By 
Back in 2010, China banned exports of rare earth metals to Japan for two months as part of a territorial dispute. Today, the measures the country is considering could have far greater repercussions on the industry of these strategic metals. Rare earths are characterized by their unique magnetic properties, which enable them to be used in a growing number of advanced technological applications. These include the F-35 stealth fighter aircraft built in the USA, as well as wind turbines, electric car motors, camera lenses and catalytic converters for gasoline-powered cars.
Producing the ultrapure dysprosium needed for the microchips that run AI programs is particularly challenging: it took Canada's Neo Performance Materials seven years of trial and error to master the 100-step chemical process at its refinery in Wuxi, China. However, the last two foreign-owned rare earth refineries in China are in the process of being acquired by a Chinese state-owned enterprise, consolidating national control over the industry. At the same time, the country is far more technologically advanced in the fields of chemistry, while Western universities are struggling to offer specialized training.
The Chinese government has also restricted exports of other essential chemical elements, such as antimony, used in semiconductors and military explosives, as well as gallium and germanium, essential for the manufacture of electronic chips. These restrictions are part of a wider struggle between China and the United States for technological supremacy, particularly in the field of semiconductors used for AI.
Dysprosium companies:
Neo Performance Materials: The Canadian company's rare earth separation business continues to suffer losses due to lower prices this year. In order to reduce exposure, Neo closed its light rare earth separation facility in Zibo (China) last April. In addition, the executive recently announced that it would sell an 86% stake in the Wuxi refinery to Shenghe Resources by the end of the year. The company, valued at 242 million USD on the markets, is back in the black this year after posting a dry loss of 8.4 million USD in 2023 due to very low rare earth prices.
Shenghe Resources is a Shanghai-listed Chinese company in which the Chinese state holds a 14% stake. The company specializes in the extraction, processing and refining of rare earths to make them suitable for industrial use. The company is valued at 3.14 billion USD. China Northern Rare Earth is another Chinese company specializing in rare earths, in which the state holds a 36.5% stake. It is capitalized at USD 12.14 billion.
MP Materials owns and operates the Mountain Pass rare earths mine and processing facility in North America. The group has a contract with the US Department of Defense to upgrade its sophisticated refining equipment to extract dysprosium. Valued on the markets at 3 billion USD, the company is struggling to return to profit after rare earths lost almost 70% of their value since the beginning of 2023.
Solvay: the Belgian company spun off from Syensqo's chemicals business refines tiny quantities of dysprosium in France, and has declared plans to increase production. However, the company did say that its first increase in dysprosium production would be for magnets, a use less in demand than semiconductors. Still, its share price has gained 35% since the start of the year.
Key figures:
- Valuation: EUR 3.9 bn
- EBITDA: EUR 1.5 bn
- PER: 28.95x
- ROE: 35.3
- Leverage: 1.5x
Lynas Rare Earth: the Australian miner has announced that it will start refining dysprosium in Malaysia next year. In addition, work has begun on a refinery in Texas in 2024.
FY 24 figures:
- Valuation: $4.91 bn
- EBITDA: $132 M
- PER: 28.9x
- ROE: 3.8
- Leverage: 8x
We can also note that very small caps, even penny stocks, are present in the exploration and extraction of dysprosium, or more generally other rare earths: Brazilian Rare Earths, Nordic Mining, Aclara Resources, Ionic Rare Earths, Rare Element Resources, Rainbow Rare Earths, Arafura Rare Earths.
