Morning Expresso – Australasia

Research evidence excerpt

Morning Expresso – Australasia

Rare Earths - A lot can happen in a week

Focus returning to sector Basic Materials

Focus is returning to the rare earths sector as newsflow increases, policy support continues to build, and

the market structure evolves. A lot can happen in a week and we specifically highlight: (i) Energy Fuels

(Not Covered) acquiring magnet maker VAC, (ii) Iluka (Neutral) announcing its maiden rare earths

offtake, (iii) Lynas (Buy) licensing delay for its LAMP expansion, and (iv) more controls on China's rare

earths exports. We continue to like the sector and expect further momentum as Western economies

actively look to decouple supply chains from China.

UUUU>VAC: Another integrated player to build out the western supply chain

Energy Fuels (UUUU)'s announced $1.9bn acquisition of German-based magnetics manufacturer

Vacuumschmelze (VAC) is only the latest example of vertical integration in the market (after MP, LYC,

etc). The merger hopes to build a fully Western integrated mine-to-magnet platform with UUUU's

upstream/midstream operations to supplement VAC's downstream facilities. In our view, this

development could impact the market in a multitude of different ways: i) it could serve as a potential

acceleration of the western magnet industry, ii) vertical integration could see further bifurcation

between West vs China, and iii) it could lead to a better understanding (and potential improvement) of

magnet pricing. The deal is due to complete in early 2027 and we will remain focused on i) the potential

use/shift of 3rd party feed for their magnet growth plans, ii) the status of the various (Australian & US)

government packages to help fund development of their various projects, and iii) the correct multiple

for a magnets business (VAC 2025 EBITDA $29m).