UBS sounds wake-up call on heavy rare earths

Made from a combination of two rare earths, terbium and dysprosium, mixed with a dash or iron, the resulting Terfenol-D is particularly useful in applications such as low frequency, high-powered underwater acoustics - think sonar and submarines.Until UBS mentioned Terfenol-D earlier this week in a research note headed "The Heavies" terbium and dysprosium were among the poor relations of the 17-member rare earth family which is dominated from an investment perspective by praseodymium and neodymium which trade in combination as NdPr.Perment magnets used in everything from wind turbines and rocket guidance systems to the tiny motors that adjust the seats and mirrors of posh cars use NdPr which rose by up 150% early last year to US$192 per kilogram before falling back to recent sales around $140/kg.Terbium and dysprosium have much smaller markets than their rare earth cousins and are even more thinly traded but they have also been through a boom/bust cycle to now sell for $1900/kg.In rare earth jargon NdPr are the "lights" because they have a lower atomic number than the heavies. Praseodymium and neodymium have atomic numbers of 59 and 60 respectively. Terbium and dysprosium are 65 and 66.None of this should matter to anyone not sitting a chemistry exam today but it has become an item of interest to UBS and that means it could be of interest to investors and rare earth exploration companies.The bank looked at the heavy rare earth potential of two Australian companies. Lynas Rare Earths, which is already a major producer of "lights", and Iluka Resources which is edging towards rare earth production at its Eneabba titanium minerals project north of Perth in Western Australia."Iluka's Eneabba project and Lynas's heavy rare earth aspirations means the industry will have to expand from looking primarily at the NdPr market to include other rare earths," UBS said."Indeed, our early work into the heavy rare earths dysprosium and terbium has us incrementally positive on the space.Terfenol-D, singled out by UBS as a market for terbium and dysprosium, was developed by the US Navy in the 1970s as an alloy which expands and contracts in a magnetic field. Its name comes from terbium (ter) iron (fe) naval ordnance laboratory (nol) and d for dysprosium - which has the highest magnetic strength of the rare earths.It was first used in navy sonar systems with its unique properties enabling it to change shape when exposed to magnetic fields but has developed other uses such as in nuclear reactors.Both terbium and dysprosium are on the critical metals lists of western governments because there is limited supply outside China.UBS said its early examination of the market for Terfenol-D indicated a modest deficit though the workings of the market for such a specialised product are not fully understood.One of the problems is that the rare earth family is often found grouped together which means some elements can be easily over-supplied if demand is for another family member with an excess of europium depressing the price for that material which is used to produce the colour red in TV screens."However, with heavy rare earth deposits scarce and supply from Myanmar volatile our preliminary view is that the fundamentals remain robust for terbium and dysprosium," UBS said.Most rare earth explorers and producers have emphasized their production of NdPr because it has been enjoying the strongest demand.What UBS has done is broaden the debate and possibly turn a spotlight on companies well endowed with terbium and dysprosium such as Australian-based Northern Minerals which is working on its Browns Range project in Western Australia, a deposit claimed to contain the world's highest-grade dysprosium and terbium orebody.Adding to interest in the company and its project is the chairman, Nick Curtis, who previously headed Lynas, and a long-term partnership with Iluka which will take all of the Browns Range output for processing at its new Eneabba project.Long in the shadow of the rare earth lights, it looks like the heavies might be starting to develop business traction thanks to speciality products such as Terfenol-D.

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