trending Market Intelligence /marketintelligence/en/news-insights/trending/ziAcF-YjTXMDwgUhlwSWLg2 content esgSubNav
In This List

Reducing permitting obstacles will be key to critical minerals revival in US

Blog

Insight Weekly: US stock performance; banks' M&A risk; COVID-19 vaccine makers' earnings

Video

S&P Capital IQ Pro | Powered by Expert Insights

Blog

Insight Weekly: LNG exports surge; investors unfazed by inflation; neobanks drive VC funding

451 Research Podcast

Next in Tech | Episode 41: IoT's Role in Energy and Utilities


Reducing permitting obstacles will be key to critical minerals revival in US

SNL Image

American Rock Salt Co. worker Bob Jaggard operates a face drill to create blast holes in a wall at the mine in Hampton Corners, N.Y.
Source: Associated Press

This is part two of a two-part series on critical minerals. Part one looks at the United States' reliance on other countries for materials that are scarcely mined domestically, while this installment examines possible solutions.

Resuscitating U.S. production of critical minerals is beyond any one quick fix, but several mining experts and leaders said reducing permitting timelines will be crucial to any U.S. effort to reboot the industry. President Donald Trump and the Republican-controlled Congress are pursuing policies that would achieve that.

"I think the Trump administration is probably bucking the trend," said Chris Hinde, who recently retired from S&P Global Market Intelligence as director of metals and mining research. "For the first time in ages, there's an administration that's looking more kindly on the mining side."

Some Republicans are pushing for tighter permitting timelines through H.R. 520, the National Strategic and Critical Minerals Production Act, but that legislation has stalled as language similar to the bill was stripped out of the final conference report of the National Defense Authorization Act. "Implementing more efficient permitting and review processes for mineral discovery, production and refining is the first step toward strengthening our nation's security and future," Sen. Dean Heller, R-Nevada, one of the authors of the bill, said in a statement to S&P Global Market Intelligence.

A pro-mining policy focus has also been part of the Trump administration's push for broader deregulation and protectionist trade measures. In late 2017, the president issued an executive order directing the Department of the Interior to identify a list of critical minerals, which it has done, and instructing the Commerce Department to consider ways to speed up permitting and boost domestic supply.

Under the executive order, Interior published a final list of 35 critical minerals and metals, which ranged from bulky fertilizers such as potash to the more esoteric rare earths that are important ingredients in advanced electronics and other applications. The list is a stepping-stone to a report expected to outline U.S. strategies to boost domestic supply.

SNL Image

The Aug. 16 deadline for the report's release has come and gone. It is not clear what is causing the delay, but one source with knowledge of the report-making process said it may have been held back due to extra review in assessing the "defense industrial base" related to the metals and minerals.

The report is supposed to define a U.S. strategy to reduce reliance on critical minerals, find ways to streamline permitting, consider alternatives to critical minerals, look at access to metal supplies from trading partners, improve U.S. mineral resource mapping and weigh how to boost U.S. domestic supply of critical minerals, from discovery to refining.

"The U.S. is underperforming globally given its vast mineral resources," National Mining Association spokeswoman Ashley Burke said. "In 2017, the estimated value of total nonfuel minerals was $75.2 billion. Modernizing our broken permitting process would allow the U.S. mining industry to live up to its resource potential and increase its already significant (15%) contribution to the GDP."

Hinde and other experts flagged permitting as a core concern the U.S. must tackle if it wants to boost production of critical minerals and metals. They said it takes as little as a couple of years to permit major projects in Canada and Australia, whereas the process averages about a decade in the U.S. With similar environmental laws, both of those countries have stricter timelines and, in some cases, greater coordination between different levels of government.

Delays cost investors money, cutting or deferring returns substantially or even killing projects entirely. Korey Christensen, a senior associate with Hogan Lovells who works with clients in the resource sector, said cash can be flighty in those circumstances. With the prospect of a longer permitting timeline, investors may avoid the U.S. or parts of it and instead fund projects abroad.

"I think the low-hanging fruit there is the permitting process — streamlining and speeding it up where possible," Christensen said.

US policy push

Permitting timelines in the U.S. have long been decried by industry, with some in Washington advocating efforts to shorten them. Sen. Lisa Murkowski, R-Alaska, raised concerns at an early 2017 committee hearing about the issue.

"When you look at the list of what it is that we import, where we import it from, and what it is used for, it quickly becomes clear that we have a problem on our hands," Murkowski said. "When it comes to permitting delays for new mines, our nation is among the worst in the world, so fixing our broken system is one of the single most important steps we can take."

Some have a skeptical view of the recent flurry of activity to try to boost mining and critical minerals.

"When it comes to the resource sector in the United States, we tend to have a knee-jerk philosophy," said Corby Anderson, a professor at the Colorado School of Mines. Anderson said the lack of U.S. domestic production of some metals such as rare earths has caused periodic cries for something to be done over the decades, but that anxiety over critical metals has not resulted in serious action.

SNL Image

"I would say that in the Western world, in the United States, we take a short-term view of resources and investments, whereas the Chinese don't," Anderson said.

Industry also shoulders responsibility for getting mired in mine permitting, a CEO who has permitted a mine in the U.S. said. "Yes, I think there needs to be tighter timelines," said Diane Garrett, president and CEO of Nickel Creek Platinum Corp. But long timelines in the regulatory process in the U.S. are not a given, and a project may drag on in permitting due to "self-inflicted wounds."

Garrett previously served as head of Romarco Minerals and oversaw the permitting of the Haile gold mine in South Carolina, which has since gone into production and is now owned by OceanaGold Corp.

"When you look at companies that are going on seven, 10 years of permitting, oftentimes you see that they didn't have a very comprehensive permit application," Garrett said. "Rule No. 1 is you've got to deliver a very fulsome report."

Opponents of Trump's deregulation have also said permitting in the U.S. is not as onerous as industry experts claim. In response to Trump's critical minerals executive order, Earthworks said the U.S. was competitive with other developed countries, and permitting at the federal level averaged three years. It has advocated that the U.S. should continue to source some critical minerals from abroad.

Trump holds a few other tools at his disposal as well. Several laws already on the books, including the Defense Production Act, give the president broad powers to stockpile materials or otherwise make it easier for companies to profitably produce materials deemed vital to national defense.

Rare earths

Another problem for the U.S. is that it has lost expertise in some critical areas, certain experts said.

As a case in point, MP Materials, a private U.S. miner of rare earths, depends on Chinese minority shareholder Leshan Shenghe Rare Earth Co. Ltd. for some technical expertise.

"They actually have a lot of knowledge on rare earths that, quite frankly, over the years the U.S. has unfortunately lost," MP Materials CEO Colin Nexhip said.

SNL Image

The private company mines rare earths in the U.S. at Mountain Pass in California but ships concentrate to China for processing.

Herein lies a trade-war twist for the U.S. in its pursuit of domestic supply. MP Materials started mining rare earths at Mountain Pass in January, with plans to produce at least 20,000 tonnes of rare earth oxides each year. Beyond that, it aims to expand and build a processing plant to refine its concentrate in the U.S., not China, according to Nexhip.

MP Materials had planned to use cash flows from operations to fund the expansion. But amid the trade war between the U.S. and China, its concentrate is now exposed to a 10% tariff in China that could jump to 25% if Trump goes ahead with harsher tariffs in early 2019. The tariff undercuts profits and could force MP Materials to shelve the expansion that, if completed, would bring back refined rare earths production to U.S. shores, Nexhip said.

MP Materials' conundrum exposes the sensitivity and complex nature of the global metal production and supply chain. Mining an ore that contains rare earths is relatively easy, Anderson said. Processing it into myriad final products that can be used in manufacturing is hard. Here the Chinese have an advantage with both ample capacity to process rare earths and technical expertise.

"They have a built-in economic and technical advantage that's hard to beat," Anderson said.