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When it comes to investing in renewable resources, many folks focus on big names like lithium or copper.
The reality, however, is there are dozens of minerals that mining companies are constantly in search of. They vary in their degrees of importance to applications in the real world.
But there’s one you should know about. It’s critical in all sorts of applications, ranging from refrigerator magnets to medical equipment to missile guidance systems!
And when it comes to EVs, it’s even more important than lithium. (You’ll see why in a second.)
And you’ve most likely never heard of it…
At the Bottom of the Periodic Table …
Way down at the bottom of the periodic table, there’s an obscure row of elements called “Lanthanides.”
This collection of metals (plus three from the main table) comprises what are commonly called “rare earth elements.”
Don’t let the name fool you. REEs aren’t actually all that rare. According to the U.S. Geological Survey, even the two least abundant REEs (Tm, Lu [that’s Thulium and Lutetium]) are nearly 200 times more common than gold.
They’re not “rare” in terms of supply, but rather they show up in such low densities that mining and extracting them can be very costly.
But while mining rare earths comes with its own unique challenges, demand for them is booming. The metals and their alloys are used in all kinds of applications ranging from catalytic converters, computer memory, fluorescent lights and DVDs, just to name a few.
And where rare earths go, neodymium is probably one of the most in demand.
What makes neodymium so special is that it is the most powerful permanent magnet material in the world. (A “permanent” magnet is one that is not easily demagnetized.) And why are they so important?
Magnets Everywhere
Well, let’s start with a few military applications. According to the U.S. Army:
Lockheed Martin Corp. is working on a small, high-power laser weapon, heavily reliant on the rare earths erbium and neodymium, that the U.S. Air Force Research Laboratory wants to test in a tactical fighter aircraft by 2021.
And that’s not all …
The permanent magnets are used in fin actuators (which control flight patterns in missiles) in missile guidance and control systems; disk drive motors installed in aircraft and tanks; satellite communications; and radar and sonar systems.
And demand for it goes beyond the military. It’s used in the medical field to produce magnetic resonance imaging (MRI) machines. It’s used in robotic surgical arms to control movement. It’s used in heart pumps and to run blood gas analyzers.
It’s also used in microwave communications applications like radar technology, satellite communications and remote control telemetry.
It’s used in the field of acoustics to produce items like speakers, microphones, hearing aids, stereo headphones, telephone receivers, electro-acoustic sensors and on and on.
It’s used in the anti-lock braking system in your car.
I could go on, but that’s not even where the big demand will come from in the future.
One of neodymium’s MOST important applications is its use in manufacturing permanent magnet motors.
A permanent magnetic motor is an AC (electric) motor that has actual magnets embedded in the drive shaft, which drives the motor and creates a more powerful and efficient motor. Magnetic motors are used in all kinds of small-scale electric motors including electric bike motors, refrigerator air conditioner motors, elevator traction machine motors, and wind-driven motors. But most importantly, they’re being used in EV motors — specifically Tesla’s Model 3.
And given that they’re essential to the drivetrain of any electric vehicle — I’d say that makes neodymium a pretty critical resource.
Demand and Miners
In 2020, demand for neodymium from all sources came to 32 kilotons.
Going forward, conservative estimates project demand will reach 54 kilotons by 2030 and 71 kilotons by 2040. (More inclusive estimates show demand reaching 66 kilotons in 2030 and 91 kilotons by 2040!)
That’s a lot of rare earths. And where will we get them?
Believe it or not, the U.S. was once self-reliant in domestically produced REEs. So there is supply in the ground. Unfortunately over the past 15 years, we’ve become 100 percent reliant on imports because of lower-cost operations.
Today the top three producers in the world currently rank as China, Russia and Malaysia.
But the U.S. has been looking to reverse that trend. And with that will come opportunities for investing in the mining industry.
Take, for example, MP Materials Corp, a $2.75 billion market cap miner. They are probably the biggest of the rare earth miners in the U.S. and focus almost exclusively on neodymium (and its cousin praseodymium).
But there are other small-cap junior mining companies in the U.S. who could offer a better bang for the buck — companies like Rare Element Resources Ltd., US Critical Metals Corp., and Ucore Rare Metals Inc.
When searching the mining industry, some of the best opportunities might be the ones you don’t even know about …
