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Rare-earth players see momentum building as US leans on defense supply chains


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Rare-earth players see momentum building as US leans on defense supply chains

Rare earths miners expect the U.S. government to continue pushing for its defense sector, and other industries using critical minerals, to establish supply chains that exclude China, after a new US$738 billion defense bill for fiscal 2020 zeroed in on domestic rare earth supplies, according to U.S. documents.

The National Defense Authorization Act, signed into law Dec. 20, 2019, also prohibits the U.S. Department of Defense from acquiring tantalum, which is now categorized as a "critical mineral," from Russia, China, Iran and North Korea.

In addition, the act authorizes the disposal of 3 million tonnes of tungsten ores and concentrates from the U.S. National Defense Stockpile and the use of up to US$37.42 million of the National Defense Stockpile Transaction Fund to acquire rare earth cerium and lanthanum compounds, aerospace-grade rayon, electrolytic manganese metal and pitch-based carbon fiber between fiscal 2020 and fiscal 2024, the government documents said.

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Key among the trusted allies is Australia, whose government has collaborated with the U.S. to develop critical minerals and shore up non-Chinese supply chains while forming a partnership between their top geological agencies. Both governments agreed to fund potential critical minerals and rare earth projects.The Defense Logistics Agency will publish a supply chain report within six months assessing U.S. rare earth material reserves and needs and providing a plan to encourage the use of rare earth materials mined, refined, processed, melted or sintered in the U.S. or from "trusted allies."

Government rationale

George Bauk, CEO of Australian rare earths producer Northern Minerals Ltd., has lamented the lack of government support for such projects and said in an interview that it often takes a "crisis," such as what is taking place in the rare earths supply, to prompt governments to act as many defense technologies "simply won't work" without rare earths.

Australian Defense Minister Linda Reynolds told the New World Metals Conference in Perth, Australia, in December 2019 that the rapid growth of renewable energy, aerospace, electric vehicles, telecommunications and agri-tech is fueling demand for critical minerals "exponentially."

Reynolds is "acutely aware" that Australia's new advanced defense technologies and capabilities demand "secure and stable" access to these raw materials, citing the F-35 Joint Strike Fighter, which requires about 417 kilograms of rare earth elements, according to a 2013 report by the U.S. Congressional Research Service.

The minister's talks with NATO, the EU, the U.S., Japan, India and many others revealed a "rapidly growing international recognition that we need to agree together on the best steps" to ensure robust and diverse supply chains and a "functioning marketplace."

Reynolds said having 70% to 90% of critical minerals supplied by China is "far too concentrated," while customers are too diverse and fragmented across companies, countries and continents. The minerals themselves are also "embedded in procurement functions that are incentivized to deliver the lowest price possible for these commodities."

"While procurement is not incentivized to purchase anything but the lowest price, there is very little [motivation] to invest in the market in a way that guarantees its future and also its freedom," Reynolds said. "This concentration of supplier agencies and the distribution of consumer agencies has combined to drive a cycle which is, in effect, a monopoly ... and monopolistic cycles are always very difficult to break, and no one sector can break it alone."

There are few alternatives to existing suppliers, and governments' increasing reliance on such minerals makes the entrenched patterns of production "increasingly harder to tackle," Reynolds said. For that reason, governments must make "early and speculative" investments.

'Something needs to be done'

Pini Althaus, CEO of USA Rare Earth LLC, which agreed in December 2019 to receive heavy rare earth concentrate from Arafura Resources Ltd.'s Nolans Bore neodymium-praseodymium project in Australia's Northern Territory, said in an interview that "the recognition is there in Washington that something needs to be done" because relying on China for the raw materials for its defense applications is "not a sound way of maintaining national security."

Nic Earner, managing director of Alkane Resources Ltd., which is looking into developing processing technology with South Korea-based Zirconium Technology Corp. for its Dubbo rare earths project in New South Wales, Australia, said in an interview that U.S. companies, particularly in the defense sector, have been slow to seek non-Chinese critical mineral materials given their "well established and supported" supply chains from the Asian nation.

Dubbo is believed to be the most advanced polymetallic project of its kind outside China, and Earner said the changing legislative environment under the Trump administration may eventually encourage or even force U.S. companies to seek non-Chinese supply.

Reed Blakemore, an associate director at the Atlantic Council Global Energy Center, a Washington-based think tank, said a "level of flexibility" exists in defense supply chains as they need the minerals themselves, as opposed to the electric vehicle and battery sectors, where supply chains have different requirements.