Others also like to report on their Critical Rare Earth Oxides (CREOs) – which depending on the company will contain a slightly different basket of REEs than the MREOs.

All this is done to present their projects as attractively as possible to investors, but it can also create some confusion. And sometimes it is all too much for even the companies themselves, and they make mistakes (or are flexible in their categorisations) when describing a REE.

So, a final coaching tip for investors playing for higher returns: Don’t be deceived by the heavy spin some companies may occasionally impart on the ball.

Natalie Chapman is the co-founder and managing director at deep tech commercialisation agency Gemaker.


Do you know more? Contact James Riley via Email.

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