August 2017 - Alkane Resources Ltd
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Exponential growth of Electric Vehicles make rare earths Extremely Valuable

Electric vehicles (EVs) have existed since the mid-19th century, but now – due to technological advances and the threats of peak oil and climate change – their time has come and the era of the internal combustion engine (ICE) is ending. Just as demand for ICE vehicles drove up the value of fossil fuels in the 20th century, increasing demand for EVs is about to launch the value of rare earths through the roof.

With rapidly falling prices, improving performance, minimal operating and maintenance costs and reduced carbon emissions compared to ICE vehicles, demand for EVs is climbing an exponential curve like demand for TVs, computers and mobile telephones did (see Figure 1), but on a far tighter time frame. Global electric car stock surpassed 2 million vehicles in 2016, after crossing the 1 million vehicles threshold in 2015.

China leads the growth in EV sales and has mandated targets for New Energy Vehicles of 8% for 2018, 10% for 2019, and 12% for 2020. A new study produced in partnership between Carbon Tracker and the Grantham Institute at Imperial College London predicts that ‘EVs account for approximately 35% of the road transport market by 2035… By 2050, EVs account for over two-thirds of the road transport market.’ Although cars like the Tesla 3 and the Hyundai Ioniq attract most attention, EVs include buses, trucks, bicycles, motorbikes and sundry other carts, trolleys and conveyances.

Global attention should be on the supply chains for materials critical for the construction and operation of EVs, like rare earths.

Rare earth permanent magnets (REPMs) are critical components in high performance electric motors. Debate has raged for years over the relative merits of REPM motors and induction motors, but Tesla has chosen an REPM motor for their just-released Tesla 3, to achieve higher power density, enhanced efficiency, faster acceleration and greater range.

A standard model electric car requires around 5 times the REPMs as an ICE vehicle (see Table 1). REPMs contain approximately 31% rare earths (Neodymium and Praseodymium). A standard model electric car needs about 2.0kg of REPMs for its motor, or around 750g Neodymium / Praseodymium oxide. Luxury models use more REPMs in motors for seats, windows, side mirrors and the boot/trunk. (Rare earths are also needed for the proximity, infrared, motion and other sensors that make driverless vehicles possible.)

The price for a standard electric car is currently around USD30 000, while the price for the rare earths in its motor is about USD50. The price of electric cars is expected to continue to drop, due to the falling cost of batteries and efficiency gains from mass production, but by 2020, the cost of the rare earths in their motors may increase significantly, as demand outstrips supply.
Price-sensitive applications of rare earths will be forced to seek alternatives. But even if rare earth prices increase significantly, they would still represent a tiny fraction of the cost of a standard electric car, so the use of REPMs to achieve superior motor performance by electric car manufacturers seems likely to continue.

In its Global EV outlook 2017, the International Energy Agency indicates that the electric car stock is likely to range between 9 million and 20 million by 2020. When EV sales reach 10 million per year, this will require up to 16,500 tonnes per annum of rare earth oxides on top of current production, equivalent to a 35% increase on all current production, or a 75% increase on current legal production. With a continuing crackdown on illegal rare earth mining, supply is likely to decrease, raising prices even further.

The value of Alkane’s Dubbo Project, which will produce at least 1,300 tonnes per annum of rare earth oxides for magnets, is clearly set for dramatic increase. It should attract investors like a magnet.

Figure 1: The rate of adoption of new technologies is accelerating

Table 1: Demand for Praseodymium and Neodymium in Electric Vehicles

Sources

https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf
https://www.vox.com/science-and-health/2017/2/2/14467748/electric-vehicles-oil-market
http://www.carbontracker.org/report/expect-the-unexpected-disruptive-power-low-carbon-technology-solar-electric-vehicles-grantham-imperial/
https://en.wikipedia.org/wiki/New_energy_vehicles_in_China
http://www.ev-volumes.com
https://www.tesla.com/en_AU/model3
https://www.hyundaiusa.com/ioniq-models/index.aspx
https://electrek.co/2017/08/07/tesla-model-3-new-details-revealed/
http://www.permanentmagnet.com/neodymium-permanent-magnet-for-Tesla-electric-vehicles-20170110.html
http://www.mining-technology.com/features/featurethe-false-monopoly-china-and-the-rare-earths-trade-4646712/
http://www.alkane.com.au/projects/current-projects/dubbo