UPDATE: Stocks of rare earths miners are skyrocketing following Australia’s consideration of a taxpayer-backed price floor for these vital minerals. Resources Minister Madeleine King announced this potential plan at the Diggers and Dealers mining forum in Kalgoorlie, igniting optimism among producers of critical minerals essential for technology and defense.
The proposed price floor would guarantee a minimum selling price for rare earths mined by Australian companies, a move seen as crucial amid ongoing geopolitical tensions between China and the United States. Following the announcement, shares for Lynas surged more than 5%, while Arafura Rare Earths skyrocketed over 8%.
King emphasized the necessity of securing Australia’s access to rare earths, especially after China restricted its exports in response to U.S. tariffs. “The floor price is but one means of how you establish a reserve,” she stated, underscoring the importance of a strategic approach to managing supply.
The Australian government has already allocated funding for a national reserve, which aims to include off-take agreements for guaranteed volumes from producers. However, the exact implementation details are still being finalized, according to King.
In July 2023, the U.S. Department of Defense invested $400 million in rare earths miner MP Materials, establishing a guaranteed price floor of $110 per kilogram for neodymium and praseodymium. This U.S. commitment has significantly impacted rare earth prices, prompting Australian firms to advocate for similar measures.
Australian Strategic Minerals (ASM), which is moving forward with its Dubbo mine, reported a surge in demand for its processing capabilities in South Korea. CEO Rowena Smith noted a “huge influx of inquiry” for the facility, which is essential for refining rare earths into high-tech metals. “The Korean metals plant has seen a significant increase in demand since China’s recent restrictions,” she stated.
Despite initial concerns from Lynas about potential government interference in pricing, the company has expressed enthusiasm for the consultation process surrounding the proposed price floor. General Manager Alex Logan remarked, “We are very enthusiastic about that consultation process,” highlighting the importance of collaboration on this critical issue.
Arafura’s CEO Darryl Cuzzubbo echoed this sentiment, urging the government to take a leadership role in establishing a price floor. “The strategic reserve presents an incredible opportunity for Australia to show global leadership in a high-impact, low-risk way,” he said, reinforcing the need for secure supply chains.
Even though Chinese rare earths are sold for approximately half the targeted price of $130 per kilogram by Western producers, Cuzzubbo believes customers would prefer to pay the premium to ensure a steady supply. “The downside of not having supply is massive,” he warned, pointing out the risks to production lines operating below capacity.
As traders and investors closely monitor these developments, the push for a price floor could redefine the landscape of the rare earths market, positioning Australia as a key player in global supply amid escalating geopolitical challenges.
