U.S. plans to refine its way out of potential “rare earths” crisis

U.S. plans to refine its way out of potential “rare earths” crisis

There was once a time that the American economy was threatened by OPEC (Organization of Petroleum Exporting Countries) because we were an importer of petroleum products.

The Americans got busy, started fracking, building pipelines, and developed new technologies. We are now producing “molecules of freedom” in abundance.

Now, after China threatens to cut our supply of rare earth elements essential for certain products, American entrepreneurs are coming to the rescue.

Rare earth elements are used every day. They are metals that are used in everything from cell phones to cars, televisions, military jet engines and medical devices.

However, the tit-for-tat trade Opens a New Window. war between the U.S. and China, Opens a New Window. may present a challenge to the industry which heavily relies on China. The retaliatory tariffs from China on $60 billion worth U.S. goods goes into effect this weekend.

Blue Line Corp., a chemical company based in Texas, is the first and only company outside of China that can process small batches of rare earth. They just partnered with Australian rare earths mining company Lynas to build a processing facility in the U.S.

According to a 2019 minerals commodity summary, approximately 80% of the nation’s rare earth elements and compounds were imported from China.  A view of this situation is summarized by the US Geological Survey:

It looks like the new goal will be to have 0% dependence on China.

Rare earth elements are a group of seventeen chemical elements that occur together in the periodic table and have a wide variety of uses in industry (e.g., smart phones, guidance systems, hard drives, MRI machines, optics, and hybrid vehicles). The team leading the mining effort are excited about this new profit opportunity.

Lynas and Blue Line plan to work together exclusively over the next year on the proposed development of a rare earths separation facility at a Blue Line site in Texas, US. The JV will initially focus on the separation of heavy rare earths but may also include work on light rare earths separation.

Lynas is the largest rare earths producer outside of China. It will have majority ownership of the JV.

Amanda Lacaze, CEO and Managing Director of Lynas, said: “This is an exciting opportunity to develop local separation capacity for our customers in the United States and to close a critical supply chain gap for United States manufacturers.”

Jon Blumenthal, President and CEO of Blue Line, said: “We are looking forward to working with Lynas to provide a secure source of rare earth materials to both US and international markets and using our technical expertise to produce raw materials for uses in green and other high-tech industries.”

Currently, there is one rare earths mine in the nation: California’s Mountain Pass mine . The facility ships about 50,000 tons of rare earth concentrate it extracts each year from California to China for processing.  Since there is no processing facility in the country, the mine’s capacity to be profitable and functional is at risk during the current trade battle.

The only rare earth metals-producing mine in the U.S. is facing short-term refining challenges as the nation looks to reduce its reliance on China for the materials due to the trade war.

… “We’re it,” James Litinsky, co-chairman of MP Materials, which owns the Mountain Pass mine, said Thursday on CNBC’s “Squawk Box.” “If we can’t be economic, there’s no hope for the U.S. industry.”

Out of concern for national safety, the Pentagon is also bolstering efforts to enhance American rare earths production. New facilities capable of processing rare earths in this country are under construction, which will add greatly to the employment opportunities as well.

At least three U.S.-based companies have rare earth processing plants under construction or in the planning stages, including one that is set to open next year at Mountain Pass mine to produce about 5,000 tons of two popular types of rare earths annually, according to a source familiar with the matter.

Additionally, there is also the option of recycling these elements. This lessens the impact of China’s trade threat tremendously, as well as provides a potential investment opportunity.

Platinum, for instance, is another automotive catalyst and it gets recycled because it’s valuable. Platinum is sold by the troy ounce and it goes for about $26 million per metric ton. Recycling isn’t economic for most rare-earth metals, unless of course prices rise.

Of course, higher rare-earth prices are a boon for small-cap mining stocks and the VanEck Vectors Rare Earth ETF may be a good investment, for a time. But that doesn’t mean the U.S. economy has a rare-earth issue.

Additionally, I noted last year that Japan had scored a major rare earths find in muds off its coast. The last time I checked, our relationship with that country was solid.

Finally, I hope the Trump Era of Deregulation can be used to inspire the opening of American rare earths mines. However, any new mine will cost at least a billion dollars to develop over a 10-year span. Therefore, expanding processing capacity is critical.

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