PEA Economics: How By-Products Can Transform a REE Project

When a second commodity changes the math

In commodity exploration, one simple principle holds: the more a project can extract from its ore, the more stable its economics. Projects that combine rare earth elements (REE) with a mineral by-product such as titanium illustrate this well. A Brazilian REE project recently drew attention with a Preliminary Economic Assessment (PEA) reporting a potential project value above one billion U.S. dollars, with titanium contributing a significant share of that figure.

If you are new to commodity investing, two questions are worth asking upfront: what exactly is a PEA, and why does a by-product shift the economics so much? And what does any of this mean when you are looking at a junior company on the stock market?

Rare earths in Brazil

Brazil holds substantial rare earth deposits that have barely been developed commercially. China controls a large share of global REE production — the figure most commonly cited runs between 60 and 70 percent — and governments and manufacturers in the West have been working for years to find alternative supply, particularly for neodymium and praseodymium, which go into permanent magnets for electric vehicles and wind turbines.

Brazil’s geology is worth paying attention to here. Many of its REE deposits formed through lateritic weathering, a process similar to the ionic adsorption clay deposits of southern China, which are generally easier to process than hard-rock deposits. What also sets many Brazilian projects apart is the host rock, which often contains heavy minerals such as ilmenite and rutile, both of which carry titanium.

Why titanium changes the numbers

A by-product like titanium adds a second revenue stream, which reduces dependence on the primary commodity price. If REE prices fall, titanium revenue offsets part of the shortfall. In mining cost accounting, these revenues appear as by-product credits, applied directly against the operating costs of REE production and lowering the breakeven point.

The economic model runs two separate revenue lines. REE are valued by elemental composition and market price, with the magnet elements fetching far more than bulk rare earths. Ilmenite and rutile go to the pigment and aerospace industries and into titanium metal production. Because titanium prices move largely independently of REE prices, the revenue base is harder to knock sideways by a single market move.

The credits only hold up, though, if the titanium price assumptions in the model do. That is worth keeping in mind before treating a PEA’s cost figures as settled.

What a PEA measures, and where it stops

A Preliminary Economic Assessment is the first formal economic study in a mining project’s development. Companies use it when they do not yet have fully classified reserves but want to show an initial picture of potential profitability.

A PEA is often built on Inferred Resources, the lowest-confidence resource category under the NI 43-101 standard. The NPV and IRR figures that come out of it are scenarios built on specific assumptions, not forward commitments.

Multi-commodity projects add layers of complexity that a single-metal PEA avoids. Price assumptions are needed for each commodity separately, processing recovery rates must be modeled for different minerals, and whether one plant can handle both streams efficiently often stays an open question until the PFS or DFS stage. Several iron ore projects in Australia’s Pilbara reported manganese as a by-product in their PEA work, and the metrics looked better for it. For some of them, the figures did not survive the prefeasibility study because processing costs had been set too low from the start.

Reading the REE-titanium model as an investor

A project producing both REE and titanium is less exposed to a price collapse in either metal on its own. That matters for project financing, since lenders generally prefer revenue spread across more than one commodity over a single price-dependent stream.

Brazil has established permitting processes and is considered a workable mining jurisdiction, but the regulatory path from a PEA to a production permit takes time, more so for projects near environmental zones or indigenous territories.

It also pays to be realistic about timelines. A PEA is followed by a prefeasibility study, then a full feasibility study, environmental assessments, financing, and construction. For complex projects, more than a decade often passes between the first PEA and first production. That gap matters when setting expectations.

Key terms for multi-commodity REE projects

PEA (Preliminary Economic Assessment)

The first formal economic study of a mining project, with an accuracy range of roughly ±35–40%. It may be based on Inferred Resources and is classified as preliminary under NI 43-101.

By-product credits

Revenues from secondary products such as titanium, applied against primary production costs in the cost model. They reduce the effective cash-cost breakeven of the primary commodity.

Inferred Resources

The lowest-confidence resource category under NI 43-101, based on limited drilling and sampling data. Inferred Resources cannot be used for reserve estimates or bankable feasibility studies.

NPV (Net Present Value)

The present-day value of a project’s future cash flows, discounted at a chosen rate. The higher the discount rate, the lower the NPV, making the choice of rate a critical variable in any study.

IRR (Internal Rate of Return)

The discount rate at which a project’s NPV equals zero. A high IRR can indicate attractive returns on capital, but it needs to be read alongside the project’s risk profile.

Ilmenite / Rutile

Two titanium-bearing minerals found as heavy minerals in beach placer deposits or weathered silicate rocks. Ilmenite contains roughly 45–65% TiO₂; rutile contains more than 90% TiO₂ and commands a higher price accordingly.

Magnet REEs

The subgroup of rare earths, primarily neodymium (Nd), praseodymium (Pr), dysprosium (Dy), and terbium (Tb), that go into high-performance permanent magnets and trade at a substantial premium to bulk rare earth material.

Important notice: This article is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. Investments in small-cap exploration and mining companies carry a high risk, including the potential total loss of capital. Before making any investment decision, consult a registered financial advisor and conduct your own analysis. Boersen Post Team is not responsible for decisions taken based on the content published here.