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Hochschild jumps on rare earths bandwagon

Precious metals miner spends $56m on clay rare earths project in Chile
October 3, 2019

Donald Trump’s long reach has massively boosted interest in rare earth minerals, used to make magnets for wind turbines and electric cars. Now, Chile-focused precious metals miner Hochschild Mining (HOC) has jumped into the space with a $56m (£46m) investment in a development project.

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Hochschild is riding high, with earnings expected to climb dramatically in the second half thanks to strong gold and silver prices. 

The US-China trade war has driven investment in rare earths, with Xi Jinping’s May visit to a processing facility and later reports of a Pentagon meeting enough to send Alternative Investment Market (Aim)-traded miner Rainbow Rare Earths’ (RBW) share price up 200 per cent to 7.6p, although it has since fallen back to 2.9p. The principal minerals targeted in the sector are neodymium (Nd), praseodymium (Pr) and dysprosium (Dy), with prices usually listed as NdPr, as these two are the main ingredients in rare earth magnets. 

Buyers pushed the NdPr price up 18 per cent between the end of April and May, to $48,500 a tonne, according to broker SP Angel. China’s sway in the market comes from the lack of alternatives; there are mines in Australia and Burundi, but China has around 80 per cent of supply.  

Hochschild said its new project, called BioLantanidos, had a “special concentration” of Nd, Pr and Dy, as well as terbium. Chief executive Ignacio Bustamante underlined his company’s regional expertise as opposed to any great knowledge of rare earths. He also said rare earths had “very strong growth characteristics”. The company did not give an estimate of the capital cost or a timeline to production, other than saying it would spend 18 months reworking an existing feasibility study. 

Hochschild initially bought into the project in 2018, taking 6 per cent for $2.5m. Shareholders were not enthusiastic about the full purchase on Wednesday, with the share price falling 3 per cent on the news. RBC analyst James Bell said this asset would only make up a small part of Hochschild’s overall portfolio. He said the purchase was a surprise, but would only partly slow the miner’s move to net cash. Its net debt was $62m as of 30 June.