Concern about tighter rare earth controls have surfaced regularly since China first stopped exports in 2010 during a dispute with Japan.

It was that event, following the collision of Japanese and Chinese ships, which led to the birth of the Australian rare earth industry with Japan rushing to fund the Mt Weld mine of Lynas Rare Earths in WA.

Back then, prices soared for the most important rare earths, neodymium and praseodymium, which are used as permanent magnets in a host of technologies such as wind turbines and in electric vehicles (EVs).

A repeat of the events of 13 years ago is possible, which is why rare earth stocks jumped in early trading this week, but there is no evidence yet of an upward price move, rather there was a slight (and unexpected) fall in the price of neodymium – and by yesterday most of the rare earth stocks had stabilised or dropped a little.

But what the latest rare earth scare did reveal is that the 17 metals of the rare earth family are considered strategically important, with governments using them as bargaining chips in wider trade disputes, as shown in an Australian Government decision to limit Chinese involvement in the local rare earth industry.

Even the western world’s lobby group, the Organisation for Economic Co-operation and Development, is concerned that an expanding layer of restrictions on the rare earth trade could raise prices to a level which slows energy transition from fossil fuels to renewables.

Best of the rare earth stocks this week was Australian Rare Earths which continues to expand its Koppamurra project on the South Australian/Victorian border as well as earning a rave review in The Australian newspaper which seems to have excited Melbourne investors, who drove the stock up to an 11-month high of 56c before it eased back to 48c for a five-day gain of 24c (100%).

Other rare earth news and market moves included:

  • Prospech, up 2.7c to 4.8c after reporting high grades of rare earth oxides and niobium from drilling at the Jokikangas project in Finland. At one stage the stock was trading at 6.4c, a 200% rise in two days before traders cashed in.
  • Arafura Rare Earths crept 0.2c higher to 49c after confirming a sales deal with Germany’s Siemens group for its renewable energy division. The stock but did reach 53c at the height of the China trade ban speculation before sliding back to almost where it started the week.
  • RareX added 0.5c to 6.2c after updating the resource estimate for its Cummins Range project in WA.
  • Heavy Rare Earths reported high grade drill hits at its Cowalinya project near Norseman in WA, including 26 metres at 1201 parts per million (O.12%) total rare earth oxides. On the market, the stock added 1.5c to 12c, but did reach 14c on Tuesday.
  • Encounter said there was considerable rare earth potential at a new project near Laverton in WA, good enough to lift the stock by 1.5c to 15c, and
  • Lynas, the sector leader rose strongly from $6.04 to $6.40 before slipping back to $6.37 to end the week down 4.5c.

More important than the latest China trade scare was the latest U.S. inflation report which showed a slight fall to an annualised rate of 5% in March compared with 6% in February.

That decline, while welcome, was not enough to dampen a view that official U.S. interest rates will be hitched higher next month with further increases later in the year as efforts continue to drive down inflation.

The risk with ongoing rate increases is that they could lead to a recession later this year, with the major discussion point now being whether it will be a deep or modest downturn.

Adding to the concern about a recession which will reduce economic activity and slow demand for Australia’s mineral exports is the effect of rising oil prices which have the same effect as higher interest rates on business and consumer demand.

Lithium stocks steadied after weeks of decline driven by concern about EV demand and excess supply of raw material in China, a point taken up by Morgan Stanley, an investment bank, which warned that Chinese converters, which make battery grade chemicals, are losing money which means they’re selling lithium stockpiles into an already over-supplied market.

The banks reckon the process has several months to run which means the spodumene (part processed ore) price could fall by another 40% to US$3000 a tonne and the lithium carbonate price could drop to US$25/kg from the current US$31/kg. It was US$87/kg just six months ago.

The long-term outlook for lithium demand remains strong, boosted this week by proposed new U.S. laws to encourage EV sales, though a niggling negative in the background is ongoing Chinese research into sodium-based batteries which could take market share from lithium.

Price moves among local lithium stocks were mixed, led by Red Dirt with rose by 5c to 41 after reporting strong assays of up to 1.2% from a depth of 357m during drilling at its Mt Ida project in WA.

Other lithium moves included Allkem slipping 4c lower to $11.08, Core adding 8c to 91c, Future Battery Metals rising by 1.6c to 9.4c and Pilbara losing 12c to $3.59, with investors possibly influenced by a Morgan Stanley report which initiated coverage of Pilbara with a sell recommendation and a price target of $3.15.

Gold, as mentioned earlier, crept higher but only by US$10 an ounce on the international market to US$2017/oz and by A$3/oz on the Australian market to A$3004/oz.

Newcrest’s acceptance of a sweetened US$19.5 billion takeover bid from U.S.-based Newcrest was the big news in the gold sector, a long-gestating deal which now consummated could set the scene for other international moves on Australian gold stocks with Northern Star and Evolution said to be high on shopping lists.

Most local gold stocks had a reasonable week, led by the next possible cabs off the takeover rank with Northern Star up 80c to $13.83 and Evolution, up 21c to $3.53.

Other gold news and moves included:

  • Lefroy Exploration added 2.5c to 26c after reporting that its Burns gold project in WA demonstrated significant scale and could be a first-of-a-kind alkaline copper/gold deposit in the Eastern Goldfields region.
  • Kingston Resources reported strong gold sales from its Mineral Hill project near Cobar in western NSW. The stock added 2c to 12c.
  • Siren Gold rose by 1.1c to 11c after analysts at the stockbroking firm Morgans rated it as a speculative buy with a price target of 28c as it works to redevelop the historic Reefton gold project in New Zealand, and
  • Great Boulder added 0.5c to 9.5c after reporting fresh high-grade assays from drilling at its Mulga Bill gold project near Meekatharra in WA.

Copper stocks firmed in line with a US5c/lb rise in the price of the metal to US$4.07/lb but the main event in Australia was the finalisation of the takeover of OZ Minerals by BHP leaving open the same question as that in the gold sector – who’s next?

Sandfire, a frequently mentioned target, certainly behaved like a takeover target with a rise this week of 68c (10.3%) to $6.99, a 12-month high.

Other news and market moves in a shortened trading week included:

  • Mineral Resources shook off the effects of a failed gas exploration well near Perth to added 44c to $77.69, aided by small increases in the price of its primary products, iron ore and lithium.
  • Greentech Metals rose to a high of 11c on Wednesday before slumping back to 8.8c, down 0.6c for the week, after investors digested the latest resource estimate for its Whundo copper and zinc project in WA, and
  • Toro Energy slipped 0.2c lower to 1.1c despite reporting visible nickel sulphides from the latest drilling at its Dimma project near the bi mt Keith nickel mine of BHP.