RE: UBS Investor Presentation, 6th June9 Jun 2023 16:22
2/2
Q Ballpark for cost structure between front and back end?
George: $295m capex: ca. 45% front end / 55% back end
Opex split: cannot divulge as have not run those numbers, but yes unbelievably profitable at spot RE prices today
Q Influx of new supply from Myanmar impact on pricing – can you quantify that?
Ryan: in recent years quite lumpy, no steady stream from Myanmar. For first 8 months of 2022, outflows were down. As China opened up, a lot of pent-up volumes returned into China, then saw at least 4 months of above average inflows.
Myanmar still remains a major unknown in the market. It is arguably the largest RE producer outside of China, certainly in terms of heavy RE supply.
Ongoing coup in country which has crated uncertain political dimension. Now seeing environmental devastation of RE mining in that country (polluting water systems and resulting in a lot of social resistance). Large protest against mining, incl. one operated by Chinese companies. Have promised to halt operations, though material still moving.
Myanmar is a blot on the industry. Due to its dominance of heavy RE production, all magnet manufacturers are likely to be using a very small portion of Myanmar heavy RE in their products.
100s of mining sites in Myanmar, so not steady flows.
Analyst Dan Major:
Q Any pricing differential for Chinese / non Chinese production? Can China control pipeline? Is there any guarantee on price as they can push market into oversupply very easily?
Ryan: Not seeing pricing differential; market generally uses China price (might not be exact)
While China produces ca. 60% of mined supply, 40% comes from elsewhere and is largely being imported to be processed in China.
If China pushes prices too much, would push that 40% that it relies on out of business. A lot of nuanced factors which make that unlikely.
China’s heavy RE Resources are mostly depleted – less than a decade left. This is why they have largely exported their heavy RE supply growth to Myanmar.
Most of China’s Light RE resource is based in Mongolia in an iron ore mine; would have to scale the iron ore production to gain access to the REEs.
Adamas estimates that China has ca. 40Mt in resources – maybe 20% is in NdPr; consider recovery rates and rates; leaves it 50 years of production by 2040.
China is dissatisfied with selling REs at “cabbage prices”; so don’t see China flooding market to depress pricing.
Script will flip in the future: from China being largest exporter of magnet RE supply to a scenario where China is importing rest of world’s excess production, which would give more pricing power to other parties. China’s influence on pricing will slowly be eroded.
Analyst Myles Allsop:
Q How should we think of long-term prices? What was used for Rainbow PEA?
George: Used spot pricing at time of PEA - $110/kg for NdPr. Rainbow could withstand a halving of pricing and still produce $100m per annum EBI
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