Rare earths has been a "school of hard knocks" for juniors struggling with a market with no Elon Musk as a savior to light the way the American business magnate has done for lithium stocks, but analysts believe the stage is set for a genuine revival they are branding "Rare Earths 2.0."

London-based Hallgarten & Co. principal and mining strategist Christopher Ecclestone said in a Feb. 7 client note that the handful of surviving rare earth element developers left from the collapse of the commodity's boom last decade were regarded as "indulging in a quixotic hunt for something no-one wanted."

However, he said investors have failed to grasp that the rare earth scene will repeat what has happened in the lithium space.

"Mass adoption of [electric vehicles or hybrid vehicles] will turn into the new normal with electric vehicles being the dominant vehicle type on the roads," he said. "This surging demand will need a surging supply and the Chinese are not positioned to meet that challenge."

Among those left, Ecclestone said Perth junior Northern Minerals Ltd. was "indubitably ahead of the pack, being the first to grasp that small is beautiful capitalizing upon the lessons learnt by the wounded [Lynas Corp. Ltd.] and slain [Molycorp Inc.] behemoths that arose from Rare Earths 1.0."

Lynas, an S&P/ASX Top 200 company, was the Australian exchange's best performer of 2017.

Patersons Securities senior resources analyst Simon Tonkin noted at an explorers conference in Fremantle, Western Australia, this month that Lynas' stock had soared by about 97% over the past year with limited supply of rare earths outside of China and the commodity greatly sought after by the renewables, electric vehicle and battery sectors.

Yet it is a different story for Northern Minerals, which is still in project construction stage and has seen its share price plummeting 36% in the past year, despite continuing strong demand for rare earths.

However, the devil is in the details.

Northern Minerals CEO George Bauk told S&P Global Market Intelligence that the market needs an "education" because many people believe the "Tesla hype" — the expectation of buoyant demand on battery metals — is entirely built on lithium.

Bauk spent much of his presentation at the explorers' conference distinguishing between the rare earths offered by Northern Minerals and Lynas, and explaining that there are plenty of other metals that make up electric vehicles.

The executive, who also chairs junior Lithium Australia NL, said Northern Minerals' basket of rare earth pricing was up to three times as much as Lynas'. This is because Northern Minerals has heavier rare earths that have more value than some of those in Lynas' basket.

Bauk said that while Lynas has talked up its more than 25 years of operations based on 22,000 tonnes per annum of rare earth oxides from its Mount Weld project in Western Australia, Northern Minerals' full-scale production is more in the vicinity of 3,000 tonnes.

Further, the two companies' baskets of rare earth elements have very different supply and demand curves. The cornerstone element — and differentiator from Lynas — in Northern Minerals' mix is dysprosium, whose market is significantly different from Lynas' neodymium-praseodymium, or NdPr, market.

"Lynas' NdPr chemical summary has a much bigger market than what we have in dysprosium-terbium," Bauk said.

One of Northern Minerals’ problems is that it has no competitor, with just one company on the TSX-Venture that has a distribution of rare earths like the Perth company's — Namibia Rare Earths Inc.

Yet that Canadian company just closed a deal on Feb. 21 to diversify from its Lofdal project into a broader portfolio of metals also critical for the electric vehicle industry including cobalt, lithium, graphite, tantalum, niobium and gold.

Even so, Bauk said, his company is lumped into the basket of rare earths and "sometimes people then misunderstand what we have."

Perth-based investment house Argonaut Metals mining and energy research director Matthew Keane still believes dysprosium is a "pretty live story," despite the lack of price response from China's green drive targeting environmentally harmful, often smaller-scale operations across the mining sector.

"In some ways rare earths is one of the last commodities to be attacked on the environmental front by the current regime in China, but now they've done that you'd expect a price response," Keane told S&P Global Market Intelligence. "That’s not to say it’s not coming — I think it is."

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