Rare earths sector ripe for M&A in rerun of lithium saga
Deal makers are on alert for a round of consolidation in the flagging rare earths sector and in other critical metals as capital markets turn off the tap on exploration companies.
Advisory firm BDO likens rare earths to where lithium was in 2018 and 2019 and valuation took a big hit that was followed by a round of consolidation that some players failed to survive.
“Although we haven’t yet seen a flurry of merger and acquisition transactions in the rare earths space, there are a host of rare earths companies with suppressed market values,” BDO said in findings based on a 10-year analysis of what happens to exploration companies when it becomes more difficult to raise cash.
“Whilst there still remains uncertainty around the economic extraction and processing of rare earths, we view it as a commodity of the future and given current valuations, consider it likely that it becomes a source of M&A activity.”
The dip in valuations comes as Lynas Rare Earths, the world’s biggest non-China supplier of rare earths, is on the hunt for a source of heavy rare earths to meet its commitments to the US Department of Defence.
And Iluka Resources does not have a rare earths mine in its portfolio as it builds Australia’s first integrated rare earths refinery at Eneabba in Western Australia.
Other ASX-listed rare earths hopefuls have received the backing of iron billionaires looking to diversify, notably Gina Rinehart with Arafura Rare Earths and the Forrest family with Hastings Technology Metals.
On top of deals in rare earths, BDO predicts the raft of deals in lithium and other battery minerals in the past six months is just the start.
In the latest example of consolidation, battery metal hopefuls Australian Vanadium and Technology Metals
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