US wants to reclaim critical rare earth supply chain

“We learned that there’s this mineral called monazite, which is very high in magnetic rare earth elements — that’s neodymium, praseodymium, dysprosium and terbium — which are the raw materials you need for these permanent rare earth magnets used in everything from electric cars to fighter jets.”

Lakewood, Colorado-based Energy Fuels (NYSE: UUUU), a uranium mining company founded in 1987, is one of several companies making recent moves in the U.S. rare earth market. Another is Lynas Corp. (ASX: LYC), an Australian rare earths company, which recently received a $30.4 million federal grant to open the first rare earths separation facility in the U.S.

“We are currently in the planning phase for our proposed integrated U.S. rare earth processing facility, for both light rare earths and heavy rare earths processing and rare earth specialty materials,” Lynas officials said in an email to FreightWaves. 

The U.S. has only one big operational rare earths mine, in Mountain Pass, California. Molycorp, which owned the mine and was the only rare earths producer in the country, went bankrupt and closed in 2015. 

Las Vegas-based MP Materials Corp. bought the Mountain Pass mine and other Molycorp assets in 2017.

MP Materials (NYSE: MP) went public in November, listing on the New York Stock Exchange in a $1.47 billion deal by merging with Fortress Value Acquisition Corp. (NYSE: FVAC), a special purpose acquisition company sponsored by an affiliate of Fortress Investment Group LLC.

“MP Materials is the largest producer of rare earth elements outside of China,” Matt Sloustcher, senior vice president of communications at MP Materials, said in an email to FreightWaves. “In 2020, Mountain Pass produced more than 38,500 metric tons of rare earth contained in concentrate, representing more than 15% of global production.”

For the moment, MP Materials is sending the rare earth from Mountain Pass to China for processing. MP Materials is also partly owned by China-based rare earth company Shenghe Resources.

In 2017, Shenghe provided about $80 million to MP Materials to fund the restart of operations at the mine and acquire the Mountain Pass facility from MolyCorp., according to filings with the U.S. Securities and Exchange Commission (SEC).

Through its investment, Shenghe Resources owns about an 8% stake in MP Materials, and has an “Offtake Agreement” with the company. 

Through the agreement, MP Materials’ principal rare earth customer is currently Shenghe, which mainly sells products in the Chinese market, according to SEC filings.

There are currently no rare earth supply chains in the U.S. with separation facilities that serve North America.

Lynas, Energy Fuels and MP Materials all eventually hope to alter that dynamic and create U.S. rare earth supply chains that provide resources to North American companies, thereby reducing reliance on China.

Last year, MP Materials received a $9.6 million investment from the U.S. Department of Defense to establish separation capabilities to the Mountain Pass operations. The goal is to have a separation facility in place by the end of 2022, Sloustcher said.

MP Materials has a three stage plan, with the ultimate goal of creating a full supply chain of rare earth mining, separation, and magnet manufacturing in the U.S.

“The company’s mission is to restore the full rare earth supply chain to the United States. By full supply chain, we mean mining, processing, and metal/magnet production. Through our Stage III, MP Materials will restore the capacity to produce rare earth metals and magnets in the U.S. and create a vertically integrated complete supply chain,” Sloustcher said.

Like MP Materials, Lynas said they want to create a rare earth supply chain in North America.

“Rare earth separation capability has been absent from the U.S. for several years, and our proposed facility will provide a secure, domestic source of high-quality separated rare earth materials,” Lynas said.

The small Texas town of Hondo — where Lynas plans to build its separation facility — is 43 miles west of San Antonio. Lynas’ proposed facility will receive rare earth processed “feedstock” from the company’s Mount Weld mine in western Australia. 

“We will follow proper processes and procedures before we finalize our construction plans. Once planning and permitting are completed, we expect the facility could be operational in 2-3 years,” Lynas said.

The moves by Energy Fuels and Lynas Corp. come at a time when the Biden administration has made it a priority to rejuvenate the U.S. as a player in the production of rare earth materials, thereby reducing the reliance on China for critical rare earth supplies.

China has dominated mining and production of rare earth since the 1980s, accounting for 80% ($110 million) of U.S. imports in 2020, according to the U.S. Geological Survey.

Processed rare earth metals are a group of 17 elements used in almost all modern technology, including smartphones, X-ray machines, turbine blades, flat-screen TVs and computer monitors, hybrid and electric vehicles, along with U.S. military weapons such as guided-missiles and F-35 fighter jets.

Rare earth elements and their applications

Rare earth elements are actually not all that rare, they are just difficult and expensive to extract and process. They also need to be found in clusters dense enough to mine. There are an estimated 2.7 million metric tons of rare earth reserves in the U.S. and more than 15 million metric tons in Canada.

China is home to about 40% of the world’s rare earth reserves (44 million metric tons), but more importantly has the technology and refining capacity to handle vast quantities of rare earth elements. That dominance creates security concerns for U.S. officials.

“Anything we can do to reduce the global/U.S. dependency of rare earth elements on China is a big deal,” Prakash B. Malla, director of research and development at the Thiele Kaolin Co., told FreightWaves. 

Sandersville, Georgia-based Thiele Kaolin is a mining and metals exporter that offers kaolin and silica products. Kaolin and silica can be used in paper, ceramics, plastics, paint manufacturing, food additives, and drugs and vitamins.

“In fact, we will want to have our own sources of these elements in the U.S. It is a national security issue,” Malla said. “The lack of this would make us a hostage to China and other countries.” 

Besides China, other sources of rare earth imports for the U.S. in 2020 included Estonia, 5%, and Japan and Malaysia, at 4% each.

Ironically, the U.S. dominated rare earth mining and production for decades, spanning roughly from the 1940s to the late 1980s. One of the major reasons the U.S. outsourced rare earth processing to China was cost, according to several experts.

“Everything really came to an end in the 1980s, across all commodities, because ultimately China had arrived into the market with material that was obviously significant, vast amounts of material across all spectrums,” said Lewis Black, president and CEO of Almonty Industries.

Almonty Industries is a Toronto-based global mining company focused primarily on tungsten mining. The company has mining operations in Spain, Portugal and South Korea. 

“Cost was a factor, because obviously, the prices the Chinese offered were much lower in the 1980s than in the U.S. And most [U.S.] rare earth metal mining went out of business,” Black said.

Black said another reason the U.S. government outsourced rare earth was that processes used throughout the 1940s to 1980s for getting the metals created harmful wastes.

“There was really no urge or enthusiasm to save the mining operations by the U.S. government because these operations, in terms of how they were operated from the 1940s and onward, there were no rules, they just needed the metals,” Black said. “So you had all kinds of environmental issues and pollution of rivers and forests. It was a terrible, terrible time. Politically, there was no will to really save that industry.” 

Aaron Mintzes, senior policy counsel at environmental group Earthworks, said the U.S. still doesn’t have the world’s best record “when it comes to the regulation of hard rock mining.”

“You can tell because of all the exemptions the mining industry enjoys from what we think of as our bedrock environmental laws that don’t apply to hard rock mining,” Mintzes said. 

Some of the exemptions mining companies use are embedded in laws such as the Clean Water and the Resource Conservation and Recovery acts, the latter of which manages wastes, as well as other federal environmental laws, Mintzes said.

He also said there are organizations that work to create international supply chains in an environmentally and socially responsible manner.

“The Initiative for Responsible Mining Assurance (IRMA)  is a third-party independent certification system for industrial scale hard rock mines, and soon for mineral processing and for exploratory mining as well,” Mintzes said. “The reason why IRMA is different from other certification systems: Mining companies are on the board, labor people are on the board, indigenous people are on the board and mineral purchasers are on the board directing their suppliers to source more responsibly.”

Raquel Dominguez, a policy associate at Earthworks, said instead of relying completely on mining, the U.S. could create a “circular economy” for rare earth metals by recycling batteries and focusing on new extraction techniques from existing waste. 

“I think it’s pretty obvious that in the long term, it makes a lot more environmental, fiscal, human-rights sense to not rely solely on just digging giant holes in the ground,” Dominguez said. “It makes a lot more sense to put what we already have into some kind of recycling streams.” 

Lynas said its proposed plant in Texas, like the company’s other global operations, will be designed to produce “ethical and environmentally-responsible products.”

“Like other industrial operations, the process will produce by-products. The by-product material does not exhibit hazardous characteristics and will meet US standards,” Lynas said.

Malla said recent investments by the U.S. government in rare earth mining — such as Lynas and Mountain Pass — are steps in the right direction.

“The U.S. needs to develop domestic sources of rare earths. Also, we invest in the sustainable technologies for extraction, concentration and separation of rare earths,” Malla said.

Once operational, Lynas’ Hondo facility is expected to produce approximately 5,000 tons annually of light rare earths products, including 1,250 tons annually of the rare earth metals neodymium and praseodymium, which power some of the strongest types of rare earth magnets.

Lynas said the Hondo facility will serve the company’s U.S. customers and “support the U.S. government’s moves to strengthen the industrial base.” 

“U.S. industrial users currently source the vast majority of their materials from China producers. Lynas will provide these users with the option to source from a local producer,” the company said. “Security of supply is an essential foundation for the renewal of downstream specialty metal making and permanent magnet manufacturing in the U.S.”

Moore said Energy Fuels gets its sand ore from a mine in southern Georgia, which contains both the rare earth element monazite and naturally occurring uranium. The monazite sand ore is mined by ​​Chemours (NYSE: CC), and is processed and sold by Energy Fuels in Utah. 

“The monazite has uranium and thorium in it. It has been widely recognized as being a very valuable rare earth mineral, but because it was radioactive, it was all going to China, until we came along,” Moore said.

Energy Fuels is sending its shipments of rare earth carbonates to a separation facility owned by Neo Performance Materials Inc. (OTCMKTS: NOPMF) in Sillamäe, Estonia.

Moore said the carbonates Energy Fuels produces and sells are not dangerous.

“We work with low-level natural radioactive materials, not highly enriched stuff or anything like that. We started processing this monazite at our White Mesa Mill facility in Utah. We were able to produce a nice, intermediate rare earth product, this carbonate,” Moore said.

The sand ore mined in Georgia is sent to Energy Fuels’ Utah mill to be processed for monazite and uranium. The shipments are picked up by trucks and taken to Salt Lake City. The container is then put on railcars and shipped to the Port of Norfolk in Virginia. Then it is loaded on an ocean vessel and sent to Estonia for separation. The total travel time is about 40 days.

Like Lynas, Energy Fuels is exploring opening a separation facility in the U.S. to cut down on shipping costs and optimize profits. The company has hired a French consulting group to help Energy Fuels explore how to proceed.

“It makes a lot of sense to perform as many refining steps in one location as possible. That way, you’re not shipping material all over the place,” Moore said. “We’re planning to install as many of these steps as possible at the White Mesa Mill in Utah.”

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