3 rare earths miners to watch for future growth

The world’s growing demand for more electronics and mobile technology is driving the hunt for rare earths. Production of these heavy metals is tightly held by China, but three Australian companies are wanting to change that.

Lynas Corporation (ASX: LYC) is the most developed Australian rare earths company, and is working towards completing its Lynas Advanced Material Plant (LAMP) processing plant in Malaysia. It has received limited production approvals by regulators, and this month announced that it has had initial sales in all of its product suites, which will appear in the September quarter activities update.

Further approvals for its phase 2 expansion to increase processing levels to 22,000 tonnes per annum are pending, and the company estimates in November the processing kilns will be in use.

In its 2013 annual report, it had a $143. 5 million net loss with only $10.7 million in revenue. The development costs are the major reason for this loss, and once it can achieve full production, the losses should subside. Its share price is at a new yearly low of $0.35.

Greenland Minerals and Energy (ASX: GGG) has just announced that the government in Greenland has just raised the moratorium on uranium mining. The Australian-based company now has 100% ownership of its mining tenements there, and is sitting on potentially the largest rare earths resource outside of China, yet the uranium mining ban blocked the development of the rare earths also. Studies indicate uranium, rare earths and zinc are present, and estimated mine lifespan is about 30 years.

News of the moratorium lifting sent the share price from $0.28 to $0.46 briefly, and is currently at $0.35.

Arafura Resources (ASX: ARU) has exploration sites at the Nolans Rare Earth Project in NT, and has just signed a memorandum of understanding with the Chinese rare earths miner and producer Shenghe Resources Holding to work together to fund and develop a mine there. Shenghe wishes to sell rare earths metals to its current customers in China and internationally.

Still at this exploration and development stage, there was no production revenue, and a net loss of $11.7 million was reported in 2013. Currently its share price is $0.09.

Foolish takeaway

The rare earths market is still 90% controlled by China, and the world’s digital age of mobile phones and other advanced electronics require a steady volume of these heavy metals. Japanese companies especially have been looking for alternative sources after being squeezed by the Chinese when political relations between the two nations soured several years ago.

Australia is on the cusp of being a major producer of these sought-after metals, so watch these three companies, and keep updated especially on Lynas Corporation for news of regulatory approvals that will potentially double its production capabilities from 11,000 to 22,000 tonnes pa.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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