MP Materials (NYSE: MP) is the Mountain Pass mine of Molycorp fame in a new legal wrapper and corporation. It's also the only major extant US mine for rare earths and along with Lynas one of only two major non-China extant producers. But there's a lot of weight resting on that “extant” word there. The way the rare earths business works these days the major determinant of mine profitability is the price for an Nd/Pr oxide mixture, the input into magnet making for all those electric motors and windmills out there. That Nd/Pr price has been falling for months now - so, how bad can it get?
MP Materials stock price from NASDAQSo, that's the daily chart and it comes from an analyst at Northland cutting the expected price. As a result of the decline in Nd/Pr prices. The argument is that China's not really fully open as yet, therefore it's difficult to predict where prices are going to go. Sure, China's the main producer, but it's also, by far, the main consumer as that's where most of the world's magnets are made.
However, we're not sure that the Nd/Pr price fall is a short term blip like that.
Shanghai Nd/Pr price from SMM
That's that short term move. And we can check that we've got the right data source as that's the one that Arafura is using as a measure of its own viability as a miner. But what about the long term? After all, we're so old that we can recall three years back when Nd/Pr was in the $30 to $40 range. And also Ce and La were at $5 not 50 cents. Back in the days when rare earth mine economics were really very different. It's true that Nd and Pr have been up well over $100 each in recent times. But the bigger question is how long will those sorts of prices last? Are we in a technical and cyclical drop here or something more fundamental?
As we've been saying when we look at OD6, Larvotto and others, now that we're finding out how common the ionic clays are we think that rare earth prices might well have peaked. Or, at least, that three to five years down the line we'll see the prices of the recent past as a peak. It's entirely true that we might not be right but we're not bullish on currently producing rare earth miners.
