If evidence of the value junior miners can create for shareholders is needed, look no further than Lindian Resources (ASX:LIN). It’s up 665% over the last year, and it’s not even producing yet.
Lindian can thank, in part, China’s aggressive stance on rare earth exports. This can be said with confidence because China is still choking off supply to Japan. China’s Commerce Ministry also just placed further restrictions on 10 US firms this week.
Lindian is developing its flagship Kangankunde Rare Earths Project in Malawi, Africa. At its last update, the company said that it expects to begin production in Q4 of this year. Commissioning begins in October.
Regal Asset Management fund manager Jackson Aldridge named Lindian as his favourite stock pick in an interview with the Australian Financial Review this week.
That should be taken with a grain of salt. His timeline and risk profile are unknown, and he could cut Lindian loose at any time and not say a word in public.
That said, it can be presumed that he’s talking about the next five years. The mining cycle has a long way to run, and China’s lock on the rare earth market is still extremely dominant.
Western projects will likely carry a premium for years.
Lindian is unlikely to keep pushing higher in the near term, as it remains in that awkward phase before production begins and, more importantly, before sales start turning into cash flow.
An eye to the longer term is what’s needed here, and a temperament to ride the inevitable volatility and possible glitches.
The future looks bright for rare earth projects, though. Iluka Resources (ASX:ILU) provides evidence of this with two important developments announced this week.
One is that a global automotive firm (unnamed) has entered a binding offtake agreement from 2028 for four years. It equates to 10% of Iluka’s production due in that period. The value of the contract could be as high as US$172 million ($246 million) at today’s pricing.
The other important news is that Iluka has secured another $400 million in Australian Government financing to complete the construction of its Eneabba rare earth refinery located 300km north of Perth, due to be completed in mid-2027.
It is reasonable to expect the market to position for a similar announcement regarding Lindian’s available production capacity, a pattern previously seen in the lithium sector.
In a secular upswing such as the current rare earths cycle, many more projects are expected to move toward production.
Investors — even governments in the case of rare earths — will provide the financing because they can see the latent potential for big returns and/or the strategic necessity.
Some other companies with at least a degree of rare earth exposure include ABx Group (ASX:ABX) and Dalaroo Metals (ASX:DAL).
Now is the time to be assessing projects likely to repeat the kind of success Lindian has enjoyed over the last 12 months.
Write to Callum Newman at Mining.com.au
Images: Lindian Resources & Trading View
