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The following segment was excerpted from this fund letter.
Ionic Rare Earths
Ionic Rare Earths (OTCPK:IXRRF) is an Australian company implementing a strategy to become an integrated Western supplier of value-added rare earth products. The company’s unique advantage is its Makuutu deposit in Uganda, one of the largest ionic clay deposits outside China at 315 million tons of resources drilled out since 2017. The announced acquisition of Seren Tech in the U.K. adds midstream and magnet recycling intellectual property to Ionic’s integrated downstream strategy. The potential is to leverage primary supply from Uganda with recycling and third-party materials to become a western supplier of value-added products.
Similar to nickel and uranium, we have patiently waited and watched for an opportunity in rare earths. The macro setup, like several other energy-related metals we have profited from in the past, is similar: demand for raw materials (NdPr and DyTb) and magnets is growing faster than supply, but we had to wait for the right company, and Ionic appears to be that company.
One of the reasons we like Ionic is the firm’s exposure to heavy magnet rare earth dysprosium (DY) and terbium (Tb). The main application of heavy rare earth minerals is adding heat resistance to permanent magnets and improving the resistance of the magnets to demagnetizing conditions. Heavy rare earth metals are especially important for high-performance applications such as wind turbines, E.V.s, and aeronautical equipment.
The supply chain for HREEs is dominated by ionic clay production from China and Chinese-owned operations in Myanmar. Chinese and Chinese-owned output represents 90% of global HREE production, even more concentrated than their collective 70% share of LREE (Lite Rare Earth Elements) production (including Nd and Pr).
Makuutu is one of the few HREE-enriched projects with 3–4x the typical Dy and Tb assemblage compared to hard rock projects such as Lynas’s Mt Weld or M.P. Material’s Mountain Pass mines. Among the notable HREE projects we are tracking, Makuutu has the most attractive combination of size, simple metallurgy, and infrastructure.
In April 2021, Ionic signed a non-binding MOU with Chinalco and its subsidiary China Rare Earths Jiangsu, outlining potential technical support and offtake. However, Ionic retains the option and intention to pursue a Western-aligned development path.
Prices today likely reflect at least a “new normal” — a permanent shift up and to the right. Even with pricing signals, suppliers will either be unable, less willing, or incur long lead times to bring new supply to the market, given some of the complex nature associated with mining and permitting these deposits.
Many deposits have radionuclides — particularly in the West — and miners need permits for Thorium, which can take years. Energy Fuels is an interesting company in that regard, given its ownership of such a permit and the theoretical optionality this provides. Ionic will likely build slowly in our portfolio, but we expect an asymmetric return in the fullness of time.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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