SKYROCKETING prices made rare earth elements one of the most talked about resources this time last year.
However a lot has changed for the at-times-overlooked metals, which consist of a set of 17 chemical elements.
Prices have dropped, uncertainty clouds supply and demand, while China, which is said to produce about 95 per cent of the world’s rare earths, remains coy about export quotas.
This has had a negative effect on Western Australia’s emerging group of rare earths-focused companies, as investor sentiment becomes more negative.
Perth-based Kimberley Rare Earths, which is developing the Cummins Range project in the state’s north, found itself in an unenviable position after being spun-out by gold miner Navigator Resources last May.
After being oversubscribed in an $18.2 million initial public offering, Kimberley Rare Earths managing director Tim Dobson said investor sentiment took a “complete reversal, from passionate highs to being very lacklustre”.
The change of attitude led to Kimberley Rare Earths’ value on the Australian Securities Exchange dropping by almost half in the second half of the year, a fate not uncommon for companies in the sector such as Lynas Corp and Arafura Resources.
Mr Dobson attributed the falls to a constant perception of risk in the rare earths sector, but he believed Kimberley Rare Earths had been dealt with unfairly.
“I feel that we have been dragged down indiscriminately with other rare earth stocks that had inflated EVs built into their share prices, considering we have no debt and are now trading below cash backing; there has been a reversal of interest in rare earths stocks over the past six months,” Mr Dobson told WA Business News.
“This isn’t a huge challenge for KRE just yet as we have over $13 million in the bank.
“We plan to spend some of that money this year developing our projects and then we may look at a capital raising at the end of the year.”
Despite companies in rare earths taking a hit in the final six months of 2011, Mr Dobson has noticed awareness building in the past few weeks, adding that prices for the metals are still much higher than in the past.
WA-based Arafura, in particular, has taken an upward spike, lifting as much as 25 per cent last month after releasing an encouraging update on discussions with prospective customers of product from its Nolans project in the Northern Territory.
The company reported that a trio of products from the project had been produced for its target customers to evaluate.
Arafura chief executive officer Steve Ward said the company had received strong support for its all-Australian model, which provided it with stand-alone independence.
“Target customers see Australia as having advantages of low sovereign risk and a well-established world-class regulatory environment,” Dr Ward said in a statement.
“Our marketing program is in full swing and we are delighted to be hosting visits by some of our target customers to Australia next month.”
Meanwhile, Lynas continues to move towards production at its Mt Weld project in the second quarter of this year despite its troubled plans to establish a processing facility in Malaysia.
The company was refused permission by the Malaysian government to import its product into the country due to health, safety and environmental concerns at the plant.
Lynas is awaiting results from an application for a temporary licence to operate the plant. This, combined with a $US225 million raising through a convertible bond issue to complete phase 1 construction at the facility, has led to an improved showing on the ASX.
However, the company is still running into problems, albeit at a community level in the South-East Asian nation, with construction costs blowing out by $40 million and further delays arising from extra engineering requirements and the monsoon season.
Mr Dobson believes issues such as these are negatively influencing perceptions of the sector, and preventing more WA companies from investing in the industry.
“I don’t think we will see many new rare earth companies out there or significant discoveries until such time as rare earths start to find a balance,” he said.