Why Billionaires Are So Much Interested In Rare Earth Companies?

In this two part  we look at a growing trend where billionaires have started investing or taken a strong interest in rare earths companies, mines, and/or projects around the world. The significance is that these billionaires are very well known and followed. Plus it now appears they have their targets set on the ‘magnet’ rare earths sector, which many analysts forecast to go into deficit this decade, driven by the shift to renewable energy and electric vehicles. The magnet rare earths mostly refers to neodymium and praseodymium (NdPr), the world’s most sought after rare earths. Dysprosium (Dy) is the third key rare earth used in magnets. It is also used in control rods for nuclear reactors.

One can argue that this trend all started back when, now billionaire, James Litinsky bought a mine in California from bankrupt Molycorp and subsequently turned the mine into USA’s largest producing rare earths mine, with the company MP Materials Corp. (NYSE: MP) now valued at US$5.48 billion. As Wikipedia states: “In June 2017, the Mountain Pass mine was purchased at auction for $20.5 million by a new entity called MP Mine Operations LLC (MPMO). MPMO was a consortium formed principally by JHL Capital Group, a Chicago-based investment firm led by James Litinsky.” Litinsky recognized, well before others, that the most powerful magnetic electric motors need rare earths, and that these motors would become essential to modern life technology, especially in the green revolution. Litinsky and his partner’s move buying a mine for just US$20.5m that is now worth 200X or more today was pure genius!

The world’s most powerful electric motors are used today in wind turbines and electric vehicles. They rely on the critical and valuable magnet rare earths (Nd, Pr, Dy). 
                 
 Jeff Bezos, Michael Bloomberg, Bill Gates & others are looking towards Greenland for rare earths

As reported by InvestorIntel in September 2022, Jeff Bezos, Michael Bloomberg, Bill Gates & others (via their company KoBold Metals) are looking towards Greenland as a source of rare earths and other critical metals. KoBold Metals is partnered with Bluejay Mining PLC to find the rare and precious metals in Greenland. An August 2022 article by CNN quoted: “Billionaires are funding a massive treasure hunt in Greenland as ice vanishes……Greenland could be a hot spot for coal, copper, gold, rare-earth elements and zinc, according to the Geological Survey of Denmark and Greenland.” While there are challenges in Greenland the fact that billionaires who made their money in online shopping, financial services/media, and software are now scouring the globe for rare earths speaks to their importance and value in modern society.

Gina Rinehart buys into Arafura Rare Earths Limited.     
                                                                                                                                                                                                                                 
Gina Rinehart, the world’s richest woman, recently bought A$60 million worth of Arafura Rare Earths Limited (ASX: ARU) shares via her private company Hancock Prospecting, as part of an A$121 million capital raising by Arafura. Arafura’s news release on December 5, stated: “Hancock Prospecting Pty Ltd acted as a cornerstone investor, committing to invest $60 million which will result in a post-completion interest of ~10%…..Funds raised will be applied towards orders for long lead items, commencement of fabrication in readiness for main plant construction and early works.”

Europe and the global auto manufacturers are also chasing the critical magnet rare earths

In September 2022 The European Commission stated: “Lithium and rare earths will soon be more important than oil and gas. Our demand for rare earths alone will increase fivefold by 2030. […] We must avoid becoming dependent again, as we did with oil and gas.” The European Critical Raw Materials Act is due for release in Q1, 2023.                                                                                                                       
2023 will likely see more urgency from countries and EV and wind turbine companies regarding sourcing the magnet rare earths.



Here in Part 2  will take a look at more billionaires chasing rare earths such as Andrew ‘Twiggy” Forrest, Chris Ellison, and Elon Musk.

Andrew Forrest’s Wyloo Metals and Hastings Technology Metals Ltd.

As announced on August 26, 2022, Australian billionaire Andrew Forrest’s private company Wyloo Metals has agreed to an A$150 million cornerstone investment in Hastings Technology Metals Ltd. (ASX: HAS), through the issuance of secured, redeemable, exchangeable notes. Even more interesting was that Hastings intends to use the A$150 million proceeds to acquire a 22.1% strategic shareholding in Canada’s Neo Performance Materials Inc. (TSX: NEO). Neo uses rare earths to make magnetic powders and magnets, which can later be used in the permanent magnet electric motors used in most quality EVs and wind turbines.

Hastings controls two rare earth projects in Western Australia, the Yangibana Project (more advanced) and the Brockman Project. At the Yangibana Project, Hastings plans to build a mine and beneficiation plant and a hydrometallurgical plant nearby in Onslow, to produce 8,500 tpa TREO production and 3,400tpa NdPr.

It was also revealed in November 2022 that Andrew Forrest’s Fortescue Metals Group Ltd. (ASX: FMG) has signaled the company hopes to open up a business mining and refining rare earths. Chris Ellison and rare earths junior VHM Limited

Mineral Resources Limited (ASX: MIN) CEO Chris Ellison has been an early leader in the lithium boom, yet now he has also turned his attention to rare earths. Ellison has backed rare earths junior VHM Limited which is set to IPO on the ASX in January 2023. VHM Limited state they have “one of the world’s largest, highest-grade rare earth deposits” at their Goschen Rare Earths and Mineral Sands Project in Victoria, aiming to begin production by H1, 2025. The rare earths in the Goschen Project include neodymium, praseodymium, dysprosium and terbium.

Elon Musk’s insatiable demand for rare earths to feed Tesla’s vehicles

In 2018 it was reported by Reuters that “Tesla’s shift to a magnetic motor using neodymium in its Model 3 Long Range car adds to pressure on already strained supplies of a rare earth metal……” Musk and Tesla (NASDAQ: TSLA) had come to learn that by using the most powerful and lightweight permanent magnet electric motors they were able to save weight and improve efficiency, which improves both performance and range as well as cost (a smaller battery is needed to achieve the same range). Permanent magnet motors are currently the smallest and lightest electric motors you can buy. The only catch is they require the magnet rare earths. So this is now Tesla’s current problem. How to source the magnet rare earths in the volumes they need now and in future years as they scale to 20 million electric cars per year by 2030. Tesla’s chair Robyn Denholm gave investors a huge clue during a speech in Canberra to mining industry leaders in 2021, when she predicted that Tesla could soon consume more than $1 billion a year in Australian produced lithium, nickel, rare earths, and other battery metals. Then again in October 2022, Denholm strongly advocated that Australia can do so much more to support the EV supply chain. Tesla chairman suggested Australia is capable to do mining, refining, battery cells production, and even make electric vehicles. She said Australia has the raw materials, including lithium, cobalt, copper, and rare earths.

I would add that Canada also has this very same potential and is now focused to build up an EV supply chain, notably in Ontario and Quebec. The Canadian government has allocated C$3.8 billion of financial support for critical minerals in its 2022 budget.

Tesla’s electric cars have shifted towards using more permanent magnet motors that use the magnet rare earths.

This “billionaires chasing the critical magnet rare earths” series has exposed a relatively new trend where several of the richest and most powerful billionaires in the world have turned their attention to the magnet rare earths, namely neodymium (Nd), praseodymium (Pr), and dysprosium (Dy). Billionaires now involved in rare earths include James Litinsky, Jeff Bezos, Michael Bloomberg, Bill Gates, Gina Rinehart, Andrew Forrest, Chris Ellison and indirectly Elon Musk via Tesla.

The reason for this unprecedented interest in the magnet rare earths sector is simple. The most powerful and efficient electric motors need the most powerful magnets, and these are made from the magnet rare earths Nd, Pr, and Dy. Also, they typically use Boron (B). Electric motors are replacing the internal combustion engine and are now central to most modern day technology especially green technology such as electrification of our transport network and renewable energy generation.

Reaching net zero carbon emissions means the next 2-3 decades will rely heavily on switching to electric motors and that will require a secure source of the critical rare earths.

Investors can also learn from these leading billionaires and invest in the magnet metal rare earths while we are still in the early stages of what looks likely to be a decade long boom.