POWER ELEMENTS
RARE EARTHS SUPPLY CHAIN SECURITY IN
AN AGE OF US-CHINA RIVALRY
By Carl T. Delfeld
February 2023
All Rights Reserved
From Triumph to Complacency
China is a supply chain superpower - a key advantage for China and a vulnerability for America.
Supply chain security is just one of the many battlegrounds that will be played out in this decisive decade of rivalry between America and China. It will either confirm or upend America’s role as the world’s leading power.
This rivalry will not only circle the globe in search of critical minerals but will extend from the oceans’ seabed to space as China is already both a maritime and space power with great ambitions to be a superpower in both.
"To explore the vast cosmos, develop the space industry and build China into a space power is our eternal dream," opens China’s latest space White Paper, released in January 2022, and was attributed to Xi Jinping.
Although the pandemic highlighted our supply chain’s fragility and lack of resilience, the trends have been going the wrong way for decades across trade, manufacturing, technology, resources and mining, aerospace, and defense.
America needs begin to rebuild from the ground up to take back control of its supply chains for rare earths and critical tech metals.
For example, recent war games conducted by CSIS highlighted that the US could run out of long-range, precision-guided munitions in less than a week in a conflict over Taiwan.
Another stark example of the resource gap is the US hypersonic missile program being held up by a lack of one critical metal.
Rare earths and critical strategic metals are not only very important, they are also very difficult and time consuming to extract as byproducts from common ores. For example, just a dollop of vanadium doubles the strength of steel with a 30% reduction in weight and one ounce of rhenium is derived from 120 tons of copper ore.
The same goes for a country’s power grid. Solar and wind power generation facilities and other clean energy will require additional supplies of copper, silver, indium, tellurium, dysprosium, neodymium, selenium, germanium, and gallium.
In short, over the past three decades, China has been filling in as it attracted capital investment, and technology, while the American industrial base has been hollowing out as stocks and China have climbed.
Trading higher profits and share prices for production has proved to be a Faustian bargain for America.
It is now time for America and North America to fill in by attracting and putting to work massive flows of private capital into real productive assets. America’s ace in the hole has always been attracting international direct investment.
This inflow of international and domestic private investment has waned along with the American power brand of dynamic stability.
In particular, the executive branch and Congress needs to work together to better align Fortune 100 and S&P 500 corporate interests with the urgent need to sharply increase capital investment in American industry and American workers.
America is a software superpower, but hardware and software are both important for production is power, a skilled workforce is power, and both are built from the ground up.
This brings us to rare earth elements.
The Japanese refer to them as “industrial vitamins” and the “oil of the 21st century.
America’s rare earths and tech metal supply chain fragility is both dangerous and puzzling. To a great degree, it could have been prevented with just a modicum of foresight.
America has one of the world’s greatest rare earths mine in Mountain Pass, California.
America has ample domestic natural resources, plus it borders commodity rich Canada and South America.
So how did we ever become dependent on China for the supply of rare earths and rare metals critical to our technology and defense base?
In short, China’s massive advance over the past three decades to become a mining and refining superpower while Washington slept, is an unforced error in our age of US-China rivalry.
The cause is not complex and can be traced first to post-Cold War complacency regarding the development of natural resources in America.
Another reason is a rigid belief in the free market solving all strategic issues. Letting the S&P 500 run our international economic policy to optimize stock price led to shifting of our industrial base to China.
America has put share price above all other economic and national security considerations. This is a questionable long-term strategy.
In a nutshell, we seem to have forgotten that America’s economic security, financial security, and national security are all one in the same.
A few highlights of this debacle include closing the U.S. Bureau of Mines in 1996, allowing America’s only rare earths mine to go bankrupt, winding down our defense stockpile, and standing passively by as China became a global manufacturing superpower while locking up strategic resources all over the world.
The defense and national security establishment also needs reform to increase competition, innovation, transparency, and agility across its supply chains. While more than 70 aerospace and defense “prime contractors” worked directly with the government in 1980, this was whittled to just 5 by the early 2000s, the same number as today: Lockheed Martin Corp., Raytheon Technologies Corp., General Dynamics Corp., Northrop Grumman Corp., and Boeing.
Consolidation has certainly not led to efficiency. One example is the Navy’s Littoral Combat Ship program that was projected to be a 55-vessel fleet costing $220 million per ship but turned into 35 ships costing on average $478 million apiece.
Politics is part of the problem. The F-35 Joint Strike Fighter program - the world’s most expensive weapons program.
A 2021 Hudson Institute study determined that the time it takes for the Defense Department to go from identifying a need to awarding a contract has increased from about one year in 1950 to seven years. For more complex systems, such as the trillion dollars plus F-35 Joint Strike Fighter program, it can take more than 20 years to become operational. We can’t afford this in an age of intense US-China rivalry.
George Washington in his first State of the Union Message, in 1790, stated that “a uniform and well-digested plan is requisite” and manufacturing should render the United States “independent of others for essential, particularly military, supplies.”
This includes rare earths which China dominates - especially the expensive “heavy” rare earths through both domestic development and access to overseas extraction activities abroad such as Myanmar.
China also dominates the technologies, equipment, and capacity needed to separate and process rare earths and to produce rare earth permanent magnets. This stranglehold has serious implications. Without rare earth elements, the Chinese press has observed, the “U.S. military’s technological advantage will be zero.”1
China clearly understood this and had a strategy to both protect its interests and exploit America’s weaknesses.
China Exploited American and Western Capitalism
China’s dominance in rare earths and critical metal production is connected to China capturing the commanding heights of global manufacturing - driven by both scale and lower labor/input costs.
Part of the plan was to attract American and Western companies to center their manufacturing operations to China.
Look no further than Apple.
Over the past two decades, Apple’s revenue is up 70-fold, and its share price up 600-fold. Remarkable to say the least.
Apple banked its production and assembly strategy on China-based factories, which now produce more than 90% of its products through more than 150 suppliers, many managed by Foxconn of Taiwan.
Apple CEO Tim Cook, explaining why Apple couldn’t manufacture at scale in the US, once told an audience that if every tool and die maker in America were invited to the auditorium where he was speaking, they “wouldn’t fill the room.”
Whereas “in China,” he added, “you would need several cities to fill with tool and die makers.” 2
Apple itself estimates that since 2008 it has trained at least 24 million Chinese workers - equal to the total population of Taiwan.
Chinese consumers also account for about 20% of Apple’s revenue.
This highlights the difficulty in getting American, European, and Japanese companies to strategically decouple from the China and the Chinese consumer market as the center of the global economy moves ever eastward towards Asia.
In 2021, American, European (particularly German), and Japanese firms sold about $700 billion worth of goods and services in China according to Bloomberg.
China now accounts for 50% of all of Asia’s economic output and military spending. Guangdong’s GDP is now five times larger than Hong Kong. China now represents:
50% of global shipbuilding
25% of value added for global manufacturing and 40% of world auto sales
30% of construction equipment
25% of global consumer appliance and electronics
However, average wages of Chinese manufacturing workers have doubled to over $500 a month. This is about twice as much as India or Vietnam, according to a survey by JETRO and this is where Apple is incrementally trying to move some production.
Meanwhile, America, which accounts for around 40% of Apple’s revenue, at best gets a few crumbs of final assembly and some small-scale test production.
America Faces a Daunting Task
America now confronts a daunting and complex high tech supply chain economic security challenge - a puzzle with a lot of moving pieces that don’t fit well together.
As it struggles to recover its supply chain security and resiliency, it is akin to trying to complete a puzzle without first forming the frame, leading to a haphazard and painfully slow approach.
For example, while one can make the argument for the recently passed $52 billion Chips Act to support the domestic semiconductor industry, it puts the proverbial cart before the horse. This legislation aids the fabrication of semiconductor chips but what about the dozens of upstream rare earths and rare metal inputs that go into the chipmaking process?
There is a global race to control many of these technology metals and China is winning. Another example is gallium - a key component of high-performance semiconductors used in fiber optic systems and mobile phone applications. The United States has virtually no domestic sources for gallium and relies on China for most of its supplies. China accounts for around 80% of global capacity for gallium, according to recent U.S. Geological Survey (USGS) data.
The priority of rebuilding supply chain security should be developing the foundation of manufacturing - commodity inputs - in America or friendly countries.
Even now, shortages are emerging, and prices are rising. If the world moves toward a green-energy future and more defense spending, the demand for many of these materials will skyrocket as global output falls far short of anticipated needs.
Private and government stockpiles can serve as a hedge and bridge while we buy time to rebuild independent and resilient supplies of rare tech metals.
This is especially important as we face defense stockpile and production issues.
An $8 billion deal by Taiwan for 66 F-16 fighters is not scheduled for delivery until at least 2025 and a Harpoon antiship deal signed by Taiwan in March will not be delivered until 2026. Despite adding leading China drone maker DJI to the “Chinese military company” list - parts of the USG are still dependent and vulnerable to economic espionage by drones with Chinese content.
China currently supplies about 80% of rare earth oxides, while four countries, Argentina, Chile, the Democratic Republic of Congo (DRC), and Peru, supply most of our copper.
The DRC produces 75% of the world’s cobalt and this is largely controlled by Chinese state-owned firms. China is also the dominant processor of many other rare metals such as gallium for semiconductors and germanium for fiber optics and satellites.
Furthermore, China is keeping more and more of all these critical materials at home to fuel its drive for dominance of the global clean tech ecosystem.
Unfortunately, the American government, politics, and media are largely reactive institutions while China plans and executes.
This quote by Deng Xiaoping captures this reality all too well.
"Unlike the Americans, our efficiency is higher; we carry things out as soon as we have made up our mind, it is our strength, and we must retain this advantage".
The Japanese and the South Koreans have done a much better job than America of securing the supply chain for these essential materials. Both countries are making investments all over the world to counter China. Japan provided critical financing to Australia’s Lynas and South Korea’s telecommunications giant KT Corp signed a partnership deal with the Mongolian government to secure a stable supply of some 80 kinds of mineral resources, including rare earth elements.
There are some encouraging signs that America is finally shaking off its complacency and grasping the linkages between the trifecta of technology, resources, and aerospace/defense.
Here is the bottom line: it will require great foresight and planning, capital investment, hedging and commercial diplomacy, to build stronger supply chain security for tech metals. Only then will there be there chance of a future in which nations do not fight over the world’s supplies of rare earths and critical metals, just as they once fought over oil.
This report will explore issues surrounding rare earths, and profile some companies actively working to increase production in North America. Some have financially supported the preparation of this special report but were invited based on their merits.
Before getting to rare earths, let’s first focus on cobalt, which highlights many of the challenges faced by critical metal producers.
Westwin Elements: America’s Nickel/Cobalt Refinery Project
Nickel and Cobalt are critical elements vital to key applications, including Nickel superalloys in jet engines, lithium-ion batteries in electric vehicles, and cemented carbides in industrial machinery.
Refining cobalt should be one of the US government’s top priorities due to cobalt’s criticality in technologies affecting America’s economic and national security. However, the last full-scale commercial cobalt refinery in the United States closed in 1985
Currently, the United States does not have a single commercial scale cobalt refinery, relying 100% on imports and recycled scrap for its cobalt. The US government’s National Defense Stockpile only has about 300 metric tons of cobalt - equal to about 5% of annual domestic demand.
Westwin Elements, a private company led by a determined group of Americans, seeks to build America’s only commercial-scale cobalt metal refinery in Oklahoma, and the company is well underway to accomplish this mission to meet the United States' increasing cobalt demand.
Cobalt is used in everything from the production of superalloys used in jet engines, to cemented carbides in industrial machinery, to batteries for electric vehicles, laptops, cell phones and other electronic devices.
According to the IEA, just one country, the Democratic Republic of Congo (DRC), currently supplies more than 75% of the world’s cobalt. This market share is more than double OPEC’s claim on oil and most of these Congolese copper-cobalt mines are controlled by Chinese companies.
Unlike China’s refining methods, which severely harms the environment, Westwin Elements will utilize a cobalt refining method that minimizes impact to air, water, and soil. Ultimately, Westwin seeks to commercialize carbonyl refining, which is environmentally neutral with no impact to air, water, and soil.
Carbonyl refining is the cleanest refining method in existence since it recycles its gas inputs and occurs in hermetically sealed chambers. Notably, carbonyl refining can likely refine shredded electric vehicle batteries, also known as black mass.
Cobalt prices have pulled back to below $20 per pound after reaching $40 a pound last May. This price drop is partly due to increased supply from the DRC and Indonesia, and Chinese demand shifting from cobalt-containing batteries to lithium iron phosphate batteries that are cheaper but also offer lower performance. While China Molybdenum (CMOC) expects to increase production of cobalt sharply this year, much of this output is likely to stay at home to fuel its electric vehicle boom. Meanwhile, Indonesia is surging as the world’s second largest producer of cobalt according to the USGS.
The projected demand for cobalt is expected to soar over the next decade. The world consumed 120,000 tons of refined cobalt in 2021, and that number is expected to cross 350,000 tons by the year 2030 according to the International Energy Association (IEA).
Source: European Parliament: 12/22: "Strengthening the security of supply of products containing Critical Raw Materials for the green transition and decarbonisation"(JRC) Joint Research Centre of the European Union, World Mining Data.
II. Rare Earths: The Secret Ingredients of Everything
Modern history is marked by technological innovations that lead to accelerating industrial production and remarkable efficiency gains.
The Watt steam engine, the telegraph, and railroad networks powered the first industrial revolution in the 19th century. The second industrial revolution was based on oil and coal leading to electricity, the telephone, and the internal combustion vehicle.
Today, we are in the emerging stages of the third industrial revolution; moving towards a carbon neutral electricity grid, fiber optic communications, and clean tech. This century requires a very different mix of metals - some of them quite rare and sourced in countries at odds with America and the West.
While America has been complacent concerning the supply of these metals, China has been on a spending spree over the last three decades. China not only developed its domestic capabilities, but China also acquired and invested in mines and supply contracts all over the world.
The Oil of the 21st Century
Daniel Yergin’s riveting tale of the major role oil played in the 20th century, The Prize: The Epic Quest for Oil, Money & Power traces the growing reliance on oil for both global commerce and war.
Oil not only powered economies, but it also played a pivotal role in the century’s statecraft from Winston Churchill’s decision to shift the Royal Navy from coal to oil in 1911 to the first Gulf War in 1991-1992 when America led a 35-country coalition to expel Iraq from Kuwait.
The following sentence in the book’s prologue sums up the world’s predicament today.
“As we look toward the 21st century, it is clear that mastery will certainly come as much from a computer chip as from a barrel of oil”
But what’s behind the computer chip and technology that forms the backbone for so much that we take for granted in modern life? The answer is rare strategic metals and rare earths.
These natural resources are critical to economic growth and advancement of technology. They are also invisibly intertwined with national strategies, geo-politics, wealth, and power. The National Geographic magazine titled an article on these metals “The Secret Ingredients to Everything.”
What exactly are rare strategic metals and rare earths? They are neither precious metals like gold nor common metals like copper or lead. Rather they are obscure rare metals like dysprosium, terbium, gallium, hafnium, indium, and rhenium that is in all sorts of products from cell phones to advanced weapons systems, aircraft engines, robots, and hybrid batteries.
The real value of rare earth elements, for example, is their unique electrical and magnetic properties that allow for miniaturization and much lighter, stronger, resilient, and efficient components. Rare earths are very difficult, time consuming, and environmentally problematic to extract from common ores and refine into oxides.
America is very dependent on imports of many of the ingredients that go into electric vehicles including the materials that make up the battery and the electric motor. There is a global race to control many of these technology metals and China is winning.
China’s rare earth ambitions go back to 1953, when the Chinese Academy of Sciences and the PRC Ministry of Metallurgical Industry jointly launched construction of China’s first rare earth plant, the China Baotou Number One Steel Rare Earth Factory. That plant was completed in 1959, and in 1969, Beijing assigned the plant to state-owned Baosteel. 3
America dominated rare earths production at that time but over the past few decades, China has become the Saudi Arabia of rare earths. China’s low-cost labor and lax environmental standards allows it to produce up to 85% of world production of rare earth oxides. And as China becomes the center of the world’s ecosystem for electric vehicles, domestic demand for their production is rising.
Rare earths expert Jack Lifton notes that the world needs seven more rare earth suppliers of the current size of Lynas (world’s #2 producer) over the coming years just to cover China’s increased domestic demand.
Furthermore, a 2022 report from the Interior Department highlights that America is now 100% dependent on imports of 21 of the rare metals deemed essential to our economic and national security. China is America’s #1, #2 or #3 source for 31 of these 35 strategic rare metals.
A F-35 fighter jet requires 920 pounds of rare metals and a Virginia class submarine 9,200 pounds, according to the Congressional Research Service. While in 1918, the British statesman Lord Curzon famously said that the Allied cause had “floated to victory upon a wave of oil” - in the 21st century, victory will depend on a river of rare earths and rare metals.
America’s dependency on China and other unstable sources of these minerals has led to an unfortunate window of strategic vulnerability. Furthermore, China is doubling down on its commanding lead by having its state-sponsored firms gobble up reserves and mining assets all over the world - even in America’s neighbors, Canada, and Latin America.
There are some that say that in our global economy, this sort of dependency is no problem, let the market work its magic - all will be well. History tells a different story and China has wielded its leverage with ruthlessness as recently as 2011 during a territorial dispute when China temporarily cut off exports of key critical metals vital to Japan’s technology economy. In just weeks, prices of many of these materials skyrocketed.
As key rare earths producer Lynas CEO Amanda Lacaze aptly puts it: “If there is a full-blown trade war, I can’t believe that the Chinese wouldn’t use rare earths as part of that. They could do it, literally overnight.”
The canvas of this “great game” is global but America has been on the sidelines. China is making investments in private companies in countries such as Brazil, Australia, the DRC, and South Africa. Japan is investing in India and Mongolia rare earths and metal projects and companies. It developed a close partnership with the largest, rare earths company outside of China - Australia’s Lynas Corporation. The Japanese are way ahead of us in executing a well thought out strategy.
Many of these materials are available in Canada and Latin America and providing some economic incentives to private companies to compensate them for lower margins, high capital requirements, and sizable environmental risk, would be more than justified.
America, which not all that long ago was the world’s top producer of rare earths and many rare metals, has been asleep at the wheel while China and other adversaries have captured these essential markets. America has been a victim of a “let the markets work” attitude and lack of strategic planning; allowing the country to virtually exit mining due to the environmental lobby.
The federal Bureau of Mines was closed in 1996 after 85 years of service. America’s only rare earths mine in Mountain Pass, California, has over the past few decades gone through several owners and, when it recently emerged from bankruptcy, it was acquired by a private equity firm with a minority stake taken by a Chinese rare earths element refining company. It is now known as MP Materials, which ships its rare earth concentrate to China for processing.
Critical and strategic rare metals and rare earths inputs necessary for clean energy such as electric vehicle (EV) production and national defense along with semiconductors and fiber optic materials are likely America and the West’s most pressing needs.
What exactly are rare earths? They are obscure rare metals that are in in all sorts of products from cell phones to advanced weapons systems, aircraft engines, robots, and hybrid batteries.
The real value of these metals is their unique electrical and magnetic properties that allow for miniaturization and much lighter, stronger, resilient, and efficient components.
China is also increasingly keeping more of all these critical rare earths and metals at home to fuel its drive for dominance of the commanding heights of the global economy. America is also extremely dependent on imports of many of the ingredients that go into electric vehicles including the materials that make up the battery and the electric motor.
This was all part of China’s plan from the beginning. Deng Xiaoping said the following in 1992, four years after China’s output of rare earths surpassed that of the United States.
“The Middle East has oil and China has rare earths,” 5
This why it is essential that America urgently build stockpiles of rare earths to reduce civilian and defense vulnerabilities to supply disruptions, and as bridge to buy time to develop domestic sources of supply and cleaner processing technologies.
Unfortunately, while American government, politics, and media are largely reactive institutions, China looks ahead.
This quote by Deng Xiaoping captures this reality all too well.
"Unlike the Americans, our efficiency is higher; we carry things out as soon as we have made up our mind, it is our strength, and we must retain this advantage". 6
Without a timely and dependable supplies of critical inputs to produce, for example, semiconductors, a country’s economy, and military can be crippled.
There is a total of 16 naturally occurring rare earth elements (REEs). 14 within the chemical group called lanthanides, plus yttrium and scandium. The latter are considered rare earth elements because they tend to occur in the same ore deposits as the lanthanides and exhibit similar chemical properties. REEs are found as components in several minerals, the most important sources being bastnäsite, monazite, xenotime, and ionic clay.
A basic distinction must be made between light and heavy rare earths. On average, the six light rare earths account for more than 95% of the volume of rare earths.
Consequently, the proportion for the nine heavy rare earths is less than 5% of rare earth volume and, because they are rarer and in high demand, they command a higher price.
The five rare earths that are key inputs for permanent magnets represent about 90% of the dollar value of rare earths produced each year.
Generally, elements with atomic numbers above that of europium are classified as heavy. These include terbium, dysprosium, europium, holmium, erbium, thulium, ytterbium, and lutetium.
Chinese rare earth element (REE) mining is concentrated in Inner Mongolia, Sichuan, Shandong, and seven southern provinces including Jiangxi. Not only does Inner Mongolia account for some 80% of China’s REE reserves, but it also specializes in light REEs such as neodymium.
Neodymium permanent magnets convert electrical energy into mechanical energy - they are much more powerful and long lasting than regular magnets and make things move more efficiently under conditions of great stress and heat.
The Wall Street Journal has recently highlighted that production of F-35 fighter jets was recently slowed by Chinese material content in permanent magnets.
Defense Metals and the Canadian Connection
Canada is resource rich and a member of NATO so it’s naturally the closest political, economic, and geographical partner of the United States.
Canada is the ideal candidate for mining rare-earth elements for the United States' green tech and defense sectors.
The US Department of Defense has already had "preliminary discussions" with several Canadian mining companies working on rare-earth projects. These discussions are part of a broader strategy of the US and its allies to reduce their reliance on non-friendly regimes, including China. This is called "friendshoring," moving supply chains within the borders of democratic economies.
The result is an impending Canadian rare-earth industry renewal. Plus, the Canadian government has announced a $3.8-billion package in federal funds that would be used to boost the country's production of critical minerals. Rare-earth elements are on that list, of course.
Just one of the companies seeking to end Western dependency on China is a Canadian resource company with the ambitious goal of providing 10% of the global supply of two vital rare earths is Defense Metals Corp. (OTC: DFMTF, TSXV: DEFN).
Defense Metals is focused on two rare earths, neodymium, and praseodymium, that are vital to the expansion of electric vehicles (EV). This is because an electric vehicle uses 3-5kg worth of neodymium–iron–boron (“NdFeB”) magnets in standard drivetrain electric motors.
Global demand for EVs is expected to grow from 8 million in 2022 to over 40 million by (or before) 2030. This will require huge amounts of rare earths most notably neodymium and praseodymium.
Rare earths expert Jack Lifton notes that China alone conservatively forecasts praseodymium-neodymium (NdPr) needs for just its own production of neodymium (NdFeB) permanent magnets as 78,000 tons per year by 2030.
Every ten million new EVs require about 10,000 tons of additional neodymium or 20% of the current annual global supply. 7
The Pentagon and by extension prim defense contractors are also concerned by America’s heavy dependence on rare earths and many critical metals produced by China.
A bipartisan piece of legislation has been introduced in the U.S. Senate that would force defense contractors to stop buying rare earths from China by 2026.
This means buying more rare earths produced by North American producers, a group that could include Defense Metals. The bill, sponsored by Senators Tom Cotton, an Arkansas Republican, and Mark Kelly, an Arizona Democrat, is the latest in U.S. legislation seeking to thwart China's near control over the sector.
Magnet rare earths neodymium and praseodymium are just what Defense Metals intends to produce after further financing and other regulatory permits for their 100% owned Wicheeda Rare Earth Element Project. This project is spread over 4,244 hectares and located 80 km northeast of Prince George, British Columbia, Canada.
If they obtain production, Defense Metals targets to produce about 25,000 tons per year of rare earth oxides over a 16-year mine life, which would make the company a globally significant rare earths producer representing 10% of the current global production.
Defense Metals recently announced the completion of its 2022 resource infill and exploration diamond drilling program which produced promising results. Next steps for Defense Metals include a preliminary feasibility study to be initiated in the first half of 2023.
There are some other positive factors investors need to take into consideration.
First, Defense Metal’s Wicheeda Project has very good road access and is close to critical infrastructure, including rail and power about 80km from Prince George, British Columbia, and the project is accessible by road.
Second, it has reached a Mineral Exploration Agreement with the McLeod Lake Indian Band regarding its project that puts in place a framework for communication and cooperation going forward.
Third, Defense Metals can also add value as it tests an acid bake extraction process for rare earths that could lower capital and operating costs. This process is expected to increase the recovery rate for rare earths, compared to the alternative caustic cracking process. Construction of the hydrometallurgical pilot plant has begun, and commissioning is scheduled to start in the second half of March.
The objective of the pilot plant is to produce a high-purity rare earth precipitate suitable as feed stock for a rare earths element (REE) separation plant and to gather data required for the pre-feasibility study.
Finally, Defense Metals has an experienced technical and management team that has an equity stake in the company. CEO Craig Taylor, before heading Defense Metals, was a director of Advantage Lithium Corp. and, previously, a director for Patriot One Technologies.
The above information is only summary information about Defense Metals Corp. and the industry in which it operates. Visit the company’s website at www.defensemetals.com for further information about the company and Independent Preliminary Economic Assessment for the Wicheeda Rare Earth Element Project, British Columbia, Canada, dated January 6, 2022, with an effective date of November 7, 2021, and prepared by SRK Consulting (Canada) Inc. is filed under Defense Metals Corp.’s Issuer Profile on SEDAR (www.sedar.com).
Neodymium, praseodymium (NdPr), terbium, and dysprosium are among the rare earth elements used to manufacture permanent magnets for offshore wind turbines, onshore wind turbines, and electric vehicle (EV) motors. Below is a chart showing how much increased production of NdPr is expected to be needed to meet projected 2030 demand.
For example, an offshore 5 MW wind power project requires 2,600 pounds of rare earths elements.8 The current and expected growth in wind power is massive.
Cleantech’s demand for rare earth elements could increase 3-7 times by 2040 compared to 2020 levels. Revenue for the rare earths mining and production value chain from the cleantech industry alone could increase eightfold from $400 million in 2020 to $3.2 billion in 2040.9
Currently, China accounts for 65% of rare earths mining and 85% of rare earths processing. That supply chain concentration has companies exploring opportunities in other countries.
For example, MP Materials, which currently operates the only rare earths mining and processing site in the United States, plans to become fully vertically integrated in the country.10 The company commissioned a separation refining facility and construction continues to advance on its magnetics manufacturing facility in Texas.11
Production of dysprosium (Dy) and neodymium (Nd), necessary for the permanent magnets of electric induction motors, will have to increase 50% and 110%, respectively, to achieve expected high performance and sharp reduction in emissions that EVs hope to achieve.
The Rare Earths Supply/Production Chain
The rare earths element production chain, up to the production of permanent rare earth magnets, includes the following steps with each step requiring specific skills, experience, and technology.
• mining rare earth elements
• producing rare earth concentrate or mixed rare earth carbonate
• separating into specific rare earth oxides
• refining into rare earth metals
• creating rare earth alloys
• fabricating rare earth products such as permanent magnets
As illustrated below, it begins with high-risk, capital-intensive mining, then a difficult and environmentally fraught chemical process to create a rare earth concentrate. Then an even more demanding process to extract and separate rare earth from the concentrate into oxides. Next, creating metals and alloys and finally manufacturing permanent magnets for application in a myriad of end products.
Since the 1970s, China has incrementally progressed up the production chain. James Hammond of the Hammond International Group describes the timeline as follows:
• 1970s to 1980s: Producing rare earth mineral concentrates
• Early 1990s: Ability to separate individual rare earth oxides from rare earth concentrate
• Late 1990s: Ability to form metals and produce magnets, phosphors, and polishing powders
• 2000s: Manufacture end products using rare earth metals such as electric motors, computers, batteries, LCDs, mobile phones.
(Source: Rare Earth Magnets and Motors: A European Call for Action A report by the Rare Earth Magnets and Motors Cluster of the European Raw Materials Alliances, Oct 2021. Argus Analytics Oct 2021. 2 Wood Mackenzie Global rare earths short-term outlook August 2022.)
As you can see, China’s domination along the spectrum of the rare earth production chain gives it significant leverage to impact and control prices of rare earth and finished products.
Since the 1980s, the Chinese government has used a combination of tax incentives, production, and export controls, and forced consolidation to reorganize the Chinese rare earth industry. The administrative expansion over rare earths has delayed “marketization” of the industry, which is highly dependent on government policies for development. The consolidation of three of China’s rare earth SOEs is simply the latest move by China’s administrative state, a culmination of decades of attempts to control the rare earth industry.
China’s Shenghe Resources, the semi-official foreign direct investment arm of China’s state council, concentrates fully on foreign heavy mineral sand resources and thereby largely eliminate the need of engaging junior rare earth miners. Shenghe also just signed a domestic deal for 8,000 tons of rare earth concentrate from Sichuan. This leads to China having the geo-political leverage to push back on countries that come into conflict with it.
Such was the case when China slowed rare earth exports by about 40% and then embargoed the export of critical rare earths to Japan for six weeks after a fishing trawler altercation near a disputed island between China and Japan in the East China Sea. As a result, neodymium/praseodymium (NdPr) prices surged from $50/kg to almost $500/kg in 2011.
Some rare earths prices such as dysprosium spiked even more, going beyond $1400/kg.
Source: USGS, Argus
In 2015, the WTO ruled against China forcing it to end export quotas so that now it adjusts production, domestic consumption, and export sales informally.
The Ministry of Industry and Information Technology allocates China’s rare earth production quota among six state-owned enterprises with China Northern Rare Earth Group having the largest allocation.
To end this dangerous dependency on China for rare earth oxides, we need to meet this challenge through a joint effort to mine and develop key rare earths in North America and South America.
The Turbulent History of America’s Mountain Pass Rare Earths Mine
The Mountain Pass, California deposit was reportedly discovered by a uranium prospector in 1949, who noticed high radioactivity. Rare earth metals and uranium tend to be found together and the Molybdenum Corp. of America bought the mining claims, and small-scale production began in 1952. Production expanded greatly in the 1960s, to supply demand for europium used as a phosphor in color television picture tubes.
The deposit was mined on a larger scale between 1965 and 1995. During this time, the mine supplied most of the worldwide rare earth metals' consumption. The Molybdenum Corp. of America changed its name to Molycorp in 1974. The corporation was acquired by Union Oil in 1977, which in turn became part of Chevron in 2005. Along the way, Molycorp absorbed GM's Magnequench along with their patents.
In 1998, the mine's separation plant ceased production of refined rare earth compounds. The mine closed in 2002, in response to both environmental restrictions and lower prices for rare earth elements in China.
As mentioned, where you find rare earths you also find radioactive ores, and radioactive slurry is a by-product of the separation process of ores. In 1998, chemical processing at the California mine stopped after a series of wastewater leaks. This led to the mine being inactive in 2002, though processing of previously mined ore continued.
In 2008, Chevron sold the mine to privately held Molycorp Minerals, LLC, a company formed to renew the Mountain Pass mine. Then in late 2010, China raised the price of rare earth elements by restricting exports of neodymium. In response, Molycorp spent hundreds of millions of dollars on a state-of-the-art ore-processing system for rare earth metals. The plan was to turn Mountain Pass into the cleanest, most reliable source of rare earth metals in the world.
Unfortunately, neodymium prices pulled back sharply in 2012, Molycorp couldn’t compete and eventually filed for bankruptcy in June 2015. At the time of the bankruptcy, Molycorp had outstanding debt was $1.4 billion.
While in bankruptcy, Secure Natural Resources (SNR), a company owned by Molycorp's creditors, including JHL Capital Group, gained control of the mine's mineral rights. In June 2017, the Mountain Pass mine was purchased at auction for $20.5 million and assumption of debt by a new entity called MP Mine Operations LLC.
Through a process of crushing, milling, conditioning, and flotation, the rare earth elements in the ore are separated from the other elements, forming a rare earth concentrate.
Shenghe Resources, a Sichuan China rare earths company, were allowed to keep 9.9% of the operation, as anything more would enact the Committee on Foreign Investments in the United States (CFIUS) review, an interagency federal government committee headed by the Department of the Treasury.
Shenghe is handling the shipment of the rare earth concentrate to China for separation and then distribution. The Ministry of Finance of the People’s Republic of China is the ultimate controller of Shenghe Resources, as is clear from the annual report of Shenghe Resources.
In 2020, MP Mine Operations LLC became a public company under the name MP Materials Corp. The transaction, which closed on November 17, 2020, raised $545 million. On November 18, 2020, MP Materials began trading on the New York Stock Exchange under the symbol "MP".
MP Materials has ambitious goals to build out the rare earths supply chain. We wish them the best, but Mountain Pass is overall a rather incredible story of mismanagement for such a strategic asset with America’s economic and national security at stake in its rivalry with China.
Permanent Magnet Rare Earths
Canadian rare earths recycler Geomega describes the challenge that it is faces in the context of a neodymium magnet demand that was a mere 40,000 tons at the turn of the 21st century and has already more than tripled. It is also expected to surpass 300,000 tons by 2030. 12
China currently supplies about 90% of the world’s rare earth neodymium (NdFeB) permanent magnets. This is the most powerful permanent magnet in existence, able to attract objects up to 1,000 times its own weight. This makes these magnets ideal inputs for high-energy applications where miniaturization is a key component of product design.
The United States (GM) and Japan (Sumitomo), by coincidence, both developed the neodymium magnet technology in 1982, but before long as you can see from the below graph, China leapt ahead.
The key pivot point and American blunder was in 1995 when GM sold its magnets subsidiary Magnequench to a consortium of Chinese companies and US investment firm Sextant Group. China was then looking for opportunities to capitalize on its abundant REE resources but didn’t have the technology to make magnets.
The deal was approved on the condition that the Chinese companies would keep Magnequench’s production in the United States for at least ten years. A few years later, a Magnequench’s production line was built in China, and in September 2001, the company announced that all US production lines would be shut down.
China then scaled up its production fast, and by the mid-2000s, China alone made up nearly 80% of global NdFeB magnet production.
We now face a dangerous situation since Lin Boqiang, the Director of the China Center for Energy Economics stated that:
“China has no obligation to be the rare earth supplier to the world.” 13
Powerful permanent magnets are used widely in wind turbines, electric motors, magnetic resonance tomographs, and smartphones all of which represent a large proportion of the total consumption of the value of rare earths. According to research by Deloitte, demand for high-performance magnets from EVs and wind turbines alone is expected to grow more than 400% from 2020 to 2030.
Neodymium magnets (also known as NdFeB, or Neo magnets) are an alloy of neodymium (Nd), iron (Fe) and boron (B), delivering a significant increase in force over ferrite, samarium cobalt, and the combination of aluminum (Al), nickel (Ni), and cobalt (Co) - also referred to as Alnico.
These magnets are extremely powerful but susceptible to corrosion and their magnetic field is only stable up to around 80° C (176° F). By adding dysprosium or terbium, the demagnetization temperature can be raised to about 200° C (392° F). Without these additions, the performance of the NdFeB magnet will limit the reliability and efficiency of electric vehicles (EVs).
Roskill projects that by 2027, close to 70% of new passenger vehicle sales will be hybrids to full battery EVs. 14
Every electric motor works as follows. First, an electric current is directed through a magnetic field. This produces motion and converts electrical energy into mechanical energy. Permanent magnets are used to create this magnetic field.
The best permanent magnets for electric motors are made with neodymium because neodymium magnets (neodymium-iron-boron) create the most stable, consistent, and powerful magnetic field due to their exceptionally high magnetic strength. Neodymium magnets are cheaper to produce, lighter, and stronger than any other high-powered magnet known today. As a result, the electric vehicle (EV) industry is projected to be the fastest-growing end-user.
Praseodymium is another rare earth oftentimes coupled with neodymium and collectively referred to NdPr. Nd and Pr each have their own separate individual applications, but the great majority of their usage is as an alloy in magnets.
Source: Geomega
Although the magnet industry has been trying for years to reduce its reliance on this alloy for high-performance magnets, gains have only been limited and dysprosium or terbium remains irreplaceable in many areas of application.
Progress towards reduction in dysprosium use appears to be stabilizing, while demand continues to increase and there is a long-term threat of supply bottlenecks/shortages for dysprosium.
Source: Arafura website
Tiny, high-powered magnets are used in laptops, tablets, and PC hard disk drives, as well as in smart phones, video game systems, blenders, vacuum cleaners, power tools, speakers, and even in motorized toothbrushes.
Rare earth magnets are also used for anti-locking braking system in automobiles.
They are also in MRI machines, blood separators, infusion pumps, and a wide range of other life-saving medical devices, point-of-sale devices, electronic locks, airplanes, and even HVAC systems.
The market for these magnets is already substantial and is expected to grow rapidly in coming years. According to a 2022 report from Adamas Intelligence, the estimated market for magnet rare earth oxides will triple between 2022 and 2035 to reach about $46 billion. The report projects neodymium magnet material shortages of 206,000 MT by 2035 and annual shortages of NdPr oxides to increase to 21,000 MT by 2030 and 206,000 MT by 2035. 15
According to a September 2021 article in Forbes, the United States needs about ten times its current rare earth supplies to reach the Biden Administration’s goal of having 50% of cars sold in 2030 be zero-emission electric vehicles.
To meet the expanding needs of green economy, the US will need exponentially more supply than current levels as investment into electric vehicles, wind power and other renewable technologies climb through the 2020’s.
From 2022 through 2035, Adamas forecasts that global demand for magnets will jump at a compound annual growth rate (CAGR) of 8.6%, underpinned by double-digit growth from the electric vehicle and wind power sectors.
Furthermore, China has more than 90% share of the global production of downstream rare earth products and technologies, including magnets.
China has gained considerable leverage over its competitors and adversaries, most notably the European Union and the United States of America. In 2022 China exported 53,288 MT of rare earth permanent magnets, up 9.6% from 2021.
The above top ten markets are 88% of all China’s rare earth permanent magnet exports. In total, China shipped to 127 countries.
The main export destinations in 2021 according to the Rare Earth Observer of 3 February 2023:
EU: 20,937 mt ·
USA: 6,376 mt
· Korea: 6,254 mt
· Vietnam: 3,967 mt
· Thailand: 2,238 mt
· Japan: 1,862 mt
· India: 1,466 mt
· Taiwan: 1,428 mt
· Mexico: 1,416 mt
· Russia: 1,035 mt
Recycling Rare Earths
One way for America to reduce its dependency on China is to develop clean and economically feasible recycling operations. Geomega (GOMRF) is building the world’s first sustainable rare earths recycling facility to help meet surging global magnet demand as the transition to vehicle electrification and renewable energy sources accelerates.
Located in a new industrial complex, a plant with a full capacity of 4.5 tons per day of magnet waste, is being built in Saint-Bruno-de-Montarville, Quebec, Canada. With a gradual scale up, low capital cost, small footprint and no liquid or solid waste, Geomega’s core project is based around the ISR Technology (Innord’s Separation of Rare Earths). This is a proprietary, low-cost, environmentally friendly way to tap into a C$1.5 billion global market to recycle magnet production waste and end of life magnets profitably and safely.
By using Geomega’s innovative technology and Quebec’s renewable hydropower, the company is keeping permanent magnets from the landfills and putting these critical rare earths back into a more self-sustaining supply chain.
This proprietary iron friendly technology benefits from the ability to recover the bulk metals (iron and aluminum) from bauxite residues. Bauxite residues is the largest waste by-product generated in the Bayer bauxite refining alumina production process. Large quantities of this caustic red mud are generated worldwide every year, posing environmental and safety challenges.
Storage of bauxite residues is a challenge for alumina refineries with over 80 plants across the world currently producing alumina from bauxite ore. It is estimated that over 1.4 tons of bauxite residues is generated per ton of alumina produced.
The Scandium factor is of particular interest as a byproduct of the bauxite residues processing. Small quantities of scandium are used to improve the tensile strength and physical properties of aluminum. Aluminum-Scandium alloys (Al-Sc alloys) are growing in interest from the automotive, aerospace, oil and gas and many other industries but its lack of supply keeps the price too high for most commercial applications. Furthermore, limited supply diversification with Scandium (Sc) mainly produced in Russia and China.
This prevents many industries from committing to Al-Sc alloys in a significant way.
Noveon (formerly known as the Urban Mining Company), appears to be the only operational U.S.-based permanent magnet manufacturer, producing a small amount of NdFeB permanent magnets.
The Defense Department DOD granted $30 million to Noveon to expand NdFeB magnet production. Noveon is the only firm in the United States that produces “sintered” neodymium magnets, which is the type of magnet the Commerce Department focused on in the report.
Sintered neodymium magnets (NdFeB) are made using high-temperature heating and a powder sintering method that exposes metal particles to high pressure and heat. The mass is then cut to shape, surface treated, and magnetized. The metal particles chemically bond to form very dense blocks that create a much more powerful product than bonded NdFeB magnets.
Source: Noveon website
Last year, China supplied 75% of America's sintered neodymium magnets imports, followed by 9% from Japan, 5% from the Philippines and 4% from Germany.
However, demand for the magnets is expected to spike in the coming years, leading to a potential global shortage. That’s because electric vehicles use about ten times as much of the magnets as conventional gasoline-powered cars.
A report from the Paulson Institute estimated that electric vehicles and wind turbines alone will require at least 50% of the high-performance neodymium magnet supply in 2025 and nearly 100% in 2030.
Demand for high-powered magnets is expected to climb much higher as the world continues to modernize and track towards an electrified future. The Paulson Institute projects that high-performance NdFeB (neodymium-iron-boron) will likely grow at an estimated 18% per annum through 2030.
Multiple technologies and applications will drive this growth such as the EV industry, which is a large consumer of permanent magnets and is expected to be a significant driver of future growth in permanent magnet demand, while offshore, direct-drive wind turbine technology continues to replace antiquated gearbox technology in the renewable energy sector as well.
Research out of the European Joint Commission suggests that the benefits of permanent magnet synchronous generator turbines (PMSG) include reliability, weight, efficiency, and maintenance and all outweigh gearbox turbines.
USA Rare Earth has the only fully equipped rare earth permanent magnet manufacturing site in America today in Stillwater, Oklahoma. It is not yet operational or staffed and therefore some time from potential production. It requires rare earth metals, alloys, and magnetic powder feedstocks.
If those hurdles are overcome then USA Rare Earth will be the first, or among the first, rare earth permanent magnet manufacturers in the US in a generation but it has a considerable way to go to get up and running.
China is Keeping More Permanent Magnet Rare Earths at Home
Jack Lifton, an expert from the Critical Minerals Institute, believes that the key issue and concern for America is China’s growing domestic demand, drawing on research by Ginger International Trade & Investments in Singapore. 16
It is based on that group’s more than thirty years of rare earth trading between China and the outside world.
Today Chinese internal demand for Neodymium and Praseodymium (Nd/Pr) for domestic products is certainly more than 50% of world supply. The Chinese domestic market for rare earth permanent magnet enabled devices is already huge and growing day by day.
For example, China probably consumes a quantity of rare earths for electric vehicles alone than the entire US market does through imports from China as finished goods.
One way to look at the Chinese growing internal demand is that based on Ginger research, to meet 2030 Chinese domestic demand will require an amount equal to seven times the total output of Lynas of Australia, the only major producer of rare earths outside of China through its rich Mt. Weld monazite.
This means an additional 250,000 mt/per year of monazite will have to be mined to reach the Chinese demand target. Even worse for the West, for the last five years or more, China has been busy locking up the bulk of the rest of the world’s annual output of monazite.
Ucore Rare Metals (UURAF) is developing advanced technology that provides separation and mining services to the mining and mineral extraction industry.
Through strategic partnerships, this vision includes disrupting China’s dominance of the US rare earths supply chain through the development of several heavy and light rare earth processing facilities. Referred to as Strategic Metals Complexes (SMC) and strategically located throughout North America.
Ucore’s RapidSX™ platform is an accelerated solvent-extraction (SX) based separation technology for the separation of critical and other metal feedstocks. The work to date indicates the potential for significant technical and economic efficiencies for producing commercial-grade REE oxides (REOs). Source: Ucore website
U.S. Government Actions to Strengthen Rare Earths Production
In July 2019, then President Trump made a series of presidential determinations (PDs) under Section 303 of the Defense Production Act of 1950 (DPA) that domestic production, separation, and manufacturing of rare earths is “essential to the national defense” of the United States.
These designations freed up funding from the Department of Defense (DOD) to pursue increased production.
On February 24, 2021, President Biden signed Executive Order 14017 on Securing America’s Supply Chains, which requires the secretary of defense to submit a report identifying risks in critical minerals supply chains, including REE, and policy recommendations to address these risks.
Title III of the DPA, which is dedicated to ensuring the timely availability of essential domestic industrial resources, can help buttress domestic rare earth industrial development.
Funding from the DPA is essential to sustaining capital flows to highly intensive rare earth extraction and processing projects. In addition, support from the DPA is seen as a signal of legitimacy for projects and companies, from a security and business standpoint, which can spur supplemental investment.
The DPA Title III program has issued several awards.
The DOD awarded Australia’s Lynas Corp an investment worth $30 million in February 2021 to establish U.S.-based processing capabilities for light rare earths. The facility to be constructed in Hondo, Texas, as part of partnership with San Antonio’s Blue Line Corporation.
The DOD also awarded $10 million to MP Materials to upgrade their on-site rare earth separation assets and a $35 million contract to MP Materials in February 2022 to design and build a heavy rare earths processing facility in Mountain Pass.
Conclusion and Recommendations
America needs to accept the fact that for the foreseeable future, China controls the price and production of rare earths. Part of this is geology, part of this is costs, part of this is a culture of speed and urgency, part of this is investment and momentum.
But the United States cannot just be complacent and look the other way. We need urgent action to reduce the supply risks and increase the probability of achieving some degree of independence through the efforts of our government and private companies and those of our allies and friends.
The point is that we need to be prepared for the worst-case scenario and not just kick the can down the road and hope for the best. This is exactly how we have ended in the current unfortunate situation. Our economic and national security depend on it.
“Most prime contractors can’t even tell you how much Chinese content is in their systems, ranging from semiconductors to displays to nuts and bolts,” 17
Michèle Flournoy, former Undersecretary of Defense for Policy
We need action to blunt China’s cost and speed advantages. In a 2021 address, Maj. Gen. Cameron Holt, then deputy assistant secretary of the Air Force for Acquisition, estimated that China is procuring munitions and other high-end weapons systems “five-to-six-times” faster than the America. 18
Full Report Recommendations Will Be Released in April 2023
Notes
1. How Apple tied its fortunes to China, Financial Times, January 17, 2023
2. Westwin Elements website
3. Huo Zhijie, (1953-1963) [The Establishment and Early Development of My Country’s First Rare Earth Production Plant (1953-1963)],” Dialectics of Nature, 2019.
4. USGS 2022 List of Critical Minerals, February 22, 2022
5. Europe and the United States use Chinese rare earths to support advanced military systems, but China can block],” Sohu News (China), August 12, 2016
6. David Kramer, “US government acts to reduce dependence on China for rare-earth magnets,” Physics Today, February 1, 2021. (https://physicstoday.scitation.org/doi/10.1063/PT.3.4675)
7. Defense Metals Corp. website
8. International Energy Agency (IEA). (2021, May). The Role of Critical Minerals in the Clean Energy Transitions.
9. Ibid.
10. Ibid.
11. Politico. (2022, December 12). China Dominates the Rare Earths Market. MP Materials (2022, November 03). MP Materials Reports Third Quarter 2022 Results and Begins Stage II Commissioning.
12. Geomega website presentation
13. Wang Denghong, [Discussion on strategic key mineral related issues],” Chemical Mineral Geology, 2019.
14. Roskill-Rare-Earths-an-industry-in-transition-from-fossil-fuels-to-the-green-economy, February 10, 2021.
15. Adamas Intelligence, Rare Earth Magnet Market Outlook to 2035, April 2022.
16. Lifton, Jack, Investor Intel, January 23, 2023
17. Bloomberg, February 20, 2023, Russia’s War on Ukraine, China’s Rise Expose US Military Failings
18. Ibid.
References
Bloomberg, 2022, A news article describing the nature of supply chains disruptions in the base metal industry. Available at: https://www.bloomberg.com/news/articles/2022-07-06/white-hot-metal- market-cools-in-warning-for-global-economy.
Keith Bradsher, “Amid Tension, China Blocks Vital Exports to Japan,” The New York Times, September 23, 2010. (https://www.nytimes.com/2010/09/23/business/global/23rare.html)
Brown, J.H. and Eggert, R.G., 2017, Simulating producer responses to selected Chinese rare earth policies Resources Policy, 6 November 2017, 10.1016/j.resourpol.2017.10.013.
Department of Defense, 2022, Securing Defense-Critical Supply Chains. An action plan developed in response to President Biden’s Executive Order 14017.
DeWit, A., 2021, Rikkyo Economic Review, Vol. 75, No. 1, July 2021, pp. 1 -32 1, The IEA’s Critical Minerals Report and its Implications for Japan.
Eckes, A. E. 1979, The United States and the Global Struggle for Minerals, University of Texas Press,
1979. In Peck, D., 2019, Critical Materials: Underlying Causes and Sustainable Mitigation Strategies.
Offerman, E. (ed.). Chapter; A Historical Perspective of Critical Materials: 1939 to 2006 London: World
Leruth, L., Mazarei, A., Régibeau, P., Renneboog, L., 2022, Green Energy Depends on Critical Minerals. Who Controls the Supply Chains?
John Tkacik, “Magnequench: CFIUS and China’s Third for US Defense Technology,” The Heritage Foundation, May 2, 2008. (https://www.heritage.org/asia/report/magnequench-cfius-and-chinas-thirst-us-defense-technology)
Mari Yamaguchi, “Japan: China rare-earth ban could hurt economy,” Associated Press, September 28, 2010. (https://phys.org/news/2010-09-japan-china-rare-earth-economy.html). For more context on the impact and policy moves adopted by Japan in the aftermath, see: Mary Hui, “Japan’s global rare earths quest holds lessons for the US and Europe,” Quartz, April 23, 2021. (https://qz.com/1998773/japans-rare-earths-strategy-has-lessons-for-us-europe)
Disclaimer
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The material in this article is intended as general information and not information that you should rely on for investment or trading purposes. We do not give any investment advice nor advocate the purchase or sale of any security or investment. You should consult with your professional investment advisor regarding investments in securities referred to herein. The Publisher and the Publisher Personnel will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material published in this article.
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RARE EARTHS SUPPLY CHAIN SECURITY IN
AN AGE OF US-CHINA RIVALRY
By Carl T. Delfeld
February 2023
All Rights Reserved
From Triumph to Complacency
China is a supply chain superpower - a key advantage for China and a vulnerability for America.
Supply chain security is just one of the many battlegrounds that will be played out in this decisive decade of rivalry between America and China. It will either confirm or upend America’s role as the world’s leading power.
This rivalry will not only circle the globe in search of critical minerals but will extend from the oceans’ seabed to space as China is already both a maritime and space power with great ambitions to be a superpower in both.
"To explore the vast cosmos, develop the space industry and build China into a space power is our eternal dream," opens China’s latest space White Paper, released in January 2022, and was attributed to Xi Jinping.
Although the pandemic highlighted our supply chain’s fragility and lack of resilience, the trends have been going the wrong way for decades across trade, manufacturing, technology, resources and mining, aerospace, and defense.
America needs begin to rebuild from the ground up to take back control of its supply chains for rare earths and critical tech metals.
For example, recent war games conducted by CSIS highlighted that the US could run out of long-range, precision-guided munitions in less than a week in a conflict over Taiwan.
Another stark example of the resource gap is the US hypersonic missile program being held up by a lack of one critical metal.
Rare earths and critical strategic metals are not only very important, they are also very difficult and time consuming to extract as byproducts from common ores. For example, just a dollop of vanadium doubles the strength of steel with a 30% reduction in weight and one ounce of rhenium is derived from 120 tons of copper ore.
The same goes for a country’s power grid. Solar and wind power generation facilities and other clean energy will require additional supplies of copper, silver, indium, tellurium, dysprosium, neodymium, selenium, germanium, and gallium.
In short, over the past three decades, China has been filling in as it attracted capital investment, and technology, while the American industrial base has been hollowing out as stocks and China have climbed.
Trading higher profits and share prices for production has proved to be a Faustian bargain for America.
It is now time for America and North America to fill in by attracting and putting to work massive flows of private capital into real productive assets. America’s ace in the hole has always been attracting international direct investment.
This inflow of international and domestic private investment has waned along with the American power brand of dynamic stability.
In particular, the executive branch and Congress needs to work together to better align Fortune 100 and S&P 500 corporate interests with the urgent need to sharply increase capital investment in American industry and American workers.
America is a software superpower, but hardware and software are both important for production is power, a skilled workforce is power, and both are built from the ground up.
This brings us to rare earth elements.
The Japanese refer to them as “industrial vitamins” and the “oil of the 21st century.
America’s rare earths and tech metal supply chain fragility is both dangerous and puzzling. To a great degree, it could have been prevented with just a modicum of foresight.
America has one of the world’s greatest rare earths mine in Mountain Pass, California.
America has ample domestic natural resources, plus it borders commodity rich Canada and South America.
So how did we ever become dependent on China for the supply of rare earths and rare metals critical to our technology and defense base?
In short, China’s massive advance over the past three decades to become a mining and refining superpower while Washington slept, is an unforced error in our age of US-China rivalry.
The cause is not complex and can be traced first to post-Cold War complacency regarding the development of natural resources in America.
Another reason is a rigid belief in the free market solving all strategic issues. Letting the S&P 500 run our international economic policy to optimize stock price led to shifting of our industrial base to China.
America has put share price above all other economic and national security considerations. This is a questionable long-term strategy.
In a nutshell, we seem to have forgotten that America’s economic security, financial security, and national security are all one in the same.
A few highlights of this debacle include closing the U.S. Bureau of Mines in 1996, allowing America’s only rare earths mine to go bankrupt, winding down our defense stockpile, and standing passively by as China became a global manufacturing superpower while locking up strategic resources all over the world.
The defense and national security establishment also needs reform to increase competition, innovation, transparency, and agility across its supply chains. While more than 70 aerospace and defense “prime contractors” worked directly with the government in 1980, this was whittled to just 5 by the early 2000s, the same number as today: Lockheed Martin Corp., Raytheon Technologies Corp., General Dynamics Corp., Northrop Grumman Corp., and Boeing.
Consolidation has certainly not led to efficiency. One example is the Navy’s Littoral Combat Ship program that was projected to be a 55-vessel fleet costing $220 million per ship but turned into 35 ships costing on average $478 million apiece.
Politics is part of the problem. The F-35 Joint Strike Fighter program - the world’s most expensive weapons program.
A 2021 Hudson Institute study determined that the time it takes for the Defense Department to go from identifying a need to awarding a contract has increased from about one year in 1950 to seven years. For more complex systems, such as the trillion dollars plus F-35 Joint Strike Fighter program, it can take more than 20 years to become operational. We can’t afford this in an age of intense US-China rivalry.
George Washington in his first State of the Union Message, in 1790, stated that “a uniform and well-digested plan is requisite” and manufacturing should render the United States “independent of others for essential, particularly military, supplies.”
This includes rare earths which China dominates - especially the expensive “heavy” rare earths through both domestic development and access to overseas extraction activities abroad such as Myanmar.
China also dominates the technologies, equipment, and capacity needed to separate and process rare earths and to produce rare earth permanent magnets. This stranglehold has serious implications. Without rare earth elements, the Chinese press has observed, the “U.S. military’s technological advantage will be zero.”1
China clearly understood this and had a strategy to both protect its interests and exploit America’s weaknesses.
China Exploited American and Western Capitalism
China’s dominance in rare earths and critical metal production is connected to China capturing the commanding heights of global manufacturing - driven by both scale and lower labor/input costs.
Part of the plan was to attract American and Western companies to center their manufacturing operations to China.
Look no further than Apple.
Over the past two decades, Apple’s revenue is up 70-fold, and its share price up 600-fold. Remarkable to say the least.
Apple banked its production and assembly strategy on China-based factories, which now produce more than 90% of its products through more than 150 suppliers, many managed by Foxconn of Taiwan.
Apple CEO Tim Cook, explaining why Apple couldn’t manufacture at scale in the US, once told an audience that if every tool and die maker in America were invited to the auditorium where he was speaking, they “wouldn’t fill the room.”
Whereas “in China,” he added, “you would need several cities to fill with tool and die makers.” 2
Apple itself estimates that since 2008 it has trained at least 24 million Chinese workers - equal to the total population of Taiwan.
Chinese consumers also account for about 20% of Apple’s revenue.
This highlights the difficulty in getting American, European, and Japanese companies to strategically decouple from the China and the Chinese consumer market as the center of the global economy moves ever eastward towards Asia.
In 2021, American, European (particularly German), and Japanese firms sold about $700 billion worth of goods and services in China according to Bloomberg.
China now accounts for 50% of all of Asia’s economic output and military spending. Guangdong’s GDP is now five times larger than Hong Kong. China now represents:
50% of global shipbuilding
25% of value added for global manufacturing and 40% of world auto sales
30% of construction equipment
25% of global consumer appliance and electronics
However, average wages of Chinese manufacturing workers have doubled to over $500 a month. This is about twice as much as India or Vietnam, according to a survey by JETRO and this is where Apple is incrementally trying to move some production.
Meanwhile, America, which accounts for around 40% of Apple’s revenue, at best gets a few crumbs of final assembly and some small-scale test production.
America Faces a Daunting Task
America now confronts a daunting and complex high tech supply chain economic security challenge - a puzzle with a lot of moving pieces that don’t fit well together.
As it struggles to recover its supply chain security and resiliency, it is akin to trying to complete a puzzle without first forming the frame, leading to a haphazard and painfully slow approach.
For example, while one can make the argument for the recently passed $52 billion Chips Act to support the domestic semiconductor industry, it puts the proverbial cart before the horse. This legislation aids the fabrication of semiconductor chips but what about the dozens of upstream rare earths and rare metal inputs that go into the chipmaking process?
There is a global race to control many of these technology metals and China is winning. Another example is gallium - a key component of high-performance semiconductors used in fiber optic systems and mobile phone applications. The United States has virtually no domestic sources for gallium and relies on China for most of its supplies. China accounts for around 80% of global capacity for gallium, according to recent U.S. Geological Survey (USGS) data.
The priority of rebuilding supply chain security should be developing the foundation of manufacturing - commodity inputs - in America or friendly countries.
Even now, shortages are emerging, and prices are rising. If the world moves toward a green-energy future and more defense spending, the demand for many of these materials will skyrocket as global output falls far short of anticipated needs.
Private and government stockpiles can serve as a hedge and bridge while we buy time to rebuild independent and resilient supplies of rare tech metals.
This is especially important as we face defense stockpile and production issues.
An $8 billion deal by Taiwan for 66 F-16 fighters is not scheduled for delivery until at least 2025 and a Harpoon antiship deal signed by Taiwan in March will not be delivered until 2026. Despite adding leading China drone maker DJI to the “Chinese military company” list - parts of the USG are still dependent and vulnerable to economic espionage by drones with Chinese content.
China currently supplies about 80% of rare earth oxides, while four countries, Argentina, Chile, the Democratic Republic of Congo (DRC), and Peru, supply most of our copper.
The DRC produces 75% of the world’s cobalt and this is largely controlled by Chinese state-owned firms. China is also the dominant processor of many other rare metals such as gallium for semiconductors and germanium for fiber optics and satellites.
Furthermore, China is keeping more and more of all these critical materials at home to fuel its drive for dominance of the global clean tech ecosystem.
Unfortunately, the American government, politics, and media are largely reactive institutions while China plans and executes.
This quote by Deng Xiaoping captures this reality all too well.
"Unlike the Americans, our efficiency is higher; we carry things out as soon as we have made up our mind, it is our strength, and we must retain this advantage".
The Japanese and the South Koreans have done a much better job than America of securing the supply chain for these essential materials. Both countries are making investments all over the world to counter China. Japan provided critical financing to Australia’s Lynas and South Korea’s telecommunications giant KT Corp signed a partnership deal with the Mongolian government to secure a stable supply of some 80 kinds of mineral resources, including rare earth elements.
There are some encouraging signs that America is finally shaking off its complacency and grasping the linkages between the trifecta of technology, resources, and aerospace/defense.
Here is the bottom line: it will require great foresight and planning, capital investment, hedging and commercial diplomacy, to build stronger supply chain security for tech metals. Only then will there be there chance of a future in which nations do not fight over the world’s supplies of rare earths and critical metals, just as they once fought over oil.
This report will explore issues surrounding rare earths, and profile some companies actively working to increase production in North America. Some have financially supported the preparation of this special report but were invited based on their merits.
Before getting to rare earths, let’s first focus on cobalt, which highlights many of the challenges faced by critical metal producers.
Westwin Elements: America’s Nickel/Cobalt Refinery Project
Nickel and Cobalt are critical elements vital to key applications, including Nickel superalloys in jet engines, lithium-ion batteries in electric vehicles, and cemented carbides in industrial machinery.
Refining cobalt should be one of the US government’s top priorities due to cobalt’s criticality in technologies affecting America’s economic and national security. However, the last full-scale commercial cobalt refinery in the United States closed in 1985
Currently, the United States does not have a single commercial scale cobalt refinery, relying 100% on imports and recycled scrap for its cobalt. The US government’s National Defense Stockpile only has about 300 metric tons of cobalt - equal to about 5% of annual domestic demand.
Westwin Elements, a private company led by a determined group of Americans, seeks to build America’s only commercial-scale cobalt metal refinery in Oklahoma, and the company is well underway to accomplish this mission to meet the United States' increasing cobalt demand.
Cobalt is used in everything from the production of superalloys used in jet engines, to cemented carbides in industrial machinery, to batteries for electric vehicles, laptops, cell phones and other electronic devices.
According to the IEA, just one country, the Democratic Republic of Congo (DRC), currently supplies more than 75% of the world’s cobalt. This market share is more than double OPEC’s claim on oil and most of these Congolese copper-cobalt mines are controlled by Chinese companies.
Unlike China’s refining methods, which severely harms the environment, Westwin Elements will utilize a cobalt refining method that minimizes impact to air, water, and soil. Ultimately, Westwin seeks to commercialize carbonyl refining, which is environmentally neutral with no impact to air, water, and soil.
Carbonyl refining is the cleanest refining method in existence since it recycles its gas inputs and occurs in hermetically sealed chambers. Notably, carbonyl refining can likely refine shredded electric vehicle batteries, also known as black mass.
Cobalt prices have pulled back to below $20 per pound after reaching $40 a pound last May. This price drop is partly due to increased supply from the DRC and Indonesia, and Chinese demand shifting from cobalt-containing batteries to lithium iron phosphate batteries that are cheaper but also offer lower performance. While China Molybdenum (CMOC) expects to increase production of cobalt sharply this year, much of this output is likely to stay at home to fuel its electric vehicle boom. Meanwhile, Indonesia is surging as the world’s second largest producer of cobalt according to the USGS.
The projected demand for cobalt is expected to soar over the next decade. The world consumed 120,000 tons of refined cobalt in 2021, and that number is expected to cross 350,000 tons by the year 2030 according to the International Energy Association (IEA).
Source: European Parliament: 12/22: "Strengthening the security of supply of products containing Critical Raw Materials for the green transition and decarbonisation"(JRC) Joint Research Centre of the European Union, World Mining Data.
II. Rare Earths: The Secret Ingredients of Everything
Modern history is marked by technological innovations that lead to accelerating industrial production and remarkable efficiency gains.
The Watt steam engine, the telegraph, and railroad networks powered the first industrial revolution in the 19th century. The second industrial revolution was based on oil and coal leading to electricity, the telephone, and the internal combustion vehicle.
Today, we are in the emerging stages of the third industrial revolution; moving towards a carbon neutral electricity grid, fiber optic communications, and clean tech. This century requires a very different mix of metals - some of them quite rare and sourced in countries at odds with America and the West.
While America has been complacent concerning the supply of these metals, China has been on a spending spree over the last three decades. China not only developed its domestic capabilities, but China also acquired and invested in mines and supply contracts all over the world.
The Oil of the 21st Century
Daniel Yergin’s riveting tale of the major role oil played in the 20th century, The Prize: The Epic Quest for Oil, Money & Power traces the growing reliance on oil for both global commerce and war.
Oil not only powered economies, but it also played a pivotal role in the century’s statecraft from Winston Churchill’s decision to shift the Royal Navy from coal to oil in 1911 to the first Gulf War in 1991-1992 when America led a 35-country coalition to expel Iraq from Kuwait.
The following sentence in the book’s prologue sums up the world’s predicament today.
“As we look toward the 21st century, it is clear that mastery will certainly come as much from a computer chip as from a barrel of oil”
But what’s behind the computer chip and technology that forms the backbone for so much that we take for granted in modern life? The answer is rare strategic metals and rare earths.
These natural resources are critical to economic growth and advancement of technology. They are also invisibly intertwined with national strategies, geo-politics, wealth, and power. The National Geographic magazine titled an article on these metals “The Secret Ingredients to Everything.”
What exactly are rare strategic metals and rare earths? They are neither precious metals like gold nor common metals like copper or lead. Rather they are obscure rare metals like dysprosium, terbium, gallium, hafnium, indium, and rhenium that is in all sorts of products from cell phones to advanced weapons systems, aircraft engines, robots, and hybrid batteries.
The real value of rare earth elements, for example, is their unique electrical and magnetic properties that allow for miniaturization and much lighter, stronger, resilient, and efficient components. Rare earths are very difficult, time consuming, and environmentally problematic to extract from common ores and refine into oxides.
America is very dependent on imports of many of the ingredients that go into electric vehicles including the materials that make up the battery and the electric motor. There is a global race to control many of these technology metals and China is winning.
China’s rare earth ambitions go back to 1953, when the Chinese Academy of Sciences and the PRC Ministry of Metallurgical Industry jointly launched construction of China’s first rare earth plant, the China Baotou Number One Steel Rare Earth Factory. That plant was completed in 1959, and in 1969, Beijing assigned the plant to state-owned Baosteel. 3
America dominated rare earths production at that time but over the past few decades, China has become the Saudi Arabia of rare earths. China’s low-cost labor and lax environmental standards allows it to produce up to 85% of world production of rare earth oxides. And as China becomes the center of the world’s ecosystem for electric vehicles, domestic demand for their production is rising.
Rare earths expert Jack Lifton notes that the world needs seven more rare earth suppliers of the current size of Lynas (world’s #2 producer) over the coming years just to cover China’s increased domestic demand.
Furthermore, a 2022 report from the Interior Department highlights that America is now 100% dependent on imports of 21 of the rare metals deemed essential to our economic and national security. China is America’s #1, #2 or #3 source for 31 of these 35 strategic rare metals.
A F-35 fighter jet requires 920 pounds of rare metals and a Virginia class submarine 9,200 pounds, according to the Congressional Research Service. While in 1918, the British statesman Lord Curzon famously said that the Allied cause had “floated to victory upon a wave of oil” - in the 21st century, victory will depend on a river of rare earths and rare metals.
America’s dependency on China and other unstable sources of these minerals has led to an unfortunate window of strategic vulnerability. Furthermore, China is doubling down on its commanding lead by having its state-sponsored firms gobble up reserves and mining assets all over the world - even in America’s neighbors, Canada, and Latin America.
There are some that say that in our global economy, this sort of dependency is no problem, let the market work its magic - all will be well. History tells a different story and China has wielded its leverage with ruthlessness as recently as 2011 during a territorial dispute when China temporarily cut off exports of key critical metals vital to Japan’s technology economy. In just weeks, prices of many of these materials skyrocketed.
As key rare earths producer Lynas CEO Amanda Lacaze aptly puts it: “If there is a full-blown trade war, I can’t believe that the Chinese wouldn’t use rare earths as part of that. They could do it, literally overnight.”
The canvas of this “great game” is global but America has been on the sidelines. China is making investments in private companies in countries such as Brazil, Australia, the DRC, and South Africa. Japan is investing in India and Mongolia rare earths and metal projects and companies. It developed a close partnership with the largest, rare earths company outside of China - Australia’s Lynas Corporation. The Japanese are way ahead of us in executing a well thought out strategy.
Many of these materials are available in Canada and Latin America and providing some economic incentives to private companies to compensate them for lower margins, high capital requirements, and sizable environmental risk, would be more than justified.
America, which not all that long ago was the world’s top producer of rare earths and many rare metals, has been asleep at the wheel while China and other adversaries have captured these essential markets. America has been a victim of a “let the markets work” attitude and lack of strategic planning; allowing the country to virtually exit mining due to the environmental lobby.
The federal Bureau of Mines was closed in 1996 after 85 years of service. America’s only rare earths mine in Mountain Pass, California, has over the past few decades gone through several owners and, when it recently emerged from bankruptcy, it was acquired by a private equity firm with a minority stake taken by a Chinese rare earths element refining company. It is now known as MP Materials, which ships its rare earth concentrate to China for processing.
Critical and strategic rare metals and rare earths inputs necessary for clean energy such as electric vehicle (EV) production and national defense along with semiconductors and fiber optic materials are likely America and the West’s most pressing needs.
What exactly are rare earths? They are obscure rare metals that are in in all sorts of products from cell phones to advanced weapons systems, aircraft engines, robots, and hybrid batteries.
The real value of these metals is their unique electrical and magnetic properties that allow for miniaturization and much lighter, stronger, resilient, and efficient components.
China is also increasingly keeping more of all these critical rare earths and metals at home to fuel its drive for dominance of the commanding heights of the global economy. America is also extremely dependent on imports of many of the ingredients that go into electric vehicles including the materials that make up the battery and the electric motor.
This was all part of China’s plan from the beginning. Deng Xiaoping said the following in 1992, four years after China’s output of rare earths surpassed that of the United States.
“The Middle East has oil and China has rare earths,” 5
This why it is essential that America urgently build stockpiles of rare earths to reduce civilian and defense vulnerabilities to supply disruptions, and as bridge to buy time to develop domestic sources of supply and cleaner processing technologies.
Unfortunately, while American government, politics, and media are largely reactive institutions, China looks ahead.
This quote by Deng Xiaoping captures this reality all too well.
"Unlike the Americans, our efficiency is higher; we carry things out as soon as we have made up our mind, it is our strength, and we must retain this advantage". 6
Without a timely and dependable supplies of critical inputs to produce, for example, semiconductors, a country’s economy, and military can be crippled.
There is a total of 16 naturally occurring rare earth elements (REEs). 14 within the chemical group called lanthanides, plus yttrium and scandium. The latter are considered rare earth elements because they tend to occur in the same ore deposits as the lanthanides and exhibit similar chemical properties. REEs are found as components in several minerals, the most important sources being bastnäsite, monazite, xenotime, and ionic clay.
A basic distinction must be made between light and heavy rare earths. On average, the six light rare earths account for more than 95% of the volume of rare earths.
Consequently, the proportion for the nine heavy rare earths is less than 5% of rare earth volume and, because they are rarer and in high demand, they command a higher price.
The five rare earths that are key inputs for permanent magnets represent about 90% of the dollar value of rare earths produced each year.
Generally, elements with atomic numbers above that of europium are classified as heavy. These include terbium, dysprosium, europium, holmium, erbium, thulium, ytterbium, and lutetium.
Chinese rare earth element (REE) mining is concentrated in Inner Mongolia, Sichuan, Shandong, and seven southern provinces including Jiangxi. Not only does Inner Mongolia account for some 80% of China’s REE reserves, but it also specializes in light REEs such as neodymium.
Neodymium permanent magnets convert electrical energy into mechanical energy - they are much more powerful and long lasting than regular magnets and make things move more efficiently under conditions of great stress and heat.
The Wall Street Journal has recently highlighted that production of F-35 fighter jets was recently slowed by Chinese material content in permanent magnets.
Defense Metals and the Canadian Connection
Canada is resource rich and a member of NATO so it’s naturally the closest political, economic, and geographical partner of the United States.
Canada is the ideal candidate for mining rare-earth elements for the United States' green tech and defense sectors.
The US Department of Defense has already had "preliminary discussions" with several Canadian mining companies working on rare-earth projects. These discussions are part of a broader strategy of the US and its allies to reduce their reliance on non-friendly regimes, including China. This is called "friendshoring," moving supply chains within the borders of democratic economies.
The result is an impending Canadian rare-earth industry renewal. Plus, the Canadian government has announced a $3.8-billion package in federal funds that would be used to boost the country's production of critical minerals. Rare-earth elements are on that list, of course.
Just one of the companies seeking to end Western dependency on China is a Canadian resource company with the ambitious goal of providing 10% of the global supply of two vital rare earths is Defense Metals Corp. (OTC: DFMTF, TSXV: DEFN).
Defense Metals is focused on two rare earths, neodymium, and praseodymium, that are vital to the expansion of electric vehicles (EV). This is because an electric vehicle uses 3-5kg worth of neodymium–iron–boron (“NdFeB”) magnets in standard drivetrain electric motors.
Global demand for EVs is expected to grow from 8 million in 2022 to over 40 million by (or before) 2030. This will require huge amounts of rare earths most notably neodymium and praseodymium.
Rare earths expert Jack Lifton notes that China alone conservatively forecasts praseodymium-neodymium (NdPr) needs for just its own production of neodymium (NdFeB) permanent magnets as 78,000 tons per year by 2030.
Every ten million new EVs require about 10,000 tons of additional neodymium or 20% of the current annual global supply. 7
The Pentagon and by extension prim defense contractors are also concerned by America’s heavy dependence on rare earths and many critical metals produced by China.
A bipartisan piece of legislation has been introduced in the U.S. Senate that would force defense contractors to stop buying rare earths from China by 2026.
This means buying more rare earths produced by North American producers, a group that could include Defense Metals. The bill, sponsored by Senators Tom Cotton, an Arkansas Republican, and Mark Kelly, an Arizona Democrat, is the latest in U.S. legislation seeking to thwart China's near control over the sector.
Magnet rare earths neodymium and praseodymium are just what Defense Metals intends to produce after further financing and other regulatory permits for their 100% owned Wicheeda Rare Earth Element Project. This project is spread over 4,244 hectares and located 80 km northeast of Prince George, British Columbia, Canada.
If they obtain production, Defense Metals targets to produce about 25,000 tons per year of rare earth oxides over a 16-year mine life, which would make the company a globally significant rare earths producer representing 10% of the current global production.
Defense Metals recently announced the completion of its 2022 resource infill and exploration diamond drilling program which produced promising results. Next steps for Defense Metals include a preliminary feasibility study to be initiated in the first half of 2023.
There are some other positive factors investors need to take into consideration.
First, Defense Metal’s Wicheeda Project has very good road access and is close to critical infrastructure, including rail and power about 80km from Prince George, British Columbia, and the project is accessible by road.
Second, it has reached a Mineral Exploration Agreement with the McLeod Lake Indian Band regarding its project that puts in place a framework for communication and cooperation going forward.
Third, Defense Metals can also add value as it tests an acid bake extraction process for rare earths that could lower capital and operating costs. This process is expected to increase the recovery rate for rare earths, compared to the alternative caustic cracking process. Construction of the hydrometallurgical pilot plant has begun, and commissioning is scheduled to start in the second half of March.
The objective of the pilot plant is to produce a high-purity rare earth precipitate suitable as feed stock for a rare earths element (REE) separation plant and to gather data required for the pre-feasibility study.
Finally, Defense Metals has an experienced technical and management team that has an equity stake in the company. CEO Craig Taylor, before heading Defense Metals, was a director of Advantage Lithium Corp. and, previously, a director for Patriot One Technologies.
The above information is only summary information about Defense Metals Corp. and the industry in which it operates. Visit the company’s website at www.defensemetals.com for further information about the company and Independent Preliminary Economic Assessment for the Wicheeda Rare Earth Element Project, British Columbia, Canada, dated January 6, 2022, with an effective date of November 7, 2021, and prepared by SRK Consulting (Canada) Inc. is filed under Defense Metals Corp.’s Issuer Profile on SEDAR (www.sedar.com).
Neodymium, praseodymium (NdPr), terbium, and dysprosium are among the rare earth elements used to manufacture permanent magnets for offshore wind turbines, onshore wind turbines, and electric vehicle (EV) motors. Below is a chart showing how much increased production of NdPr is expected to be needed to meet projected 2030 demand.
For example, an offshore 5 MW wind power project requires 2,600 pounds of rare earths elements.8 The current and expected growth in wind power is massive.
Cleantech’s demand for rare earth elements could increase 3-7 times by 2040 compared to 2020 levels. Revenue for the rare earths mining and production value chain from the cleantech industry alone could increase eightfold from $400 million in 2020 to $3.2 billion in 2040.9
Currently, China accounts for 65% of rare earths mining and 85% of rare earths processing. That supply chain concentration has companies exploring opportunities in other countries.
For example, MP Materials, which currently operates the only rare earths mining and processing site in the United States, plans to become fully vertically integrated in the country.10 The company commissioned a separation refining facility and construction continues to advance on its magnetics manufacturing facility in Texas.11
Production of dysprosium (Dy) and neodymium (Nd), necessary for the permanent magnets of electric induction motors, will have to increase 50% and 110%, respectively, to achieve expected high performance and sharp reduction in emissions that EVs hope to achieve.
The Rare Earths Supply/Production Chain
The rare earths element production chain, up to the production of permanent rare earth magnets, includes the following steps with each step requiring specific skills, experience, and technology.
• mining rare earth elements
• producing rare earth concentrate or mixed rare earth carbonate
• separating into specific rare earth oxides
• refining into rare earth metals
• creating rare earth alloys
• fabricating rare earth products such as permanent magnets
As illustrated below, it begins with high-risk, capital-intensive mining, then a difficult and environmentally fraught chemical process to create a rare earth concentrate. Then an even more demanding process to extract and separate rare earth from the concentrate into oxides. Next, creating metals and alloys and finally manufacturing permanent magnets for application in a myriad of end products.
Since the 1970s, China has incrementally progressed up the production chain. James Hammond of the Hammond International Group describes the timeline as follows:
• 1970s to 1980s: Producing rare earth mineral concentrates
• Early 1990s: Ability to separate individual rare earth oxides from rare earth concentrate
• Late 1990s: Ability to form metals and produce magnets, phosphors, and polishing powders
• 2000s: Manufacture end products using rare earth metals such as electric motors, computers, batteries, LCDs, mobile phones.
(Source: Rare Earth Magnets and Motors: A European Call for Action A report by the Rare Earth Magnets and Motors Cluster of the European Raw Materials Alliances, Oct 2021. Argus Analytics Oct 2021. 2 Wood Mackenzie Global rare earths short-term outlook August 2022.)
As you can see, China’s domination along the spectrum of the rare earth production chain gives it significant leverage to impact and control prices of rare earth and finished products.
Since the 1980s, the Chinese government has used a combination of tax incentives, production, and export controls, and forced consolidation to reorganize the Chinese rare earth industry. The administrative expansion over rare earths has delayed “marketization” of the industry, which is highly dependent on government policies for development. The consolidation of three of China’s rare earth SOEs is simply the latest move by China’s administrative state, a culmination of decades of attempts to control the rare earth industry.
China’s Shenghe Resources, the semi-official foreign direct investment arm of China’s state council, concentrates fully on foreign heavy mineral sand resources and thereby largely eliminate the need of engaging junior rare earth miners. Shenghe also just signed a domestic deal for 8,000 tons of rare earth concentrate from Sichuan. This leads to China having the geo-political leverage to push back on countries that come into conflict with it.
Such was the case when China slowed rare earth exports by about 40% and then embargoed the export of critical rare earths to Japan for six weeks after a fishing trawler altercation near a disputed island between China and Japan in the East China Sea. As a result, neodymium/praseodymium (NdPr) prices surged from $50/kg to almost $500/kg in 2011.
Some rare earths prices such as dysprosium spiked even more, going beyond $1400/kg.
Source: USGS, Argus
In 2015, the WTO ruled against China forcing it to end export quotas so that now it adjusts production, domestic consumption, and export sales informally.
The Ministry of Industry and Information Technology allocates China’s rare earth production quota among six state-owned enterprises with China Northern Rare Earth Group having the largest allocation.
To end this dangerous dependency on China for rare earth oxides, we need to meet this challenge through a joint effort to mine and develop key rare earths in North America and South America.
The Turbulent History of America’s Mountain Pass Rare Earths Mine
The Mountain Pass, California deposit was reportedly discovered by a uranium prospector in 1949, who noticed high radioactivity. Rare earth metals and uranium tend to be found together and the Molybdenum Corp. of America bought the mining claims, and small-scale production began in 1952. Production expanded greatly in the 1960s, to supply demand for europium used as a phosphor in color television picture tubes.
The deposit was mined on a larger scale between 1965 and 1995. During this time, the mine supplied most of the worldwide rare earth metals' consumption. The Molybdenum Corp. of America changed its name to Molycorp in 1974. The corporation was acquired by Union Oil in 1977, which in turn became part of Chevron in 2005. Along the way, Molycorp absorbed GM's Magnequench along with their patents.
In 1998, the mine's separation plant ceased production of refined rare earth compounds. The mine closed in 2002, in response to both environmental restrictions and lower prices for rare earth elements in China.
As mentioned, where you find rare earths you also find radioactive ores, and radioactive slurry is a by-product of the separation process of ores. In 1998, chemical processing at the California mine stopped after a series of wastewater leaks. This led to the mine being inactive in 2002, though processing of previously mined ore continued.
In 2008, Chevron sold the mine to privately held Molycorp Minerals, LLC, a company formed to renew the Mountain Pass mine. Then in late 2010, China raised the price of rare earth elements by restricting exports of neodymium. In response, Molycorp spent hundreds of millions of dollars on a state-of-the-art ore-processing system for rare earth metals. The plan was to turn Mountain Pass into the cleanest, most reliable source of rare earth metals in the world.
Unfortunately, neodymium prices pulled back sharply in 2012, Molycorp couldn’t compete and eventually filed for bankruptcy in June 2015. At the time of the bankruptcy, Molycorp had outstanding debt was $1.4 billion.
While in bankruptcy, Secure Natural Resources (SNR), a company owned by Molycorp's creditors, including JHL Capital Group, gained control of the mine's mineral rights. In June 2017, the Mountain Pass mine was purchased at auction for $20.5 million and assumption of debt by a new entity called MP Mine Operations LLC.
Through a process of crushing, milling, conditioning, and flotation, the rare earth elements in the ore are separated from the other elements, forming a rare earth concentrate.
Shenghe Resources, a Sichuan China rare earths company, were allowed to keep 9.9% of the operation, as anything more would enact the Committee on Foreign Investments in the United States (CFIUS) review, an interagency federal government committee headed by the Department of the Treasury.
Shenghe is handling the shipment of the rare earth concentrate to China for separation and then distribution. The Ministry of Finance of the People’s Republic of China is the ultimate controller of Shenghe Resources, as is clear from the annual report of Shenghe Resources.
In 2020, MP Mine Operations LLC became a public company under the name MP Materials Corp. The transaction, which closed on November 17, 2020, raised $545 million. On November 18, 2020, MP Materials began trading on the New York Stock Exchange under the symbol "MP".
MP Materials has ambitious goals to build out the rare earths supply chain. We wish them the best, but Mountain Pass is overall a rather incredible story of mismanagement for such a strategic asset with America’s economic and national security at stake in its rivalry with China.
Permanent Magnet Rare Earths
Canadian rare earths recycler Geomega describes the challenge that it is faces in the context of a neodymium magnet demand that was a mere 40,000 tons at the turn of the 21st century and has already more than tripled. It is also expected to surpass 300,000 tons by 2030. 12
China currently supplies about 90% of the world’s rare earth neodymium (NdFeB) permanent magnets. This is the most powerful permanent magnet in existence, able to attract objects up to 1,000 times its own weight. This makes these magnets ideal inputs for high-energy applications where miniaturization is a key component of product design.
The United States (GM) and Japan (Sumitomo), by coincidence, both developed the neodymium magnet technology in 1982, but before long as you can see from the below graph, China leapt ahead.
The key pivot point and American blunder was in 1995 when GM sold its magnets subsidiary Magnequench to a consortium of Chinese companies and US investment firm Sextant Group. China was then looking for opportunities to capitalize on its abundant REE resources but didn’t have the technology to make magnets.
The deal was approved on the condition that the Chinese companies would keep Magnequench’s production in the United States for at least ten years. A few years later, a Magnequench’s production line was built in China, and in September 2001, the company announced that all US production lines would be shut down.
China then scaled up its production fast, and by the mid-2000s, China alone made up nearly 80% of global NdFeB magnet production.
We now face a dangerous situation since Lin Boqiang, the Director of the China Center for Energy Economics stated that:
“China has no obligation to be the rare earth supplier to the world.” 13
Powerful permanent magnets are used widely in wind turbines, electric motors, magnetic resonance tomographs, and smartphones all of which represent a large proportion of the total consumption of the value of rare earths. According to research by Deloitte, demand for high-performance magnets from EVs and wind turbines alone is expected to grow more than 400% from 2020 to 2030.
Neodymium magnets (also known as NdFeB, or Neo magnets) are an alloy of neodymium (Nd), iron (Fe) and boron (B), delivering a significant increase in force over ferrite, samarium cobalt, and the combination of aluminum (Al), nickel (Ni), and cobalt (Co) - also referred to as Alnico.
These magnets are extremely powerful but susceptible to corrosion and their magnetic field is only stable up to around 80° C (176° F). By adding dysprosium or terbium, the demagnetization temperature can be raised to about 200° C (392° F). Without these additions, the performance of the NdFeB magnet will limit the reliability and efficiency of electric vehicles (EVs).
Roskill projects that by 2027, close to 70% of new passenger vehicle sales will be hybrids to full battery EVs. 14
Every electric motor works as follows. First, an electric current is directed through a magnetic field. This produces motion and converts electrical energy into mechanical energy. Permanent magnets are used to create this magnetic field.
The best permanent magnets for electric motors are made with neodymium because neodymium magnets (neodymium-iron-boron) create the most stable, consistent, and powerful magnetic field due to their exceptionally high magnetic strength. Neodymium magnets are cheaper to produce, lighter, and stronger than any other high-powered magnet known today. As a result, the electric vehicle (EV) industry is projected to be the fastest-growing end-user.
Praseodymium is another rare earth oftentimes coupled with neodymium and collectively referred to NdPr. Nd and Pr each have their own separate individual applications, but the great majority of their usage is as an alloy in magnets.
Source: Geomega
Although the magnet industry has been trying for years to reduce its reliance on this alloy for high-performance magnets, gains have only been limited and dysprosium or terbium remains irreplaceable in many areas of application.
Progress towards reduction in dysprosium use appears to be stabilizing, while demand continues to increase and there is a long-term threat of supply bottlenecks/shortages for dysprosium.
Source: Arafura website
Tiny, high-powered magnets are used in laptops, tablets, and PC hard disk drives, as well as in smart phones, video game systems, blenders, vacuum cleaners, power tools, speakers, and even in motorized toothbrushes.
Rare earth magnets are also used for anti-locking braking system in automobiles.
They are also in MRI machines, blood separators, infusion pumps, and a wide range of other life-saving medical devices, point-of-sale devices, electronic locks, airplanes, and even HVAC systems.
The market for these magnets is already substantial and is expected to grow rapidly in coming years. According to a 2022 report from Adamas Intelligence, the estimated market for magnet rare earth oxides will triple between 2022 and 2035 to reach about $46 billion. The report projects neodymium magnet material shortages of 206,000 MT by 2035 and annual shortages of NdPr oxides to increase to 21,000 MT by 2030 and 206,000 MT by 2035. 15
According to a September 2021 article in Forbes, the United States needs about ten times its current rare earth supplies to reach the Biden Administration’s goal of having 50% of cars sold in 2030 be zero-emission electric vehicles.
To meet the expanding needs of green economy, the US will need exponentially more supply than current levels as investment into electric vehicles, wind power and other renewable technologies climb through the 2020’s.
From 2022 through 2035, Adamas forecasts that global demand for magnets will jump at a compound annual growth rate (CAGR) of 8.6%, underpinned by double-digit growth from the electric vehicle and wind power sectors.
Furthermore, China has more than 90% share of the global production of downstream rare earth products and technologies, including magnets.
China has gained considerable leverage over its competitors and adversaries, most notably the European Union and the United States of America. In 2022 China exported 53,288 MT of rare earth permanent magnets, up 9.6% from 2021.
The above top ten markets are 88% of all China’s rare earth permanent magnet exports. In total, China shipped to 127 countries.
The main export destinations in 2021 according to the Rare Earth Observer of 3 February 2023:
EU: 20,937 mt ·
USA: 6,376 mt
· Korea: 6,254 mt
· Vietnam: 3,967 mt
· Thailand: 2,238 mt
· Japan: 1,862 mt
· India: 1,466 mt
· Taiwan: 1,428 mt
· Mexico: 1,416 mt
· Russia: 1,035 mt
Recycling Rare Earths
One way for America to reduce its dependency on China is to develop clean and economically feasible recycling operations. Geomega (GOMRF) is building the world’s first sustainable rare earths recycling facility to help meet surging global magnet demand as the transition to vehicle electrification and renewable energy sources accelerates.
Located in a new industrial complex, a plant with a full capacity of 4.5 tons per day of magnet waste, is being built in Saint-Bruno-de-Montarville, Quebec, Canada. With a gradual scale up, low capital cost, small footprint and no liquid or solid waste, Geomega’s core project is based around the ISR Technology (Innord’s Separation of Rare Earths). This is a proprietary, low-cost, environmentally friendly way to tap into a C$1.5 billion global market to recycle magnet production waste and end of life magnets profitably and safely.
By using Geomega’s innovative technology and Quebec’s renewable hydropower, the company is keeping permanent magnets from the landfills and putting these critical rare earths back into a more self-sustaining supply chain.
This proprietary iron friendly technology benefits from the ability to recover the bulk metals (iron and aluminum) from bauxite residues. Bauxite residues is the largest waste by-product generated in the Bayer bauxite refining alumina production process. Large quantities of this caustic red mud are generated worldwide every year, posing environmental and safety challenges.
Storage of bauxite residues is a challenge for alumina refineries with over 80 plants across the world currently producing alumina from bauxite ore. It is estimated that over 1.4 tons of bauxite residues is generated per ton of alumina produced.
The Scandium factor is of particular interest as a byproduct of the bauxite residues processing. Small quantities of scandium are used to improve the tensile strength and physical properties of aluminum. Aluminum-Scandium alloys (Al-Sc alloys) are growing in interest from the automotive, aerospace, oil and gas and many other industries but its lack of supply keeps the price too high for most commercial applications. Furthermore, limited supply diversification with Scandium (Sc) mainly produced in Russia and China.
This prevents many industries from committing to Al-Sc alloys in a significant way.
Noveon (formerly known as the Urban Mining Company), appears to be the only operational U.S.-based permanent magnet manufacturer, producing a small amount of NdFeB permanent magnets.
The Defense Department DOD granted $30 million to Noveon to expand NdFeB magnet production. Noveon is the only firm in the United States that produces “sintered” neodymium magnets, which is the type of magnet the Commerce Department focused on in the report.
Sintered neodymium magnets (NdFeB) are made using high-temperature heating and a powder sintering method that exposes metal particles to high pressure and heat. The mass is then cut to shape, surface treated, and magnetized. The metal particles chemically bond to form very dense blocks that create a much more powerful product than bonded NdFeB magnets.
Source: Noveon website
Last year, China supplied 75% of America's sintered neodymium magnets imports, followed by 9% from Japan, 5% from the Philippines and 4% from Germany.
However, demand for the magnets is expected to spike in the coming years, leading to a potential global shortage. That’s because electric vehicles use about ten times as much of the magnets as conventional gasoline-powered cars.
A report from the Paulson Institute estimated that electric vehicles and wind turbines alone will require at least 50% of the high-performance neodymium magnet supply in 2025 and nearly 100% in 2030.
Demand for high-powered magnets is expected to climb much higher as the world continues to modernize and track towards an electrified future. The Paulson Institute projects that high-performance NdFeB (neodymium-iron-boron) will likely grow at an estimated 18% per annum through 2030.
Multiple technologies and applications will drive this growth such as the EV industry, which is a large consumer of permanent magnets and is expected to be a significant driver of future growth in permanent magnet demand, while offshore, direct-drive wind turbine technology continues to replace antiquated gearbox technology in the renewable energy sector as well.
Research out of the European Joint Commission suggests that the benefits of permanent magnet synchronous generator turbines (PMSG) include reliability, weight, efficiency, and maintenance and all outweigh gearbox turbines.
USA Rare Earth has the only fully equipped rare earth permanent magnet manufacturing site in America today in Stillwater, Oklahoma. It is not yet operational or staffed and therefore some time from potential production. It requires rare earth metals, alloys, and magnetic powder feedstocks.
If those hurdles are overcome then USA Rare Earth will be the first, or among the first, rare earth permanent magnet manufacturers in the US in a generation but it has a considerable way to go to get up and running.
China is Keeping More Permanent Magnet Rare Earths at Home
Jack Lifton, an expert from the Critical Minerals Institute, believes that the key issue and concern for America is China’s growing domestic demand, drawing on research by Ginger International Trade & Investments in Singapore. 16
It is based on that group’s more than thirty years of rare earth trading between China and the outside world.
Today Chinese internal demand for Neodymium and Praseodymium (Nd/Pr) for domestic products is certainly more than 50% of world supply. The Chinese domestic market for rare earth permanent magnet enabled devices is already huge and growing day by day.
For example, China probably consumes a quantity of rare earths for electric vehicles alone than the entire US market does through imports from China as finished goods.
One way to look at the Chinese growing internal demand is that based on Ginger research, to meet 2030 Chinese domestic demand will require an amount equal to seven times the total output of Lynas of Australia, the only major producer of rare earths outside of China through its rich Mt. Weld monazite.
This means an additional 250,000 mt/per year of monazite will have to be mined to reach the Chinese demand target. Even worse for the West, for the last five years or more, China has been busy locking up the bulk of the rest of the world’s annual output of monazite.
Ucore Rare Metals (UURAF) is developing advanced technology that provides separation and mining services to the mining and mineral extraction industry.
Through strategic partnerships, this vision includes disrupting China’s dominance of the US rare earths supply chain through the development of several heavy and light rare earth processing facilities. Referred to as Strategic Metals Complexes (SMC) and strategically located throughout North America.
Ucore’s RapidSX™ platform is an accelerated solvent-extraction (SX) based separation technology for the separation of critical and other metal feedstocks. The work to date indicates the potential for significant technical and economic efficiencies for producing commercial-grade REE oxides (REOs). Source: Ucore website
U.S. Government Actions to Strengthen Rare Earths Production
In July 2019, then President Trump made a series of presidential determinations (PDs) under Section 303 of the Defense Production Act of 1950 (DPA) that domestic production, separation, and manufacturing of rare earths is “essential to the national defense” of the United States.
These designations freed up funding from the Department of Defense (DOD) to pursue increased production.
On February 24, 2021, President Biden signed Executive Order 14017 on Securing America’s Supply Chains, which requires the secretary of defense to submit a report identifying risks in critical minerals supply chains, including REE, and policy recommendations to address these risks.
Title III of the DPA, which is dedicated to ensuring the timely availability of essential domestic industrial resources, can help buttress domestic rare earth industrial development.
Funding from the DPA is essential to sustaining capital flows to highly intensive rare earth extraction and processing projects. In addition, support from the DPA is seen as a signal of legitimacy for projects and companies, from a security and business standpoint, which can spur supplemental investment.
The DPA Title III program has issued several awards.
The DOD awarded Australia’s Lynas Corp an investment worth $30 million in February 2021 to establish U.S.-based processing capabilities for light rare earths. The facility to be constructed in Hondo, Texas, as part of partnership with San Antonio’s Blue Line Corporation.
The DOD also awarded $10 million to MP Materials to upgrade their on-site rare earth separation assets and a $35 million contract to MP Materials in February 2022 to design and build a heavy rare earths processing facility in Mountain Pass.
Conclusion and Recommendations
America needs to accept the fact that for the foreseeable future, China controls the price and production of rare earths. Part of this is geology, part of this is costs, part of this is a culture of speed and urgency, part of this is investment and momentum.
But the United States cannot just be complacent and look the other way. We need urgent action to reduce the supply risks and increase the probability of achieving some degree of independence through the efforts of our government and private companies and those of our allies and friends.
The point is that we need to be prepared for the worst-case scenario and not just kick the can down the road and hope for the best. This is exactly how we have ended in the current unfortunate situation. Our economic and national security depend on it.
“Most prime contractors can’t even tell you how much Chinese content is in their systems, ranging from semiconductors to displays to nuts and bolts,” 17
Michèle Flournoy, former Undersecretary of Defense for Policy
We need action to blunt China’s cost and speed advantages. In a 2021 address, Maj. Gen. Cameron Holt, then deputy assistant secretary of the Air Force for Acquisition, estimated that China is procuring munitions and other high-end weapons systems “five-to-six-times” faster than the America. 18
Full Report Recommendations Will Be Released in April 2023
Notes
1. How Apple tied its fortunes to China, Financial Times, January 17, 2023
2. Westwin Elements website
3. Huo Zhijie, (1953-1963) [The Establishment and Early Development of My Country’s First Rare Earth Production Plant (1953-1963)],” Dialectics of Nature, 2019.
4. USGS 2022 List of Critical Minerals, February 22, 2022
5. Europe and the United States use Chinese rare earths to support advanced military systems, but China can block],” Sohu News (China), August 12, 2016
6. David Kramer, “US government acts to reduce dependence on China for rare-earth magnets,” Physics Today, February 1, 2021. (https://physicstoday.scitation.org/doi/10.1063/PT.3.4675)
7. Defense Metals Corp. website
8. International Energy Agency (IEA). (2021, May). The Role of Critical Minerals in the Clean Energy Transitions.
9. Ibid.
10. Ibid.
11. Politico. (2022, December 12). China Dominates the Rare Earths Market. MP Materials (2022, November 03). MP Materials Reports Third Quarter 2022 Results and Begins Stage II Commissioning.
12. Geomega website presentation
13. Wang Denghong, [Discussion on strategic key mineral related issues],” Chemical Mineral Geology, 2019.
14. Roskill-Rare-Earths-an-industry-in-transition-from-fossil-fuels-to-the-green-economy, February 10, 2021.
15. Adamas Intelligence, Rare Earth Magnet Market Outlook to 2035, April 2022.
16. Lifton, Jack, Investor Intel, January 23, 2023
17. Bloomberg, February 20, 2023, Russia’s War on Ukraine, China’s Rise Expose US Military Failings
18. Ibid.
References
Bloomberg, 2022, A news article describing the nature of supply chains disruptions in the base metal industry. Available at: https://www.bloomberg.com/news/articles/2022-07-06/white-hot-metal- market-cools-in-warning-for-global-economy.
Keith Bradsher, “Amid Tension, China Blocks Vital Exports to Japan,” The New York Times, September 23, 2010. (https://www.nytimes.com/2010/09/23/business/global/23rare.html)
Brown, J.H. and Eggert, R.G., 2017, Simulating producer responses to selected Chinese rare earth policies Resources Policy, 6 November 2017, 10.1016/j.resourpol.2017.10.013.
Department of Defense, 2022, Securing Defense-Critical Supply Chains. An action plan developed in response to President Biden’s Executive Order 14017.
DeWit, A., 2021, Rikkyo Economic Review, Vol. 75, No. 1, July 2021, pp. 1 -32 1, The IEA’s Critical Minerals Report and its Implications for Japan.
Eckes, A. E. 1979, The United States and the Global Struggle for Minerals, University of Texas Press,
1979. In Peck, D., 2019, Critical Materials: Underlying Causes and Sustainable Mitigation Strategies.
Offerman, E. (ed.). Chapter; A Historical Perspective of Critical Materials: 1939 to 2006 London: World
Leruth, L., Mazarei, A., Régibeau, P., Renneboog, L., 2022, Green Energy Depends on Critical Minerals. Who Controls the Supply Chains?
John Tkacik, “Magnequench: CFIUS and China’s Third for US Defense Technology,” The Heritage Foundation, May 2, 2008. (https://www.heritage.org/asia/report/magnequench-cfius-and-chinas-thirst-us-defense-technology)
Mari Yamaguchi, “Japan: China rare-earth ban could hurt economy,” Associated Press, September 28, 2010. (https://phys.org/news/2010-09-japan-china-rare-earth-economy.html). For more context on the impact and policy moves adopted by Japan in the aftermath, see: Mary Hui, “Japan’s global rare earths quest holds lessons for the US and Europe,” Quartz, April 23, 2021. (https://qz.com/1998773/japans-rare-earths-strategy-has-lessons-for-us-europe)
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