Neodymium and Praseodymium (NdPr) · too believe this is the future of our society, Peak should be...
Transcript of Neodymium and Praseodymium (NdPr) · too believe this is the future of our society, Peak should be...
ENABLING LOW CARBON TECHNOLOGIES
Neodymium and Praseodymium (NdPr)
The biggest blind spot in the global
commodity market
A commodity and industry focused
white paper by Peak Resources
Author: Michael Prassas October 2017 / Updated February 2018
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Table of Contents Foreword ................................................................................................................................................................ 4 What are Rare Earths? .......................................................................................................................................... 9
General Application Overview & Rare Earth Definitions ...................................................................................... 9 The Market and it’s Dynamics ............................................................................................................................ 10
Supply – China’s Almost Absolute Control of the RE market ............................................................................ 11 China ............................................................................................................................................................. 11 Illegal Mining ................................................................................................................................................. 14 China’s Rare Earth Industry Consolidation and the Way Forward ................................................................ 15
Supply: Rest of the World.................................................................................................................................. 18
NdPr Demand Supported by Global Legislation – Not If But When ................................................................ 19 Why Peak? ........................................................................................................................................................... 21 The Premier NdPr Development Story Globally ............................................................................................... 21
The Management Team .................................................................................................................................... 22 The Asset – The Ngualla Rare Earth Deposit ................................................................................................... 23 Our Product Basket - Absolute Alignment with High Growth Markets ............................................................... 24 Commercial Excellence ..................................................................................................................................... 25 Operational Excellence ..................................................................................................................................... 26 Leading the Pack – Peak Performance ............................................................................................................. 27
The Investment Proposition - Peak Performance Across All Categories ....................................................... 27 The Benchmarking Study .............................................................................................................................. 28 Adamas Intelligence Benchmarking Exercise - Introduction ......................................................................... 29 Cross-Comparison of Projects’ Operating Profit Margins .............................................................................. 30 Cross-Comparison of Projects’ Operating Costs Weighted to PrNd Oxide Only ........................................... 31 Pre-Production Capital Expense Payback Period ......................................................................................... 32 Proportion of Annual Production Comprised of ‘Market-Needed’ Rare Earths .............................................. 33 Peak Resources Benchmarking Exercise – Extraction ................................................................................. 34
China: Strengthening the Global Superpower Position. ................................................................................. 35
Global Macro Economics & Trends ................................................................................................................... 36 China’s Domestic Economy .............................................................................................................................. 40 The Rare Earth Pricing Eco System .................................................................................................................. 45
Uses and Trends of NdPr ................................................................................................................................... 46
NdFeB Magnets & Permanent Magnet Motors .................................................................................................. 46 What are NdFeB Magnets? ............................................................................................................................... 47 Best in Class - The Permanent Magnet Brushless Motor Engine ...................................................................... 49
Megatrend No1: Automotive & E-Mobility ......................................................................................................... 50
E-mobility Sales Forecasts ................................................................................................................................ 58 Automotive - What is the Impact on the Global Demand of NdPr? .................................................................... 60 NdPr Price Elasticity / Price Sensitivity and Replacement Risks ....................................................................... 61
Peak Resources Extrapolation Based on the UBS Report May 2017 ........................................................... 62 The Different Engine Technologies ................................................................................................................... 63
The AC Induction Engine Without Permanent Magnets ................................................................................ 63 The DC Brushed Permanent Magnet Engine ................................................................................................ 65 The DC Brushless Permanent Magnet Engine.............................................................................................. 65
Megatrend No.2: Wind Energy ........................................................................................................................... 66
The Market - Status Quo ................................................................................................................................... 69 Latest Technological Developments ................................................................................................................. 70 The Market Players ........................................................................................................................................... 71 Market Forecast ................................................................................................................................................ 72 Wind – The NdPr Demand ................................................................................................................................ 74
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Overview of Existing Drive Line Technologies .................................................................................................. 76 Overview of Today’s Established Drive Line Configurations ............................................................................. 77 How Do DFIG Turbines Work? .......................................................................................................................... 78 Advantages of Permanent Magnet Generators (PMGs) .................................................................................... 79 Replacement Threats for DD-PM Turbines ....................................................................................................... 81 Onshore – The Market Share of Individual Drive Trains ................................................................................... 83 Onshore – Drive Train Configuration Depending on the Nominal Power of the Generator ............................... 84 Offshore – Market Share of the Individual Drive Trains ..................................................................................... 86 Price Elasticity / Price Sensitivity of NdPr in the Wind Turbine Business .......................................................... 88
Other NdFeB Applications.................................................................................................................................. 89
Potential Megatrends ........................................................................................................................................ 90 Robotics ............................................................................................................................................................ 91 Magnetocaloric Fridges ..................................................................................................................................... 93 Drones, Planes and Other Electric Flying Objects ............................................................................................ 95 Consumer Electronic Drones ............................................................................................................................ 96 Flying Cars, Air-Taxis, Passenger Drones & Electric Airplanes ........................................................................ 97 Marine Propulsion Solutions.............................................................................................................................. 98 Electric Bikes ..................................................................................................................................................... 99 Electric Scooters ............................................................................................................................................. 100 Automotive Accessories .................................................................................................................................. 101 Others ............................................................................................................................................................. 102
The General Substitution Risk for NdFeB ....................................................................................................... 103
Substitution ..................................................................................................................................................... 104 Increased Efficiency ........................................................................................................................................ 107 Recycling......................................................................................................................................................... 108
Corporate Business Development Strategy ................................................................................................... 110 Appendix ............................................................................................................................................................ 111
Praseodymium Applications ............................................................................................................................ 111 Neodymium Applications ................................................................................................................................. 112 Lanthanum Applications .................................................................................................................................. 113 Cerium Applications ........................................................................................................................................ 115
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Foreword
This report has been compiled with the aim of providing a comprehensive understanding of the dynamics of the
Neodymium Praseodymium (“NdPr”) business as well as sharing the overall corporate strategy of how Peak African
Minerals (PAM) respectively Peak Resources Limited (“Peak”) intends to position and distinguish itself as a supplier
of choice in the rare earth industry.
The objective of this report is to connect the dots between information and facts already available in the public
domain, giving a comprehensive understanding of how the rare earth industry and market operate, how we believe
the market will develop and how this will ultimately effect Peak as a competitive producer.
The most accurate material and knowledge available in the public domain on the individual areas has been sourced
and collated to provide a comprehensive summary. We do not claim to be the sole author of the content of this
document and recognize that some content has been copied, modified and arranged in a new context as relevant
from different sources. Where possible, the individual sources of the content have been listed.
Best regards,
Michael Prassas
Disclaimer and Cautionary Statement
The information contained in this document is provided by Peak Resources and the author for general educational
purposes only. Certain information herein is based on third-party sources that are believed to be reliable, but whose
accuracy is not guaranteed. This document contains statements that could constitute forward-looking statements,
describing expectations, opinions, or guidance that are not statements of fact.
Forward looking statements may include, among others, statements regarding future market supply and demand,
government policies, and other market dynamics, or the assumptions underlying any of the foregoing. In this
document, words such as "may", "could", "would" "will", "likely", "believe", "expect", "anticipate", "intend", "plan",
“goal”, "estimate”, “forecast” and similar words and the negative forms thereof are used to identify forward-looking
statements.
Forward-looking statements are subject to known and unknown risks, uncertain ties and other factors that are
beyond Peak Resource’s control, and which may cause actual results, level of activity, performance or
achievements to be materially different from those expressed or implied by such forward-looking statements.
This document is provided on an “as is” basis, and neither Peak Resources nor the author make no representations
or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability
with respect to the third-party information, data, or charts contained herein, for any purpose. Use of all information
herein is voluntary, and reliance on it should only be under taken after an independent review of its accuracy,
completeness, efficacy, and timeliness. Any reliance placed on such information is therefore strictly at the risk of
the user.
In no event will Peak Resources or the author be held liable for any loss or damage including without limitation,
indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits
arising out of, or in connection with, the use of this document or the information contained within it.
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Executive Summary
Welcome!
On the following pages, we will share with you our understanding of the rare earth market and market-outlook-
dynamics as well as the corporate strategy and overall vision for Peak as a Company.
Electrification is the Future of Mobility
Peak anticipates that our society will ultimately be driven by electrification - be it on the road, water or air. If you
too believe this is the future of our society, Peak should be on your radar as its Ngualla Rare Earth Project is one
of the largest and highest-grade undeveloped neodymium praseodymium (NdPr) deposits globally. Perhaps of
even greater significance is Peak’s position as the only rare earth project developer worldwide who aims to be fully
vertically integrated by building its own oxide and carbonate refinery, ensuring it maintains complete pricing power
in the supply chain. NdPr is the raw material which is literally the driving force behind the majority of automotive
electric motors and the heart of the upcoming global electric revolution.
Our main product, NdPr oxide, of which we aim to produce 2,810 tpa, is the key ingredient for the strongest magnets
in the world which are the heart of permanent magnet motor/generator. NdPr is a core enabler of the electrification
era of our society and lacks any real substitution threat on the horizon whilst offering greater torque than competing
technologies at the same values of current and voltage and more power by weight. In some occasions there might
be a potential to reduce the usage of NdPr in NdFeB permanent magnet motors by adding Cerium but in no case
NdPr can ever be totally replaced.
95% Penetration of NdPr Electric Motors
This technology represents an unprecedented growth opportunity for NdPr due to the almost 100% adoption of this
technology by the automotive industry as a drive line solution for electric vehicles. In addition to the existing positive
sentiment towards electrification in the market, we anticipate an acceleration of demand due to tighter global
emission standards and stricter legislation on environmentally harmful technologies (see page 19). For these
reasons, we see Peak operating as a core raw material supplier in the most attractive growth segments of the next
industrial revolution. In addition to the strong growth forecast from the Electric Vehicle sector, additional demand
drivers such as automation and robotic solutions combined with AI (see page 91), sustainable wind energy (see
page 66) and the global trend of electric mobility (see page 50) are supporting this extraordinary growth story.
Peak is operating in an attractive market in the backdrop of a strong macroeconomic environment. The NdPr market
is already demonstrating a compound annual growth rate of 7.4% (CAGR) that is outpacing the individual GDP
growth rates of the biggest industrial nations worldwide. Estimates for the growth in electrification show high double
digits year after year for the coming decade. For example, in 2017 global plug-in vehicle sales reached nearly 1.2
million vehicle resulting in a 57% YoY growth. Therefore the overall fundamentals are already beginning to look
exceptional.
Significant Supply Shortages in NdPr
Due to the increasing technological shift in mobility from combustion to E-mobility technologies and the cost
competitiveness of wind energy compared to established energy sources, we anticipate that our main product,
NdPr, will face a significant supply shortage around 2025 and will be heavily under supplied. Estimates by leading
industry observers expect this shortage to be in the range of ~20,000 - 30,000 tpa which is equivalent to current
legal production levels. This will be further exacerbated by the restricted Chinese production quotas which are to
take full effect by 2020, limiting their annual legal NdPr production to a maximum of ~27,000 tpa. It is also forecast
that China will become a net importer of NdPr by 2020.
The market entry timing of Peak is perfectly aligned with the overall market dynamics allowing Peak to capture the
first significant volumes when demand ramps up. Notably, the market forecasts that by ~2023, the cost of ownership
of an electric vehicle will be lower than that of an internal combustion engine thus allowing Peak to take full
advantage of what is likely to be an enormous gap in supply versus demand.
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Demand is Underpinned by Government Legislation
Already in 2017, several major government announcements have been made regarding future plans for these
technologies. The Netherlands aims to ban the sales of new internal combustion engines (ICE) vehicles entirely by
2030. France and UK announced that by 2040, they too intend to accomplish this goal. The European Union CO2
reduction goal for 2050 requires 95% decarbonisation of road transport.
China, the largest single electric vehicle market worldwide, recently announced a new law which will enforce a NEV
car quota. Commencing in 2018, the Ministry of Industry and Information Technology has proposed to introduce
regulations that will require car manufacturers who produce more than 50,000 conventional fuel driven vehicles
p.a, to meet the New Energy Vehicle (NEV) budget requirements. This will be represented by a credit system with
minimums of 8%, 10% and 12% for 2018, 2019, and 2020 respectively. The credits are transferable from car
manufacturer to another. Furthermore, the Chinese Government confirmed in 2017 that they are working on a
deadline for the sales of ICE vehicles in the Chinese market altogether.
The Indian government has recently announced significant investment into an EV industry and wants to see electric
vehicle use reach 100% by 2030.
In the backdrop of a demand cycle underpinned by Government legislation, it seems a foregone conclusion that
the momentum behind e-mobility electrification is here to stay.
One of the Largest and Highest-Grade Development Projects Globally
The Ngualla Rare Earth Project, located in Tanzania, is one of the largest undeveloped, highest grade, NdPr rich
rare earth deposits outside of China. The deposit has favourable weathered bastnaesite mineralogy with low levels
of phosphate and carbonate and low radio-nuclei levels. The highly economic Bankable Feasibility Study (BFS)
utilised only 22% of the total mineral resource and still yielded a 26-year mine life. This demonstrates the scale,
expandability and strategic significance of the Ngualla Project.
Being one of the lowest cost producers in this specialist commodity segment will reward Peak Resources with
becoming a truly viable vertically-integrated, non-Chinese supplier offering a sustainable, 100% transparent,
traceable, ethical and quality focused supply solution with top tier environmental standards located with its refinery
in the UK with sustainable economics. These features will enable Peak to enter successful relationships with the
downstream business and become a prosperous corporation delivering consistent profits to its stakeholders.
Peak is the Only ‘Fully-Integrated’ Rare Earths Developer
In comparing the various rare earth development projects, the market is not comparing apples-to-apples. Other
than Lynas, an existing NdPr producer, Peak’s development peers all aim to produce an intermediate concentrate
which they will export to a third party Asian refiner. Given the strategic significance of this commodity, not having
the means and expertise to separate the final rare earth elements means losing ultimate control over the pricing
and supply chain.
At its planned UK separation refinery, Peak will be producing the final rare earth elements which can be exported
directly to the integrated magnet manufacturers. Whilst other developers are working on pilot test programs to
attempt the final separation themselves, no developer, other than Peak, has yet been able to demonstrate their
ability to be fully-vertically-integrated to a Bankable Feasibility Study (BFS) level. This is due to Peak’s exceptional
in-house expertise as well as the comparatively simple metallurgy of the Ngualla deposit.
Simple Refining Process Reduces Execution Risk and Lowers Capex and Opex
Peak deliberately designed the refinery process to reject the low-value material cerium from early on, therefore
allowing the planned UK refinery to operate on a much smaller scale with most of the focus being given to Peak’s
champion product, NdPr.
This enables Peak to run the UK refinery process just a little bit above ambient temperature on low acidity levels,
directly resulting in a low corrosion risk operation meaning we are able to use simple, lower-cost materials like
polymer piping and tanks rather than steel and other expensive exotic materials such as titanium or tantalum
equipment.
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Located in a modern industrial park providing easy access to all production relevant utilities and supplies, the UK
refinery provides exceptional versatility and adaptability. A major infrastructural advantage is that we do not need
to build tailings infrastructure or facilities for our residues and effluents as pre-established facilities are already
available on the chosen site. These supporting attributes of Peak’s industrial footprint will assist in securing our
future position as an industry leader.
Our corporate strategy is focused on being one of the lowest cost operators in the sector and at the same time
being one of the most innovative. Peak plans to achieve this using a smart and sophisticated IT approach which
will support us to secure leadership amongst our peers and offer a premium experience to our customers, combined
with an ethical and sustainable supply chain solution providing services unprecedented in the mining industry. This
will place Peak with an attractive and unique selling proposition which will differentiate us from our competitors.
More Than $100 Billion Already Committed to the Electric Vehicle Revolution
As previously highlighted, applications in the automotive and wind sectors will be key applications in influencing
future demand growth of permanent magnets, and in particular for NdFeB, respectively, NdPr.
The Automotive Industry has the clear leading position in impacting the global demand on NdPr magnets and the
related raw materials. Bloomberg confirmed just recently that more than 90 billion USD will be invested in electric
vehicles by the global automakers and the number is still growing with Nissan and Porsche. Furthermore, in a
recently published market summary by McKinsey & Company, it was established that 200 new electric vehicles will
be launched by 2019. Market experts predict that electric and plug-in-hybrid vehicles will most probably make up
two thirds of the automotive market by 2030 in a market of +100 million units sales per year.
After Tesla announced they’d chosen to use an NdFeB permanent magnet motor (“PMM”) for their high volume
vehicle Model 3, the already strong position of this rare earth technology has moved from a ~90% market share
towards nearly 100% market share among all passenger car manufacturers. In this context, it’s important to also
understand the nature of the automotive business and the lifecycle management of these platforms and the impact
on the lifecycle of components.
The aforesaid positive developments in total cost of ownership (TCO), country targets, governmental incentives
and announcements of the car manufacturers themselves indicate that there is a very good chance that the pool
of operating electric cars will grow from 3.2 million globally today to approx. 9 -12 million by 2020, and between
~30 million and ~60 million by 2025.
The development of a large variety of popular EVs in the market space from 2020 will be a game changer in regards
to the global NdPr demand and its global supply chain. It is predicted that during 2022-2025, the cost of ownership
of a HEV/EV will become lower than that of a traditional combustion engine vehicle. This is the moment when the
classic S-curve for innovations kicks in and the demand for NdPr will skyrocket (see similarities of the life cycles
like the shift from Black/White TV’s to colour TV’s and from a standard mobile phone to smart phones, see page
21).
To give you an idea of the order of magnitude of this evaluation, the automotive industry alone will have the potential
to absorb today’s global annual production of legally manufactured NdPr in just one year when electric mobility will
reach a global market share of ~40%. Demand from the automotive industry will create a massive shortfall in global
NdPr by 2025 at the latest.
Robotics and Automation: The Great Disruptor
Furthermore, we see the robotics and automation solution sector is becoming a reality as another upcoming
disruptive force in the century of electrification. With autonomous driving reaching stage 5, Artificial Intelligence has
tackled one of its biggest hurdles and robotics is set to take-off in a big way. We believe there will be an
unprecedented shift from manual industrial labour to AI robotic solutions. This upcoming technology shift, in which
NdPr is to play a vital role in the permanent magnet motors within robotic solutions, represents a life changing
industrial revolution equivalent to those triggered by the invention of steam engines, motor cars and electricity.
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The NdPr Price Hasn’t Yet Seen Demand-side Pressure
We believe that the supply chain will first consume their existing inventory levels to delay any purchases as long
as possible. Particularly in the export business, we will see a classic trade-off between air shipment costs versus
actual price increase. This is caused by the established industry practice to manage raw material prices with a raw
material price index formula which causes a 3-4 month delay on pricing effects in the wider market. This short-term
focus on maximizing profits of the rare earth industry and the fact that the magnet industry still operates on fixed
price long term contracts will seriously amplify the future pricing trend as getting new industry capacity online will
take a minimum of 3 years. In mid-2017, the first investors from the capital market entered the rare earth market to
speculate, adding more complexity to the market environment. In the last 12 months, between February 2017 and
February 2018 the NdPr price performance was +30% reaching ~52 USD/Kg NdPr oxide domestic China.
With these facts in mind, we project an overall sustainable continuous uptrend for NdPr prices, despite the classic
short-term pull backs as we have experienced recently (Q4-2017), as NdPr represents a core pillar of this new
century of electrification.
Peak Resources Offers Investors the Most Leverage in the Sector
Peak Resources represents the absolute value investment proposition among its peers when it comes to worldwide
development projects in the special metals sector. The market fundamentals are unfolding and provide an idea on
the project potential and upside. At a market capitalization of only $28.33m (as at 7 Feb 2018) the potential upside
for any investor is substantial.
We aim to become the next Lynas. We aim to produce 9,290 tpa rare earth oxide equivalent, which is a little bit
more than half (58%) of Lynas’ established product output of 16,003 tpa in 2017. Like them, we are planning to be
fully integrated with our own refining capability which assures that the company retains the pricing power through
the supply chain to the final saleable oxide product stage. No other western project developer currently has
publicized plans to be capable of this. All our peers are aiming to commercialize an intermediate concentrate or
intend to find a tolling partner for processing their material to the final commercial saleable product stage. None of
our peers have been successful in securing binding commercial tolling agreements, however they incorporate in
their business cases tolling assumptions, projected sales and revenues of finished oxides for which they do not
currently have a secured route to market. It is important to note that currently there is no solid understanding as to
values or established routes to market for intermediate rare earth concentrates (pre-refining).
It is interesting to acknowledge that their indicated capital and operational expenditures still remain higher than that
of Peak’s, which has been fully stress tested under the BFS. This further underpins the quality of Peak Resources,
its asset in Tanzania and the planned refinery in UK.
If you have a look at Peak’s project KPIs (see page 27) you will see that Peak has a better cost base, better product
mix and better overall project economics compared to its peers. Furthermore, Peak’s Ngualla Project is one of the
biggest undeveloped NdPr resource worldwide of which the BFS only takes into account 22% of the resource -
once again demonstrating the scale and significance of this deposit and the opportunity Peak represents.
Peak is aiming to produce over 9,290 tpa of rare earth products in total (2,810 tpa NdPr and 6,480 tpa other rare
earth materials) at an operating cost of ~US $91 million p.a. Taking just the annual NdPr portion into account,
Peak’s unit operating cost would be just US $32.24/kg per kg NdPr (91 million divided by 2,810 tpa).
With the market price for NdPr sitting at US $51.84kg (RMB 328) as at 10/01/2018. Using this price, Peak would
generate a profit of US $19.60/kg or US $55.08 million cash per year. And don’t forget - this is completely
ignoring sales profits from the remaining 6,480 tpa of additional rare earth material available.
If you compare Peak’s Net Present Value (NPV) projections against Lynas’ market cap of AU $1.06 billion (8 Feb
2018) one is able to fully comprehend the true potential value of Peak Resources.
JUST DO THE MATH!
Peak Resources is the go-to Fully-Integrated Rare Earth Specialist
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What are Rare Earths?
General Application Overview & Rare Earth Definitions
A rare earth element (REE) or rare earth metal (REM), as defined by IUPAC, is one of a set of seventeen chemical
elements in the periodic table, specifically the fifteen lanthanides, as well as scandium and yttrium. Scandium and
yttrium are considered rare earth elements because they tend to occur in the same ore deposits as the lanthanides
and exhibit similar chemical properties.
Rare earth elements are:
cerium (Ce), dysprosium (Dy), erbium (Er), europium (Eu), gadolinium (Gd), holmium (Ho), lanthanum (La),
lutetium (Lu), neodymium (Nd), praseodymium (Pr), promethium (Pm), samarium (Sm), scandium (Sc), terbium (
Tb), thulium (Tm), ytterbium (Yb) and yttrium (Y).
Despite their name, rare earth elements are – with the exception of the radioactive promethium – relatively plentiful
in Earth's crust, with cerium being the 25th most abundant element at 68 parts per million, or as abundant as copper.
They are not especially rare however typically they are not found in concentrated deposits that allow for economic
mining. They tend to occur together in nature and are difficult to separate from one another.
Complexities in separation
Rare earth elements are in principal immobile elements which does not enable them to be found in concentrated
veins like gold or silver. Rare earth elements can be mobilized by applying different levels of mild acidic Ph levels
in solvent extraction cells through a multi separation stages which requires hundreds if not thousands of individual
cells. Additionally, usually the host mineral contains several impurities like for example monazite contains quite
high levels of Thorium and Uranium which provides additional complexity to the separation process.
General overview of Rare Earth applications:
Source: Shades of Grey and Wikipedia and others
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The Market and it’s Dynamics
Rare earths suffer from a supply and demand
imbalance problem, as the ratio in which the
elements occur in nature differ significantly from the
ratio in which they are used in industrial applications.
As a result, depending on the particular industrial
technology area, some rare earth elements are in a
significant oversupply whilst others are in supply
deficit which results in amplified, extreme pricing
scenarios.
In 2011, the rare earth industry experienced a pricing
bubble initiated by a conflict between Japan and
China. As we know, bubbles are never healthy for
any industry as it always triggers events which
ultimately causes disruptions on either the demand
or supply side. The situation in 2011 caused
customers to endeavour to become less reliant on
rare earths, reducing their consumption where
possible or avoiding them completely. The polishing
powder industry experienced, at the peak, close to
50% reduction of total demand due to customers
recycling/reusing their powders instead of
purchasing virgin material for each application.
The rare earth industry experienced another big
event when in 2012-2013, LED technology took
over from florescent lamps. As a consequence, the
need for traditional phosphors (Eu and Y) was
reduced dramatically. The industry anticipated that
this process of transition would take 4-6 years
however in reality, it was just 2 years before the
phosphor business as we knew it was cut by more
than half, leaving industry giants like Osram and
Phillips struggling to adjust to the significantly
decreased demand levels. With the end of the
phosphor era, minerals like terbium, europium and
yttrium lost significance and were repositioned in the
market. Some people believe that this transition was
accelerated due to the pricing events of 2011.
The aftermath of this event and in particular, how
quickly the transition to LED technology occurred, is
a great example directly contradicting the popular
belief that a lengthy process is required in order for
new technologies to replace existing ones and that
their potential to completely change an industry
sector is constrained. It shows how quickly change is
happening nowadays.
In years past, we have also seen new technologies
introduced which have replaced rare earth
consuming technologies, in turn reducing the overall
global rare earth oxide consumption. For example,
solid state drives (SSD) are replacing the traditional
hard disk drives (HDD) and NiMH batteries will
gradually be replaced by Li-Ion batteries.
Altogether the rare earth industry suffered a loss of
around 40,000 tonnes in annual sales of rare earth
oxides due to industry efforts to reduce the need for
rare earth materials.
Then in 2015 we experienced another significant
event for the rare earth pricing. China scrapped its
export quotas and export tariffs on rare earths after
losing a World Trade Organisation case led by the
USA and supported by Japan and the EU. In
consequence, export price declined by approx. 20-
35% over the following two months resulting in a 6
year low in pricing. Prices dropped so low that in
2016, hardly any upstream rare earth producers
inside or outside of China made any profits. From our
perspective, rare earth prices have bottomed out
in 2015. Since then we can see that the sentiment in
the market has changed. We see below, 4 main
drivers for an improvement on the future pricing:
The new Chinese rare earth strategy for the up
and downstream business
Macroeconomics and the anticipated global
growth- especially carbon low technologies
The trend of more stringent legislation to reduce
the global carbon footprint
Upcoming new technologies which will initiate a
shift and change in demand for commodities
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Supply – China’s Almost
Absolute Control of the RE market
China
China surpassed the US as the world largest rare
earth producer in 1986 with an annual output of
~12,000 tons. Since then, China has dominated the
global rare earth market reaching 85% global
market share in 2017. The main export markets are
Japan, followed by USA and then the European
Union. Nowadays, China has almost achieved
monopoly in the upstream of the business and is
dominating several downstream areas as well. In the
permanent magnet space, China has achieved
similar control as in the upstream business- reaching
a global market share of approx. 80-85%.
Active mines outside of China are few and are
located in Russia, Australia, USA, Malaysia, India,
Burundi and Myanmar.
In 1998 the Chinese government began to restrict
rare earth exports and ultimately established an
export quota system to manage and control the rare
earth business, a move which caused friction with the
western industrialised nations. This eventually
materialized in a complaint initiated by the United
States, Japan and the European Union being lodged
with the World Trade Organization (WTO) in 2012.
They argued that China’s rare earth export quota
system granted the Chinese industry players unfair
advantages and that the established Chinese
framework would represent governmental resource
protectionism. The Chinese government defended
themselves claiming that the set-up was meant to
protect the environment and gain control over
negative, illegal repercussions.
In March 2014, the WTO concluded that the Chinese
government must revoke the established export tariff
and quota system, which Chinese government
implemented in May 2015.
Most of China’s rare earth reserves are located in the
provinces of Inner Mongolia, Sichuan, and
Shandong, and within seven provinces that share
borders in southern China (Jiangxi, Fujian,
Guangdong, Guangxi, Hubei, Hunan and Yunnan).
The deposits in Inner Mongolia and Sichuan contain
mainly light rare earth elements. Inner Mongolia’s
Bayan Obo is the biggest mining reserve in China,
accounting for ~84% of total REEs reserves. Most
rare earth enterprises in China are located in the
areas where there are rare earth mines. Three major
rare earth bases in China are as follows:
1. The northern production base for rare earths is
dominated by Baotou with an estimated
separation capacity of ~80,000 tpa.
There are approx. 60 rare earth enterprises
including 20 key enterprises. Baotou has two
enterprises with annual processing capacity of
more than 10,000 tons of rare earth
concentrates, five backbone enterprises with
more than 5,000 tons of capacity, and 12
enterprises with 2,000 –3,500 tons of capacity.
The remaining enterprises have less than 2,000
tons of processing capacity. The Inner Mongolia
Rare Earth High-tech Company is the largest
Chinese enterprise for rare earth mineral
production and rare earth smelting and
processing.
2. The medium & heavy rare earth production base
is in the south of China and concentrated in the
provinces Jiangxi, Fujian, Guangdong,
Guangxi, Hubei, Hunan and Yunnan which are
dominated by ion-type rare earths with an
estimated separation capacity of ~60,000 tpa.
In 2013 out of 104 mining rights in the southern
provinces 88 were owned by Jiangxi Ganzhou
Rare Earth Mining Ltd, an enterprise with 20
rare earth separation firms and annual capacity
of ~60,000 tons. The company is located in
Ganzhou city and produces mostly medium and
heavy rare earths. The China Minmetals
Corporation has established China Minmetals
Rare Earth Co., Ltd. in Jiangxi Province with an
investment of CNY 2 billion over 5 years, aiming
at an annual separating capacity of ~13,500
tons.
3. The production base for bastnaesite is in
Sichuan and has an estimated separation
capacity of ~30,000tpa. In the Sichuan Province
are approx. 28 rare earths enterprises. Two or
three enterprises are large scale operations the
other ones are rather small but responsible for
considerable environmental pollution and
damage.
In 2010 the Chinese Ministry of Industry and
Information Technology (MIIT) and National
Development and Reform Commission (NDRC)
developed plans to consolidate the industry. They
initiated a restructuring of the industry and regulatory
reforms to integrate the RE industry. In 2014 they
announced that they have selected 6 state owned
enterprises (SoE) which should take full control of the
Chinese rare earth industry and it is expected that
these companies will consolidate 100% of the
Chinese upstream and downstream rare earth
industry.
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The six SoE are as follows:
1. Inner Mongolia Baotou Steel Rare Earth Hi-Tech,
2. Xiamen Tungsten Co. Ltd,
3. China Minmetals Corp.,
4. Aluminum Corp.of China,
5. Ganzhou Rare Earth Group Co. Ltd
6. China National Nonferrous Metals Industry Guangzhou Corp
According to the China Rare Earth Industry
Association, annual capacity of rare earths was
~300,000 - 400,000 tpa or more in 2016, and the six
group capacity (~50 companies) was about
~280,000 tpa. In addition, China has a recycling
capacity of approx. ~40-50,000 tpa.
The official Chinese production quota from 2014 to
present (August 2017) is 105,000tpa with an
additional estimated 35,000t - 45,000t REO resulting
from illegal Chinese production.
Since the total industry capacity is ultimately
unknown, and even we report in this market
summary different figures, we have to assume that
the real figure is among the different published data.
However with the further industry consolidation in
China we expect that total industry capacity will
continuously be reduced.
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Illegal Mining
To understand the magnitude of China’s illegal
mining industry and the disconnection between the
official Chinese quota system and actual production,
we are going to recalculate the NdPr oxide
consumption from the reported annual Chinese
production of NdFeB permanent magnets.
Accordingly the official quota, in 2017, China will
produce 105,000tpa oxides. A good ratio for Nd + Pr
output would be approx. 25% across all deposits
which would result in total ~26,250tpa produced
NdPr oxides. According to the 2016 report published
by Roskill, the ratio should be even smaller resulting
in 18,000 -19,000 tpa NdPr. According to Ruidow a
Chines Pricing house 2017 November, NdPr
represented 20.09% or 16kt Nd and 4.8kt Pr of the
official 105kt quota in 2016.
Furthermore, the Chinese government announced in
2016 that it plans to limit the annual production of
oxides to max 140,000 tpa and the separation
capacity to 200,000tpa by 2020. This would limit the
maximum annual available output of NdPr to
~35,000tpa, or in case of a linear extrapolation of the
Roskill assumption, 24,000-25,333 tpa.
Source: www.magneticsmagazine.com
additional info: more_than_you_ever_wanted_to_know
If we now take a look at reported Chinese NdFeB
volumes of ~95,000tpa NdFeB magnets (ADAMAS
2016 Report) and consider that 30% of the reported
volume is pure NdPr and we add 20% conversion
losses (oxide to metal) on top, we end up with an
actual 2016 consumption of 34,200tpa of NdPr
(28,500 + 5,700).
Ruidow informed the market at the rare earth
conference 2017 in HK that 2016 China alone has
produced sintered NdFeB Magnets of 135k and
bonded NdFeB magnets of 3.2k, resulting in a
feedstock of approximately 49.750 tpa (41,46k
+8.29) of NdPr.
It appears that China represents approximately 85%-
90% of global production with the remaining volume
produced by Japan and a few other small producers
across the globe.
Additionally, according to Asian Metal China data (16
Feb 2017), China’s NdFeB magnet exports in 2016
were up by 15.6% YOY. Magnet exports in 2016
were 26,944t, up by 15.6% from 23,300t in 2015. At
3,172t, the US was the biggest importer-
representing 12% of China’s total exports in 2016.
This should provide us rough idea in regards to the
global footprint of the magnet business.
If we connect these numbers we can see that today
the supply and demand are already no longer in
balance and that there is a gap of approx. 2,727t
NdPr (34,200 - 26,250 =7,950t - 5223t Lynas (2017)
to 18,277t (49,750-26,250=23,500 -5,223)
It could of course be argued that historical stockpiles
can be activated to address this imbalance however
even if this were a possibility, the back supply is not
endless and it too will run out eventually.
We can only guess what the actual size of illegal
mining is today! This conservative approach would
suggest that in reality, the actual gap is considerably
larger than our calculation. It is also clear that the
illegal volumes come out ultimately of existing
Chinese legal operations and there is no such thing
like a hidden illegal rare earth shadow operation in
China. As soon as the Chinese government
continuously supervise the industry to comply with
the governmental KPI’s and the overall Agenda the
supply-demand imbalance will become more and
more visible.
It is important to understand, regardless of the final
numbers, certain physical rules must be obeyed. To
obtain 10,000 tpa of incremental NdPr oxide, it
requires minimum production of ~45,000 tpa
incremental mined total oxides. Each incremental
demand of 10,000tpa NdFeB magnets requires
~3,700 tpa NdPr oxide including conversion losses.
To recap and to visualize the consequences of these
findings, we should recall that as one of the best
undeveloped NdPr deposits worldwide, Peak
Resources requires a capex of just US $365 million
and an annual Opex of 91 million to mine 711,000tpa
ore, thus producing 32,700tpa of 45% rare earth
mineral concentrate and delivering 2,810tpa NdPr in
total.
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China’s Rare Earth Industry
Consolidation and the Way Forward
Even though China has dominated the rare earth
space for decades, they have failed to attain pricing
power or to generate large profits. To the contrary,
the Chinese rare earth industry generated huge
losses during 2014 to 2016, reaching the peak in
2015 when the industry sector and the big 6
generated an accumulated 800 million RMB in
losses.
In 2017, the consolidation into the SoE has nearly
finished but it is obvious that the Chinese rare earth
industry is still facing fundamental challenges that
will lead to a dysfunctional market which does not
follow normal market economics and mechanics. To
tackle these issues, the Chinese government has
identified the following 6 key areas which will drive
their agenda and action plan in transforming the
Chinese rare earth industry:
1. Environmental and operational compliance
and excellence
Irrational exploitation of rare earth resources has
caused serious damage to domestic Chinese
ecology. The Chinese government understands that
the current status quo is not acceptable or
sustainable and therefore have continuously
improved the standards for environmental protection,
production technology, resources and energy
consumption in order to impose more rigorous
requirements on the scale of production and the
equipment enterprises use for rare earth smelting or
separation. As of 2015, in principle, no new rare
earth smelting or separation projects in China will be
approved.
The extraction of rare earths in Ganzhou region have
severely damaged the Dongjiang River where it is
estimated that ecological restoration will cost at least
CNY 38 billion. This is a prime example of the
magnitude of the harm that is being reported. For
more information, please refer to following report:
Rare Earth Shades of Grey
2. Industry consolidation
The Chinese government has made it a priority to
consolidate the industry into the big 6 SoE by either
closing the small rare earth operations or integrating
them to the big 6.
The objective is to reduce the number of industry
players involved in mining and processing to
approximately ~20, achieving this through mergers,
phasing out small-scale, unlicensed mines and
general non-compliant operations thus reversing the
downturn trend of rare earth prices. The principal
objective is to tackle the serious overcapacity issue.
3. Research and Development
The objective is to move away from low value/low
quality products to strive for higher product quality
and more environmentally compliant rare earth
industry operations. The Chinese government
requires industry players to expend more focus on
R&D, technological transformation and equipment
investments. It is understood that the capability of
self-development and true innovation are
fundamental for the desired transformation- which is
why the Chinese government is encouraging its
domestic industry to invest in research centres to
expedite efficiency, research and indigenous
innovation.
4. Technology Enhancement
In the 13th 5 year plan “Made in China 2025” and the
latest rare earth policies, the Chinese government
emphasises and encourages the expansion of the
development of high-tech applications in conjunction
with the consumption of rare earth minerals.
Especially in the fields of e-mobility, renewable
energy, information technology and the development
of a circular economy (recycling), China has
experienced unprecedented growth during the last
few years and is determined to exceed the historical
results in the near future.
For further details on the policies and the 5 year plan,
please refer to the following sources:
Published October 2016 "Rare Earth Industry
Development Plan (2016-2020)" of the “Ministry
of Industry & Information Technology”, this plan
represents the implementation of the new “Rare
Earth Industrial Standard Regulation” which was
published on July 1, 2016.
13th 5 year plan “Made in China 2025” see
dedicated chapter
National Traceability System on Key
Commodities (including rare earths)
5. National Rare Earth storage programme /
Stockpiling.
The Chinese government is carrying out stockpiling
programs and are buying out the market volumes
which have been produced in excess demand in
order to support the pricing and to secure strategic
supply for the domestic market.
Commercial Stockpiling: The National
Development and Reform Commission have been
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targeting the light rare earth (LREs) since 2012 and
in 2013 the acquisition of heavy rare earths was also
ramped up- with the source of these materials being
the 6 SoE. Each SoE is required to stock in-house a
30% minimum of the volume supplied to the central
stockpile program. These products are required to be
packed according to national standard and
transported from the six large SOEs warehouses to
the national warehouse.
National stockpile (SRB): This program is in
addition to the commercial stock piling program
mentioned above. It was launched by the Chinese
government in 2016 and is managed by the State
Reserve Bureau (SRB). The program was initiated to
support the market pricing. In June 2016, a Rare
Earth National Stockpile meeting was held in Beijing,
chaired by the State Reserve Bureau and supported
by MIIT and NDRC. The prices offered by SRB were
so low that all of the six SOEs refused to supply.
6. Illegal mining and small size enterprises
The objective is moving the rare earth industry into a
higher value-adding, more technically advanced
sector. The Chinese government understands that
the barrier for entering the rare earth industry is
currently too low, especially considering of the ionic
clay deposits in the south of China. This problem is
amplified by the lack of rigorousness in the
implementation of the existing legislation and afore
mentioned industry strategy. It’s also understood that
the existing legal and regulatory framework still has
deficiencies which provides loopholes and
interpretations that allow illegal mining and
separation to continue to be carried out.
Grey areas have been identified in the rare earth
recycling business in regards to traceability of feed
material which has opened the doors for illegal
activities and malpractice. This issue has not been
resolved and still requires serious attention.
The central and local governments need to
continuously maintain robust efforts to prevent illegal
mining and smuggling. Unfortunately a certain level
of illegal activities will always exist, but the current
level is unacceptable and damaging to the industry
as a whole. And more importantly, the damage
caused to the environment is severe and ultimately
inexcusable.
The Chinese government understands that it is
essential to tackle the aforesaid 6 major identified
areas and to advance them as a whole while keeping
the focus on the lead enabler of the transformation
“The consolidation process”. It will be essential to
continuously progress in the identified areas so that
the industry can transform and start to follow normal
market mechanics and economical rules.
It is acknowledged that it is almost impossible to
control the hundreds of small and illegal businesses
scattered all over the country- especially in rural
areas in the south of China. Illegal mining, production
and smuggling has seriously disrupted market order
and has been one of the major factors which has led
to the substantial decline in the price of rare earth
products due to oversupply from these illegitimate
entities.
The central government must supervise local
provincial governments to prevent collusion and
illegal project approvals and strengthen the
management of public opinion by reporting success
stories and good examples of best industry practice,
but also exposing and condemning negative
examples.
The central government is required to play a more
active supervisory role due to the existing conflict of
interest between central government, local provincial
governments and individual major industry players
which slows down the implementation of the policies
and overall strategy.
Specific rare earth laws and regulations such as the
proper implementation of the new Chinese Resource
Tax and the planned expansion to include the Water
Resources Tax need further improvement in their
definition and execution so the ambiguity of terms
and meaning are reduced to a minimum and do not
leave any further space for misinterpretation.
If they manage to accomplish a continuous
improvement in the main identified areas, they will
succeed with the transformation. However the
prerequisite is stricter law enforcement which will
lead to higher operating cost and raise the entrance
barrier, eventually materializing in higher rare earth
pricing. This would automatically wipe out the less
significant small/medium enterprises which should
have never entered the market in the first place and
would solve the existing overcapacity problem. As a
result, normal market mechanisms would again play
a decisive role and rare earth pricing would recover
to a sustainable level. This would result in active
industry players operating on healthy margins and
generating decent profits enabling them to invest in
R&D and innovation and ultimately allowing them to
upgrade their business and operations.
Since mid-2016 it appears that the Chinese
government is ‘walking the talk’ and are more
determined than ever to enforce and improve the
existing legislation and to combat misconduct in the
areas of social law, general corruption,
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environmental law and in particular general illegal
mining operations.
Source: page 9 -17; different Elsevier publications,
Overview on China's Rare Earth Industry Restructuring and
Regulation Reforms report, Asian Metal and other
publications.
For more information, please refer to following
content:
THE YEAR 2017 – SUMMARY- China
waging ‘unprecedented pollution
crackdown
160809 – China daily – China to crack down
on illegal rare earth mining
160824 – Roskill – Rare Earths: China to
take tougher stance on illegal mining
161213 – SMM – Analysis of China
Crackdowns on Rare Earth Sector, SMM
Reports
170126 – INDMIN – Chinese provinces
crack down on rare earth activities
170220 – Reuters – China to crack down
on illegal mining, as miners meet on output
cuts
170911 – Taipei Times - PRC curb on illegal
mining boosting rare earth metals
170907 – Bloomberg - Rare Earth Metals
Electrified by China's Illegal Mining Clean-
Up
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Supply: Rest of the World
Outside of China, the rare earth industry has only a
few active mines located in Russia, Australia, USA,
Malaysia, India, Burundi and Myanmar.
Rare earths were not mined in the US at all during
2016. Molycorp, once North America’s sole producer
of rare earths, filed for bankruptcy in 2015 and was
put on care and maintenance later that year. In June
2017, Molycorp’s Mountain Pass operation was
acquired by JHL Capital Group QVT and Shenghe
Resources for USD 20.5 million.
With its Mt Weld mine located in Western Australia
and solvent extraction plant in Malaysia Kuantan,
Lynas is currently the only significant rare earth
producer outside of China, able to produce up to
4800-6000 t p.a. of NdPr.
COMPANY COUNTRY MINE/REGION
China Northern Rare Earth Group China Inner Mongolia
China Southern Rare Earth Group China Sichuan, Jiangxi
Chinalco Rare Earth Group China Guangxi, Shandong
China Minmetals Rare Earth Group China Hunan,Yunnan,Jiangxi
Fujian Rare Earth Group China Fujian
Guangdong Rare Earth Group China Guangdong
Molycorp USA/China Mountain Pass
Lynas Corporation Australia Mt. Weld
Pegang Mining Malaysia Kinta Valley
Myanmar Ye Huang Mining Myanmar Kokang
Lovozerskiy Russia Lovozero
Indian Rare Earth Linited India Tamil Nadu
Kerala Metals and Minerals India Kerala
Nuclear Industries of Brazil Brazil Buena Norte
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NdPr Demand Supported by Global Legislation – Not If But When
From our perspective, we are in the early days of a
new industrial revolution of electrification which will
strongly rely on NdPr technologies, respectively
NdFeB permanent magnets, and we believe that
the framework for the upcoming decarbonisation
century has been put in place during the last 3-5
years. We are currently on the threshold of these
niche technologies entering the market and
changing modern technology as we know it.
The future demand growth of NdPr is underwritten
and fully supported by an existing number of
technological and governmental policies, initiatives
and developments including urbanisation, industry
modernisation and stricter environmental standards.
Emissions legislations are a huge portion of this
with the primary focus on significant reduction of
greenhouse gasses, anti-idling laws and greater
vehicle efficiency.
These factors are expected to drive a steady
significant growth of low to zero emissions
technologies and hence the global NdPr demand.
We believe that upwards of 50% of future demand
will be underpinned by these regulations and
initiatives.
For more information, please refer to the following
sources:
Montreal > The Kigali Agreement +
summary
The Paris agreement COP 21
Efforts is regards to Energy efficiency (EU
overview
IEA global database of policies
OECD paper in regards of policy alignment
activities
In the automotive sector in particular, we can expect
immense progress due to positive changes in public
awareness the and overall sentiment in society
towards e-mobility technologies. This has been a
key driver towards the rapid changes we have seen
in legislation in the past 2-3 years compared to the
drawn out processes of years prior.
Internal combustion engines have dominated our
streets for over a century now, with an operational
fleet of ~1.3 billion cars (2015) on our roads. With
an annual car manufacturing capacity of around 100
million vehicles per year, it will take approx. 20
years for a complete transition to e-vehicles to be
achieved. NdPr and NdFeB magnets will play a
pivot role in this new era of mobility and electric
automatization, causing them to become a critical
element in the future societal developments.
Already in 2017, several major governmental
announcements have been made regarding future
plans for these technologies. The Indian
government has announced "massive" investments
and wants to see electric vehicle use reach 100%
by 2030. The Netherlands aims to ban the sales of
new cars with ICE engines entirely by 2030. France
and UK announced that by 2040, they too intend to
accomplish this goal. The EU CO2 reduction goal for
2050 requires 95% decarbonisation of road
transport. China, the largest single electric vehicle
market worldwide, has announced the launch of a
new law which will enforce a New Energy vehicle
(NEV) car quota. Commencing in 2018, the Ministry
of Industry and Information Technology has
proposed to introduce regulations that will require
car manufacturers who produce more than 50,000
conventional fuel driven vehicles p.a, to meet the
New Energy Vehicle (NEV) budget requirements.
This will be represented by a credit system with
minimums of 8%, 10% and 12% for 2018, 2019,
and 2020, respectively. The credits are transferable
from one OEM to another.
Furthermore, we predict that more urban areas like
the biggest cities in this world will start to ban
internal combustion engines form their city centres
to improve air quality and noise levels. To provide
you an idea of the impact of such measure, please
check out this video here.
These new policies and more stringent legislation
roadmaps are forcing automakers to rethink their
product offerings. Today the main force of the E-car
deployments are governmental subsidies and tax
advantages, but step by step, the governments and
local authorities are implementing policies aimed at
reaping the benefits of EVs. Tools currently
available for policy makers include purchase
subsidies, measures supporting EVSE deployment,
evolving fuel economy standards plus many others,
each paving the way for e-mobility to become a
popular, mainstream technology.
As battery pack costs decrease, electric vehicles
will become increasingly cost competitive. The need
for vehicle purchase incentives will diminish and
subsidies for electric cars will no longer be required.
It is expected that with a bigger electric vehicle
share in the market, the governmental revenues
stream will need to be remodelled (e.g. fuel tax) and
new tax model will need to be implemented. Hence,
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the rising costs of developing combustion engines
that meet ever-stricter emissions regulations could
make some electric models more affordable as
soon as 2025-2027. These new and more stringent
legislations will directly translate to higher
manufacturing costs for manufacturers of traditional
ICE’s, which will definitely accelerate the adoption
of new energy vehicles and therefore their market
penetration. A point will come where car
manufacturers must make a strategic decision on
how they want to move forward in regards to
investment returns and the overall deployment of
their resources.
For further information regarding automotive
emission standards, please refer to the following
sources:
Car Emissions - What/How/Why
Umicore Group - Emission standards
Overview of the emission control
standards in the G20 countries and the
way forward
European emission standards
Low-carbon fuel standard
California Air Resources Board “CARB”
Source: Download Electric Vehicles - The quiet rEVolution (73 pgs)
Source: .mckinsey study - the future of mobility in India 2017
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Why Peak?
The Premier NdPr Development Story Globally
Peak possesses many unique qualities which are all
relevant to Peak’s success in becoming the low-cost,
sustainable, innovative supplier of choice in the rare
earth industry.
At Peak, an unrivaled management team with direct
rare earth experience & management capabilities
meet with a world class deposit and a perfect
alignment with the market to create a company that
has the potential to skyrocket, combined with new
consumer applications and technologies expected to
materialize on a scale of incremental multi-million
unit sales per year- each of them containing more
than a kilogram of Peak’s material.
We believe that these are extraordinary times in
which we live and that the impending business
opportunities are those that arise just once in a
lifetime. Careful observers will recognize that the
product adoption curves have recently gotten
steeper, the market dynamics have accelerated and
the classic product lifecycles undergo the same
dynamics. If we put this information in context with
what is happening in the e-mobility segment right
now, we understand that this industry is at the verge
of leaving the early adapter segment and is ready to
take off!
We aim to establish Peak as a solution provider in
the low carbon, clean mobility and clean energy
sectors. We perceive ourselves as a manufacturer of
bespoke, niche rare earth specialties with an
exceptional and unique asset. We aim to become a
strategic marketer in the rare earth space, creating
value by understanding customer needs and market
dynamics including supply demand sensitivity,
market mechanisms, value-in-use differences
between products, pricing and contracting principles.
We position ourselves as a provider to the
downstream, predominantly in Catalysis, Metal
Alloys and Magnet producers and business by
understanding their requirements- especially their
sensitivities in further processing. We strive to serve
our customers with a steady, high quality and
sustainable solution.
We understand that commercial and operational and innovation excellence are together the core pillars for our future success and add substantial value to the bottom line. With this in mind, we have developed the following strategy that aims to drive our core pillars of success:
People make the difference – a top class management team
Innovation, Commercial & Operation excellence
The Hybrid model – our defined strategy for our route to market
Physicals drive financials – the quality of our assets
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The Management Team
Peak Resources is the only rare earth developer who
has both extensive in-house rare earth
manufacturing experience as well as rare earth sales
expertise. The Company has infused this know-how
into the engineering design and BFS to produce the
best outcome for Peak, its stakeholders and its
customers. Combined with real-life operational
experience, rare earth expertise and thorough pilot
plant operation and testing, Peak Resources has
extensively de-risked the mine-to-product supply
chain.
Peak has the full advantage of the extensive rare
earth know-how of CEO-Rocky Smith, who
possesses a BS Chemistry from Fort Lewis College,
Durango, Colorado, and the majority of his 35+ year
career working in specialty metals and materials.
Rocky’s first-hand knowledge of production and
separation was invaluable in assisting Peak in
designing its process and separation methodology.
Rocky is one of the few western mining executives
who possesses an in-depth knowledge of the rare
earth industry including the supply chain, coupled
with extensive experience with startup and
operations of complex chemical process facilities
including rare earths. Rocky was formerly Managing
Director for Molycorp’s Mountain Pass Rare Earth
operations where he was pivotal in the development
of the process solution, going on to manage the day
to day refining operation, leading a team of 500+
people.
The track record of our management team shows we
have a steady yet highly capable approach. The
management team is well connected in the industry
and have the capability to build out the business and
team and to deliver quality products with a reliable,
sustainable supply chain. We aim to add value to our
customers’ business by being engaged, strategic
partners who provide insights into the rare earth
market
As a management team, we want to be recognized
for proactive, innovative thinking, taking ownership
and delivering profitable growth.
To assure that Peak Resources Marketing, Sales
and Business development activities are aligned with
the industry’s needs and requirements, Michael
Prassas joined the Peak team in 2016. Michael is an
experienced marketing, sales and business
development executive. Before Peak, Michael, was
the Global Account Manager for Automotive
Catalysis and Sales Manager - Rare Earth Systems
for leading global chemical company Solvay/ Rhodia.
Michael’s primary responsibility was for Rare Earth
Mixed Oxide sales in Europe and Africa. Michael has
over 20 years’ experience in sales and marketing
and his focus has been negotiating long-term supply
contracts with global accounts and developing
business relationships and offtake agreements with
some of the world’s largest automotive companies.
In addition to sales and marketing, Michael has
extensive experience in business development and
has been involved in start-up companies providing
technology to the automobile industry.
Lucas Stanfield formerly Peak’s Project Manager
and moving into the role of General Manager of
Development in 2017, manages our Mining
application process in Tanzania with the support of
our local team. Lucas was responsible for the
management of the company’s scoping, preliminary
feasibility, refinery location selection and bankable
feasibility studies. He has spent a considerable
amount of time in Tanzania representing the
Company, has an excellent working relationship with
all stakeholders in country and is very well placed to
further advance the Ngualla Project.
We understand that a reliable and successful
operation is based on developing organic in-house
talents. We are convinced that people really do
matter and are the crux of an effective enterprise. We
understand that as leaders, we must develop the
capabilities of employees, foster their careers and
manage the performance of individuals and teams.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
23 23
The Asset – The Ngualla Rare
Earth Deposit
Ngualla is one of the world’s largest and highest
grade undeveloped neodymium (Nd) &
praseodymium (Pr) rare earth projects.
The Ngualla Rare Earth Project is centred on the
Ngualla Carbonatite in southern Tanzania, 147
kilometers from the city of Mbeya on the edge of the
East African Rift Valley. The name ‘Ngualla’ comes
from the Swahili word for ‘bald head’ which reflects
the appearance of the hill – mostly bare land on
which there is no habitation, agriculture, grazing or
reserves.
The weathered Bastnaesite Zone that is the target for
initial development occurs as a thick blanket of high
grade rare earth mineralisation from surface on
Ngualla Hill. Rare earths are contained within the
mineral bastnaesite within a weathered host rock that
contains very low levels of phosphate, carbonate,
uranium and thorium compared to other rare earth
deposits. This makes it easy-to-mine by low strip
ratio open pit techniques and subsequently upgraded
to a high grade processed concentrate through a
multi stage processing plant on site.
The Total Mineral Resource estimate for the Ngualla
Project above a 1% REO cut-off is 214.4 million
tonnes at 2.15% REO, for 4,620,000 tonnes of
contained REO. Included in this Mineral Resource is
the Weathered Bastnaesite Zone Mineral Resource,
the measured and indicated portions of which form
the basis of the Ore Reserve estimate.
At a 1% REO cut-off, the Mineral Resource estimate
for the Weathered Bastnaesite Zone is 21.3 million
tonnes at 4.75% REO, for 1,010,000 tonnes of
contained REO. Details of the Mineral Resource
estimate are contained within the ASX
Announcement “Higher grade Resource for Ngualla
nearly 1 million tonnes REO" dated 22 February
2016.
The Ore Reserve estimate for the Ngualla Project is
18.5 million tonnes at 4.80% REO for 887,000 tonnes
of contained REO. ASX Announcement “Ngualla
Rare Earth Project – Updated Ore Reserve” dated 12
April 2017 provides further details and
assumptions. The Ore Reserve represents just 22%
of the total Mineral Resource but is sufficient to
support a mine life of 26 years.
The Company plans to export approximately 32,700
tonnes per annum of rare earth concentrate grading
45% REO from Tanzania to the UK refinery.
Ngualla is also host to widespread, high grade
niobium-tantalum, phosphate, fluorspar and barite
mineralisation. These additional commodities are at
an early stage of evaluation and represent potential
upside opportunities for additional products from the
project.
The planned total capital expenditure in Tanzania as
defined by the detailed BFS study and the Project
update estimated at US $200 million including 15%
contingency and plus 5% owners costs. We
anticipate for Tanzania an annual operational
expenditure of US $51 million.
The superior physical attributes of the Ngualla
orebody combined with the unique advantages of the
Tees Valley refinery location makes Peak the lowest
operating and capital cost project of any comparable
rare earth developer. In regards to the superior
position of the Ngualla asset and its global
competitiveness we like to refer to the independent
analysis of the consulting company ADAMAS see
page 27-33.
Tanzania is politically stable and has a well-
established mining culture, being the fourth largest
gold producer in Africa. Existing transport
infrastructure together with a low tonnage, high value
product will enable cost effective transport from
Ngualla to the deep water port in Dar es Salaam.
In July 2017, the Tanzanian government changed
their mining legislation. Since the changes were
introduced, Peak’s senior executives have spent
considerable time in Tanzania continuing to develop
strong working relationships with government
officials and other stakeholders. On his most recent
visit, Peak’s CEO, Rocky Smith met with senior
officials in the new Ministry of Minerals, obtaining
further clarity on the implementation of the new
legislation as well as the timing of Peak’s pending
Special Mining Licence application.
Due to the impending revolution of electrification,
today's commodity landscape will experience a
seismic shift and Tanzania with its rich mineral
resources such as rare earths, niobium, graphite etc,
is in the unique position to transform its country to
something similar to what Dubai experienced in the
1960s. The key element of success in this
transformation will be how the country’s executives
manage to establish a collaborative, transparent and
predictable secure environment which attracts
foreign investment and operations.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
24 24
Our Product Basket - Absolute
Alignment with High Growth
Markets
Peak’s processing strategy has been enhanced to
maximize the yield for 2 main minerals neodymium
and praseodymium (NdPr).
These two minerals are the core ingredients for
manufacturing permanent magnets (NdFeB
magnets), which are used in high-efficiency electric-
motors and generators enabling low carbon
technologies. The demand for NdPr is expected to
grow rapidly as one of the core enablers for the
upcoming new technology chapter.
The high strength to weight ratio of NdFeB magnets
facilitates the miniaturization of electric motor
systems and is the preferred solution when it comes
to the tradeoff between weight versus performance.
Peak’s production basket is in line with the highest
value and growth market.
NdPr accounts for ~90% of Peak Resources’
revenue and represents the main focus of the
marketing, sales and business development
strategy. With its unique Ngualla deposit in Tanzania,
Peak Resources is perfectly positioned to become a
sustainable and long term supplier to meet increased
global demand in the green energy, e-mobility and
electrification sectors.
The overall annual product output is projected to
be as follows:
2,810 REO tpa of neodymium-
praseodymium oxide 99%
4,230 REO tpa or 7,995 tpa lanthanum rare
earth carbonate product
1,920 REO tpa 3,475 tpa of a cerium rare
earth carbonate product
330 REO tpa or 625 tpa of a SEG + Heavies
RE chloride or carbonate product
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
25 25
Commercial Excellence
Marketing and the use of sophisticated strategies
and tools are the basis with which to differentiate
yourself and your company from the rest of the
competition. By providing customers with better
services, experiences and higher transparency, this
enables us and our customers to make better
decisions and will ultimately contribute significantly to
the bottom line of Peak. We understand that through
consistent implementation, there is an opportunity to
generate long term value from commercial
excellence and we have identified following enablers:
Product-market strategy
Commercial value capturing
o Trading incl. arbitrage, speculation
opportunities and international swing
capacity, consignment or global
decentralized stock locations,
financing, pricing incl. transactional
pricing,
o Contract-management including the
right balance between fix - floating
pricing, spot and long term agreements
o Key Account management including
technical expertise/support to offer
bespoke solutions, logistics
(packaging, labeling), managing
customers process, purchasing,
regulation and risk
o Branding( white label no service versus
branded with Service)
Commercial System (Operating System +
Management System + capabilities)
Our analysis and experience makes it clear that
marketing and sales represent an opportunity for
mining companies to add substantial value to the
bottom line. Our vision is to aim for long term supply
contracts but also pursue and capture additional
value through continuous arbitrage opportunities,
superior insights, short-term price developments and
potential shortages.
A robust product-market strategy has been
developed which perfectly aligns with the Company’s
assets. Our decision has been guided by our
commercial aspiration, linking our portfolio to the
most attractive market segments and customers.
Based on our experience and detailed level of market
insight, we have a clear visibility of the existing
margin framework in the industry and perfectly
understand the value in use differences. Due to this
clear understanding of the value of our products
compared with the other options available to
customers, this enables us to position ourselves as
an integrated solutions provider and to capture the
maximum market value.
Based on our insights, we have developed a product-
market strategy where our products need to sit high
on the quality curve in terms of impurities and grade
to maximize the value our products can generate for
Peak. It is essential and critical to ensure that our
products are able to access the high value market
and pass customer specification and technical cut-off
points.
We are aware that the catalysis mixed oxide
business is the most profitable mainstream rare earth
segment and delivers the best margins in the rare
earth industry. In catalysis, depending on the
application and volumes, producers can access good
margins. Due to the opaque nature of the rare earth
industry, we know that there are a substantial
amount of custom made, niche applications
implemented across the globe which are known only
by the individual customers and the direct supplier
who holds the business. Based on our experience
and knowledge, we believe some of these will be
accessible to Peak.
As part of this strategy, we have decided to cover
additional elements of the value chain beyond mining
and separation. We will offer our customers
additional services such as logistics (transport),
stockpiling and warehousing, technical services,
third-party trading and further processing. By being
more deeply integrated into the value chain, we
ensure to remain connected to the market and to
obtain access to valuable market insights that can be
used to Peak’s advantage.
Next to organic growth Peak also recognizes that as
a prerequisite to securing the ability to capture the
indicated additional value from the downstream
business, through either partial ownership or JV
agreements, the Company will need to secure
access to industrial capacity and know-how in China
as number one leading rare earth market worldwide.
This will become extremely important when the
market starts to gather momentum and therefore
Peak’s team is already actively working on the
execution of this strategy. For the overall delivery of
this strategy, we are aware that it is instrumental to
implement a 24/7, 360o connected operational and
commercial management system which will allow us
to generate, both internally and externally, the
required transparency and access to real-time
information enabling us and our customers to make
informed and correct decisions.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
26 26
Operational Excellence
Relationships between suppliers and customers are
essential elements in building financial and economic
value and also play a key role in the promotion of
social and environmental best practice.
This is a top priority at Peak and consequently we
are committed to the principles of sustainable acting
in all areas of manufacturing and procurement – be
it mining, labour, raw materials, energy, chemicals or
other goods or services. We believe that besides the
traditional elements of qualifying, ranking or
assessing a supplier (quality, technical
specifications, price, service, and technology) the
ranking in regards to sustainable and environmental
and social practice should play a vital role. The
process of sourcing raw materials in the industry is
particularly struggling due to illegal practices
including child labour, non-compliant environmental
operations and the total lack of transparency
regarding the place of origin.
Peak is committed to offering its customers cradle to
grave transparency, giving peace of mind when it
comes to sourcing rare earth material. Our
customers will always know where the product has
come from and where, how and by whom it has been
processed ensuring quality every single time.
Peak aims to become a recognised quality provider
of oxide, chemicals material and metals to low
carbon technology sectors worldwide including
catalysis, automotive, and the wind turbine industry.
In support of our vision, our policy is to establish and
maintain a practical but comprehensive Quality
Assurance Management System (QA-S), Health,
Safety, Security and Environment policies (HSSE)
and Corporate Social Responsibility based on ISO
9001:2015, ISO 14001, OSHA 18001 and REACH.
This will be central to the delivery of our commitment
to customer satisfaction and continuous
improvement.
Guided by following standards:
Peak Resources Code of Conduct
Universal Declaration of Human Rights
ILO Declaration on Fundamental Principles and
Rights at Work
Guidelines on occupational safety and health
management systems ILO-OSH 2001
Eco-Management and Audit Scheme (EMAS)
ISO 14001 series environmental management
systems
OHSAS 18001 Health and Safety Systems
ISO 9001:2015 Quality management systems
REACH/ ECHA Registration, Evaluation,
Authorisation and Restriction of Chemicals.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
27 27
Leading the Pack – Peak
Performance
The Investment Proposition - Peak
Performance Across All Categories
The outstanding quality of the Ngualla Rare Earth
project becomes clearly visible when the project is
compared with its peers based on a set of KPI’s. The
bucket diagrams below shows 4 KPI’s that we
believe are required for such an exercise. Peak
proves its superior position amongst its peers by
achieving the highest overall ranking. For the
detailed explanation of the defined KPI’s we would
like to refer to the dedicated section on our website.
This exceptional position has also been reflected in
the results of the Bankable Feasibility Study
published on 12 April 2017 and the Project Update
published on the 12 October 2017, materializing in
following results:
NPV10 - Pre Tax and Royalties US$ 686 million*
NPV10 - Post Tax and Royalties US$ 444 million*
IRR – Post Tax and Royalties 22%*
Annual operating margin EBITDA US $150
million p.a.*
Unit operating cost US 32.24 /kg NdPr
(total annual Opex of ~91 million divide by only the annual NdPr output of 2810. Ignoring the sales of our other rare earth material of 6480 tpa)
*see pricing deck information here page 47
At a pricing level of USD 51.84 (328 RMB dated 10th
January 2017) for 1 kg of NdPr Peak Resources
would generate per sold NdPr kg 19.60 USD or 55.08
million USD positive cash only from the projected
2,810t p.a. NdPr sales.
Peak is the leading global development project with
one of the world’s lowest operating costs of NdPr
oxide.
Peak is the place where top class rare earth
expertise and experience meet with a world class
deposit and a perfect alignment with the market.
The benchmarking exercise which has been
performed by Adamas Intelligence plus the Peak
Resources in-house analysis clearly shows that
Peak is the superior choice among its peers and is
leading the competition.
Why Peak is Number 1:
Peak’s deposit has peer beating metallurgical properties allowing for a less complex separation process compared to its competitors.
Peak’s BFS utilised only 22% of its JORC resource, yet yielded a 26 year mine life. The expansion potential of the planned operation is enormous.
The at-surface and high-grade deposit equates to a low strip ratio and therefore, very low OPEX.
Other than Lynas, no other NdPr producer or developer has the ability to have a ‘fully integrated’ supply chain and complete the
final separation themselves.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
28 28
The Benchmarking Study
Peak Resources commissioned a benchmark study
with Adamas Intelligence to get an unbiased opinion
and summary on the quality of the Ngualla project
and the overall results of the BFS study. The final
conclusion and result is summarized below.
We would like to acknowledge the generosity of
Adamas in allowing Peak to share extracts of this
comprehensive Benchmarking exercise in this
paper.
Using this extensive Benchmarketing analysis
independent industry experts ADAMAS came to
the following key findings and takeaways:
1. The Ngualla project has potential to be the
lowest cost producer of NdPr oxide among its
peers, and the lowest cost producer of TREO.
2. The Ngualla project has potential to yield the
highest pre-tax operating profit margin
among its peers.
3. High-demand rare earths used in permanent
magnets and catalysts make up 76% of planned
annual rare earth oxide production from Ngualla;
the highest proportion among incumbents.
4. The Ngualla project is one of only two low-
CAPEX rare earth projects outside of China with
potential to payback pre-production capital
expenses in under three years.
5. At current price levels, the Ngualla project is the
only project among its peers with potential to
earn a pre-tax operating profit from
production of NdPr oxide only.
Furthermore, Peak continues to run its in-house
benchmarking report, following its peers and tracking
their progress. We have attached an extract of this
report showing Peak’s position versus its Australian
Peers for your reference. Please find the details on
Page 34.
Both analyses come to the same conclusion of the
exceptional quality of Peak Resources’ asset and
underpin Peak’s position to become the next Lynas
and respectively, the next fully integrated, leading
rare earth producer outside of China.
Disclaimer: The pages 28 to 33 have been re-
produced with permission from the Adamas
Intelligence benchmarking study.
.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
29 29
Adamas Intelligence Benchmarking
Exercise - Introduction
Global demand for certain rare earth elements is
poised to grow strongly over the coming ten years
with little-to-no new global production to
compensate. In fact, as China, the world’s dominant
producer of rare earth elements, continues to clamp
down on illegal rare earth production in the nation,
Adamas Intelligence forecasts that global production
of some rare earth elements may in fact decrease.
Within the next ten years Adamas Intelligence
believes that the evolving supply – demand
fundamentals of the rare earth market will open a
window of opportunity for multiple new rare earth
mines to be developed outside of China, so long as
these new mines are economically viable, and their
output is comprised predominantly of the rare earth
elements the market will necessitate most.
Adamas Intelligence was engaged by Peak
Resources to carry out a benchmarking study of
development-stage rare earth projects globally to
determine how the company’s Ngualla project
compares to its peers across metrics that Adamas
believe are critical to techno-economic success.
Adamas began with an all-encompassing group of 38
projects in 16 nations – all of which have at minimum
completed a compliant Preliminary Economic
Assessment (“PEA”), although several have
advanced further through completion of a compliant
Pre-Feasibility Study (“PFS”), and/or compliant
Feasibility Study (“FS”).
For each project, Adamas extrapolated key project
metrics, such as capital costs, operating costs,
sustaining capital costs, planned production
quantities, and many others, from their latest
technical reports, as available, and subsequently
‘normalized’ the extrapolated metrics using identical
exchange rate and toll-processing cost assumptions
for all so as to make the data amenable to an ‘apples-
to-apples’ analysis.
Seven of the 38 projects were eliminated from further
consideration at the outset of the analysis due to a
lack of publicly-available information – primarily
because many of the projects are privately owned.
Of the remaining 29 projects, Adamas eliminated an
additional six projects from further consideration due
to a lack of independently verified and/or up-to-date
information pertaining to the latest publicised project
development strategy.
Thereafter, we cross-compared the remaining 23
projects across six metrics that we believe are
defining attributes of economically-promising
investment prospects, in the context of our long-term
forecasts for rare earth prices, by-product prices,
exchange rates, and toll-processing costs
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
30 30
Cross-Comparison of Projects’
Operating Profit Margins
In the below graph, the cash cost of each project is
shown as a percentage of its respective product
basket value in order to normalize the product value
of each project, and ultimately, cross-compare the
operating profit margin that each project has
potential to yield.
The cash cost of production as a percentage of
product basket value of each project is plotted along
the y-axis, indicated by the height of each blue and
grey column.
The product basket value of each project, expressed
as 100%, is also plotted along the y-axis in the graph,
indicated by the horizontal dark blue line.
Finally, as in the other graphs, the annual TREO
production capacity proposed for each project is
plotted along the x-axis in graph, indicated by the
width of each blue and grey column.
As shown below, the Ngualla project (bright blue)
has potential to be a profit leader among its peers
with the highest operating profit margin among
incumbents.
Cross-comparison of project cash costs as a
percentage of product basket value
Cash Cost = Operating Cost + Sustaining Capital Cost + Toll-Separation Cost (if applicable)
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
31 31
Cross-Comparison of Projects’
Operating Costs Weighted to PrNd
Oxide Only
Below graph shows the total cash cost of each
project has been weighted to production of NdPr
oxide only to cross-compare the production costs of
projects under a scenario in which high-demand
NdPr oxide (or individual Pr oxide and/or Nd oxide)
is the only saleable product.
In below graph, each project’s cash cost of NdPr
oxide production is plotted along the y-axis, indicated
by the height of each blue and grey column. We
calculated these costs by dividing the average
annual cash cost projected for each project by the
average annual NdPr oxide production level
projected for each project.
Below graph shows the cross-comparison of
project cash costs weighted to production of
PrNd oxide only
The dark blue line indicates Peak Resources’ long-
term average NdPr oxide price forecast, as
extrapolated from the October 2017 Ngualla
Feasibility Study Update.
Finally, the annual NdPr oxide production capacity
(or individual Pr oxide and/or Nd oxide capacity)
proposed for each project is plotted along the x-axis
in below graph, indicated by the width of each blue
and grey column.
As shown in below graph, the Ngualla project
(bright blue) has potential to be the lowest-cost
producer of NdPr oxide among incumbents, and
is the only project among its peers with a
projected NdPr oxide production cost below U.S.
$40 per kilogram.
Cash Cost = Operating Cost + Sustaining Capital Cost + Toll-Separation Cost (if applicable)
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
32 32
Pre-Production Capital Expense
Payback Period
Below graph shows the projected pre-production
capital expense associated with each project has
been plotted along the y-axis, and the forecasted
annual pre-tax operating profit attributed to each
project has been plotted along the x-axis.
By dividing a project’s y-axis value (capital expense)
by its x-axis value (operating profit) the estimated
payback period of its pre-production capital expense
has been quantified (in years). The dashed lines in
below graph represent ‘isochrons’ along which the
capital expense payback period is fixed.
Cross-comparison of projects’ pre-production
capital expense payback periods:
As shown below graph, the Ngualla project
(bright blue triangle) is one of just two low-
CAPEX rare earth projects outside of China with
potential to payback pre-production capital
expenses in under three years, and one of just
five low-CAPEX projects with potential to
payback in less than six years.
Note: Annual pre-tax profit shown is projected average per annum over mine life. Long ramp-up periods for new mines will extend payback.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
33 33
Proportion of Annual Production
Comprised of ‘Market-Needed’ Rare
Earths
In a recent report, titled “Rare Earth Market Outlook:
Supply, Demand, and Pricing from 2016 through
2025”, Adamas Intelligence concluded that a handful
of high-demand rare earth oxides (“neo-CREOs”) will
become increasingly vulnerable to supply disruptions
over the coming ten years should China not
substantially increase production and multiple new
sources of supply outside China not emerge.
The five high-demand rare earth oxides Adamas
identified as most vulnerable to supply disruptions,
and most critical to clean energy and electric
mobility, are neodymium oxide, praseodymium
oxide, lanthanum oxide, terbium oxide, and
dysprosium oxide.
Percent of each project’s annual TREO
production comprised of ‘market-needed’ rare
earths
As shown in below graph, the Ngualla project
aims to produce a basket of saleable rare earth
products containing the highest proportion of
‘market-needed’ rare earth oxides among
incumbents.
neo-CREOs = (“new-Critical Rare Earth Oxides”) = Neodymium oxide, Praseodymium oxide, Lanthanum oxide, Terbium oxide, Dysprosium oxide
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
34 34
Peak Resources Benchmarking
Exercise – Extraction
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,36
7 t
pa
co
nce
ntr
ate
+
6,6
64
tp
a N
dP
r/SE
G/H
ea
vy m
ix
chlo
rid
e c
on
cen
tra
te
in t
he
pa
st 2
,40
0 t
pa
Nd
Pr
+
oth
er
oxi
de
= t
ota
l 1
5,0
00
tpa
sep
ara
ted
RE
Oxi
de
s. U
nd
er
ne
w
ow
ne
rsh
ip t
he
y p
lan
to
exp
ort
ba
stn
ae
site
co
nce
ntr
ate
to
Ch
ina
fo
r fu
rth
er
pro
cssi
ng
Do
th
ey
pro
du
ce N
dP
r o
xid
e i
nh
ou
se w
ith
ow
n r
efi
ne
ryY
es,
10
0%
ow
ne
d l
oca
tio
n i
n U
KY
es,
10
0%
ow
ne
d l
oca
tio
n i
n
Ma
lays
ia
No
No
No
No
Ye
s, 1
00
% o
wn
ed
lo
cati
on
USA
By
pro
du
cts
No
– o
nly
Ra
re E
art
hN
o –
on
ly R
are
Ea
rth
No
– o
nly
Ra
re E
art
hY
es
– P
ho
sph
ori
c A
cid
Y
es
- U
ran
ium
, R
are
Ea
rth
s,
Zin
c
Ye
s -
Ha
fniu
m,
Zir
con
ium
,
Nio
biu
m
No
– o
nly
Ra
re E
art
h
Cu
rre
nt
De
ve
lop
me
nt
Sta
ge
DFS
fin
ish
ed
- F
ina
nci
ng
/ O
ff
take
sO
pe
rati
on
al
DFS
fin
ish
ed
- F
ina
nci
ng
/
Off
take
sw
ork
ing
on
th
e D
FSD
FS f
inis
he
d -
up
da
te
on
go
ing
DFS
fin
ish
ed
- F
ina
nci
ng
/Off
take
s
Wo
rk i
n P
rog
ress
un
de
r n
ew
ow
ne
rsh
ip
Eco
no
mic
Min
era
log
yB
ast
na
esi
teM
on
azi
te,
Ap
ati
teM
on
azi
teM
on
azi
te,
Ap
ati
te,
All
an
ite
Ste
en
stru
pin
e,
Sph
ale
rite
eu
dia
lyte
/ba
stn
asi
teB
ast
na
esi
te
Re
sou
rce
mil
lio
n t
on
na
ge
21
4.4
02
3.1
02
1.0
05
6.0
06
73
.00
75
.18
35
.35
To
tal
RE
O G
rad
e2
.15
%7
.34
%1
.17
%2
.60
%1
.09
%0
.88
%6
.37
%
Nd
Pr
in %
20
.97
%2
3.1
4%
34
.27
%2
6.5
1%
No
t p
ub
lish
ed
No
t p
ub
lish
ed
16
.09
%
tota
l O
re R
eso
urc
e N
dP
r to
nn
ag
e9
66
,63
33
92
,34
88
4,2
10
38
5,9
86
NA
NA
36
2,3
14
Re
serv
e m
illi
on
to
nn
ag
e1
8.5
09
.70
5.0
1R
ese
rve
to
be
up
da
ted
wit
h
DFS
(d
ue
to
dif
fere
nt
pro
cess
)1
08
.00
18
.90
16
.71
To
tal
RE
O G
rad
e4
.80
%1
0.7
0%
1.1
2%
1.4
3%
0.8
7%
7.9
8%
Nd
Pr
in %
21
.26
%2
3.2
9%
41
.40
%1
7.4
8%
17
.59
%1
6.0
9%
tota
l O
re R
ese
rve
Nd
Pr
ton
na
ge
18
8,7
89
24
1,7
27
23
,23
02
69
,96
12
8,9
23
21
4,5
21
An
nu
al
pro
du
ced
Nd
Pr
p.a
.2
,81
05
,22
33
,23
23
,60
15
,08
41
,15
82
,40
0
To
tal
RE
O o
utp
ut
p.a
.9
,28
51
6,0
03
8,0
09
14
,00
02
4,3
91
6,6
64
15
,00
0
To
tal
Life
of
min
e (
rese
rve
as
a b
asi
s)
26
+2
56
23
37
35
33
US
D C
AP
EX
mil
lio
n
3
65
,00
0,0
00
6
59
,19
0,8
06
25
1,2
50
,00
0
68
0,0
00
,00
0
8
32
,00
0,0
00
93
0,0
00
,00
0
1,6
00
,00
0,0
00
US
D O
pe
x m
illi
on
9
0,5
94
,40
0
18
2,7
69
,32
6
1
06
,00
0,0
00
1
25
,00
0,0
00
33
4,0
00
,00
0
1
95
,00
0,0
00
2
00
,00
0,0
00
To
llin
g p
art
ne
r re
qu
ire
d t
o g
et
to o
xid
e N
O
NO
Y
es
- to
be
de
fin
ed
Y
es
- O
CI
in K
ore
a
Ye
s -S
he
ng
he
Y
es
- C
RE
Vie
tna
m
To
be
de
fin
ed
An
tici
pa
ted
to
llin
g c
ost
in
in
dic
ate
d C
ap
Ex
or
Op
Ex
no
t a
pp
lica
ble
n
ot
ap
pli
cab
le
no
thin
g
dis
clo
sed
8
5m
in
Ca
pe
x in
clu
de
d
80
.2m
in
Op
Ex
incl
ud
ed
n
oth
ing
d
iscl
ose
d
no
t a
pp
lica
ble
An
tici
pa
ted
to
llin
g c
ost
pe
r k
g o
xid
e/
US
D z
ero
= i
nh
ou
se i
ncl
in
Op
ex
+
Ca
pe
x
ze
ro =
in
ho
use
in
cl i
n O
pe
x +
Ca
pe
x
2.5
0
no
t p
ub
lish
ed
n
ot
pu
bli
she
d
no
t p
ub
lish
ed
z
ero
= i
nh
ou
se i
ncl
in
Op
ex
+
Ca
pe
x
US
D O
PE
X/
kg
Nd
Pr
32
.24
3
4.9
9
32
.80
3
4.7
1
65
.70
16
8.3
98
3.3
3
US
D O
PE
X/
kg
RE
O
9
.76
1
1.4
2
13
.24
8.9
3
13
.69
29
.26
13
.33
Ca
pe
x in
ten
sity
(U
S$
/kg
Nd
Pr
Oxi
de
Lo
M)
5.0
05
.05
12
.96
8.2
14
.42
22
.95
20
.20
Ca
pe
x in
ten
sity
(T
ota
l R
EO
)
1.5
1
1
.65
5.2
3
2.1
1
0.9
2
3
.99
3
.23
Pro
cess
De
scri
pti
on
Alk
ali
Ro
ast
Wa
ter
Lea
ch
HC
l Le
ach
Pu
rifi
cati
on SX
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du
ct p
reci
pit
ati
on
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hu
ric
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d B
ake
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ter
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ch
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rifi
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ct p
reci
pit
ati
on
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hu
ric
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d B
ake
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ter
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ch
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rifi
cati
on
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ach
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rme
dia
te P
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pit
ati
on
Aci
d R
eco
very
an
d R
ecy
cle
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hu
ric
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ch
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ric
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ake
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le S
ulp
ha
te P
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nve
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l Le
ach
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sta
llis
ati
on
an
d
Inte
rme
dia
te P
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pit
ati
on
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ak
Aci
d L
ea
ch (
Ura
niu
m)
Stro
ng
Aci
d L
ea
ch (
Ra
re
Ea
rth
s)
Ca
ust
ic C
on
vers
ion
HC
l Le
ach
Imp
uri
ty R
em
ova
l
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rme
dia
te P
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pit
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d B
ake
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ter
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ch
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Nb
, R
EE
)
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rme
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te P
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pit
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on
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l Le
ach
Ca
ust
ic C
on
vers
ion
Re
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ach
Pu
rifi
cati
on SX
Pro
du
ctio
n P
reci
pit
ati
on
So
urc
e o
f In
form
ati
on
:2
01
7 O
ct p
roje
ct u
pd
ate
2
01
7 a
nn
ua
l re
po
rt
20
17
PP
Ju
ly "
Ko
rea
..."
20
17
oct
GM
EL P
P2
01
7 A
nn
ua
l re
po
rt
R. S
mit
h fo
rme
r M
D M
ou
nta
in P
ass
20
17
Pre
sen
tati
on
23
Ma
rch
20
17
No
v D
FS. C
om
me
nt:
Re
seve
su
pp
ort
6
Yea
rs O
pe
rati
on
th
ere
fore
th
ese
da
ta h
as
be
en
use
d2
01
7 P
P A
pri
l HK
h
ttp
://w
ww
.ggg
.gl/
do
cs/A
SX-
an
no
un
cem
en
ts/R
efi
ne
ry-P
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t-P
lan
t-
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mp
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.pd
f
20
17
Alk
an
e P
P E
con
om
ics
of R
E p
roje
ct
Nd
Pr%
in R
ese
rve
ba
sed
on
co
mp
ari
son
da
ta
fro
m: h
ttp
://w
ww
.ggg
.gl/
do
cs/s
ha
w-
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arc
h/c
om
pa
ny-
rep
ort
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-ma
rch
-
20
12
.pd
f
20
17
Dig
gers
& D
ea
rls
Min
ing
Foru
m
Pre
sen
tati
on
"Th
e T
ime
is N
ow
: Th
e N
ext
Ch
ap
ter
of t
he
Lyn
as
Sto
ry"
8.8
.20
17
Co
mp
an
y P
P N
ov
20
17
20
17
ha
fniu
m P
P
Nd
Pr%
in r
eso
urc
e: 0
8 J
un
e 2
01
2
reso
urc
e u
pd
ate
20
16
oct
PP
"Si
gnif
ica
nt
imp
rove
me
nt
in
Ca
pit
al C
ost
…."
The
ab
ove
figu
res
wil
l be
up
da
ted
wh
en
th
e
ne
w o
wn
ers
hip
an
no
un
ces
its
rou
te-t
o-
ma
rke
t st
rate
gy.
5 O
cto
be
r 2
01
5 A
SX A
nn
ou
nce
me
nt:
Mo
un
t
We
ld M
ine
ral R
eso
urc
e a
nd
Ore
Re
serv
e
Up
da
te 2
01
5
Pro
cess
de
scri
pti
on
fro
m E
IS2
01
6 M
ay
"RIU
Syd
ne
y R
eso
urc
e…
"
20
11
Re
sou
rce
s e
stim
ate
Nd
Pr%
in t
he
min
era
l re
sou
rce
s is
ca
lcu
late
d
fro
m W
eig
hte
d A
vera
ge o
f CLD
an
d D
un
can
Re
sou
rce
s.
Re
serv
e N
dP
r %
cal
cula
ted
fro
m:
ASX
an
no
un
cem
en
t 1
9 S
ep
t 2
01
7: "
Du
bb
o
Pro
ject
Re
sou
rce
an
d R
ese
rve
Sta
tem
en
ts
FY1
7"
an
d P
rese
nta
tio
n "
No
t O
nly
Ra
re
Eart
hs
- Du
bb
o Z
irco
nia
Pro
ject
" fr
om
11
th
Inte
rna
tio
n R
are
Ea
rth
Co
nfe
ren
ce,
Sin
gap
ore
, 9-1
2 N
ov
20
15
Pro
cess
de
scri
pti
on
fro
m:
htt
p:/
/ww
w.a
lka
ne
.co
m.a
u/w
p-
con
ten
t/u
plo
ad
s/2
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ub
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f
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
35 35
China: Strengthening the Global Superpower Position.
China has issued a recent update of its 5 year plan
called “China’s 13th five year plan Made in China
2025”. This plan clearly articulates the shift in China’s
strategy of moving away from low-tech to become a
high-tech technology manufacturing downstream
industry nation. From our perspective, this decision
will clearly further increase the Chinese domestic
demand and consumption of rare earth minerals and
accelerate the potential shortage of NdPr.
Further information on the “Made in China 2025
Plan” can be found here:
1. Information of The Chinese State Council:
made in china 2025
2. IoT summary :
http://www.cittadellascienza.it/cina
3. European Chamber: China manufacturing
2025: putting industrial policy ahead of market
trends
Source: HKTDC research
Growth of Industrial Enterprises in China
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
36 36
Global Macro Economics &
Trends
From a macro perspective, it is predicted that the
world will experience continuous substantial growth
in all areas. It is projected that the world population
will grow from 7 to 9 billion by 2040. Consequentially,
this will lead to a net-increase of the global energy
demand of an estimated 25 percent by the year
2040. Energy demand will increase 100% from
today’s perspective but it is estimated that 75% of
this growth can be avoided by energy saving
initiatives. The assumed 25% is similar to adding
another North America and Latin America to the
world’s current energy demand.
Source: Exxon Mobile energy outlook 2017
Additionally it is predicted that we will experience a
substantial growth of the middle class which will
expand on a global basis, more than doubling by
2030 to reach almost 5 billion people. This would
ultimately result in doubling the world GDP by 2040
causing a stronger urbanisation trend towards more
and larger mega-cities. These cities will have to
address the issues which arise with such
developments for instance problems with pollution
and overall mobility management.
Source: Exxon Mobile energy outlook 2017
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
37 37
The unprecedented expansion of the global
middle class:
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
38 38
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
39 39
Overall, the sheer unstoppable growth of the global
population will fundamentally underpin the increase
of the demand for basic commodities which are
essential for certain industries and societies to
function. Among them are rare earth minerals which
are present in any kind of high-tech technology but
especially in e-mobility, robotic and low carbon
energy solutions.
As incomes rise, individuals will seek to upgrade their
standard of living- like buying their first car, taking an
oversea vacation or upgrading their housing
situation. In conjunction with these changes, the
demand for rare earth minerals will rise as well.
The 4 categories below are enabled through the
utilization of rare earth minerals and will drive the
demand and pricing for rare earth minerals not only
through organic growth of the population, but also
through gaining significant additional market shares
due to their superior performance and features.
1. Housing & Electricity solutions (Wind energy,
Smart home solutions)
2. Mobility & Transportation solutions (E-mobility
Trains, Trucks, Vans, Cars, bikes etc.)
3. Communications & Education (Mobile phones,
tables, computers etc.)
4. Productivity & Robotics/ Artificial Intelligence (“AI”)
solutions (domestic and industry use of robotic
solutions)
In the meantime, the World Bank and oil majors have
acknowledged that renewable energy and e-mobility
plays a vital role in shaping our future and in one way
or the other, the change will come – it’s inevitable.
“We always overestimate the change that will
occur in the next two years and underestimate
the change that will occur in the next ten years.
Don't let yourself be lulled into inaction.”
Bill Gates
For further information on the outlook of
macroeconomics in connection and wind energy and
e-mobility, please refer to following documents and
sources:
2017 exxon mobil - outlook for energy 2017-
2040
2017 bp - energy outlook 2017
2017 Total - integrating climate into our
strategy_
2016 Shell_- energy_scenarios_2050
2017 Energy Perspectives
2017 Brookings – The unprecedented
expansion of the global middle class
2017 Worldbank - The Growing Role of Minerals
and Metals for a Low Carbon Future
2017 - The Credit Suisse Research Institute's
Global Wealth Report
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
40 40
China’s Domestic Economy
If we take a close look at the cost situation in China,
we can see that during the last 5-10 years the overall
trend was that manufacturing costs increased year
by year. China’s manufacturing cost advantage is
now eroding and it is understood that China will
undergo the same transition as all developed
industry nations have. This is mainly driven by fact
that that wages in China have risen much faster than
the increases in productivity or inflation.
Source: Tradingeconomics.com / National Bureau of statistics of China
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
41 41
It has been observed that China has started to
experience an outflow of low-end manufacturing jobs
to less developed countries with more attractive labor
cost like Vietnam, Miramar, Laos, Cambodia or Sri
Lanka.
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
42 42
For decades the wages of Chinese workers have
been significantly rising from year to year and in
combination with the trend of a shrinking working-
age population, it is expected that this phenomenon
of increased manufacturing costs will continue.
It’s anticipated that the shift to advanced, higher
value manufacturing will fuel the competition going
forward and will push those countries who are unable
to aptly manage this transition to the backseat. It is
crucial for China to accelerate the transformation of
its domestic industry to a high-tech industry so that
enough time is allowed to build up the required
capabilities and expertise.
China will be unable to rapidly transform into
service economy. For the foreseeable future, the
manufacturing sector will remain the backbone of
China's economy- which is why the Chinese
government is pushing its companies to automate,
boost research budgets and move towards higher-
value products.
In this context, the government has encouraged
takeovers of European and U.S. enterprises with
advanced technology to accelerate this transition.
China surprised the world with an all-time record
when it announced takeovers worth $US 246 billion
in 2016. In 2017, China invested 158.1 billion (-31%
YoY) globally, 4.7 billion has been invested in the
mining sector alone this calendar year.
Source: Bloomberg
2016 takeover examples:
2016 Qingdao Haier Co. Spends $5.6 Billion To Buy GE Appliance Business
2016 Midea spends $5 Billion for German robotic company Kuka2016 HNA Group buy’s Ingram Micro for $6 billion
2016 ChemChina spends $43 billion for the Swiss pesticides and seeds group Syngenta
China's Geely Buys $9 Billion Daimler Stake
For further details, please see: Bloomberg’s China
Deal Watch
This expected trend will require China to continue to
spend billions (if not trillions) of dollars to upgrade
their working force capabilities and modernize their
industrial footprints like manufacturing lines and
automation, robotics and research.
Therefore, the prediction is that the trends outlined
above will continue to contribute to an increase in
Chinese manufacturing costs. This will have an
impact on the overall landscape of Chinese prices
including rare earth minerals.
Particularly if we consider that the Chinese mining
industry sector is not only confronted with the overall
phenomenon of increasing cost, but it also has to
deal with the fact that it is required to undertake new
investments, and to accept additional new cost
because of more stringent enforcement of
operational & environmental regulations and new tax
regimes. See details here:
“NdPr: The Biggest Blind Spot in the Global Commodity Market” February 2018
ENABLING LOW CARBON TECHNOLOGIES
43 43
April 30, 2015 New Resource Tax Reform +
Deloitte summary
December 25, 2016; China to introduce
environmental tax for enhanced pollution
control
Considering the highlighted global and Chinese Macro-economic factors and that the 6 State-owned entities that control the Chinese rare earth business made very little profit during 2015 and 2016, it is apparent that such low pricing levels are unsustainable.
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Rare Earth Pricing
The production capacity of primary rare earth
products is still in serious surplus. Although the
consolidation of the industry into 6 SoE has
significantly reduced the separation capacity, with a
final output of ~200,000 tons, the problem of
overcapacity is still quite severe. In addition, illegal
mining is still being driven by huge economic benefits
and the environmental damage caused by these
operations is not included in the value and pricing of
the product, leading to oversupply of the market and
low prices.
As highlighted in this summary, we believe that there
are enough market elements to positively impact the
price performance of NdPr in the future. For this
reason, we believe the recent NdPr price increase
+97% up to ~77 USD (September 2017) is the
beginning of a long-lasting, sustainable upward trend
with the usual correction cycles (see end of the year
2017) underpinned by a changing market
environment. By 2020, we expect to see prices in the
range of US $75 -$110 /kg for NdPr oxide 99%.
Rare Earth pricing tracking chart:
In the long term, we expect cerium to face an
oversupply situation. The main demand for cerium
has historically come from the polishing powder
business however in recent years, consumers have
created strategies that allow them to reuse/recycle
existing cerium and consequently have significantly
decreased their need to purchase virgin material.
Another factor to consider is that as a byproduct of
NdPr, cerium will still be produced however the
buying market no longer exists to support cerium
sales of that level. With this in mind, we predict a
chronic oversupply situation in cerium. The same
statement could apply for lanthanum also, however
we believe that core applications will see a stable
demand, and possibly even growth, for applications
like FCC (yield improver +10% crude oil to Gasoline),
Ferrite magnets, glass and ceramic manufacturing,
infrared absorbing glass, high strength alloy steel
and NiMH batteries and PVC thermal stabilizer etc.
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The Rare Earth Pricing Eco
System
Below we have prepared a simplistic view on the rare
earth market and its individual drivers and
influencers for the NdPr rare earth pricing. In
principle, it’s all about supply and demand balance
generated in a market environment which follows the
same overarching rules and normal market
mechanics apply to determine the value of a product.
The red elements represent critical elements, green
represent positive factors on NdPr pricing and the
blue elements show the NdPr value chain.
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Uses and Trends of NdPr
NdFeB Magnets & Permanent
Magnet Motors
Neodymium-Iron-Boron (NdFeB) based permanent
magnets are indispensable and the key enabler for
today’s technologies and more importantly, for the
low carbon future of our technology-driven society.
When compared to other permanent magnets such
as Alnico and Ferrite, NdFeB magnets offer
substantially stronger magnetic fields per volume,
which make them suitable for high performance
products with compact designs.
NdFeB magnets are especially important for clean
energy, low carbon products such as electric
mobility solutions (bikes, cars, trains, trucks,
commercial vehicles, drones and other e-aircrafts),
wind turbines and domestic and industrial
automatization and robotic solutions.
With recent surges in demand for these core
technologies and the continuing trend of
miniaturizing products, it is expected that the
demand for NdFeB magnets is poised to grow. Being
the key minerals in manufacturing NdFeB magnets,
it is inevitable that demand for neodymium
praseodymium will experience this significant
upturn also.
Globally, China represents the largest market for
NdFeB magnets, followed by Japan, Europe and the
USA. As China provides a secure and economical
supply of the major raw materials, most of the rare
earth magnet manufacturers are based in China.
Other manufacturers are located in the USA, Europe
and Japan.
Key Players include:
Hitachi Metals (Japan)
Shin-Etsu Chemical Co. (Japan)
Ltd, Daido Steel Co.Ltd., (Japan)
TDK (Japan)
Vacuumschmelze (Germany)
Magnequench (China)
Zhong Ke San Huan (China)
Zhenfhai Magnetic (China)
Tianhe Magnets (China)
Shougang Magnetic Material (China)
Jingci Magnet (China)
Hangzhou Permanent Magnet Group (China)
Ningbo Yunsheng High-tech Magnetics Co. (China)
JPMF Guangdong Co. Ltd. (China)
Adams Magnetic Products (USA)
Electron Energy Corp (USA)
Arnold Magnetic Technologies (USA)
Thomas &Skinner
Tengam
Magnet Applications
Electrodyne
Magnum
With fossil energy proven to be no longer sustainable
due its carbon footprint and the overall impact on our
society, energy generation focus is shifting towards
the renewable and low carbon sources.
Wind energy has become a prominent solution
among renewable sources of energy, in 2015 adding
an additional incremental capacity of 63 GW,
accumulating a total installed global capacity of 433
gigawatts by end of 2015. It is predicted that the size
of the permanent magnet market in the energy
generation sector will increase substantially in the
near future as governments across the globe commit
to replace environmentally damaging energy
sources with renewable energy solutions.
The automotive industry is, and will continue to be, a
major contributor to the growth of permanent magnet
demand as these products are extensively used in
vehicles. In a standard passenger car, more than 30
individual applications are present. In 2015, the
automotive industry had an all-time record year with
90.8 million new registered motor vehicles sold
globally and were a massive contributor to the global
GDP, governmental income (2015 taxation revenues
from the EU alone were 401.5 billion Euro) and thus
enhanced lifestyles globally.
The increasing growth of the middle class, especially
in China and India, will influence the permanent
magnet market positively. This will create
investments for innovative production lines and
further development of low cost manufacturing
processes by deploying more and better robotic
solutions- which will in turn further accelerate the
global demand. NdFeB products will witness a
positive overall growth due to increasing demand for
lightweight, miniaturized equipment and powerful
products with superior aesthetics.
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What are NdFeB Magnets?
Rare-earth magnets are strong permanentmade
from alloys of rare earth elements. Developed in the
1970s and '80s, rare-earth magnets are the
strongest type of permanent magnets available,
producing significantly stronger magnetic fields than
other types such as ferrite or alnico magnets. There
are two types of popular permanent magnets
neodymium magnets and samarium-cobalt
magnets. Rare earth magnets are
extremely brittle and also vulnerable to corrosion,
so they are usually plated or coated to protect them
from breaking, chipping, or crumbling into powder.
A neodymium magnet (also known
as (NdPr)2Fe14B, NIB or Neo magnet) is made
from an alloy of neodymium, iron and boron to form
the Nd2Fe14B tetragonal crystalline structure.
Developed independently in 1982 by General
Motors and Sumitomo Special Metals, neodymium
magnets are the strongest type of permanent
magnet commercially available. They are
considered strong because they resist
demagnetization and have a high saturation
magnetization. The saturation magnetization is
related to the magnetic energy a material can
store, so it's an indicator of the physical pull
strength the magnet can achieve. Many other types
of magnets have been replaced by NdFeB magnets
in modern products that require strong permanent
magnets.
Comparing remnant flux density (magnetic strength) and
coercivity (resistance to demagnetisation) for different hard
magnetic materials.
Source: Wikipedia
Neodymium magnets appear in products where low
mass, small volume, or strong magnetic fields are
required. Neodymium magnet electric motors are
used in the electric motors of hybrid and electric
cars, and in the electricity generators of direct drive
wind turbines and below other applications:
Computer Hard Drive Magnets (replacement technology solid state memory),
Microphones,
Headphones,
Dentures,
Loudspeakers,
Magnetic Pump Couplings,
Door Catches,
Magnetic Suspension, Motors (e.g. washing machines, drills, food mixers, vacuum cleaners, hand dryers),
Generators (e.g. Wind turbines, Wave Power, Turbo Generators, etc),
Sensors, Orthopaedics, Halbach Arrays,
Jewellery,
Healthcare,
MRI and NMR,
Magnetic Separators
TWT (Transverse Wave Tube)
Magnetic Bearings
Lifting Apparatus
Limpet Pot Magnets
Starter motors
ABS systems
Fans Eddy Current
Brakes
Alternators
Meters
Magnetic Clamps
Magnetic Levitation
Electro-acoustic pick-ups
Switches
Relays
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A Typical Composition of NdFeB Alloy:
Main Elements within
NdFeB
Weight
Percentage
Neodymium &
Praseodymium (75%Nd
25%Pr)
29% - 32%
Iron (Fe) 64.2% - 68.5%
Boron (B) 1.0% - 1.2%
Aluminium (Al) 0.2% - 0.4%
Niobium (Nb) 0.5% - 1%
Dysprosium (Dy) 0.8% - 1.2%
One of the more important uses for dysprosium is
its usage in neodymium‐iron‐ boron permanent
magnets (NdFeB) to improve the magnets’
resistance to demagnetization, and by extension, its
high temperature performance. The Dy content
could be increased up to 9% to allow the magnet to
operate at high temperatures, i.e. up to 200 °C.
For further information on the role of Dysprosium in
permanent magnets, please refer to following
document compiled by Arnold Magnetic
Technologies.
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Best in Class - The Permanent
Magnet Brushless Motor Engine
In an electric traction motor, NdFeB magnets allow
a very strong magnetic field to be generated in a
very small volume. The alternative would be to use
electromagnets, where a magnetic field is
generated by passing current through a conducting
coil. It can be shown that a 3 mm thick piece of
NdFeB magnet produces the equivalent magnetic
field to passing 13 A (being the rating of a UK home
electrical socket) through a coil with 220 turns of
copper wire. In terms of space, if a current density
of 10 A/mm2 is assumed in the conductor (which is
typical for normal operation of a traction motor),
then an equivalent electromagnetic coil might have
five times the cross sectional area of the NdFeB
magnet. At the same time the coil would produce
losses in the windings of 50 W or more per metre
length of the coil, arising due to the electrical
resistance of the conductor. To put this in
perspective, in a representative 80 kW traction
motor the optimum use of NdFeB magnets would
theoretically be equivalent to saving perhaps 20% in
total motor volume and, conservatively, in the order
of 300 W of winding loss.
Source: http://www.sciencedirect.com
When judged against the closest competing
technologies, these motors are considered
unbeatable performance, representing the most
suitable solution for automotive applications
delivering the highest energy efficiency, coercive
force and power density. The permanent magnet
brushless motor engine technology has the
ability to produce a larger torque than competing
technologies at the same values of current and
voltage and more power by weight. They also suffer
less electric and mechanical loss, and benefit from
simple rotor/stator configurations. They are smaller
sizes (as much as one third of most AC motor sizes,
which makes installation and maintenance much
easier), and they have the ability to maintain full
torque at low speeds. Ultimately resulting in a
longer driving range due to lesser energy/battery
drainage than using other engine designs.
For further information regarding automotive engine
technology and the superior performance of
permanent magnet engines in comparison to other
existing technologies, please refer to the following
links:
1. Comparing AC and PM motors for
automotive applications
2. Comparison of characteristics of various
motor drives
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Megatrend No1: Automotive &
E-Mobility
Auto-Manufacturers Have Already Committed
$100B to 200 new models
Traditionally, the success of new technologies tend
to be underestimated by establishments due to the
nature of the mindset and corporate DNA. Thanks
to Tesla, who challenged status quo and claimed
technology leadership in the automotive space,
things have changed during the last three years.
Tesla has managed to push the established original
equipment manufacturers (OEM’s) out of their
comfort zone and has forced them to reconsider
their product strategies. Tesla needs to succeed in
becoming a viable, alternative supplier which
customers can go to for an E-mobility solution. This
will ensure that the big OEM’s have to ‘walk the talk’
and go full speed ahead in developing their
improved offers around this transition so that
consumers will have the opportunity to make a
decision on which technology will prevail. With the
changing sentiment in our society towards E-
mobility, it’s widely accepted that the transition will
happen- the question now is only ‘how quickly will
this happen?’
The net result has been the planned release of
approximately more than 200 new electric vehicles
by 2019 and perhaps by 2025 the model landscape
may have even doubled. More than 90% of these
vehicles will most likely be equipped and
homologated with permanent magnet engines. The
individual company announcements below support
this evidence:
Hyundai-Kia, GM, BMW Group , Honda, VW Group,
Daimler, Nissan, BYD, Ford. Toyota, Porsche
Infinity Motor Company, Volvo
E-mobility is on its way to becoming mainstream
and we have seen a tidal wave of investment into
electric vehicles by leading car manufacturers.
During the past 2 years, a majority of the leading
car manufacturers have reshaped their product
roadmaps creating greener, more energy efficient
vehicles that will comply with new emissions rules
and regulations by increasing their focus on
electrified vehicles.
Demand for Mobility Remains Strong
Global demand for mobility is increasing as
population and wealth grow. Growing prosperity in
emerging economies helps lift their citizens from
poverty into middle class and with it comes an
increased demand for energy and mobility. The
growth in demand has been driven by a growing
road vehicle fleet, including heavy vehicles and
motorcycles, which has more than doubled since
2000 from 1.1 billion to 2.3 billion road vehicles in
2015. The majority of this growth has been
motorcycles. The momentum of EV penetration is
growing and economy of scale and total cost of
ownership will make EVs more competitive
compared to ICEVs, ready to take over the mobility
market.
Exponential Electric Vehicle Demand Growth for
the next 20 years.
In 2015, electric car sales reached more than
550,000 vehicles (BEV & PHEV). With in excess of
1 million vehicles already on the road, this equals
1.26 million vehicles in total. The annual sales of
electric cars in 2015 represents 0.75% of the total
90 million passenger cars registered in 2015- of
which China alone represented ~25 million. In 2016,
global sales climbed to 94 million, of which China
represented 28 million, the cumulative number of
electric vehicles produced globally surpassed the 2
million mark. In 2017 annual sales of electric
vehicles more than tripled compared with 2015.
According to Statoil, by 2020 the amount of full
electric and plug-in hybrid electric cars is expected
to reach around 16 million, 1.2% of the global fleet.
A pivoting point will be reached around 2025 when
EVs will gain a competitive advantage over Internal
Combustion Engine Vehicles (“ICEVs”) and the
impact on global oil demand will become evident,
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not only in mature economies but worldwide. By
2030, the EV share of the global fleet will have
grown to 12%. Throughout the 2030s, due to the
effects of changes in transport patterns,
digitalisation and electrification strengths, light-duty
diesel cars will become an insignificant portion of
new car sales. The electricity share of the global
bus and truck fleet will have grown from almost
nothing in 2017 to around 10% in 2030. The global
trucking fleet is expected to increase in all
scenarios, driven by increasing population and
economic growth.
Overall, E-mobility is set to grow and to conquer the
mobility market with its applications, be it passenger
cars, motorbikes, scooters, trucks, buses or vans
and with this transition, the commodities required to
build these new technologies will flourish.
NdPr at the heart of 99% of Electric Vehicle
Motors
NdPr is the core ingredient to produce the strongest
magnets in existence- so called NdFeB magnets.
These magnets are needed to build the most
efficient and best performing electric
generators/motors in the world. Permanent magnet
motors have gained upwards of 90% market share
among all car manufacturers/OEM’s worldwide and
represents the leading engine technology.
Bloomberg confirmed in January 2018 that 90 billion
USD are already committed to be invested in
electric vehicles by the global automakers and the
number is still growing.
To understand the magnitude of the upcoming
avalanche and impact of this technology roll out, it
is important to know that each permanent magnet
vehicle which replaces a combustion engine vehicle
represents a minimum net incremental demand of
1kg of NdPr oxide.
If you multiply this number by the predicted annual
electric vehicle sales in the near future, you will end
up with millions of kilograms of material that the
automotive industry will need to purchase from the
market annually. And do not forget that we are only
talking about one individual NdPr application
requiring a significant amount of new incremental
demand which will disrupt the current
supply/demand situation.
This dominance of permanent magnet motors can
be demonstrated through their existing market
share among all car manufacturers. Since August
2017 it’s clear that also Tesla will us the permanent
magnet Motor technology for its power trains,
resulting in a ~99% market share for permanent
magnet motor solution powered by neodymium and
praseodymium oxide.
Additionally it’s important to note that today, a
standard mid-class vehicle contains more than 30
individual applications which use NdFeB permanent
magnets (see page 52). Our understanding is that
the listed applications represent approx. ~0.6 kg
NdFeB magnets accumulatively.
The engine of a hybrid or battery electric vehicle
contains an additional ~1.5 to 2.5 kg of NdFeB
permanent magnets. Including losses occurring
during the manufacturing process, we calculate that
the approximate demand for pure NdPr oxide is
40% of the final weight of the NdFeB magnet.
Therefore, each new energy vehicle represents ~1
kg incremental demand of NdPr oxide. (See
reference UBS report and Toyota Prius).
~99% of all electric cars in the market today are
equipped with a NdPr motor technology and based
on public available information on new electric
vehicle launches this trend should continue and
remain the dominating motor technology for the
future.
Source: Hybridcars.com 2016 August
With Teslas announcement that it will adopt a
permanent magnet motor for it’s Tesla Model 3 ,
NdFeB permanent magnet Motors (PMM) has
reached close to ~99% market share.
The NdFeB PMM technology is now clearly the
leading engine technology and industry standard.
Above chart shows the Market status by end of the
year 2016 before the Model 3 launch, representing
only model X and S.
Therefore we believe that due to the upcoming
technology shift in the automotive space, one of the
biggest industry sectors globally, the commodity
market will change fundamentally and with it, the
landscape for related commodities with NdPr at the
forefront.
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Each mid/ high end ICE and electric vehicle has
approximately up to 30 individual NdFeB
applications additionally to the engine:
Source: BMI Research
Sunroof Motor Windshield Wiper Motor
Windshield Washer Pump Mirror Motors
Economy and Pollution Control Heat/ ventilation +
Air conditioning Control Unit Ignition System + Starter Motor
Climate con., Coolant Fan Motor E turbo, Cruise Control
Defogger Motor Headlights Motor
Heat Air Conditioner Motor Liquid level indicator
Anti-Skid Sensor and Motor
Tailgate Motor Speakers Four Wheel Steering Electric Power Steering Fuel Pump Motor Door Lock Motor Seat Belt Motor Seat Adjust Motor Lumbar support Gauges Window Lifter Motor Suspension System Throttle and Crankshaft position sensor Traction Control
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Lithium Battery Manufacturing Capacity a
Barometer of NdPr Requirements
We believe a good early indicator for anticipating
such supply demand imbalance is the available and
planned expansion of the global manufacturing
capacity of batteries. According to Bloomberg the
expected industry capacity should grow by 2020 up
to 313.226 GW globally and it continues to grow. If
we assume that the average battery capacity per
vehicle is somewhere between 50kWh and ~75kWh
( reference model Tesla 3 full EV vehicle ) then
soon the supply chain has the capability to serve
the market with between 4.2 to 6.2 million
vehicles per year by 2020 and we understand that
the businesses owning these capacities are
intending to utilize them.
If we consider that plug-in vehicles have an average
battery size of 20kWh then the planned lithium
battery capacity in 2020 would be enough to supply
15.6 million Plugin hybrids. Therefore, we see
2020 as key inflection point.
At present, more than US $20 billion has been
invested by companies like VW, Samsung, LG
Chem, BYD, Boston-Power , Foxconn , Tesla -
Panasonic, Daimler , CATL and Tesla into new
capacity for lithium batteries and storage factories
world-wide.
Reduced Ownership Costs to Drive Inflection in
EV demand by 2025
Bloomberg predicts that between 2025-2027,
electric vehicles (EV) could hit an inflection point
where the total cost of ownership (TCO) of an EV
will be lower than of a traditional internal
combustion engine (ICE) vehicle
According the latest UBS report published in May
2017, this point could even be reached by 2018 for
some vehicle categories, starting with Europe.
“Consumer cost of ownership parity” initiates the
inevitable shift of the tide towards E-mobility, kicking
off the classical S-curve phenomenon with an
acceleration that will shock market participants who
underestimated the projected market transition
towards E-mobility. For the first time, we will see a
significant end-consumer rare earth application
coming online with a disruptive impact to the rare
earth market.
Main driver and key-enabler to initiate this event will
be to reduce the overall cost of the battery pack.
UBS highlighted the fact that for the Chevrolet Bolt
model, the battery pack represents ~ 30% ($209 /
kWh = $12,522 = 60 kWh) of the total vehicle cost
of 30,000 USD (US $37,000 without US
Government subsidies) which is in line with the
overall OEM market. It is crucial to understand the
magnitude of E-cars now being offered in this price
range because today, the high volume sales
segment in the USA has an average sales price of
29,000-30,000 USD. This is the first time that E-
cars will address this high volume sales segment
with the models like Tesla/ Model 3 ~ US $35k and
the GM/ Bolt with a price of ~ US $30,000 after
federal tax credit initiating a new level of
competition.
Source: UBS
Looking at the historical cost reduction progress,
producers and industry analysts are confident that
the progress in this field can be accomplished
without any new breakthroughs in terms of battery
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technology, and without massive discounts or
subsidies. The market expects that the cost will be
further reduced from today’s average market price
of ~US $300/kWh to ~US $130/kWh by 2022-25.
Tesla has set an even more ambitious goal of
reaching US $100/kWh by 2020-2022. The
achievement of this milestone would clearly enable
electric mobility to unleash its full potential in
becoming the key technology in mobility sector.
Source: GlobalEVOutlook2017
China will dominate Electric Vehicle Uptake
Electric cars (without Hybrids) hit a new record in
2017, with more than 1,2 million new vehicle
sales worldwide. The People’s Republic of China is
clearly leading as a nation this global trend. In 2017,
China was by far the largest electric car market,
accounting for more than 50% of the electric cars
sold in the world and more than dribble the amount
sold in the United States.
The global electric car stock surpassed 3.2 million
vehicles in 2017 after crossing the 2 million mark in
2016.
China is aggressively driving the E-mobility agenda,
aiming to take the global lead for this technology
and to make it a fundamental part of its transition
strategy for its domestic industrial from a low
technology spectrum, and to become the leader of
the technology solution of future mobility.
The Chinese government has identified the early
phase of this new technology as an opportunity to
pursue a leadership position. China aims to become
in E-mobility what Germany is today in the domain
of combustion engines.
Therefore, it's expected that China will increase its
efforts regarding legislation, indirect- or direct-
subsidies, financing, governmental expenditures or
any other measure required to become the global
E-Mobility industry leader be it in infrastructure,
industrial foot print, R&D or sales.
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For example, in 2017 China has released a new
NEV policy to accelerate the market adoption for E-
mobility and the overall industry development. The
government has set the new energy vehicle (NEV)
quota ratio at 10% and 12% for 2019/20
respectively. The policy aim to accelerate the
vehicle electrification process. The NEV credit
points are set at 2/5/5 for plug-in hybrid, fuel cell
and pure electric vehicles respectively.
Furthermore, the Chinese market has to comply
with more stringent fuel consumption standard by
2020. 2018-2020 is a critical period for all the
automakers to implement their NEV strategies to
meet the stringent 2020 fuel requirement.
Source: GlobalEVOutlook2017
By then, automakers are required to meet the
average fuel consumption of 5L/100km. In view of
this, several major foreign automakers have formed
NEV JVs with their local partners to accelerate the
electrification process. On the other hand, the
traditional car market remains important, as the
economic benefits are significant while NEV takes
time to gain traction.
The aforesaid positive developments in total cost of
ownership (TCO), country targets, governmental
incentives and announcements of the car
manufacturers themselves indicate that there is a
very good chance that the electric car stock will
grow from today’s levels of 3,2 million globally to
approx. 9 -12 million by 2020, and between ~30
million and ~60 million by 2025.
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Source: NDRC, MIIT, Ministry of Environment, Exane
BNP Paribas estimates
Source: IEA, Orocobre, Exane BNP Paribas Auto.team IEA.org
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Source: I IEA.org
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E-mobility Sales Forecasts
VW Group 2016 2m -3m BEV by 2025;
30 new e-models by 2025 representing 25% of their
revenues
Hyundai-Kia's 2016 26 new models by
2020; The 26 vehicles = 12 hybrids, 6 plug-in
hybrids, 2 EVs and 2 Fc
Nissan 2015 10% electric car
sales in Europe by 2020. Nissan with Datsun sold
737,501 vehicles in FY2015
Volvo 2016 1m e-cars
cumulative by 2025. 2015 = 503.127 cars +8%;
after “19 only HEV or BEV
Ford 2016 Ford announced to
launch 13 new electrified cars by 2021
Daimler 2016 10 E-cars + goal e-
mobility will represent 25% ww-sales by 2025. 2016
= 2.23m cars (incl. Smart)
Toyota 2016 Appointed CEO and
VP to head e-mobility activities + dep. Target: 1st
100% BEV by 2020
BMW 2016 Sold 2.37m cars
2016 incl. MINI & Rolls-Royce. Goal is 15% - 25%
of sales with e-cars by 2025
Honda 2017 Thirds of all sales to
come from electrified models by 2030 incl
PHEV,BEV and FCEV
Chinese OEMs 2017 4.52 million annual
electric car sales by 2020
ACEA 2016 Forecasts all e-cars
(incl hybrids) of up to 8% of annual sales = approx.
8 million by 2025
California/USA 2016 Accounts 12.2% of
USA sales has the target of 3.3m EVs on their
roads by 2025
China 2017 The Government aims to
implement NEV sales quota 2018=8 % 2019=10%
and 2020 =12%.Overall objective is to achieve a
NEV stock of 5 million by 2020
UBS 2017 2025 = 14% = 14.2m;
EU= 30% of sales e-cars by 2025
IHS: 2016 Predicts fivefold
growth of electric cars by 2025 reaching 7 million
annual sales
BNP Paribas 2016 By 2025 they predict
that e-mobility reaches 11% global market share =
11m-13m p.a
Bloomberg 2016 2025 = 7-8 million
and by 2040 = 41m vehicles p.a.
Bloomberg update 2017 2025 = ~8 million and by
2040 = 64.8m vehicles p.a
Deutsche Bank: 2016 16m e-cars by 2025.
Of which 3m are BEV. By 2025 sales = 112m pa.
16% HEV, PHEV, BEV (3%)
Goldman Sachs: 2015 25m HEV&BEV by
2025 –10x more gaining a market share of 22%
of 113m global vehicle sales.
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Morgan Stanley: 2016 Old forecast 7m p.a.
by 2025. Updated forecast 10-15% p.a. of annual
sales = 11-17m p.a and 35% by 2040
BP: 2017 Car fleet ‘15 = 0.9b
will grow 1.8b by 2035. ‘15 = 1.2m e- cars, 2035=
100m = 6% of ww fleet
Exxon: 2016 2040, 1 of every 4
cars =hybrid; 1.75b LDV by 2040, 25% = 437 million
fleet vehicles electrified
Exxon 2017 Car fleet 2015 1b will
grow 1.8b by 2040. Hybrids=15%; E-cars ~5%
together 20% = 360m ww
Total: 2017 Chief energy economist,
Joel Couse, forecasted EVs 15-30% of ww sales
vehicle sales by 2030
Source: Faurecia 2017 investor day
Statoil ASA 2017 By 2030 the EV share of
the global fleet has grown to around 12% and 10%
for Busses and Trucks
IEA.org 2017 electric car stock of
approx. 9-20 million by 2020 and between 40 million
and 70 million by 2025
World Bank 2017 2DS, IEA [2016a]),
there are 140 million electric vehicles in operation
by 2030, versus approximately 25million units in the
more pessimistic 4DS and 6DS scenarios
Wood Mackenzie 2017 issued a report this year
in which the base case had EVs reaching almost
100 million in sales by 2035 (which, it notes,
displaces about 2 million barrels of oil a day).
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Automotive - What is the Impact
on the Global Demand of NdPr?
If we translate this projection into average, annual
incremental demand of NdPr, taking into account
that each new energy vehicle engine represents an
incremental demand of 1kg NdPr pure oxide per
vehicle and ignoring any additional needs for
standard automotive accessory applications as
shown on page 101 (irrespective of whether it’s an
ICE or NEV vehicle), our simplified demand model
projects from 2017 onwards ~1,750 to ~2,500t p.a.
in 2020. After that it is anticipated that from 2020-
2025 the average incremental annual demand will
increase to ~4,200 to ~9,600t p.a.
This represents an annual demand equivalent to
what 2 to4 Ngualla projects could produce annually.
Even if we consider that our assumptions may be
too high due to exceptional progress in the
development of new electric driveline technologies
and our assumption of 1 kg of pure NdPr oxide
demand per electric vehicle was reduced by 65% to
0.33 kg per vehicle, the automotive market for
passenger cars alone would still require an average
annual incremental demand of NdPr of ~583 to
~833t p.a. until 2020. Following this, it is projected
that between 2020 - 2025 the average incremental
annual demand will increase to ~1,400 to ~3,200t
p.a.
Moreover, it is important to highlight that the above
NdPr volumes do not consider any demand from
other electric mobility applications such as:
1. Electric bikes, scooters, motorbikes
2. Electric commercial Trucks, Vans or Busses
3. Electric boats market
4. Electric drones or airplanes
5. Automotive accessories and additional vehicle
equipment/features like electric steering (See
p.107)
It’s clear that these additional applications represent
further substantial demand for NdPr but rather than
make any assumptions, we will leave it up to the
market observers to decide what their true impact
will be.
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NdPr Price Elasticity / Price
Sensitivity and Replacement
Risks
In the UBS report published in May 2017, it is
estimated that the NdPr and dysprosium content in
the GM-Bolt motor is approximately 1kg, which
represents ~$100 unit cost or ~8-9% of the total e-
motor cost. Below we have prepared a breakdown
of the price sensitivity for NdPr and its contribution
to the overall vehicle cost as well as the standalone
components. For this exercise, we have made the
assumption that UBS has already taken the valid
mineral price at the time the report was compiled
into consideration.
We have assumed the following raw material prices
for the base case:
NdPr oxide 2N = 42 USD per Kg
Dy oxide 2N = 180 USD/ Kg
With today’s NdPrDy base case scenario at cost
price of US $100 per vehicle, rare earth minerals
represent 12.5% of the motor cost or 0.23% of the
total vehicle cost. Taking the projected reductions
for the vehicle manufacturing cost into account, this
would increase to 13.89% on the engine level and
to 0.34% on the vehicle level by 2025.
Considering the likely scenario that the NdPrDy
cost will double and reach US $200, which would
represent an NdPr price of US $84/kg, the rare
earth minerals would represent 25.0-27.8% of the
motor cost or 0.47- 0.70% of the total vehicle cost.
Supposing that the NdPrDy cost would increase
threefold and reach US $300 by 2025, the impact
on a component level is considerable representing
37.50%-41.67% of the motor cost. This could cause
trouble for engine suppliers if they have not
protected themselves and signed contracts with the
OEM’s based on a raw material index formula. But
in the grand scheme of things, even if the price of
NdPr oxide triples and reaches ~US $126/kg, rare
earth minerals of the motor would still contribute
only 0.7%~1.02 % to the total vehicle cost.
Therefore, our understanding is that NdPrDy price
elasticity in automotive applications remains low,
even after the tripling in the NdPr price!
This is due to the fact that the car manufacturers
understand that the permanent magnet engine
technology offers them significant advantages
compared to other technologies from a holistic
perspective. It provides them with the advantage of
lower after sales costs and, in particular warranty
costs due to less engine design complexity
compared to traditional internal combustion engine.
The permanent magnet technology has only 3
moving parts in its engine compared to 113 in a
traditional internal combustion engine.
In the area of emission control systems, this new
technology is indisputably superior. It has an
undeniable advantage in light of the impending
stricter legislations (e.g. real driving emission
standards) and the trend that ICE vehicles are
intended to become prohibited from urban areas,
especially considering the aftermath of the VW
scandal including the financial impact and brand
damage this caused for the VW-Group.
We believe that it is not a question of whether e-
mobility will happen, but merely when.
For further information on the automotive segment,
please refer to the following sources and reports:
ACEA_Pocket_Guide_2016_2017
Electric car use by country
The Quiet rEVolution + 2017 update
GlobalEVOutlook2017
Source: UBS
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Peak Resources Extrapolation Based
on the UBS Report May 2017
UBS ANALYSIS
PEAK Resources extrapolation:
Chevrolet BOLT May 2017 2025E Vehicle cost (VC) 42,585 USD 29,358 USD Car purchase price 37,074 USD 37,074 USD
EBIT - 5,520 USD -14.9% 7,716 USD 20.8% Total Drive line cost (TDLC) 1,200 USD 1,080 USD Engine Cost (EC) 800 USD 720 USD
Gear box 400 USD 360 USD Engine weight 35 kg Gearbox weight 41 kg
Scenario: A 100 USD NdPrDy 1kg cost 100 USD 12.5 % EC 100 USD 13.9 % EC 8 % TDLC 9.2 % TDLC
0.23 % VC 0.3 % VC
NdPr oxide dom price 42 USD 285 RMB Dy oxide dom price 180 USD 1220 RMB
Scenario B: Double price scenario NdPrDy 1kg 200 USD 25 % EC 200 USD 27.8 % EC 15 % TDLC 18.5 % TDLC 0.47 % VC 0.7 % VC
NdPr oxide dom price 84 USD 570 RMB Dy oxide dom price 360 USD 2440 RMB
Scenario C: Dribble price scenario NdPrDy 1kg 300 USD 37.5% EC 300 USD 41.67 % EC
25 % TDLC 27.70 % TDLC 0.7 % VC 1.02 % VC
NdPr oxide dom price 126 USD 855 RMB Dy oxide dom price 540 USD 1220 RMB
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The Different Engine
Technologies
The AC Induction Engine Without
Permanent Magnets
Unlike direct current (DC) voltage, which has
constant polarity (like a AA battery with a positive
and a negative end), alternating current (AC)
changes from positive to negative several times a
second (it alternates the polarity from + to -). AC is
measured as an oscillating sine wave. To take
household wiring as an example, the voltage goes
from zero to a positive 120 volts and then ramps
down to again to zero volts. It then repeats the
cycle, only with the polarity reversed. This occurs
60 times a second in the US and 50Hz in Europe.
Here’s an image of an AC sine wave:
So each time the voltage rises and
falls, an electromagnetic field is created
the change in voltage levels creates a magnetic
field. Instead of using coils or magnets, it instead
uses a casting of conductive material such as
aluminum or copper for the rotor which energizes
opposing pairs of coils in the stator with alternating
current instead of direct current. A pair of coils (180°
apart) in the stator are wired in series, much like
Christmas tree lights. A wire is wrapped around a
steel core in a clockwise manner, which is then
extended to the opposing coil and wrapped in a
counter-clockwise manner.
When an AC voltage is applied to the pair of coils,
an electromagnetic field of opposite charges is
created. The fields extend to each other across a
plane of the conductive rotor, creating an
electromagnet with a north and south pole. This
activity induces a current to flow on the rotor. The
induced current ebbs and flows along with the
electromagnetic field from the AC source as the
rotor current rises and falls. For the same reason
current flowing in the coils produced an
electromagnetic field, the current flowing on the
rotor does the same. The rotor is creating a
magnetic field in tune to the cycling of the AC
current feeding the stator coils resulting in having
two opposing magnetic fields that make a motor
spin. So paired coils on the stator > apply an
alternating current to the coils > an electromagnetic
field is created that spans the rotor > a current is
induced to flow on the rotor > the rotor emits an
opposing electromagnetic field > the rotor turns in
response to the magnetic pull.
The earlier animation demonstrates a 2-pole motor.
Just two opposing coils are wired together (in
series). Thus, two poles, or a 2-pole motor. The
animation has two sets of those paired coils (blue
and red), and real motors will have several more
around the circumference of the stator, but it is still
considered a 2-pole motor.
A refined version of this design uses 4 coils wired in
series. One paired set of poles still face opposite
each other, but another pair is added 90° apart.
Thus, the 4-pole motor. Doubling the number of
poles in the circuit increases torque. Picture an
apple pie cut in four slices. That gives you an idea
of the topography of the coils, which sit at the fat
end of each slice. As noted with 2-pole motors,
there will be multiple sets of these 4 coils, wired in
the same manner. You can just keep slicing that pie
up in your head or look at this fully wired stator:
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It’s hard to tell how many poles this stator has as it
all depends on how the coils were wired together.
What you’re looking at is insulated copper wire
wrapped around the length of the stator. The coils
of wire are referred to as windings for obvious
reasons.
3 phase AC is just three sources of AC power. It
takes the form of three separate power cables.
Think of AC phases as cylinders in a conventional
ICE. The more cylinders (power sources), the
smoother the engine runs. Right? A V8 engine runs
smoother than a 4 cylinder engine and has more
power.
But how best to apply the extra power? The earlier
image of a sinewave was of a single phase circuit.
Let’s look at a sinewave again before continuing:
Notice that power starts at zero volts, drops to zero
volts as the cycle transitions from positive to
negative, and then drops to zero volts again. No
voltage = no current flow in that instant. No current
flow equals no electromagnetic field.
So, with our example 60Hz power, there is no
power 120 times each second.
The solution to this “problem” is to apply a separate
AC source to power an adjacent set of coils. But
you don’t power both circuits at the same time.
Instead, you time it so that the second AC source is
producing an electromagnetic field when the first is
not. Thus, the motor is always powered. And if two
AC legs are good, three must be better (3 phase is
the industry standard). So, now, three separate AC
sources are each powering a separate set of 4 coils
(4 poles, at 4 opposing points on the compass) at
any given moment, each out of phase with the
other.
To continue our ICE analogy, do the pistons in the
engine all have their combustion cycle occur in the
same instant? No. The combustion cycles are
staggered (phased) to maximize torque and smooth
the operation of the engine. It’s the very same
principal for electric motors. The below diagram
illustrates 3 phase AC in action. Notice that, at any
point in time, voltage is present… thus current
flow… thus an electromagnetic field… thus a force
pulling on the rotor.
Add it all up and, in effect, you have what designers
term a rotating magnetic field progressing around
the circumference of the rotor. The rotor is
constantly being dragged around in a circle, never
quite catching up to the rotating field. The action is
orchestrated by an electronic controller.
So, there it is. The 3-phase 4-pole induction motor.
In an induction motor, the rotor always turns at a
lower speed than the field, making it an example of
what's called an asynchronous AC motor. The
difference in speed of both elements is called slip
(also influenced of the load on the motor).
Source: Cleantechnica.com
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The DC Brushed Permanent Magnet
Engine
A conventional DC motors work by surrounding a
rotating shaft with windings of copper wire that are
energized by a DC power source (termed
an armature because the wires are wrapped around
the arms of a metal frame). The rotor is then
surrounded by another magnetic field from a fixed
position, which is accomplished with permanent
magnets attached to a metal case encircling the
rotor (this sort of rig is called a stator because it is
stationary).
The challenge is how to get power to the coil on the
rotor since it will be spinning (to make the wheels
on the car go round and round). This is where
brushes come in. Pressing a conductive material
against the rotor does the job, as illustrated here:
As you can see, a pair of carbon brushes are
connected to the DC power leads. The brushes
make physical contact with a designated area near
the end of the rotor that distributes the voltage to
the armature (it’s called a commutator because
it commutes the current across). The weakness of
this design is that you have two parts rubbing
against each other and the (softer) brushes
eventually wear down to a nub and must be
replaced. You don’t want that happening in traffic,
which is why a brushed motor is a non-starter in an
EV.
Source: http://fweb.wallawalla.edu
The DC Brushless Permanent Magnet
Engine
The DC motor evolved some time ago into a version
not requiring brushes. They moved the permanent
magnets from the stator to the rotor, and moved the
coils of wire from the rotor to the stator. With this
advance, the DC leads could easily be attached to
the coils on the stationary part of the motor. There
was no longer a need to get electricity to the rotor.
So the brushes and the commutator were no longer
required.
Source: Cleantechnica.com + others
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Megatrend No.2: Wind Energy
A megatrend in itself, but also an accelerator
and amplifier of the upcoming NdPr shortage
Wind turbines are one of the largest applications for
NdFeB magnets and represent the second pillar for
incremental sustainable growth of NdPr. Among all
NdPr applications Wind Turbines represent the
biggest demand driver with the largest consumption
of NdFeB magnet per produced turbine/ unit.
Wind is one of the fastest growing energy sources
in the world. With the accelerating electricity
consumption and increasing demand for clean
energy without greenhouse effect and
consequential environmental degradation, the
global deployment of wind farms is increasing year
by year. Wind power has become one of the most
significant methods of renewable power generation
and it is commercially utilized by more than 80
countries.
China’s electricity mix in 2016 in TWh
Source: China Energy Portal
In 2016, China was again the biggest single wind
market, representing 43% of the global incremental
new installed wind capacity. To understand the
magnitude of opportunity for renewable energy and
in particular for wind, we only need to look at
China’s current electricity mix. In 2016, China
acquired 65% of its electricity from coal- a solution
which is not infinitely sustainable. This issue has
been addressed by the Chinese government with a
commitment to invest a further 2.5 trillion yuan
($361 billion USD) into the renewable energy sector
by 2020. 700 billion yuan of this investment will be
directed solely towards wind farms. The NEA's job
creation forecast differs from the NDRC's released
in December that predicted an additional 3 million
jobs, bringing the total in the sector to 13 million by
2020. Despite the latest commitments to increase
the market share of renewables, China still has a
long way to go until it will reduce coal consumption
significantly, reflecting the massive market potential
for wind applications over the coming decades in
China alone.
According to Bloomberg’s Energy Outlook 2017,
onshore wind levelized costs will fall 47% by 2040
thanks to cheaper, more efficient turbines and
advanced OPEX regimes. In the same period,
offshore wind costs will slide a whopping 71%,
helped by experience, competition, and economies
of scale.
Bloomberg expect $10.2 trillion to be invested in
new power generation capacity worldwide by 2040.
Of this investment, 72% or $7.4 trillion, is allocated
to renewables whilst solar will receive $2.8 trillion
and wind $3.3 trillion.
Investment in renewable energy increases to ~$400
billion per year by 2040, a 2-3% average annual
increase. Investment in wind grows faster than solar
–increasing 3.4% and solar 2.3% per year on
average. Wind and solar account for 48% of
installed capacity and 34% of electricity generation
world-wide by 2040.
This is compared with just 12% and 5% today.
Installed solar capacity increases 14-fold and wind
capacity fourfold by 2040. The Global Wind Energy
Council are even more optimistic projecting a
fivefold increase by 2040.
Bloomberg anticipate that by 2040, renewable
energy will reach 74% penetration in Germany, 38%
in the USA, 55% in China and 49% in India as
batteries and new sources of flexibility bolster the
reach of renewables. Onshore wind costs fall fast
but offshore falls faster. Bloomberg expect the
levelized cost of offshore wind to decline 71% by
2040, helped by development experience,
competition, reduced risk and economies of scale
resulting from larger projects and bigger turbines.
Source: Bloomberg’s Energy Outlook 2017
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Technology trends in the industry were traditionally
using doubly fed induction geneators (DFIGs) with
gearbox-operated wind turbines.
To be used in wind turbine, these generators
required excitement (generation of magnetic field)
through external power sources. Windfarm owners
are supposed to buy electricity from the grid in order
to start electricity generation from a wind turbine.
PMGs do not require excitement through external
power sources, as a magnetic field is generated by
permanent magnets.
PMG can minimize nacelle weight and offers
superior efficiency under partial load when
compared with doubly fed induction generators
(DFIGs).
The gearbox represents the highest-maintenance
part and error source of breakdowns of a wind
turbine as it consists of multiple wheels and
bearings; which are exposed to tremendous stress
by wind turbulence. While wind turbines are
designed to have a lifetime of around 20 years,
existing gearboxes have exhibited failures after
about 5 years of operation. The costs associated
with securing a crane large enough to replace the
gearbox and the long downtimes associated with
such a repair affect the operational profitability of
wind turbines.
A simple gearbox replacement on a 1.5 MW wind
turbine may cost the operator over $250,000
(Rensselar, 2010). The replacement of a gearbox
accounts for about 10 percent of the construction
and installation cost of the wind turbine and will
negatively affect the estimated income from a wind
turbine (Kaiser & Fröhlingsdorf, 2007). Additionally,
fires may be started by the oil in an overheated
gearbox. The gusty nature of the wind degrades the
gearbox and unfortunately, this is unavoidable
This is why Direct Drive Wind Turbines (DDWT),
which do not operate with a gearbox, are year by
year gaining more market share with their less
complex design, higher efficiency and better return
of investment.
For this technology, the rotor is directly connected
to a low-speed multi-pole generator, which rotates
at the same speed as the rotor. This mechanism
allows for the slow movement of all parts of the
wind turbine systems and therefore reduces wear
and tear in the system. This system is considered
more reliable as it contains fewer parts compared
that which uses a gearbox.
As this technology uses multipole PMG, the size of
the generator is larger than both an induction
generator and a permanent magnet generator that
uses a gearbox.
Source: researchgate.net/publication/224137242
The adoption of gearless wind turbines is strongest
in Asia Pacific – led by China. Globally, China is
expected to remain the most attractive market for
DDWT. DDWT are generally preferred over geared
turbines owing to advantages such as less
downtime, noise-reduction and longer equipment
life. Direct drive wind turbines can be classified on
the basis of mode of operation and capacity.
On the basis of mode of operation, these turbines
are categorized into permanent magnet
synchronous generator and electrically excited
synchronous generator. Among these, demand for
permanent synchronous generators is higher, owing
to high energy output achieved through them.
On the basis of capacity, the direct drive wind
turbine market is segmented into small-sized (less
than 1MW), mid-sized (1MW to 3MW), and large-
sized (over 3MW).
Region-wise, Asia Pacific and North America are
the largest markets, both in terms of installation
base and revenues. Europe, Germany and Spain
are expected to witness a spate of installations in
the near future. China, India, US, Germany and
Spain collectively account for nearly 50% revenues
of the global direct drive wind turbine market.
It is anticipated that the trend in the industry will
continue towards larger wingspan, utilization of light
weight material and design, longer product life
cycles, adaptability of lower wind speeds and
onshore systems adopting more and more offshore
system development. NdFeB permanent magnets
are key components in meeting all these
requirements. This is why the global direct drive
(gearless) wind turbines market, and in particular
direct drive permanent magnet generators, are
expected to witness substantial, sustained growth in
the next decade driven by enhancing operational
efficiency and reducing maintenance costs.
Although figures vary by manufacturer and product,
the direct-drive permanent-magnet generator
(DDPMG) design typically requires the largest
amount of NdFeB magnets at 600-830kg per 1MW
of capacity installation. Hybrid designs use much
lower amounts of NdFeB magnets- around 100-
200kg per megawatt. One third of this is pure NdPr.
Therefore, the outlook for NdPr growth resulting
from wind turbines has the potential to be
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impressive. Even the World Bank has
acknowledged in its report ”The Growing Role of
Minerals and Metals for a Low Carbon Future
(English)” published in June 2017, that Neodymium
is one of the raw materials which will most likely
experience a significant growth due to the upcoming
technology shift.
Source: 2017 World Bank
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The Market - Status Quo
According to the JRC report 2016, the global wind
energy capacity reached 430 GW in 2015, more
than doubling from 5 years earlier. All EU's wind
energy capacity, about a third of the global capacity
or 140 GW, is connected to the grid which makes
Europe a global leader in supplying wind energy.
Thanks to the rapid expansion in new installations,
China was overtaking the EU in total capacity for
the first time, although not all is connected to the
electricity grid at this stage.
2015 was another successful year with 63 GW of
new wind turbines installed around the world. This
was a 20% increase from 2014. The EU has been
adding 10-13 GW of new wind capacity annually
since 2010 and advancements in offshore wind are
likely to push this figure to 15 GW in the next 4-6
years.
According to the 2015 GWEC report, worldwide
capacity reached 432,883 MW. Out of this,
63,467MW (3,443 MW Offshore/ total 12,167MW)
were added in 2015. China alone installed
30,753MW in 2015. In 2016 the worldwide capacity
reached 486,790MW, out of which 54,642MW
(2,219MW Offshore / total 14,384MW) were added
in 2016. Also in 2016, China represented the
biggest single market with 23,370MW incremental
new capacity.
According to BP, global wind power generation
reached 960 TWh in 2016, or 4% of total world
electricity generation. That is almost equivalent to
the total power generation of Japan, the world’s fifth
largest power generator. In its Global Wind Energy
Outlook 2016 Report, the GWEC projects that Wind
energy’s global market share will grow to 7-9% by
2020, 11-18% by 2030, 14-26% by 2040 and 18-
36% by 2050.
The JRC 2016 report shows that in 2015 the global
market share of permanent magnet wind turbines
reached a market penetration of 13% among the
total global installed base of the onshore wind
turbines and 17% of the total global installed
offshore wind capacity with a steady tendency of
growth.
In 2015, PMG among the new installed capacity
onshore reached 32.5% market share in Europe,
20% in Asia, 5% in USA and 15% in ROW. During
2015, PMG reached a market share of 50% in
Europe and 32% in Asia in the offshore
business. These market share percentage growths
among the additional annual new installations
proves the potential of PMGs and confirms the
positive outlook.
The global trend towards bigger turbines and
medium to low wind speeds will contribute to future
growth of permanent magnet wind turbines. A good
example for this is the fact that out of the global top
10 biggest wind turbines, 7 are based on PMG
technology.
MHI Vestas 9MW + 9.5MW
Siemens 8 MW SWT-8.0-154
Siemens 12 MW
Adwen AD-180 - 8 MW Platform + 5MW
Platform
Ming Yang SCD 6.0MW
GE’s Haliade* 150-6MW
Samsung’s 7 MW (SHI 7.0-171)
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Latest Technological
Developments
Low speed wind turbines are growing!
In the global market, wind turbines for high wind
speed locations (class I) have progressively lost
share in the recent years in favour of wind turbines
for medium and low wind speed locations (class II
and class III). The Asian market has been
dominated by class III wind turbines during the last
decade, mainly due to the low-wind conditions
experienced in most of China and India.
Class II wind turbines (for medium wind speeds)
predominated in North America over the years;
however low wind turbines (class III) have shown a
strong development starting from 2010. In the rest
of the world, class I and II wind turbines prevailed.
On the contrary, high wind speed turbines have
gradually lost share in favour of class II and III wind
turbines. The reason may be that higher wind speed
locations were preferred during the first years.
Therefore, the lower the speed of an electricity
generator, the larger its size. A medium speed
generator has a larger diameter than a high-speed
one but induction (asynchronous) machines are
generally less attractive with low speeds and large
diameters [Jamieson, 2011]. Therefore only
synchronous machines, especially PMGs, are
considered at medium and low speeds.
As wind energy technology evolves towards larger
wind turbines with longer blades, taller towers and
more powerful generators, PMG’s will gain more
market share. These large machines will help the
industry reduce capex/opex on a one-turbine, one-
foundation basis by offering an even higher output
per square metre of swept area.
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The Market Players
The wind turbine market continues growing and
attracting new entrants, particularly in China and
India. The recent mergers and acquisitions among
Western OEMs (Original Equipment Manufacturers)
such as Siemens and Gamesa in 2017 and Alstom
and GE in 2015, suggest a desire or need for
Western companies to become stronger in order to
face the expected expansion of Chinese
manufacturers abroad.
The Chinese role as a forerunner in new installed
capacity is accompanied by a strong local market
for turbines. Chinese OEMs supply 97.3% of
Chinese wind power plants with turbines whilst their
participation on foreign markets remains minor so
far. Nevertheless, the strong Chinese home market
has for the first time resulted in a Chinese company
– Goldwind – leading the ranking of turbine
manufacturers in terms of installed capacity.
Source: JRC Report 2012
European turbine manufacturer, Vestas ranked
second, with European companies Siemens,
Gamesa and Enercon also found in the top 15.
Xinjiang GoldWind uses only permanent magnet
direct drive technology, whereby the generator
speed required is much lower than that required by
the DFIG system. Siemens and GE have introduced
Permanent Magnet Direct Drive (PMDD) turbines
during the last few years as well.
Enercon has taken a different approach by using
electromagnets.
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Market Forecast
Overall, the general forecast for Wind energy looks
positive with a steady increase of the total
installation base. The latest GWEC update
published in 2017 is showing that the process is
already accelerating, now forecasted to reach an
installation base of 741.7 GW by 2020, and
projecting an average new installation base per
year 61.9 MW.
Considering 2015 as the baseline, the GWEC
Global Wind Energy Outlook 2016 predicts that the
installed base will increase by 50% by 2020, by
2030 it will increase by threefold, by 2040 it will
increase close to fivefold and by 2050 it will
increase sevenfold reaching a total of 2,869 GW
capacity.
The wind industry is at a critical juncture due to the
subsidies that have cradled and underpinned its
business model since its inception in the early
1990s disappearing as politicians enact a long-
planned push to make the industry more
commercially viable and competitive with other
energy sources.
And based on the latest industry news regarding the
recent auction outcomes in Germany and Australia,
we have no doubt that this will be accomplished.
Although the overall outlook is already very
promising, we believe it will actually be surpassed
by the reality.
As wind energy is a long cyclic, investment
intensive B2B business, we perceive this
technology segment as a steady robust growth
industry which will contribute to and amplify the
supply demand imbalance of NdPr- but we do not
expect it to be the initiator. Our belief is that this role
will be claimed by B2C (Business to Consumer)
industries such as E-Mobility through its
developments with passenger cars, bikes, vans,
trucks and drones. The B2C segment is far less
predictable when it comes to projecting the future
demand and technology adoption by the customers.
Source: GLOBAL WIND REPORT ANNUAL MARKET
UPDATE 2016 issued 2017 by GWEC
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Source: GWEC GlobalWindEnergyOutlook2016 issued
October 2016
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Wind – The NdPr Demand
Wind turbines that contain rare earth permanent
magnets most commonly use them in the electricity
generator. Here, rare earths make up 30 to 32% of
the mass in the magnets. During 2015, wind
turbines with permanent magnet electricity
generators (PMG) covered approximately 13-17%
of the world market. The other 83-87% were
electromagnet generators which use copper
windings and an electricity current to generate
magnetism. The amount of magnets used in PMG is
quite diverse and depends heavily on the speed of
the generator.
Extending the data in below Table, taking as a
reference a 3-MW PMG, if it is low-speed it would
use approximately 650kg of magnets per MW;
being medium speed it would need some 160-200
kg/MW, and the high-speed version approximately
80 kg/MW.
Source: above JRC Report 2012;
Based on our interaction with the established
industry players, we understand that their latest
large permanent magnet offshore wind turbines
require 333 kg NdPr oxide per Megawatt.
Furthermore, in 2011 the German research Oeko
Institute published additional information on this
subject as did the 2012 report published by JRC,
see below.
We anticipate a trend of moving towards a larger
variety of generator designs with a higher share of
PMG. PMG are more efficient at partial loads than
the traditional doubly-fed induction generators
(DFIG) which is crucial considering that turbines
generate electricity at partial loads most of the time.
PMG have fewer moving parts than DFIG and it’s
the moving parts that require the most
maintenance. Thus the evolution from DFIG to PMG
is expected to continue, consequently reducing
operation and maintenance costs.
Source: Oeko – Institut e.v - wind turbine supply chain & logistics
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The below table illustrates the growing demand for
NdPr resulting from this trend. We have assumed
that across all hybrid and direct drive permanent
magnet wind turbines, an average deployment of
200kg of NdPr per Megawatt is required.
Our projection is that the permanent magnet wind
turbines will achieve a market share of 20% by
2020 and will continue to grow thereafter. The blue
highlighted boxes indicate the range that we believe
will most likely be achieved. Regardless of which
scenario is chosen, the incremental NdPr demand
from this application will be substantially higher than
today’s consumption levels.
For further information regarding the Wind energy
market share and outlook, please refer to the
following sources and publications:
Bloomberg Energy outlook 2017
BP - Energy outlook 2035 + BP - Energy
Outlook 2017
Exxon - 2017 Outlook for Energy: A View to
2040 2040
Statoil - Energy Perspectives Long-term macro
and market outlook 2017
200
Year
2015 432,656 63,467 1904.01 2538.7 3173.4 3808.02 4442.69 5077.4 5712
2016 486,790 54,642 1639.26 2185.7 2732.1 3278.52 3824.94 4371.4 4917.8
2017 546,190 59,400 1782 2376 2970 3564 4158 4752 5346
2018 607,090 60,900 1827 2436 3045 3654 4263 4872 5481
2019 671,790 64,700 1941 2588 3235 3882 4529 5176 5823
2020 741,790 70,000 2100 2800 3500 4200 4900 5600 6300
2021 817,090 75,300 2259 3012 3765 4518 5271 6024 6777
2015-2020 639,478 879,466 41,364 61,827 1,241 1,855 1,655 2,473 2,068 3,091 2,482 3,710 2,896 4,328 3,309 4,946 3,723 5,564
2020-2030 1,259,974 2,110,161 62,050 136,837 1,861 4,105 2,482 5,473 3,102 6,842 3,723 8,210 4,343 9,579 4,964 10,947 5,584 12,315
2030-2040 2,052,583 3,720,919 79,261 161,076 2,378 4,832 3,170 6,443 3,963 8,054 4,756 9,665 5,548 11,275 6,341 12,886 7,133 14,497
2040-2050 2,869,611 5,805,882 81,703 208,496 2,451 6,255 3,268 8,340 4,085 10,425 4,902 12,510 5,719 14,595 6,536 16,680 7,353 18,765
150
Year
2015 432,656 63,467 1428.01 1904 2380 2856.015 3332.02 3808 4284
2016 486,790 54,642 1229.45 1639.3 2049.1 2458.89 2868.71 3278.5 3688.3
2017 546,190 59,400 1336.5 1782 2227.5 2673 3118.5 3564 4009.5
2018 607,090 60,900 1370.25 1827 2283.8 2740.5 3197.25 3654 4110.8
2019 671,790 64,700 1455.75 1941 2426.3 2911.5 3396.75 3882 4367.3
2020 741,790 70,000 1575 2100 2625 3150 3675 4200 4725
2021 817,090 75,300 1694.25 2259 2823.8 3388.5 3953.25 4518 5082.8
2015-2020 639,478 879,466 41,364 89,362 931 2,011 1,241 2,681 1,551 3,351 1,861 4,021 2,172 4,692 2,482 5,362 2,792 6,032
2020-2030 1,259,974 2,110,161 62,050 123,070 1,396 2,769 1,861 3,692 2,327 4,615 2,792 5,538 3,258 6,461 3,723 7,384 4,188 8,307
2030-2040 2,052,583 3,720,919 79,261 161,076 1,783 3,624 2,378 4,832 2,972 6,040 3,567 7,248 4,161 8,456 4,756 9,665 5,350 10,873
2040-2050 2,869,611 5,805,882 81,703 208,496 1,838 4,691 2,451 6,255 3,064 7,819 3,677 9,382 4,289 10,946 4,902 12,510 5,515 14,074
Source: Wind forecast data is from the Global Wind Energy Outlook 2016
worse case optimal case mid case
35%
45%
MW installation projections in
MW
Incremental new
capacity in MW p.a.
15% 20% 25%Permanent Magnet Wind Turbine Marketshare
1 Mw = NdPr oxide 2N in kg
30% 35% 40%
GW
CE
up
dat
e
Fore
cast
Oct
2016
GW
CE
up
dat
e
Fore
cast
Oct
2016
Actuals
Actuals
Estimate of the annual demand of NdPr consumption for the new installed Wind capacity in tonnes
40% 45%
1 Mw = NdPr oxide 2N in kg
MW installation
projections in MW
Incremental new
capacity in MW p.a.Estimate of the annual demand of NdPr consumption for the new installed Wind capacity in tonnes
Direct drive PM wind turbine marketshare 15% 20% 25% 30%
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Overview of Existing Drive Line
Technologies
Source: Technological evolution of onshore wind
turbines—a market-based analysis
Type A. Fixed-speed generator. The rotational
speed of the electric (asynchronous) generator
squirrel cage induction generator (SCIG) is
usually employed in this configuration because its
constructive simplicity and robustness is
constrained by the spinning speed of the blades
with very limited range response to variations in
wind speed. Neither power converter nor other
speed regulation techniques are employed in this
configuration. NEG Micon N48 and Vestas V27 are
some examples of type A wind turbines. (Geared
and high speed SCIG)
Type B. The speed of the asynchronous generator
is controlled by a variable resistance that enables
modifying the current circulating in the rotor. As a
consequence, wounded rotor induction
generators (WRIG) are employed in this
configuration. This solution provides higher control
flexibility than type A. However, the electrical losses
are relatively high and the response to grid
requirements is very limited. Vestas V52 and
Suzlon S82 are the main representatives of this
configuration in the market. (Geared and high
speed WRIG)
Type C. This configuration is known as a doubly-
fed induction generator (DFIG). The current in the
electric generator’s rotor is controlled by a power
converter. Thus, electrical losses are lower and the
response to grid requirements is enhanced. Since
the power converter is only connected to the rotor of
the generator, the converter only covers around
30% of the energy generated by the wind turbine.
Vestas V90, Gamesa G80 and General Electric GE
1.5 are some representative models of this
configuration. (Geared and high speed DFIG)
Type D. A full-power converter enables decoupling
the generator from the grid frequency so that the
frequency (and hence the rotational speed) of the
generator can be fully controlled and the use of a
gearbox can be avoided. Additionally, the full
converter provides enhanced grid services. Enercon
is the dominant manufacturer in direct drive wind
turbines based on electrically excited synchronous
generators (EESGs) = D-EE; whereas Goldwin has
manufactured most wind turbines in the market
employing direct drive combined with permanent
magnet synchronous generators (PMSG) = D-
PM. (DD and low speed PMSG)
Type E. A gearbox-equipped (one, two or three
stages of gearing) wind turbine with a full converter
and medium-/high-speed synchronous generator
(EESG or PMSG). In practice (with exception of the
old model Made AE-52), all type E wind turbines
use permanent magnets. Gamesa G128-4.5 MW
and Vestas V112-3.0 are some examples of this
configuration.
(Medium and high speed Turbines)
Type F. A gearbox-equipped wind turbine with a full
converter and high-speed asynchronous generator.
Thanks to the use of the full converter, a simpler
generator (SCIG) can be used, which is the case
for the most popular turbines under this
configuration, the Siemens SWT-2.3 and SWT-3.6
series. (Geared and high speed Turbines)
In summary, types A, B and C are geared high-
speed wind turbines, type D corresponds to
direct drive configuration and types E and F are
hybrid arrangements.
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Overview of Today’s Established
Drive Line Configurations
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How Do DFIG Turbines Work?
In a high-speed DFIG drivetrain, a slow-turning
shaft from the rotor (10-20 rpm) drives a gearbox
whose output shaft, rotating at up to 2,000 rpm,
drives the generator. In a DFIG, both rotor and
stator use electrically excited copper windings to
create magnetic fields. As the rotor spins,
interaction between these fields generates
electricity. DFIGs must spin at 750-1500 rpm to
operate, hence they are restricted to high-speed
applications.
The rotor circuit is controlled by a power electronics
converter, while the stator is connected directly to
the grid. This converter controls voltages and
currents, keeping the DFIG synchronised with the
grid while turbine rotor speed varies (typically the
range is +/- 30% of the synchronous speed or 60%
to 110% of the DFIG’s rated speed).
The great advantage of the DFIG is that it only
requires a ‘partial’ - roughly 35% of the generator’s
rated capacity - converter because only 25%-30%
of the input mechanical energy is fed to the grid
through the converter from the rotor, the rest going
directly to the grid from the stator. The efficiency of
the DFIG is very good for the same reason; little
power is lost via the converter.
Controlling the rotor circuit in this way also allows
the generator to import and export reactive power to
support the grid during outages - Low Voltage Ride-
Through (LVRT). However, today’s more
demanding grid codes stretch this to the limit and
many existing DFIGs have had to be retrofitted with
extra electronics to cope.
In PMGs and in other synchronous designs like the
EESG where the electrical energy is generated at a
variable frequency related to the rotational speed of
the rotor, the output must be converted to match the
frequency of the grid. Here the electronics must
deal with the full power output, demanding full
power converters which are considerably more
expensive than partial converters – around three
times as much according to Indar - and which also
have greater electrical losses. But as turbines
become larger and more advanced, vendors are
looking to these PMG designs to enhance reliability
and serviceability, reduce weight and comply with
grid codes. For those manufacturers looking to
eliminate the gearbox, compact PMGs are
particularly attractive. Slow rotation speeds typically
demand much larger diameter generators to
accommodate the increase in the number of
magnetic poles on the rotor for direct drive
applications.
PMGs operate in much the same way as EESGs
except, as their name suggests, they employ
magnets in the rotor instead of windings to create
the magnetic field required. This means no slip
rings or brushes, and so reduced maintenance and
greater reliability. The high energy density of
permanent magnets (a 15 mm-thick segment of
permanent magnets can generate the same
magnetic field as a 10-15 cm section of energised
copper coils) also helps to deliver a lighter, more
compact unit.
PMGs are almost as efficient at full-load generation
as standard DFIGs, but are more efficient at part-
loads – the most common conditions that wind
turbines operate in. DFIGs are more efficient in
high, steady winds, but must have electrical current
injected into the rotor at low speeds, resulting in
lower efficiency. Companies such as GE and
Vestas have used PMGs for some years in various
models and have more recently been joined by the
likes of Alstom and Siemens.
A key attraction for manufacturers is that a full
power converter (FPC) confers greater ability to
comply with the latest grid codes, of which LVRT is
the main element. To support grid voltage during a
voltage dip, the turbine drive train and its power
converter must inject reactive current.
Because it is completely decoupled from the grid,
full power converters can support longer, lower dips
than a standard DFIG whose otherwise efficient
partial converter works against it here. This full
decoupling between a PMG and the grid can also
potentially lengthen gearbox life due to reduced
loads on the drivetrain and does away with the
parasitic currents found in DFIGs which can
damage generator bearings.
Source: Which Tec Will Win?
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Advantages of Permanent
Magnet Generators (PMGs)
Permanent magnet generators (PMGs) have
distinct advantages over conventional double-fed
machines. They are able to produce efficiency
levels up to 98% at the rated point. When used in
low-speed, direct-drive applications, generator
efficiency is not quite as high but the need for a
gearbox is eliminated, creating excellent overall
drive train efficiency better than a DFIG, WRIG or
an EESG. The true strength of PMGs is in partial
load situations – the state in which turbines most
often operate due to wind inconsistency. In
particular along with a PMG allows easier
compliance with the most demanding grid “fault
ride-through” capabilities required by recent grid
codes. PMG efficiencies remain very high – close to
nominal value – over a wide range of speeds,
thereby producing much higher energy yields. With
low-speed, direct drive applications, the need for a
gearbox is eliminated, creating excellent overall
drive train efficiency.
The design life assumption is an important driver for
a levelized cost of electricity (LCOE) and this has
improved with the market moving towards a 25-year
design life up from the previous 20 years. The
Siemens’ direct drive permanent magnet turbine
SWT -6.0- 154 has been certified for a 25 lifetime.
The advantage of not having a gearbox as a part of
the drive line is important considering that existing
gearboxes are already experiencing failures after
only 5 years in operation. These repairs are
extremely costly and difficult to engineer, therefore
having no gearbox is the superior solution. This is
especially the case for offshore operations where
maintenance can only be carried out during specific
seasons as allowed by weather circumstances.
The PMG is a simple form of synchronous
generator that requires no connections and energy
feed to the rotor. Depending on the application,
permanent magnets are placed on the rotor, for low-
or medium-speed generators, or embedded in the
rotor for high-speed generators. The magnet
arrangements create excitation, a major factor in
delivering greater efficiency, as this concept virtually
eliminates rotor losses.
By driving the generator with an optimal power
factor using PMG technology, stator-side losses are
also minimized. PMGs do not require excitement
through external power sources, as a magnetic field
is generated by permanent magnets, thereby
reducing cost, simplifying the system, and
improving system efficiency. Further, no slip rings
are used, greatly reducing maintenance needs.
By allowing a wide range of speeds, a drive train
based on PMG technology can run at the optimized
operation point for the turbine. Control is based on
the optimum turbine curve and is not limited by the
drive train, thereby providing better partial load
rates. PMG can minimize nacelle weight and offers
superior efficiency under partial load, when
compared with doubly fed induction generators
(DFIGs). A double-fed machine, conversely, has a
limited speed range that does not allow the turbine
to fully adapt to actual site conditions.
Another benefit is that the optimized PMG electro-
magnetic circuit reduces cogging and thus
vibrations. This extends the lifetime of the turbine
and reduces the need for service. PMGs easily
meet the needs of modern wind farm turbines with
ranges from 500 kW to 5 MW and higher.
Therefore, Direct-driven PMGs have fewer moving
parts than EESGs and wound rotor induction
generators, being more robust, reliable and
requiring less maintenance. With overall reduced
maintenance time, production time increases, which
provides improved returns.
Because of these advantages we believe that this
PMG technology will continue to take over market
share in the coming years.
Source: the Switch & renewableenergyworld.com & Wind
Turbine Gearbox Technologies and others
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Source: windpowerengineering.com
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Replacement Threats for DD-PM
Turbines
The technologies we will discuss below are
potential threats to replacing PMG in the future,
however so far they are still in R&D stages and field
testing stadium. It’s difficult to predict or anticipate
the likelihood and timing around if and when these
products will enter the market. In this high capital
intensive, long cyclic investment environment with
lifecycles of +25 years, we expect that any potential
replacement technologies would need to first prove
their superior OpEx and CapEx long-term
performance through field testing prior to any roll-
out taking place. Once the new technology has
been launched, previous examples would suggest
that it may take 5-10 years for the new technology
to gain noteworthy traction in sales and market
share.
In today’s wind industry, customers already have
alternative solutions for PMGs by using geared
systems or direct drive synchronous generators with
electrical excitation. Ultimately it comes down to
timing and what the best package and solution is for
the individual site for which deployment of the wind
turbine is planned.
From today’s perspective, we are not aware of any
imminent threat which could replace NdPr
permanent magnet wind turbine technologies.
PMGs are “the clear choice for optimizing all factors
affecting the cost of energy of the installed turbine.”
Electromagnets
As previously highlighted, it is possible to substitute
PMG with electromagnets, however their main
weakness is the much larger size resulting in a
greater space requirement within the final
application. This becomes more and more
problematic as trends lean towards more powerful
wind turbines.
Ferrite-based PMSG
Progress is being made to reduce the content of
rare earths (in particular dysprosium which is the
scarcest, costliest and most used rare earth
element) in permanent magnets employed in
PMSGs. The most recent technological advances
aim to push this boundary even further by sourcing
alternate materials to substitute for rare earths
entirely. In this sense, the world´s first ferrite-based
PMSG has been developed by GreenSpur
Renewables. Unlike rare earths, ferrite has no
supply-chain restrictions or market monopolies and
therefore a lower CapEx may be achieved, which is
especially relevant for larger electric generators.
Currently, 3 MW and 6 MW ferrite-based PMSGs
are being deployed and a 15 MW PMSG is
expected to be tested by 2021. New magnetic alloy
alternatives to dysprosium are also being
investigated. An alloy of cerium co-doping with
cobalt to substitute cerium for dysprosium without
losing desired magnetic properties could become
an alternative in the future.
High-temperature superconductor (HTS)
generators
The ongoing research project EcoSwing, funded by
the EU Framework Programme for Research and
Innovation H2020, aims to achieve the world´s first
demonstration of a low-cost and lightweight
superconductor-based generator in a modern 3.6
MW wind turbine to be installed in Denmark by
2019. This superconducting generator is expected
to achieve a weight saving of more than 40%
compared to conventional generators and to
drastically reduce the use of rare earths in
permanent magnet generators (from 200 kg/MW to
less than 2 kg/MW).
The replacement of permanent magnet generators
in wind power plants with ceramic high-temperature
superconductors has the potential to become a
reality however as they will still contain other rare
earths such as yttrium, it simply substitutes of one
critical material for another. This is not so much a
solution as postponement of the core issue.
Modular Strategy
As wind turbines evolve towards more powerful
electric generators, modular designs also start
emerging with the target of achieving weight
reduction and more compact dimensions. In a
modular design, the electric generator is
constructed in sections, reducing costs for
transportation and installation processes.
Furthermore, if any stator module fails, either it can
be easily replaced by facilitating the maintenance
process or alternatively, the wind turbine can
continue to operate at reduced power output.
Modular generators also better satisfy the grid
codes.
Some recently deployed generators are the modular
prototype Flux-Switching PMSG (also known as
Permavent) developed by Jacobs Powertec and the
modular EESG for the 4.2 MW E-126 wind turbine
model developed by Enercon.
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For further information on technology and
technology trends in the wind sector, please refer to
the below publications and sources:
Wind Turbine Gearbox Technologies
Advanced Wind Turbine Drivetrain
concepts
Review of Generator Systems for Direct-
Drive Wind Turbines
Comparing_AC_and_PM_motors.pdf
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Onshore – The Market Share of
Individual Drive Trains
The graphs below show the evolution of the ratio of
installed capacity categorised by drive train
configuration in onshore wind turbine business
globally, separated by geographical zone.
Type E-Pm and Type D-Pm are NdPr base
solutions. In Type D and E, the type of generator
PMSG or EESG has not been identified. Siemens
supplies all turbines of the type F segment.
The 2016 report published by JRC shows that the
global market share of permanent magnet wind
turbines reached a market penetration of 13%
among the total global installed base of the onshore
wind turbine installations in 2015.
In 2015, newly installed capacity onshore PMGs
reached 32.5% of the market share in Europe, 20%
in Asia, 5% in USA and 15% in the rest of the world.
During 2015, the offshore business PMG in Europe
reached a market share of 50% and 32% in Asia.
The track record of PMGs demonstrates that the
technology enjoys steady continuous growth since
2006
Source + Note: JRC Wind Energy Report 2016
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Onshore – Drive Train
Configuration Depending on the
Nominal Power of the Generator
Below Graphs indicate the Drive train configuration
according to nominal power in onshore wind
turbines installed during 2015 and different
geographical zones. As it can be observed the drive
train configuration is closely related to nominal
power of wind turbines. Most wind turbines below 2
MW use type C configuration however DFIG loses
market share as nominal power increases.
In 2-3 MW wind turbines, direct drive configuration
had a similar share than type C in the European
market (45 %) in 2015 and it was mainly supplied
by Enercon. In turn, type D configuration was
mainly dominated by EESGs versus PMSGs,
representing 35 % and 10 % respectively. The
hybrid arrangements type E-PM and type F only
represented 8 % and 1 %, respectively.
Conversely, type F configuration displayed the most
prominent role in North America in 2015 and
overcame type C configuration by representing 51
% versus 32 %. Siemens supplied all turbines of the
type F segment. Unlike Europe, Type D only
represented 11 % in North America.
In wind turbines above 3 MW, the hybrid
arrangement Type E-PM was the preferred solution
in all markets in 2015. It covered the whole market
share in Asia, North America and the rest of the
world and it represented 60 % in Europe.
Moreover, manufacturers vary across drive train
configurations, as not each OEM offers the entire
range of drive train configurations. The Top 10
OEMs in the global onshore wind market show
some technological differences in their product
portfolio. Vestas, the leading manufacturer of total
onshore wind turbines installed, has historically
supplied geared designs, mainly type C
configuration. Nevertheless, in 2015 it covered 75
% of type E-PM and 23 % of type C configuration.
General Electric supplies similar configurations
although it led type C in 2015 representing 28 % of
this configuration. Enercon has historically covered
almost the entire supply of EESGs for direct drive
con-figuration while hybrid arrangement type F is
exclusively supplied by Siemens. Gold-wind's
technology is mainly based on PMSGs for type D
configuration.
The 2016 JRC reports shows that the global market
share of permanent magnet wind turbines reached
in 2015 a market penetration of 13% among the
total global installed base, with the robust outlook
for further growth
Source: JRC Wind Energy Report 2016 and Note: P
represents the wind turbine nominal power (MW)
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Pie chart Source: JRC Wind Energy Report 2016 Note:
Drive train configuration across the Top 10 OEMs in terms
of total installed capacity of onshore wind energy in the
world; Source: JRC Wind Energy Database.
Additional Note: Inner doughnut represents the share of
each drive train configuration in the global onshore wind
market while outer doughnut displays the share of the Top
10 OEMs according to each drive train configuration. The
capacity installed with unknown drive train configuration in
the JRC Wind Energy Database is not included in the
figure. Type D and E configurations without
subcategorization according to type of electrical generator
(i.e. either EE or PM) are included in the category of drive
train configuration named "Others".Please note that only
the Top 10 OEMs (in terms of global cumulative installed
capacity) are represented in the figure. Thus, other OEMs
that represent a higher share in some specific drive train
configurations are displayed in the category "Other
OEMs".
For further information we would like to refer to
following publications:
Technological evolution of onshore wind
turbines—a market-based analysis
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Offshore – Market Share of the
Individual Drive Trains
Above: Evolution of nominal power of offshore wind
turbines in the world Source: JRC Wind Energy Database
Above Evolution of the share of installed capacity by drive train configuration in offshore wind turbines by geographical zone Source: JRC Wind Energy Database Note: According to JRC analysis, Siemens modified type C (DFIG) drive train configuration of some wind turbines models to type F
Currently, 2.5-5.5 MW wind turbines are commonly
installed in offshore wind projects. The average
nominal power has grown from almost 3 MW in
2006 to 3.6 MW in 2015 representing an increase of
20%. Unlike onshore, the evolution of nominal
power of offshore wind turbines is less
homogeneous because the offshore market is much
smaller and it is dominated by a few wind turbine
models. The largest machine was installed in 2014
in the United Kingdom in the Levenmouth
demonstrator permanent magnet turbine with 7 MW
(SHI 7.0-171).
The offshore wind market has evolved from a
dominant type C configuration (geared high-speed
DFIG) towards both direct drive (type D) and hybrid
arrangements (types E and F). In the European
market, the hybrid configurations type F and type E-
PM have reached a prominent role in recent years.
On the contrary, in Asia, type C configuration is
losing ground in favour of type D-PM, although this
evolution is not homogenous.
The three largest OEMs Siemens, MHI Vestas and
Senvion dominate the global off-shore wind market,
accounting for 85% of cumulative installed capacity
at the close of 2015. Siemens leads all main drive
train configurations used in the off-shore market
and covers all supplies of the hybrid arrangement
type F (as in onshore wind market).
In 2015, PMGs in the offshore business reached a
market share of 50% in Europe and 32% in Asia
among the new installed capacity. This resulted in a
global market share of 17% of installed offshore
wind capacity permanent magnet wind turbines
installed globally with a steady growth tendency
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Figure xx Evolution of nominal power of offshore wind turbines in
the world Source: JRC Wind Energy Database
Above: Evolution of the share of installed capacity by
drive train configuration in offshore wind turbines by
geographical zone
Source: JRC Wind Energy Database
Note: According to JRC analysis, Siemens modified type
C (DFIG) drive train configuration of some wind turbines
models to type F
Pie chart above Drive train configuration across the Top
10 OEMs in terms of total installed capacity of offshore
wind energy in the world
Source: JRC Wind Energy Database
Note: Inner doughnut represents the share of each drive
train configuration in the global offshore wind market while
outer doughnut displays the share of the Top 10 OEMs
according to each drive train configuration.
The capacity installed with unknown drive train
configuration in the JRC Wind Energy Database is not
included in the figure.
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Price Elasticity / Price Sensitivity
of NdPr in the Wind Turbine
Business
The wind turbine is the most expensive component
of most wind farms. The below picture represents
the indicative cost breakdown for a large offshore
wind turbine. The reality is that a range of costs
exist, depending on the country, maturity of the
wind industry in that country and project specifics.
The two most expensive components are the
towers and rotor blades, with these contributing
around half of the total cost. After these two
components, the next largest cost component is the
gearbox. But this underestimates the importance of
gearboxes, as these generally
are an important part of the O&M costs, as they can
require extensive maintenance Onshore wind
turbines, with their smaller sizes, will tend to have
slightly lower cost percentages for the tower and
blades.
We have chosen to use the UK's 630MW London
Array, the world's largest operating offshore project,
as an example. The total project cost approximately
EUR 2.2 billion. Considering that turbines usually
account for 64% of the total cost, we can assume
that around EUR 1.4 billion was spent on turbines.
That would indicate a price of EUR 4.2 million for
each of the 175 Siemens 3.6MW turbines, or EUR
1.17 million per megawatt.
According to Siemens they require per megawatt
nominal performance ~333kg of NdPr, we add 20%
for the losses occurring in the conversion process to
alloy/metal and magnets and receive as a result the
demand of 400 kg NdPr per megawatt. Below we
have prepared a simplified extrapolation to
breakdown the ratio represented by NdPr in the
total sales price.
In the overall context of the sold turbine, NdPr
represents a correspondingly small part, so it can
be assumed that price elasticity for REEs is
relatively small (USDE 2010).
From our understanding, a NdPr price in the range
of US $85-100/kg is totally acceptable by the
industry and will not represent a trigger point to
initiate replacement initiatives. Long term (1-2
years) price levels above US $170-250/kg represent
a risk that the industry will kick off serious R&D
budgets to investigate alternative technologies.
We also believe that long term price levels above
US $100/kg will encourage NdPr recycling
businesses to receive more attention and the
reusing of materials will start to ramp up. Peak
Resources recognises this scenario is a logical
outcome and have decided to integrate recycling
into the strategy for our UK site.
For further information on the cost of windturbines,
please refer to the following publications and
sources:
www.irena.org
RE_Technologies_Cost_Analysis-
WIND_POWER
NdPr price/kg 400kg Total cost contribution
42.50 17,000 0.40%
85.00 34,000 0.80%
127.50 51,000 1.20%
170 68,000 1.60%
212.5 85,000 2.00%
255 102,000 2.40%
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Other NdFeB Applications
NdFeB magnets are used in a wide range of
applications in addition to the two megatrends we
highlighted earlier. We merely chose Automotive
and Wind as examples to explore in greater detail
because we believe they will disrupt the supply-
demand balance for NdPr most significantly and
therefore have a more severe effect on the market
as a whole. However there are already many
established NdFeB reliant applications exhibiting
continuous growth in the market today.
We will categorise these technologies as “Potential
Megatrends” and “Others”. Potential megatrends
are technologies which if to succeed in becoming
mainstream, would greatly amplify the shortages of
NdPr. Those that fall into the “other” category are
technologies which are already in existence, have
achieved moderate growth and/or are nearing the
end of their product lifecycle and therefore likely to
be replaced by more sophisticated technologies in
the imminent future.
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Potential Megatrends
Robotics
Magnetocaloric Fridges
Drones, planes and other electric flying
objects
Flying Cars, Air-Taxis, Passenger Drones,
electric airplanes
Marine Propulsion Solutions
Electric Bikes
Electric Scooters
Automotive accessories
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Robotics
Factories worldwide are replacing human workers
with robots in a new automation-driven industrial
revolution with a CAGR in the two digit range
predicted until 2020. Robots are ultimately a
cheaper, more precise and more reliable solution
compared with people, which in turn improves the
overall productivity of the producers. This trend will
be even further amplified once artificial intelligence
becomes commonplace in labour solutions
available to the consumer, allowing robotics to take
over from roles that require real-time learning and
reactive responses.
Source: FT
In a government-backed, robot driven industrial
revolution the likes of which the world has never
seen, China has again taken the reins. In each year
since 2013, China has purchased more industrial
robots than any other country, including high-tech
manufacturing giants such as
Germany, Japan and South Korea. According to
industry lobby group, the International Federation of
Robotics (IFR), China will overtake Japan in
becoming the world’s largest operator of industrial
robots by the end of 2016. Currently China has just
36 robots per 10,000 manufacturing workers,
compared with 292 in Germany, 314 in Japan and
478 in South Korea. Roughly 100 million people
work in the Chinese manufacturing sector which
contributes ~36% of China’s gross domestic
product. With a workforce of around 100 million
people, China would need about 13-15 million
robots by 2025 in order to make it into the top 10
countries with the highest robot density. This would
drop to 7-10 million robots within the same
timeframe should the manufacturing workforce be
halved to 50 million. The automation could boost
production and revenue from manufacturing by
25%.
China’s 13th five year plan includes a Made in
China 2025 Plan” which endeavours to make China
an advanced manufacturing power within a decade.
The Chinese example shows this vast growth
opportunity for robotic solutions worldwide without
including the other Asian markets or Central and
Eastern Europe or other regions in the world.
Another good industry example for the growth
opportunity of robots is the agricultural market.
Source: www.tractica.com
Robotic solutions are developing at a rapid pace
with a large number of established and startup
agricultural technology companies developing,
piloting, and launching an innovative range of
robotic systems to tackle a wide variety of tasks.
Key application areas for agricultural robots include
driverless tractors, unmanned aerial vehicles
(UAVs), material management, field crops and
forest management, soil management, dairy
management, and animal management, with a
diverse set of subcategories emerging within each
of those areas.
According to a new report from Tractica, developed
in collaboration with The Robot Report, shipments
of agricultural robots will increase significantly in the
years ahead, rising from 32,000 units in 2016 to
594,000 units annually in 2024, by which time the
market is expected to reach $74.1 billion in annual
revenue.
Source: market_overviewWorld_Robotics 2016
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Other strong growth areas are service robots for
professional and personal domestic use, logistics,
hospitals, medical surgery, rehabilitation support,
ergonomic support for reducing loads, diagnostic
and robot assisted surgery or therapies.
The International Federation of Robotics (IFR)
projects double-digit growth between 2016 and
2019 and forecasting following sales:
~1.4 million Industrial robots will be
installed in the factories to increase
productivity
~333,000 service robots for professional
use will be sold to non-manufacturing and
to manufacturing sectors
~42 million service robots for personal
and domestic use (consumer robots) will
be used in our private life
We estimate that on average, industrial robotic
solution requires ~15kg NdFeB permanent magnets
which is equivalent to ~5kg NdPr oxide (4.16kg +
20% losses). We assume that NdFeB will represent
~50% market share among these robotic solutions.
According to the IFR, 1.4 + 0.333 million
incremental service and industrial robots will be sold
between 2016 and 2019. This represents an annual
incremental demand of NdPr oxide of ~1,083t
(8,665 /2 = 4,333/4) from this segment alone.
In addition, sales in the private sector are
forecasted to reach ~42 million robotic solutions.
Due to miniaturization being key for these
technologies, it is likely that NdFeB will have a
higher market share of ~70%. We estimate an
average demand per sold unit of ~0.6kg NdFeB
which is equivalent to ~0.24kg NdPr oxide. This will
result in an annual average incremental demand of
~1,764t per year between 2016-2019.
To put this in perspective, Ngualla’s annual output
of NdPr suffices for a maximum ~484,000 Industrial
Robots.
For further information, please refer to the following
sources and publications:
Presentation_market_overviewWorld_Robotics
_29_9_2016
Website of the International Federation of
Robotics (IFR)
Business Insider: Almost half of all US workers
are at risk of losing their jobs to robots
Mc Kinsey: Disruptive technologies
Forbes: Killer cars and robotic teddy bears
Daily Express (UK): Fears of killer robots
increase as machine revolution now firmly
underway
The Guardian Robot revolution: rise of 'thinking'
machines could exacerbate inequality
nextbigfuture.com China will spend trillions for
automation, robotics, 3D manufacturing and
research
AI combined with robotics the next industrial
revolution Interesting defence article + forecast from
Siemens on the topic: http://www.robotics
Siemens forecast
Mr MAs perspective on things + university of
oxford projections on the topic: Mr Ma: Ai and
Robotics
Elon Musk on Ai and robotics
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Magnetocaloric Fridges
Magnetic refrigeration is a cooling technology based
on the magnetocaloric effect. This technique can be
used to attain extremely low temperatures, as well
as the ranges used in common household
refrigerators. Compared to traditional gas-
compression refrigeration, magnetic refrigeration is:
safer, quieter, Less noise and vibrations:
environmental comfort
More compact,
High Coefficient of Performance
(COP):reduce energy consumption by up
to 20-30%
More environmentally friendly because it
does not use harmful, ozone-depleting
coolant gases. Instead they use
substances such as water-based coolant
liquid / glycol water.):Eliminate harmful
emissions - Meet F-gas regulations
No gas leakage: reinforced safety and
eliminate CO2 emissions
Low pressure system, no gas: reinforced
safety, reliability and reduced maintenance
costs
These state-of-the-art cooling refrigerators use a
newly developed material that changes temperature
based on how strongly magnetized it becomes. GE
researchers predict the cooling refrigerators could
reduce energy consumption by 20-30%, in addition
to being a quieter and greener alternative for
consumers. Magnetocaloric materials will one day
replace the conventional compressor technology
The magnetocaloric effect, like vapor-compression
refrigeration (the method used in all modern cars,
fridges, etc.) was discovered a very long time ago
but there have always been large barriers
preventing its commercial adoption. Basically, some
metals get warmer when exposed to a magnetic
field, and then cool down again when the magnet is
removed. By doing this repeatedly, you can create a
heat pump that moves thermal energy from one
place and deposits it elsewhere. (This is exactly
what your AC unit does, incidentally.)
Developed over the past decade, these new
magnetocaloric materials have the potential to
revolutionize refrigerators and other products that
require efficient cooling technologies. It will also
provide new technology that helps to meet the
increasing regulation of greenhouse gases.
Therefore, the next generation of refrigerators and
air conditioners will be even more environmentally
friendly thanks to this innovative technology. Some
of the future applications are:
Magnetic household refrigeration
appliancesMagnetic cooling and air
conditioning in buildings and houses
Central cooling system
Refrigeration in medicine
Cooling in food industry and storage
Cooling in transportation
Cooling of electronic equipment’s
Today we have approximately 7.5 billion people on
the planet. Assuming that there is one fridge for
every 7 people and that each fridge is replaced
every 10 years, we would estimate that 107 million
refrigerators are sold annually. Under the
assumption that each NdPr magnetocaloric fridge
represents 0.40kg incremental NdPr oxide demand
then for every 1 million Magnetocaloric Fridges
sold, this would create 400t of incremental demand
of NdPr oxide per year. We believe that this
technology has significant market potential for
NdPr, especially considering commercial spaces
such as grocery and hospitality chains where the
reduction of electricity consumption and cost could
be significant.
For further information, please refer to the following
sources and publications:
Wikipedia: Magnetic refrigeration
BASF: NdPr refrigerators can save up to 35%
electricity + video
GE high-tech fridge magnets that could save
the world billions of energy cost
GE Global Research: NdPr can change the
way how you will keep things cool
GE: How does it work + video 2
Cooltech: announces commercial availability of
its MRS systems + PP
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Source: http://www.cooltech-applications.com
Sources: GE + BASF + eramanagrawal - magnetic-
refrigeration-
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Drones, Planes and Other
Electric Flying Objects
Drones will become a part of our daily lives. They
are already increasingly used for many different
applications such as aerial cinematic photography
and video photo footage (media), surveillance
(police), inspections (construction) and surveying
(agricultural applications and mining) and perhaps
eventually even for delivering special goods to
remote areas in case of emergency (medicine
deliveries). We predict that one of the first human
passenger drone applications will be unmanned
ambulances. Such solutions are already technically
possible however do not yet have the required
legislation framework to embark.
Drones enable spectacular high-resolution footage
and data collection which could otherwise only be
achieved with immense effort and considerably
higher cost. The convenience with which drones
operate in comparison to their competitor
technologies has revolutionised several industries,
therefore driving further improvements to
performance aspects such as speed, payload, flight
time, intelligence, sensory features and cost of
ownership.
.
The range of applications drone technologies can
be used for is limitless and will continue to
skyrocket and with it, NdPr. NdFeB Permanent
magnets are clearly the best suitable solution when
it comes to flying objects with an electric motor. This
is mainly due to their advantages of producing
maximum power and efficiency whilst maintaining
minimum weight which is critical for any application
that’s main assignment is to navigate the air.
According to Goldman Sachs report, the drone
market will experience tremendous growth between
2016 and 2020, representing a $100 billion market
opportunity of which the military represents 70%,
consumers 17% and commercial applications 13%.
GoldmanSachs forecast sales of 78 million drones.
Assuming that each NdFeB permanent magnet
used for the drone’s motor will weight an average of
200g, each drone would require 80gr NdPr oxide.
This totals an incremental demand of 6,240t or
1,040t p.a. over 6 years and refers only the demand
of the drones for consumer electronics.
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Consumer Electronic Drones
These drones are becoming a professional tool
used in our daily work. More and more dedicated
software applications will develop to capitalize on
the hardware which a drone already poses in
industries like mining, construction, agriculture,
mapping, exploration, Insurance Claims, Offshore
Oil and gas Refinery, Fire, Coast Guards,
Journalism, Boarder protection, Pipelines, Clean
Energy to name a view.
Among all analyst, the tenor is the same they all
have a bullish outlook for this segment with the
expectations to see year by year CAGR between
15-20% over the next coming years.
For further information we would like to refer to
following sources and publications:
grandviewresearch.com
marketsandmarkets.com
www.gminsights.com
www.embedded-vision.com
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Flying Cars, Air-Taxis, Passenger
Drones & Electric Airplanes
Companies around the world, including giant
aerospace manufacturers, are working on products
to serve the transport drone market. Regulatory
issues are the biggest roadblock on the way to
mass market adoption however once they are
overcome, this mode of transportation represents a
huge growth potential for NdFeB magnets. As in
aviation, the weight reduction and performance
capabilities of NdFeB magnets are the undisputed
leading motor technology predesignated to serve
this industry.
The chart below shows some of the current air-taxi
projects, capabilities and individual progress. The
next 5 to 10 years are going to an incredible time for
the roll-out of this technology. It is estimated that
this sector of 2 seater drones represents an NdFeB
consumption per produced unit of approximately ~3
- 4 kg on average, or ~1.2kg -1.6kg of pure NdPr.
A snapshot of ongoing projects world-wide:
Source: https://www.droneii.com/flying-cars-an-industry-
snapshot
In additional to the latest developments discussed
before, in 2015 Siemens announced that it has
developed a Powerful Ultralight Motor for
Electrically Powered Flight with an exceptional
electric motor that combines high power with
minimal weight. So overall, it is clear that
electrification will not stop on the streets and drone
passenger transportation may very well evolve to
the airspace also. It’s merely a matter of time until
this technology enters the mainstream.
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Marine Propulsion Solutions
Due to positive developments in battery cost and
performance, electrification doesn’t stop on the road
but continues on the water. More and more
developers are using NdFeB technologies to create
alternative transportation solutions that are an
entirely new concept in comparison to the historical
options we are used to.
Siemens developed the first emission-free, electric
“car and passenger ferry” in the world! Christened
Ampere, it was developed by Siemens in
cooperation with Norwegian shipbuilder Fjellstrand.
Find the full story here.
Pod propulsion solutions based on Permanent
magnet technology are gaining higher market share
as this application becomes more popular due to
the known advantages such as low maintenance
requirements (no lubrication) and a nearly vibration
free operation. Examples of applications are cruise
ships, drilling rigs, submarines and other
conventional ships.
For example, Azipod is an electric podded azimuth
thruster produced by ABB Group. This configuration
of marine propellers placed in pods that can be
rotated 360° to any horizontal angle (azimuth),
making a rudder unnecessary. These give ships
better manoeuvrability than a fixed propeller and
rudder system. The assumed consumption for one
MW performance is approx. 160-200kg of NdPr
oxide.
Established suppliers of these solutions include
Siemens Schotte, GE, Voith, Trustmaster and Rolls-
Royce.
For further information, please refer to the following
sources and publications:
Publications.lib.chalmers.se
Rolls-Royce | Permanent Magnet Technology
Siemens Permasyn (PMG) Motor: The
propulsion solution for today's submarines
SKF Permanent Magnet Motor and Magnetic
Bearings
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Electric Bikes
China is dominating the electrical bicycle space. In
2016, the global stock of electric two wheelers
reached 200-230 million units with a minority stake
outside of China. According to the EVI data
submission, in 2016 China alone sold in approx.
~26 million. More information at EBIKE -Executive-
Summary
Worldwide, this figure was 35 million bikes
according to research by Navigant, making China
the global leader by a long shot.
The high growth rate in electric two-wheelers is
partially due to the country implementing policies
designed to limit air pollution hazards, such as a
ban on gasoline-powered motorcycles, limits on the
issuing of licences, and the division of lanes.
Additionally, two-wheelers have reached cost parity
with ICE models, making them both attractive and
affordable to consumers.
In comparison to cars, E-bikes are much more
affordable, smaller, easier to park and are a perfect
fit for city commutes. E-bikes don’t require a license
or any additional infrastructure to operate. With
lithium battery technology continuously improving,
this lower cost, superior performance alternative is
steadily moving into a position to take over the two
wheeler segment. We expect this growth to
continue to increase, both inside and outside of
China, particularly in urban areas where E-bikes are
designed to thrive.
Excluding China’s contribution, global E-bike sales
are expected to grow from 3.3 million units annually
to some 6.8 million units by 2025, with the majority
of this growth coming from Western Europe,
followed by Japan and Vietnam.
The overall share of E-bikes in the bicycle market is
expected to remain at a steady 22% over the
coming decade due to the projected decline of e-
bike sales in China. However this is expected to
increase significantly in all markets outside of China
through to at least 2025. The overall e-bike market
is forecast by Navigant to grow from an estimated
$15.7 billion in 2016 to somewhere in the range of
$24.3 billion by 2025.
Assuming that each electric bike using the latest
technology requires 300gr of NdFeB, this would
result in a need for 120gr NdPr oxide per unit.
Therefore for each 1 million e-bikes that are sold,
there will be an incremental demand of 120t NdPr
oxide per year.
Source: Clean Technica and Navigant Research
For further information, please refer to the following
sources and publications:
Report: European bicycle market analysis 2015
Forbes: Riding A 2 Billion Bike Market By
Building A Better Electric Bike: Bosch eBikes
Wikipedia: Electric bikes,
Website: The Light Electric Vehicle Association
(LEVA)
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Electric Scooters
Based on figures from monitored markets, the two-
wheeler sector (scooters and motorcycles) recorded
sales of over 46 million vehicles globally in 2016.
Compared to 2015, this was an overall increase of
0.6% and had different geographic dynamics of
purchases per country than the previous year.
India, the largest two-wheeler market, continued its
growth trend in 2016 concluding the year with just
over 17.7 million vehicles sold, up by 9.7% from
2015.
In contrast, China recorded decreasing volumes in
2016, down by 12% compared to the previous year,
ending the period with nearly 8 million units sold.
The Asian area, termed Asean 5, reported a slight
increase in 2016 (+0.9% compared to 2015) ending
the year with 12.3 million units sold. Indonesia, the
chief market of this region, continued its downturn in
2016 with total volumes of over 5.9 million units and
a decrease of 8.5% compared to the previous year.
Growth in Thailand picked up with 1.7 million units
sold; +6.4% compared to 2015. Malaysia continued
its negative trend from the previous year with unit
sales of 373 thousand; -1.9% compared to 2015.
The sales trend in Vietnam remained buoyant in
2016 with 3.1 million units sold; +9.5% compared to
2015. The Philippines recorded the strongest
growth trend in the area, with first-time sales of over
1 million units (1.1 million units sold; +34.1%
compared to 2015).
Overall, the volumes of other Asian countries
(Singapore, Hong Kong, South Korea, Japan,
Taiwan, New Zealand and Australia) increased from
the previous year with 1.4 million units sold (+8.5%).
Japan was still affected by a downturn (380
thousand vehicles sold, -6.6% compared to 2015),
while sales in Taiwan went up considerably, with
788 thousand units sold (+18% compared to
2015).The North American market reported a
decrease of 1.9% compared to 2015 (547,100
vehicles sold in 2016) reversing its positive trend of
previous years.
Brazil, the leading market in South America,
recorded a strong downturn (- 28%), with 858
thousand vehicles sold in 2016.
Europe, the reference area for Piaggio Group
activities, confirmed its positive growth trend in
2016 as well, reporting an 8.7% increase in sales
overall compared to 2015 (+15.2% for the
motorcycle segment and +3.4% for scooters),
ending the period with 1.3 million units sold. Source:
piaggiogroup.com
Cost and range improvements to the battery sector
will have a positive effect on sales in the electric
scooter segment. Superior operations such as the
batteries’ extremely quiet performance, low
maintenance, environmental positives and simple,
convenient charging will all contribute to this
technology conquering urban markets around the
world.
Electric scooters and motorcycles are cheaper to
purchase and run than electric cars, giving them a
strong advantage that would suggest that their
current market sales will only increase as time goes
on.
Assuming that each electric bike of this technology
generation requires 450gr of NdFeB, 180gr NdPr
oxide would be used for each application.
Therefore, the incremental demand of PrNd oxide
per year would equal 180t for every 1 million e-
scooters sold.
For further information, please refer to the following
sources and publications:
Wikipedia: Electric motorcycles and scooters
Autoblog.com: Annual e-motorcycle, e-scooter
sales will reach 6 million by 2023
boltmobility.com: Bolt the electric Scooter
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Automotive Accessories
Today, approximately 30 individual applications
which use NdFeB permanent magnets are
incorporated in combustion engine vehicles. A basic
breakdown of these applications can be seen
below.
The usage of NdFeB varies between the different
applications. Please see below examples for
reference;
Simple sensors = 5gr of NdFeB (2gr NdPr
oxide),
Power window motors = 10gr NdFeB (4gr
NdPr oxide),
Electronic braking system drives = 25gr
NdFeB (11gr NdPr oxide)
Electric power steering applications= 70gr
NdFeB (28gr of NdPr oxide)
Cooling Fan Motor = up to 150gr NdFeB
(60gr NdPr oxide)
The total vehicle weight is both a key factor and a
challenge in the new mobility era, leading to the
conclusion that the NdFeB technology will likely see
a much wider utilisation as new car models hit the
market.
Assuming that in average a vehicle today is using
200gr NdFeB permanent Magnets respectively 60gr
NdPr oxide for additional accessories, this would
result in an annual incremental demand of 60t NdPr
oxide for every 1 million vehicles sold.
Sunroof Motor Windshield Wiper Motor
Windshield Washer Pump Mirror Motors
Economy and Pollution Control Heat/ ventilation +
Air conditioning Control Unit Ignition System + Starter Motor
Climate con., Coolant Fan Motor E turbo, Cruise Control
Defogger Motor Headlights Motor
Heat Air Conditioner Motor Liquid level indicator
Anti Skid Sensor and Motor
Tailgate Motor Speakers Four Wheel Steering Electric Power Steering Fuel Pump Motor Door Lock Motor Seat Belt Motor Seat Adjust Motor Lumbar support Gauges Window Lifter Motor Suspension System Throttle and Crankshaft position sensor Traction Control
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Others
1. Consumer electronics:
We expect that this segment will continue to grow at
a moderate pace.
NdFeB permanent magnets are used in a variety of
different applications such as small motors,
actuators and sensors. A few technologies that use
these magnets are;
1. Solid state devices (SSD): a digital
document storage solution which has no
moving mechanical parts and also use less
energy than its predecessor, the
historically popular hard disk drive.
2. Headphones and Loudspeakers: NdFeB
permanent magnets are used to generate
sound for these devices
3. Mobile devices: Vibration functionality uses
NdPr permanent magnets
2. Air conditioning Systems
It is predicted that the middle class of our global
society will experience tremendous growth over the
next two decades. Due to this promotion to the
general living standard, installation rates of air
conditioning systems are projected to grow,
predominantly in regions like India and China.
NdFeB PMs are used in some inverter air
conditioning units to control the compressor speed
by regulating temperature. Automotive applications
will represent a significant market share in the air
conditioning sector.
3. Cordless power tools
4. Elevators and Escalators
5. Magnetic Lifts
6. MRI
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The General Substitution Risk
for NdFeB
From today’s perspective and understanding, we do
not see any new technologies which show the same
quality performance as NdFeB magnets but do not
use NdPr. In terms of size, weight and energy
efficiency, there are currently no existing,
acceptable substitutes.
Overall we see three work streams in the NdFeB
market:
1. Substitution– obtaining an alternative material
with a lower supply risk
2. Increased efficiency – to get more of the
desired effect from less material
3. Reuse and recycling – creating a circular
economy
Replacing the original materials with alternatives
that pose just as much risk (e.g. Sm-Co magnets)
doesn’t make any sense.
So far, there are none on the horizon and we
believe due to product qualification processes and
lifecycle constraints in the high-volume applications
like wind and automotive, it will be many years
before a potential candidate could have a significant
impact.
Some producers have succeeded in reducing the
amount of rare earths used in their applications on a
per unit basis, for example Wind turbine
manufacturers like Siemens have developed
solutions without dysprosium by implementing a
better design which solves an improved solution in
regards to cooling the overall system.
Due to the laid out global growth scenario for low
carbon technologies and the overall supportive
macroeconomic elements, we expect tremendous
growth for NdFeB technologies on a per-unit basis
and in consequence, for neodymium and
praseodymium.
NdFeB Magnets are the best performing magnets in
the world.
NdPr Magnet’s Cost Represents a Small
Proportional Cost to an Electric Vehicle
Because the proportional cost of the Permanent
Magnets in the majority of Electric Vehicles
represents only less ~1% of the overall vehicle,
prices will need to increase to beyond $ 300 kg of
NdPr before manufacturers will begin to look to
alternatives.
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Substitution
1. SmCo Magnets
SmCo magnets are traditionally more expensive
than NdFeB magnets and have only been used in
high temperature applications. Two different alloys
are used for samarium cobalt magnets- SmCo5 and
Sm2Co17. Approximately the rare earth content for
Samarium is between 23% and 34%. SmCo5 (1:5)
alloy is an energy product of 180 kJ / m3. Sm2Co17
(2:7) achieves 225 kJ / m3 and can be used in
applications which manage temperatures of up to
350 ° C. With the addition of other elements, the
Alloys can be further optimized so that energy
products of up to 260 kJ / m3 can be achieved.
Compared to NdFeB magnets, SmCo magnets are
more suitable for high temperatures (200-350°C).
Moreover, they are significantly more corrosion-
resistant. But on the other hand they are much
more costly in manufacturing compared to NdFeB
magnets and, considering the cost for the raw
material today, not a low risk solution. Furthermore,
the availability of the necessary volumes of the
required raw materials is not given and is therefore
not a sustainable alternative to replace NdFeB
magnets. They also have the disadvantage of being
considered to be very brittle and fracture-prone
which is why SmCo magnets represent a niche
segment in the permanent magnet industry.
Comparison of NdFeB and SmCo Magnets
Material Energy
Products
Mechanical
Strength
Density
(lbs/in3-
gm/cm3)
Corrosion
Resistance
Temperature
Stability Cost
NdFeB 10 to 48 Medium 0.275 - 7.5 Low Low to Medium Lower
SmCo 15 to 32 Low 0.300 - 8.3 High High Higher
Source: magnet sales.com
Source: cermag.co.uk and other sources patents/US4664723
Compositions weight example
2a – SaCo
1:5 – 18 MGO
2b – SaCo
1:5 – 20 MGO
2c – SaCo
2:17 – 45
MGO
2d – SaCo
2:17 – 26
MGO
2e – SaCo
2:17 – 28
MGO
2f – SaCo
2:17 – 30
MGO
SM 15% 15% 26% 26% 26% 26%
Pr 15% 15% `
Co 70% 70% 50% 50% 50% 50%
Fe 17% 17% 17% 17%
Cu 5% 5% 5% 5%
Zr 2% 2% 2% 2%
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2. Ferrite magnets
In less critical applications, as the rising cost of
production is passed on to magnet customers, other
types of permanent magnet systems such as ferrite
magnets have become more competitive. They are
a much cheaper alternative but are larger in size
and offer less temperature resistance than NdFeB
magnets. So in cases where the customer can
accept the trade-off effects, ferrite magnet solutions
tend to be used.
3. Drive trains without rare earth usage
In January 2015, it was reported that UQM
Technologies had been granted a US patent for an
electric and hybrid electric vehicle motor design
using non-rare earth magnets. The patent covers
the unique magnet geometry and the method of
manufacturing the motor. Many electric and hybrid
electric vehicles use permanent magnet motors with
rare-earth magnet materials because of the high
coercivity of the rare earths. Coercivity is a measure
of the reverse field needed to drive magnetization to
zero after being saturated; a measure of the
resistance to demagnetization. The new UQM
design enables the use of low coercivity magnets,
such as Aluminum Nickel Cobalt (AlNiCo) or Iron
Cobalt Tungsten (FeCoW), in permanent magnet
motors.
From our understanding this application is quite in
its early R&D stage and it’s not clear if and how it
will perform in a real driving conditions of a vehicle.
4. Ce doped Nd-Fe-B Permanent magnets
The addition of cost effective light rare earth
elements, such as Ce, to sintered Nd-Fe-B magnets
is acceptable for applications with lower magnetic
requirements.
Cerium is a light rare earth element, the most
abundant among the rare earth elements.
Consequently, the price of Ce is much lower than
that of Nd. In the last couple of years, the subject of
Ce substitution for Nd in 2:14:1 magnets has
attracted more attention in the magnetics
community due to cost concern of raw materials.
Leaving small amounts of Ce coexist with Nd and /
or Praseodymium (Pr) would significantly reduce
the complexity of the refining process. Test have
been performed and the substitution of Nd with
La/Ce is inevitably accompanied with magnetic
dilution due to inferior intrinsic magnetic properties
of La/Ce. The industry sometimes uses Ce
substitution in low grades of Nd-Fe-B magnets for
applications where the trade-off for the customer
and application are acceptable, such as N35 and
N38.
For further information on substitution we like to
refer to following Article:
Recent developments and trends in Nd-Fe-B
magnets
Improved thermal stability of Nd-Ce-Fe-B
sintered magnets by Y substitution
Growth and Characterization of Ce- Substituted
Nd2Fe14 11B Single Crystals
5. High-temperature superconductor
See wind turbine chapter page 81
6. Heavy Rare Earth Free NdFeB Magnets
Dy is commonly used to increase intrinsic coercivity
(withstand an external magnetic field without
becoming demagnetized). Which is important for
many industrial applications such as motors and
generators. Dy can cost as multiple times more than
Nd, which makes it one of the important cost drivers
for the Nd-Fe-B magnets. Nearly all grades of Nd-
Fe-B magnets with intrinsic coercivity less than 20
kOe can be made without heavy rare earths, which
can satisfy the majority of requirements for
industrial applications. The need for heavy rare
earth has also been significantly reduced for Nd-Fe-
B magnets with intrinsic coercivity of 25 to 30 kOe.
For example, one approach has been to reduce the
grain size in sintered NdFeB magnets from a typical
5–10 μm to around 80 nm. Movement of the
magnetic domains is reduced by the larger number
of grain boundaries increasing the thermal stability.
This has allowed the demonstration of magnets
suitable for traction motors without adding any
dysprosium demand for dysprosium will also grow
from the use of magnets in high temperature
applications (including NEVs) but manufacturers are
actively trying to reduce dysprosium-containing
magnet consumption wherever possible and to
develop new ways to reduce intensity of dysprosium
use.
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We received the market feedback that customers
prefer the Dy solution and therefore the none DY
solution is a fallback, evasion -strategy in case the
market prices for Dy is eroding their margins too
much.
Little to zero dysprosium is consumed in wind
turbines. The industry developed a solution to
maximizing the airflow what allows them to achieve
lower operating temperature and thus a lower need
for Dy.
In addition the market has established solutions
where Dy in some application is replaced with Tb.
Another discovery recently reported by Oak Ridge
National Laboratory, USA, was that dysprosium
could be replaced with cerium co-doped with cobalt.
Since cerium is the most common rare earth
element and dysprosium one of the scarcest, there
is potential to reduce the cost of high performance
NdFeB magnets by 20%–40%. Cerium on its own
does not work as it reduces the temperature at
which the magnetism is lost, but the new alloy with
cobalt maintains its performance to temperatures
higher than dysprosium doped magnets.
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Increased Efficiency
There have been new developments in recent years
including high energy Nd-Fe-B grades, heavy rare
earth free high intrinsic coecivity Nd-Fe-B grades,
radially oriented anisotropic rings, and improved
manufacturing processes.
With the exception of N46SH, nearly all Nd-Fe-B
magnet grades with intrinsic coercivity less than 20
kOe can be made without heavy rare earths, which
can satisfy the majority of requirements for
industrial applications. The amount of the heavy
rare earth elements has also been significantly
reduced in Nd-Fe-B magnets with intrinsic coercivity
of 25 to 30 kOe, by employing grain boundary
engineering.
Radially oriented Nd-Fe-B magnet rings can be
used for multipole rotors, which reduces rotor
assembly time and cost, and ultimately, a better
motor performance.
3D printing to create precise magnet
Oak Ridge National Laboratory has performed
research work with this technology which showed
positive results. This Technology shows advantages
creating precise magnet forms with minimal
material. A magnet can be designed by computer
modelling to provide the precise field strength and
distribution using as little magnetic material as
possible. 3D printing can then produce these forms
with negligible waste. Watch for more information
the video
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Recycling
There are a couple of factors which contribute to the
currently low recycling rate of rare earth elements
from permanent magnets: technological difficulties,
lack of regulations and inefficient scrap collection.
Development of an economical recycling process to
produce pure rare earth elements or magnet alloys
using scrap precursors is contingent upon solving
problems related to the process scalability,
efficiency and product quality.
The biggest challenge for the recycling business is
the diversity of designs and that the material
composition is unknown and may be different from
unit to unit, which creates significant problems in
achieving good quality from the recycled product
due to a wide range of impurities.
If a circular economy in rare earth elements is to be
made possible, products need to be designed for
reuse and recycling, and business models need to
allow the efficient recovery of consumer products
containing the rare earth. Improved methods to
recover of NdPr are of little use if there is no stream
of consumer products to process. Therefore, we
believe with NdPr application in e-mobility and wind
energy becoming mainstream there will be chance
for a first successful implementation at a certain
stage of the lifecycle of these overall 2 application.
The expected end-of-life event for an off-shore wind
turbine is approximately achieved after being 20 to
30 years in service and for an electric car
(depending of the average driven mileage per year)
approx. reached after 10 years. We anticipate that
between 10-15 years after the first high annual
sales volume have been realized that the critical
end-of-life volumes are in the market that a
sustainable recycling business can be established.
There are a number of processes for recycling rare
earth magnets, varying in cost, efficiency and
environmental risk. The simplest cost effective
recycling case is, direct use of end-of-life magnets
recuperated in proper condition (with eventually
intact plating). Other methods includes remelting to
yield alloys, hydrogen decrepitation to yield powder,
and liquid metal extraction to yield pure rare earth
elements. There are also chemical routes that result
in rare earth oxides which need to be further
reduced to recover the pure rare earth elements.
Depending on the raw material cost the magnet
manufacturing industry is activating their recycling
activities from production waste. It is estimated that
in a typical magnet manufacturing facility, about
20% to 30% of the magnets are wasted as scrap,
mostly as leftovers from machining blocks into
particular geometries, chipping, cracking, sludge
and swarf. However, to date, only small quantities
of magnet material, estimated to be less than 1
percent, are being recycled from pre-consumer
scrap.
Overall at present, no commercial operation has
been identified for recycling the end of life NdFeB
permanent magnets. Most of the processing
methods are still at various research and
development stages. Recycling and recovery of
REEs from EOL magnets are challenging due to
their relatively small sizes used in the final
applications. The recycling industry also face
difficulties in identifying the individual different kind
of permanent magnets from each other when they
get collected in the market. Also pre-dismantling to
access the magnets represents a challenge for
itself. All aspects which needs to be addressed by
companies and governments to secure that a viable
circular industry can be established.
Therefore we have not identified an immediate
threat from the recycling activities which could
significantly impact the supply side.
At Peak, we have identified this as a business
opportunity for our UK plant. We intend to take full
advantage of our UK industrial facilities and the
expertise of our labor force, to enter the recycling
business and to become one of the leading NdFeB
recycling operators in the western hemisphere.
To recap we have encountered following 4 major
challenges for the NdFeB permanent magnet
recycling business:
Due to the fact that the recovery of rare
earths from end-of-life applications (EoL) is
not yet realized on an industrial scale,
there is currently no functioning market for
magnetic scrap. Currently, nor the time
horizons for the establishment of such a
market neither the price levels are
predictable. This uncertainty naturally has
a negative impact on the readiness to
invest in such separation facilities. The
Permanent magnet recycling face here a
classical chicken and egg problem.
Furthermore it is observed that the
established industry practice is that used
industrial equipment is often not scrapped
in the developed countries, but sold and
exported abroad to less developed
countries with less strict environmental
requirements or at least not as firmly
controlled as in the developed countries.
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This highlights the existing problem and
practice where the industry is delegating
the scrapping topic to second or third world
countries to avoid the cost.
Rare earth magnets are mostly installed in
their application so that these are really
difficult to be identified as such at the end
of life of a device. Experts have suggested
establishing a recycling law that requests
the producers of magnets and the OEM's
of the final applications to mark them in a
way that it is easy to identify them when
they reach EOL.
The currently established pretreatment
technologies for industrial equipment are
unable to separate according to single
origin and therefore today a lot of
permanent magnets get lost in the steel
separation process. Without solving these
issue it is expected that it will be quite
difficult, even if a magnetic scrap market
has been established, to collect significant
volumes from the market. Impurities are a
headache in any recycling activity because
the aim is to prepare a consistent quality of
the feed material for the established
recycling process.
For further details on this substitution subject we
like to refer to following published papers:
Recent developments and trends in
NdFeB magnets in regards of alternatives
2010 Rare Earth Crisis Case Study &
replacement scenarios for NdFeB
Materials Challenges for a Transforming
World
“REE Recovery from End-of- Life NdFeB
Permanent Magnet Scrap: A Critical
Review “
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Corporate Business
Development Strategy
The future of the REEs business is dependent upon
the market developing and expanding beyond
China. Industrial companies will be more
comfortable developing new products and
technologies that incorporate REEs as the market
becomes deeper and broader. This profound and
important notion is something that is consistent with
Peak’s perspective and approach in developing its
corporate business development strategy.
We believe that NdPr is a commodity with attractive
supply-and-demand fundamentals driven by the
rapidly growing electric vehicle and wind energy
market. The idea is to expand Peak‘s activities
beyond the development of Ngualla Project and
expanding our scope with following additional
activities:
Expanding in further Downstream activities
Acquisition, processing and trading of high
purity REE material
Route to Market - The Hybrid Model
Service Provider
Peak’s objective is to achieve appreciation in the
value of its physical NdPr position and aggressively
grow its NdPr exposure.
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Appendix
Praseodymium Applications
As an alloying agent with magnesium to create
high-strength metals that are used in aircraft
engines; yttrium and neodymium are also
viable substitutes
Praseodymium compounds give glasses and e
namels a yellow colour
Praseodymium is used to colour ceramics
yellow
Praseodymium is used as a dopant in ceramic
capacitors
Praseodymium is a component of didymium
glass, which is used to make certain types
of welder's and glass blower's goggles
Doping praseodymium in fluoride glass allows it
to be used as a single mode fiber optical
amplifier
Praseodymium oxide in solid solution
with ceria, or with ceria-zirconia, have been
used as oxidation catalysts
Pr3+ ions are used as activators in some red,
green, blue, and ultraviolet phosphors
Praseodymium is present in the rare earth
mixture whose fluoride forms the core
of carbon arc lights which are used in
the motion picture industry for studio lighting
and projector lights
Praseodymium alloyed with nickel (PrNi) has
such a strong magnetocaloric effect that it has
allowed scientists to approach within one
thousandth of a degree of absolute zero In
general, most alloys of the cerium group rare
earths (lanthanum through samarium) with
3d transition metals give extremely stable
magnets that are often used in small equipment
Silicate crystals doped with praseodymium ions
have been used to slow a light pulse down to a
few hundred meters per second.
Source: Wikipedia and others
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Neodymium Applications
Neodymium oxide is used to dope glass,
including sunglasses, to make solid-state
lasers, and to color glasses
and enamels.[3] Neodymium-doped glass turns
purple due to the absorbance of yellow and
green light, and is used
in welding goggles.[4] Neodymium oxide is also
used as a polymerization catalyst
Source: Wikipedia and others
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Lanthanum Applications
Various compounds of lanthanum and other
rare-earth elements (oxides, chlorides, etc.) are
components of various catalysis, such
as petroleum cracking catalysts.[53]
Especially Fluid catalytic cracking (FCC) is a major
application for Lanthanum.
According to BASF the use of rare earths in FCC
catalysts was driven by the need for more active
and hydrothermally stable products with better yield
performance. Rare Earth Oxides (REO) achieved
these goals by enhancing catalytic activity and
preventing loss of acid sites during normal unit
operation. To address the specific needs of each
FCC unit, catalyst manufacturers formulate
catalysts with various rare earth levels that allow for
optimal unit performance. The level of REO in a
specific catalyst formulation is determined by
operational severity and product objectives. As the
need for increased amounts of gasoline grew over
time, refiners tended to increase the level of rare
earths in their catalyst formulation to meet their
profitability targets. Rare earths gradually increased
over the years and at the end of 2010, the average
was 3%, with several refineries running in excess of
the average.
La is used for anodic material of nickel-metal
hydride batteries (Ni3.6Mn 0.4Al 0.3Co 0.7).
Due to high cost to extract the other
lanthanides, a mischmetal with more than 50%
of lanthanum is used instead of pure
lanthanum. The compound is
an intermetallic component of the AB
5 type.[39][40]
As most hybrid cars use nickel-metal hydride
batteries, massive quantities of lanthanum are
required for the production of hybrid automobiles. A
typical hybrid automobile battery for a Toyota
Prius requires 10 to 15 kilograms of lanthanum. As
engineers push the technology to increase fuel
efficiency, twice that amount of lanthanum could be
required per vehicle.[41][42]
Despite the fact that full battery vehicles and lithium
batteries will dramatically increase their
Markets share it is anticipated that hybrid vehicles
will appreciate a sound growth as well. In
addition to that a steady, continues consumption for
rechargeable NiMH single batteries in the consumer
electronics is anticipated.
Hydrogen sponge alloys can contain lanthanum.
These alloys are capable of storing up to 400 times
their own volume of hydrogen gas in a reversible
adsorption process. Heat energy is released every
time they do so; therefore these alloys have
possibilities in energy conservation systems.[12][43]
Mischmetal, a pyrophoric alloy used in lighter
flints, contains 25% to 45% lanthanum.[44]
Lanthanum oxide and the boride are used in
electronic vacuum tubes as hot
cathode materials with strong emissivity
of electrons. Crystals of LaB6 are used in high-
brightness, extended-life, thermionic electron
emission sources for electron
microscopes and Hall-effect thrusters.[45]
Lanthanum trifluoride (LaF3) is an essential
component of a heavy fluoride glass
named ZBLAN. This glass has superior
transmittance in the infrared range and is
therefore used for fiber-optical communication
systems.[46]
Cerium-doped lanthanum
bromide and lanthanum chloride are the recent
inorganic scintillators, which have a
combination of high light yield, best energy
resolution, and fast response. Their high yield
converts into superior energy resolution;
moreover, the light output is very stable and
quite high over a very wide range of
temperatures, making it particularly attractive
for high-temperature applications. These
scintillators are already widely used
commercially in detectors
of neutrons or gamma rays.[47]
Lanthanum oxide (La2O3) improves the alkali
resistance of glass and is used in making
special optical glasses, such as infrared-
absorbing glass, as well as camera
and telescope lenses, because of the
high refractive index and low dispersion of rare-
earth glasses.[12] Lanthanum oxide is also used
as a grain-growth additive during the liquid-
phase sintering of silicon nitride and zirconium
diboride.[49]
Small amounts of lanthanum added
to steel improves its malleability, resistance to
impact, and ductility, whereas addition of
lanthanum to molybdenum decreases its
hardness and sensitivity to temperature
variations.[12]
Small amounts of lanthanum are present in
many pool products to remove the phosphates
that feed algae.[50]
Lanthanum oxide additive to tungsten is used
in gas tungsten arc welding electrodes, as a
substitute for radioactive thorium.[51][52]
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Lanthanum-barium radiometric dating is used
to estimate age of rocks and ores, though the
technique has limited popularity.[54]
Lanthanum carbonate was approved as a
medication (Fosrenol, Shire Pharmaceuticals)
to absorb excess phosphate in cases of end-
stage renal failure.[55]
Lanthanum fluoride is used in phosphor lamp
coatings. Mixed with europium fluoride, it is
also applied in the crystal membrane of fluoride
ion-selective electrodes.[8]
Like horseradish peroxidase, lanthanum is
used as an electron-dense tracer in molecular
biology.[56]
Lanthanum-modified bentonite (or phoslock) is
used to remove phosphates from water in lake
treatments.[57]
PVC stabilizer
Source: Wikipedia and others
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Cerium Applications
A major use of cerium is in polishing powder to
finish surfaces for electronic components such
as hard disc drives and silicon wafers, display
screens, mirrors and optical glass.
Cerium is used in catalysts and catalyst
support, in particular in catalytic convertors that
reduce automobile emissions. Cerium is also
used in fuel additives for use with diesel
particulate filters. Other catalysts which use
cerium include FCCs (where cerium increases
thermal stability of the zeolite, and reduces
sulphur and nitrogen oxide emissions) and in
catalysts for the production of styrene from
ethylbenezene (to improve styrene formation).
Ceric ammonium nitrate is used as an oxidant
in organic chemistry and in etching electronic
components, and as a primary standard for
quantitative analysis.[5][49]
Cerium additives, or mischmetal alloy
containing cerium, are used in the steel
industry as a desulphuriser and to improve
corrosion resistance, and in the iron industry to
encourage the precipitation of graphite
precipitation nodules and to help bind
undesirable trace elements which inhibit
graphitisation.
Cerium is used in aluminium alloys to improve
strength and corrosion resistance.
Cerium-rich mischmetal alloy is used as a
lighter flint.
Cerium is used as an oxidising agent in glass
to decolourise any intense discolouration
caused by the iron content of the glass.
Glass can be stabilised against the effects of
UV by adding cerium. This is useful for optical,
medical and vehicular glassware, and for glass
bottles that contain foodstuffs. Cerium is also
used in glass to prevent browning from high
energy radiation in CRT glass, as well as glass
exposed to X-rays and gamma rays. Use of
cerium oxide in UV-resistant vehicle glass is a
market specific to Japan, where the glass is
required by law to be used in vehicle front
windscreens. Domestic demand for cerium
oxide in this use was estimated at 500-700t
REO in 2014.
Cerium is used in a variety of engineering
ceramics, including ceramic capacitors and
refractories.
Cerium is used in water purification technology.
Cerium can be added to magnet alloys in order
to replace other rare earths (such as
neodymium). This results in a loss of
magnetism but is feasible in low power
magnets
PVC stabilizer
Source: Wikipedia and others
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