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Pentagon explores rare earths production with Australia to cut reliance on China

The U.S. Department of Defense is in discussions with Australia to develop a new rare earths processing plant as the U.S. looks to reduce its dependence on China for the minerals, Reuters reported, citing Ellen Lord, Pentagon's undersecretary of defense for acquisition and sustainment.

The U.S. is heavily reliant on China for refined rare earths, which is the biggest producer of the specialized materials, used in fighter jets, tanks and high-tech consumer electronics, and hosts about 80% of the global processing capacity.

"We're concerned about any fragility in the supply chain and especially where an adversary controls the supply," Lord said.

The U.S. Senate Committee on Energy and Natural Resources passed a bill mid-July aiming to reduce the nation's foreign dependence on critical minerals, though several lawmakers said hard-rock mining laws needed to be reformed first.

A defense spokeswoman said that cooperation with international partners is vital to guarantee rare earths and critical minerals supply, Reuters wrote.

In addition to Australia, the Pentagon is also looking at Canada and Africa to secure secondary sources for supply of rare earths.

In early June, the U.S. Department of Defense held talks with Malawi-focused Mkango Resources Ltd., Rainbow Rare Earths Ltd. and other miners to secure minerals listed as strategic metals in a bid to search for diversified resources outside China.

U.S. President Donald Trump made a series of "presidential determinations" in late July under Section 303 of the Defense Production Act, labeling domestic separation and processing of rare earths and production of some rare earth-containing products as "essential to the national defense."

According to experts, reports that China may extend its retaliatory action against U.S. tariffs to include restrictions on rare earth exports could backfire on the Asian giant, which they say is on the verge of becoming a net importer due to its significant manufacturing plans.

Meanwhile, rare earth-focused firms outside of China are starting to build capacity.

MP Materials recently decided to revive its mothballed refining equipment at its Mountain Pass rare earths mine in California after China raised its tariffs on U.S. rare earths imports to 25% and said it will impose further 10% tariffs in September.

Australia's Lynas Corp. Ltd.'s initial processing plant in Western Australia is expected to be operational within the next four years, with investment planned to develop a plant in Texas.

Northern Minerals Ltd., which produced first rare earth carbonate at its Browns Range rare earths project in Western Australia in October 2018, will decide on the final form and funding for a full scale plant in about a year, a spokesman said.