A recent monumental development within the mining and rare earths sectors is the Australian government’s financial endorsement of Arafura Rare Earths Limited‘s (ASX: ARU) rare earth mine and refinery project. This marks a significant step forward in the global pursuit of sustainable and secure Non-Chinese owned or operated sources for critical minerals. This move, underscored by an impressive A$840 million in loans and grants, signals a strong Australian governmental belief in the necessity and potential profitability of domestically sourced rare earth elements, vital for electric vehicle (EV) motors and renewable energy technologies.

Gina Rinehart’s Hancock Prospecting, alongside other private equity interests, has seen a notable appreciation in value following this announcement, illustrating the private sector’s growing confidence in rare earth ventures as a viable and lucrative investment avenue. This confidence is buoyed by government backing, which often acts as a catalyst for further private investment by demonstrating a commitment to the sector’s success and stability.

Australia’s strategic decision to support Arafura’s project, situated near Alice Springs, showcases its ambition to become a frontrunner in the production of rare earth elements, crucial for EVs and wind turbines. This initiative not only addresses the immediate financial hurdles faced by the mining industry but also aligns with broader goals of establishing Australia as a key player in the global supply chain for renewable energy technologies.

The involvement of figures like Gina Rinehart and Andrew Forrest, both of whom have substantial stakes in mining ventures, underscores a deeper shift towards mining as an investment that offers both substantial returns and strategic value in the context of the global green transition. Their investments in rare earths and the potential for vertical integration, as seen in the partnership between Forrest’s Hastings Technology Metals Limited (ASX: HAS) and Neo Performance Materials Inc. (TSX: NEO), highlight a keen understanding of the sector’s critical role in future technologies and energy solutions.

Australia’s proactive stance, contrasted with the more cautious approaches of other Western nations, illustrates a deep understanding of the strategic importance of rare earths and the necessity for domestic processing capabilities. This is not just about securing supply chains but also about capturing more value within the country, creating jobs, and fostering technological advancements in green energy and EV production.

Moreover, the broad financial and strategic implications of this government support extend beyond the immediate economic benefits. They underscore a pivotal moment for the global rare earths market, emphasizing the critical need for diversified, reliable sources of these essential materials. As tensions and competitions intensify on the international stage, Australia’s move represents a significant step towards greater independence and resilience in the face of geopolitical and market pressures.

In conclusion, this development is a clarion call to nations and investors alike to recognize the indispensable role of rare earths in the modern world. It is a testament to the vision and audacity of those like Rinehart and Forrest, who see beyond the immediate to the immense potential that rare earths hold for the future of technology, energy, and national security. As Australia forges ahead, it sets a compelling example for others to follow, highlighting the comprehensive strategy needed to fulfill the burgeoning demand for domestic sourcing of rare earth magnets, especially among European and American EV automotive OEMs.

Reviving the Domestic American Rare Earth Permanent Magnet Industry

Bad news for those who think that the shortage of rare earth processing in America can be resolved by the injection of “free” money (A/K/A subsidies [also known as taxpayer’s money]) into the “free” market as, drum roll, please, “tax credits,” grants, and loans. The Chinese have decided not to give up their decades-long, learned by trial and error as much as by science and engineering, dominance in rare earth processing. China has announced a (further) tightening of its strict laws against the export of rare earth themed industrial technology. In particular, this means that technologies for producing rare earth metals, alloys and MAGNETS may not be shared with ANY foreign (to China) entity as a matter of national security!

Indeed, most of the mining, refining, processing, and fabricating technology for rare earths and their commercial products originated in Europe and the United States between the end of World War II and the early 1980s, but, at that time a combination of newly exploited deposits in China and the need to lower costs for the rapid expansion of the rare earth permanent magnet industry drove rare earth processing and manufacturing engineering to China and Japan.

By the end of the twentieth century, the rare earth permanent magnet manufacturing industry had essentially vanished from the West. By two decades later, it has become even more narrowly confined to China.

Scientists in the West (more and more of whom are of Asian origin) certainly understand the science behind rare earth permanent magnets. Still, the manufacturing engineers who produce products based on this “science” are a vanishing breed. Since they have had little or no employment in the specialty of the mass production of rare earth permanent magnets since the late twentieth century, their numbers have diminished to below replacement level; in other words, the specialty is dead.

Of course, none of this is of interest either to our technologically illiterate governing class (the self-serving aristocrats previously known as politicians), or to their subservient academic mob of backbiting “advisors.” The Field of Dreams, also known as the U.S. Congress, goes by the mantra, “We will fund it, and it will happen. So, let it be enacted, so let Wall Street prosper.”

But, no amount of money, high fashion, good dining, or good looks (Have you ever seen the staffers in the House and Senate office buildings or the young Wall Streeters?) can substitute for legacy engineering, where the older experienced generation of manufacturing engineers has nurtured a younger generation to carry on and avoid the inevitable mistakes and costly dead ends so common to the well educated but inexperienced. Of course, engineering is of no interest to the table-top and bench-scale “scientists” who plague our society and influence our governors with their innovation and disruptive technology!

The tiny remaining rump of Western rare earth permanent magnet makers are mostly smoke and mirror specialists; they buy magnet alloy “blanks” from Chinese manufacturers and finish them into end-user forms in their non-Chinese home countries. Thus, this makes such products count as “domestic.”

I don’t see how such magnets can pass the “non-Chinese produced mandate of the IRA, so users of them will not qualify for the Bidenomic “tax credits.” And, I suspect, that if the U.S. tax rebate (subsidy) on domestic magnet production now before Congress is enacted, then China will simply terminate the sale of such blanks to foreigners, or for export, cutting off the scam of importing such blanks into the U.S. and calling the magnets then produced domestic.

What’s going to happen if and when the Chinese government declares such exports to simply be “technology” forbidden for export as an impediment to (Chinese) national security?

I think we’re about to find out.

Northvolt’s Innovative Financing in Quebec: A Model of International Collaboration

The recent news about Northvolt AB‘s venture in Quebec is a testament to the power of international finance collaboration. This project, backed by a mix of private European and American financiers, alongside public funds from Ontario and Quebec, is remarkable. Notably, the involvement of major players like Volkswagen, BlackRock, Goldman Sachs, and Canadian provincial investment groups highlights a unique synergy. This contrasts sharply with the American approach, which often relies on tax breaks rather than direct investment. The Canadian model, with its subject matter awareness and understanding, is a commendable approach that others, especially in the U.S., should consider emulating.

Ucore’s Dual Government Support: A Sign of Confidence

Ucore Rare Metals Inc.’s (TSXV: UCU | OTCQX: UURAF) recent acquisition of a $4.28 million funding agreement from the Canadian Government, in addition to support from the U.S. Department of Defense, speaks volumes about its credibility. This bi-national backing for a Canadian company with operations in the U.S. showcases the growing government recognition of the importance of rare earth elements and the technologies that Ucore brings to the table.

First Phosphate’s Vision and Recognition

The acknowledgment of First Phosphate Corp. (CSE: PHOS | FSE: KD0) by Professor Whittingham, a key figure in lithium-ion battery development, is significant. First Phosphate’s strategy to leverage Quebec’s phosphate resources for lithium iron phosphate batteries aligns well with current industry trends and Professor Whittingham’s endorsement. This positions them as an underrated yet potentially influential player in the battery materials market.

The Uranium Boom: A New Era for North American Energy

The recent surge in interest and investment in uranium, highlighted by companies like F3 Uranium Corp. (TSXV: FUU | OTCQB: FUUFF) and Energy Fuels Inc. (NYSE American: UUUU | TSX: EFR), signals a major shift in North American energy priorities. The rapid market capitalization growth and the reopening of mines underscore a renewed focus on nuclear power as a crucial component of the future energy mix. This shift is a clear response to the growing need for sustainable and reliable energy sources.

Biden-Harris Administration’s Push for Domestic Battery Manufacturing

The announcement of a $3.5 billion investment by the Biden-Harris Administration to bolster domestic battery manufacturing marks a significant step in America’s clean energy journey. This investment aims to enhance the U.S.’s position in the global battery market, create jobs, and support the clean energy transition. It’s a move that aligns with the growing realization of the importance of battery technology in the modern energy landscape.

Critical Minerals Institute’s Masterclass: A Focus on Future Financing

The upcoming Critical Minerals Institute masterclass on charitable flow-through and critical minerals is a crucial event for those in the industry. Understanding the mechanics of flow-through financing is vital for the development of junior companies. This masterclass represents an invaluable learning opportunity for those looking to deepen their understanding of the financial landscape in the critical minerals sector.

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Jack Lifton brings his extensive knowledge and insight into the latest developments in the technology metals sector, offering a comprehensive overview of the current trends and future prospects. Jack is the Co-Chairman of the Critical Minerals Institute and is well known for coining the term #technologymetals in 2010.

The rare earths necessary for the manufacturing of the magnets needed for the type of electric motors that can drive electric cars fall into two categories, the basic critical permanent magnet rare earths, neodymium (Nd) and praseodymium (Pr), and the critical, critical rare earths necessary for that purpose, dysprosium (Dy) and terbium (Tb). Without the addition of Dy and/or Tb to the alloy based on NdPr (a natural mixture called didymium) the magnetic material produced will not be able to maintain its (magnetic) strength at the high operating temperature and cycles of heating and cooling experienced daily by the electric drive motors to be used in EVs.

Unfortunately, while rare earth bearing deposits with NdPr contents of 16% to 25% of the total of rare earths contained are fairly well known, such deposits do not contain more than a “trace” of Dy and Tb. Dy and Tb, therefore, were laboratory curiosities until almost the end of the twentieth century when large areas of the formations known now as ionic adsorption clays were discovered in southern China’s Jiangxi Province. These, at or near, surface formations are the result of the natural weathering (dissolution) of rare earth bearing granites by tropical (warm) rains, creating, after a few hundred thousand centuries, “deposits” of porous clays in which the rare earths have been chromatographed (partially separated) by atomic number.

The lower atomic numbered rare earths such as cerium and lanthanum are barely present in these clays. They do have substantial distributions though of the basic critical magnet rare earths, Nd and Pr, and surprisingly and luckily, the highest relative concentrations of the higher atomic numbered rare earths, such as Dy and Tb, known anywhere. In addition, the rare earth elements are “adsorbed” on the clay particles; not chemically bound, so that they can be extracted from the clays by a simple wash of the common agricultural chemical, ammonium sulfate in water solution.

The clays in China are processed “in situ,” i.e, in place, by pumping an ammonium sulphate solution through the clay and then collecting the solutions in downstream plastic tanks where the rare earths are then precipitated as water insoluble carbonates or oxalates for transport to a processing plant where they are separated from each other and ultimately become part of alloys that can be magnetized and can maintain their magnetization at high temperatures. These ionic clay formations containing, in China, perhaps 300-1000 ppm of rare earths were the only commercial sources known for the heavy rare earths until quite recently when similar deposits in southeastern Asia in line with those in China were discovered.

In particular, Myanmar, formerly known as Burma, has significant ionic adsorption clays bearing rare earths. But China has acquired the rights to all of those that are being mined in Myanmar today, perhaps to exhaustion, with the output going exclusively to China. So too, with the ionic adsorption clay deposit known as Serra Verde in Brazil. This is a very good clay deposit, and it is scheduled to produce 2000 tpa of NdPr and 200 tpa of DyTb annually. But like Myanmar, all of this material will go to China.

Enter now, Appia Rare Earths & Uranium Corp. (CSE: API | OTCQX: APAAF), and its PCH discovery in Brazil. This looks to be a true ionic adsorption clay with, perhaps, the highest known total adsorbed rare earths concentration, so far discovered, of all or the majority ionic adsorption clay on this planet. The juniors have now descended upon Brazil, and announcements of deposits of “heavy rare earths sourced from ionic adsorption clays” are the flavor of the month. I still think we may be looking, in the case of Appia’s PCH deposit at the best ionic adsorption clay deposit in the Americas in the sense that it can be easily extracted with legacy in situ processing. It is a key discovery that, if properly developed, will benefit greatly the EV industries of North America and Europe. There are few sure things in life, I admit, but this is likely to be one of them. 

For those who want to argue that the Appia deposit is a mix of adsorbed rare earths and microcrystalline (chemically, covalently, bound rare earths) I will counter that it is the total cost of extracting the critical rare earths and the efficiency of that extraction that matters. Some of the “ionic clay” deposits require an acid leach after the aqueous leach to extract sufficient magnet rare earths; some of the “deposits” are simply too low a grade or the mix of magnet and non-magnet rare earths is skewed in favor of non-magnet rare earths. From the data that Appia has published, I believe that PCH is a major, economic, deposit with a very high recoverable grade of heavy magnet rare earths, and as such it is a key deposit for the re-development of a non-Chinese rare earth permanent magnet industry.

The Western OEM automotive industry has begun to downshift its expectations of the speed at which it will be able to changeover its traditional powertrain from internal combustion engines to electric motors. This is primarily due to two factors, one is material, the sourcing of components the operation of which depends on critical metals and minerals being mined and processed by an unplanned total supply chain that in many cases does not (yet?) exist, and the other is the industry’s reliance on customer demand coming from arbitrary government mandates requiring the EV transformation rather than on market forces.

It would seem that If the American Federal Government had good planning skills, its mandarins would, prior to the attempted implementation of a policy, look at the foreseeable consequences to the necessary critical materials’ supply chains of that policy. In the same vein you would assume that the management of American manufacturing corporations, looking at a radical product change, in the case of mass produced consumer products, would try to  coldly estimate the true costs of such a project. Alas, this is not the case for the vast majority of governmental oversight and private manufacturing organizations. They, thus, careen from one totally foreseeable crisis to another due, in both cases, to their ignorance of the time and capital allocation required for the design,  engineering and the construction of the mineral and processed metal products’ supply chains critically  necessary and sufficient for that radical product change.

Let’s look at the need both for mined minerals and for the total industrial supply chains downstream of mining to convert those minerals into the end-user forms necessary for the manufacturing of OEM automotive components used directly on cars and trucks. We will focus only on the manufacturing of electrically powered vehicles, EVs.

It cannot be overemphasized, and it is painfully obvious after a few moments of reflection, that the OEM industrial world does not directly use the mined ores of the metals that constitute the structure of, or the appearance of, or enable the properties of the electrical or electronic components of its finished products. In the last generation or so, the number of steps in the widely variant supply chains that transform these ores into finished end-user ready components has been of little or no interest to the financializers who now dominate the management of Western manufacturing corporations. In fact, the legacy of managers, who are trained and have operated as engineers and scientists within the corporations and who understand these supply chains has all but vanished.

The America OEM automotive industry’s move to electrification has placed its costs in intensive care [a/k/a margin collapse] The American Federal Government’s only therapy is to offer to subsidize the costs of EVs to reduce the losses, temporarily while the OEMs figure out how to become competitive with their dual nemeses at home and abroad, America’s Tesla and the growing Chinese EV behemoths led today by BYD, but we are assured that tomorrow the Chinese EV manufacturing industry will consolidate into just a few megacorporations making competition in the EV space in China all but impossible.

The Wall Street Journal recently wrote a review of the growth of BYD, which included the following paragraph:

“The investment bank, UBS, estimates BYD has a cost advantage of around 25% over traditional automakers in North America and Europe, due in large part to its in-house manufacturing of parts[my emphasis]. Analysts at UBS recently tore down a 2022 BYD model and found that around three-quarters of its parts were manufactured in-house.”

The American OEM automotive industry ignored the mining and processing industries after Henry Ford taught it to break the commodity based manufacturing “trusts” (a/k/a “monopolies)  of the 1910s, by vertically integrating his company upstream of his final products all the way to mining iron ore, shipping it, making steel, mining silicates, making glass, and even growing rubber for the making of tires. The surviving car makers, after the corporate bloodbaths of the teens and twenties of the twentieth century adopted this strategy of necessity in order to compete.

While I was a teenager, in the 1950s, car makers with names such as Hudson, Nash, Kaiser-Fraser, Studebaker and Packard vanished in bankruptcy leaving by the end of that decade just the Big Three, Ford, General Motors, and the Chrysler Corporation, and a small fourth called American Motors, the remainder of the last attempt by France’s Renault, to enter the American market.  

The vertical integration of the American car makers continued until the final quarter of the twentieth century, and their production and service parts labeled as  FoMoCo, Delco (GM), and Mopar (Chrysler) logos were familiar to the sourcing managers, and the manufacturing managers, not only of the OEM automotive assembly industry but also to those of the automotive  maintenance and repair industry.

The biggest instance in one industry of financialization for profitability rather than innovation and productivity was the selling off by the Big Three of their internal parts and service organizations. The best example of this folly was the sale of GM’s Delco to a private group that re-baptized it as Delphi and enriched itself even after filling GM’s then emptying coffers with more than a billion dollars. NB: One of the miscellaneous parts of this sell-off was the by-then moribund Magnequench subsidiary of General Motors, the very entity that had been created to first produce rare earth permanent magnets for the OEM automotive industry-you see, by the late twentieth century the Chinese had mastered the technology for producing magnet rare earths from the short-sighted Molycorp executives that had gone to them to secure low cost skilled and unskilled labor in the early 1980s. Of course magnet making followed, and by the late 90s it was all over for both Molycorp and Magnequench.

For the record, a financializer first bought the Magnequench unit from GM and could not revive it. He sold it to a Canadian group headed by a CEO who was an experienced chemical engineer. The Canadians immediately moved the operations to China to cut costs and may have kick-started China’s today dominance over Japan as the overwhelmingly largest manufacturer of rare earth permanent magnets for the OEM automotive industry (and for everything else, also).

The American rare earth processing industry shut down in 1998 when Molycorp shuttered its once pioneering and for some time, world’s largest solvent extraction plant dedicated to rare earth separation. As of today, October 24, 2023, twenty five years later, there is no solvent extraction plant dedicated to rare earths separation operating in North America. There is no operation in the Americas today making rare earth metals and alloys for magnets from rare earth chemicals. There is no operation in the Americas making rare earth permanent magnets for the OEM automotive, aerospace, or wind turbine industries.

I am now 83 and in pretty good health for my age-my mother lived to be 100. Why am I saying this to you? Because when I was asked at the Pentagon about 7 years ago how the USA could regain its footing in rare earth permanent magnets manufacturing I told them that they should scour the retiree communities and assisted care homes first to find the most experienced rare earth permanent magnet scientists and engineers and then provide oxygen, nursing care, and wheelchairs to those chosen to help.

Just since the closing of the original operations of Molycorp in 1998 and of Magnequech’s move to China shortly thereafter, the Chinese have trained and utilized an entire generation of rare earth miners, processors, and end-use product fabricators. Simultaneously they have created the world’s largest reservoir of specially educated rare earth scientists and manufacturing engineers(!). The total membership of these groups in China is believed to exceed 50,000 men and women. That means that while we, in the West, have been obsessed with financialization, the Chinese have already spent ONE MILLION MAN-YEARS on mining, refining, and producing and fabricating end user forms of rare earths for both the consumer and (their) military industries.

The sole driver today for the revival of a domestic American rare earth permanent magnet manufacturing industry is security of supply. But our institutional knowledge and inertia from excellence are extinct and have to be rebuilt.

If the United States actually were a free market economy then there would be no demand for domestic rare earth permanent magnets, since all potential domestically owned providers have openly said that they cannot match Chinese prices for such magnets. So, why are POSCO, Vakuumschmeltze, and JLMAG coming to North America to manufacture here such magnets? Its entirely due to the IRA, the Inflation Reduction Act, which grants subsidies, i.e., taxpayer giveaways, to those whose products have the majority of their value added domestically or in nations within which the USA has a “free trade” agreement, an FTA in Washington jargon.

The American OEM automotive industry has wisely embarked on a trajectory to become “involved” in a total domestic rare earth permanent magnet supply chain for its own needs. The U.S. Department of Defense has embarked on a similar mission. Neither group has much subject matter knowledge and may well waste quite a bit of time and effort on dead-ends, but both groups, the automakers and the military face an existential threat, the first being overwhelmed by Chinese made EVs and the second being overwhelmed by a Chinese military build up.  Both would lead to restrictions on the sale of rare earth permanent magnets by China to the USA to give China a competitive advantage.

America is now robbing Europe of its remaining expertise in the manufacturing of rare earth permanent magnets. This is due to the subsidies to be provided to European manufacturers who relocate to the USA. Time will tell if this is going to be enough. I believe that we are entering a zero-sum game. Some companies and government departments will win and some will lose.

There is simply not enough expertise to go around, and there certainly is not enough of the critical minerals and their processing either.

The world of rare earth permanent magnet manufacturing just received a jolt of excitement. A new announcement from the Department of Defense has revealed a significant investment in a domestic manufacturing plant, a move that holds implications not just for defense, but also for the wider commercial sphere.

For context, it’s worth noting that for years, the German company Vacuumschmelze (VAC) had a sales office in Kentucky via a company named E-VAC Magnetics, LLC (E-VAC). Primarily a marketing office, E-VAC was linked with home building projects but was also known for marketing VAC’s magnet products. And now, in a surprising twist, the Department of Defense has invested a whopping $94.1 million in E-VAC to bring to life a rare earth permanent magnet manufacturing plant right here in the U.S.

But there’s more to this story.

It’s customary for the Department of Defense’s grants to predominantly target American-owned and operated businesses. Enter Lynas Rare Earths Ltd. (ASX: LYC), an Australian company currently producing rare earths, which applied for a grant to build a heavy rare earths’ separation plant along with American company Blue Line Chemicals, a processor of rare earth products, in Texas. The dynamics of this partnership and grant allocation remain somewhat enigmatic. The essential detail here is that a non-manufacturing entity like E-VAC has secured this grant, and behind the curtain orchestrating the moves is VAC, a reputable manufacturer of these rare earth permanent magnets vital for automotive EVs.

A telling point is the recent order from General Motors (NYSE: GM) to VAC: a requirement for 1000 tons of magnets per year to be delivered beginning mid-2025. This order aligns intriguingly with the announcement that the new E-VAC manufacturing facility, bankrolled by the Department of Defense, is set to be operational by 2025. Given that the factory’s projected capacity is 1500 tons annually, it’s compelling to infer that General Motors might source its order from this very plant.

Still, there’s a broader implication to this move.

Defense doesn’t invest in consumer markets. Its core mandate is national security. The F-35 fighter jet, for instance, is believed to use substantial quantities of rare earth permanent magnets. This means the primary output from the E-VAC facility might be earmarked for defense purposes, with consumer needs taking second place. The scenario painted here is a deliberate strategy by the Department of Defense to ensure a domestic supply chain that meets both defense and commercial requirements.

However, a pressing question arises: where will the raw materials for these magnets come from? As of now, no U.S. entity manufactures these in quantities that a 1500-ton factory would demand. The primary Western supplier today is LCM of England, but its output is a mere fraction of this requirement.

This move by the Department of Defense is historic. It represents the first significant announcement of a large scale commercial rare earth permanent magnet factory in North America, since Magnequench was sold and moved to China nearly 25 years ago. But as this initiative takes shape, stakeholders will be keenly watching to determine the origins of the raw materials and the supply chain dynamics that this factory will engender.

The blather in the media suggesting that China could or already be weaponizing the export of their “rare earths” to the rest of the world is so one-sided that it must make the Chinese wonder if non-Chinese “analysts” and “experts” ever bother to see the world from the perspective of “others.” For more than a decade China has been aggressively acquiring outright or buying the output of non-Chinese rare earth sources. At this point in time, China is the overwhelming buyer, worldwide, for example of the mineral monazite, which is produced primarily as a byproduct of the processing of heavy mineral sands, which are the source of zircon and ilmenite, source minerals for, respectively, zirconium and titanium.

We can speculate that China seeks heavy mineral sands for its world-dominating production of zirconium and titanium and that the rare earths are just an added extra attraction. But my survey of actual China experts, not those who’ve never been to China and work for “intelligence” gatherers and purveyors, tells me that China is focused on conserving its own rare earth resources and responding to internal pressure to clean up its massive rare earth industry’s pollution problems. We know that Baotou’s famous operations now include extracting rare earths from the massive tailings produced over the last 30 years of poor quality mining and that China Nuclear has been licensed to process up to 50,000 tons per year of monazite to recover up to 30,000 tons per year of total light rare earths while removing the uranium and thorium from the monazites, which typically contain up to 50% more of the desirable magnet precursors, neodymium and praseodymium, than Baotou’s (and MP Materials Corp.’s (NYSE: MP)) bastnaesite.

China has now also essentially shut down its domestic heavy rare earth production from its ionic adsorption clays due to environmental degradation from their in-situ processing. China gets the majority of its heavy rare earths from Myanmar ionic adsorption clays today. The production of the first Western ionic adsorption clay producers, in Burundi and Brazil, is already pre-sold to China.

Australia has the world’s first hard-rock heavy rare earth mineral mine, that of Northern Minerals Limited’s (ASX: NTU) xenotime deposit in Western Australia. It is controlled by Chinese interests.

China is doubling the size of its rare earth permanent magnet industry. It is said that this will happen by 2025.

This means that China needs more, much more of the magnet precursor rare earths and all of the heavy rare earths, in particular, that it controls.

It is the domestic Chinese market, the market of the Belt and Road countries, and the rest of the non-aligned with China world, in that order that is driving the Chinese rare earth markets with emphasis on value added in China.

When Western, Japanese, and Korean governments announce that they want to be independent of China for rare earth permanent magnet products, the Chinese simply calculate when, in the best and worst cases, they will no longer have demand for rare earth enabled products from those countries and focus on their key domestic and allied markets.

It is very unlikely that Western car and appliance makers will be able to replace any substantial quantity of Chinese sourced rare earth permanent magnet motors by any of the ridiculously short-sighted timelines dictated by government mandates. In fact, as is already happening in Europe, it is likely that Chinese EV makers will outcompete European car makers in their (European) home markets due to their cost and critical minerals availability advantages.

The United States is woefully unprepared for the EV transition. But the 25% Trump tariff on Chinese imported cars is helping stave off a Chinese tsunami in the US car market.

2030 is fast approaching, and it’s hard to see how the automotive and appliance industries are going to decouple from China.

Overview of Lynas’ Financial Achievements

Lynas Rare Earths Ltd. (ASX: LYC) recently unveiled its financial statistics for the fiscal period culminating on 30 June 2023. The firm’s financial year was marked by significant operational feats, most notably setting new benchmarks in concentrate and NdPr production during the latter half.

• The revenue stood impressively at AUS$739.3 million with EBITDA and NPAT making up 51% and 42% of this total, respectively.
• CEO Amanda Lacaze, while applauding the company’s recent achievements, pointed out that the past fiscal year, though robust, did not eclipse the monumental market highs of FY22.
• Highlighting the company’s commitment to growth and future projects, Lynas dedicated $595 million to capital endeavors, concluding the year with a formidable cash reserve of AUS$1,011.2 million.

Projects at a Glance

1. Kalgoorlie Rare Earths Processing Facility: Having witnessed extensive construction throughout the year, only the waste gas treatment segment remains pending. Unexpected expenses have nudged the project’s budget to an estimated $730 million.
2. Mt Weld Development: Launched in March 2023, this project continues to advance seamlessly, remaining firmly on its timeline.
3. Lynas’ Venture into the U.S.: Strengthening its global presence, Lynas clinched a collaboration with the U.S. Department of Defense, focused on erecting the Heavy Rare Earths component of their Texas-based processing facility. Financial commitment from the U.S. Government is pegged around US$258 million.

Symbiotic Government Collaborations

Lynas has strategically forged partnerships worldwide to bolster the rare earths supply chain:

• A nod from the Australian Government came with an award of AUS$20 million in June 2023.
• March saw the Japanese Government infuse AUS$200 million via Japan Australia Rare Earths B.V. (JARE).
• A significant contract from the U.S. Government worth US$258 million was finalized in August 2023.
• In Malaysia, while Lynas procured a license renewal valid for three years starting February 2023, it came with stipulations, leading Lynas to take the judicial route.

Expert Perspective: Jack Lifton’s Observations

Renowned analyst Jack Lifton cast a discerning eye over the report, highlighting a few areas of concern:

• Lifton expressed reservations about the company’s projected costs, particularly emphasizing the unexpected doubling in the estimate for the Lynas U.S. venture as quoted by the Department of Defense.
• Lifton’s scrutiny extended to the credibility of Lynas’ costing, especially when it came to American projects.
• The Kalgoorlie initiative drew attention too, with its budget swelling by 50%, a figure Lifton deemed notably high.
• On the Malaysian front, Lifton underscored Lynas’ challenge – the prohibition against processing radioactive material. With the Kalgoorlie initiative aimed at purifying the ore of thorium and uranium before its Malaysian journey, Lifton probed the readiness of the project, questioning its ability to meet the January 2024 deadline for shipments.

While Lynas Rare Earths Ltd. certainly celebrates a year of notable achievements, the meticulous observations and questions raised by experts such as Lifton emphasize the importance of thorough scrutiny, foresight, and transparent communication in ensuring sustained growth and stakeholder trust.

South Korea, with its thriving tech giants and world-class OEM automotive industry, is transforming into a hub for the rare earth supply chain. While many look to China, the US, and Japan as key players in the rare earth game, Korea’s role is frequently overshadowed, despite its growing clout and demand.

Firstly, one must dispel misconceptions. South Korea is not a reservoir for rare earth elements. Nevertheless, its demand is robust due to its dynamic industrial base. Surprisingly to some, for example, Samsung Electronics Co., a Korean enterprise, surpasses even Apple Inc. (NASDAQ: AAPL) as the world’s premier cell phone manufacturer. Each phone requires a fraction of a gram of permanent magnet. Given their production volume, this accumulates to a significant demand. Furthermore, Korea boasts two of the globe’s top three battery producers: LG Energy Solution (LGES) and Samsung SDI Co., Ltd., subsidiaries of industrial giants, LG and Samsung, respectively.

Complementing this, Korea is home to Hyundai and Kia, renowned automotive brands that have gained a reputation for producing quality electric vehicles at competitive prices. The Hyundai Ioniq, for instance, was one of the initial electric cars introduced to the US market, utilizing permanent magnet motors and lithium-ion batteries. Notably, every raw material essential for these devices must be sourced from outside Korea.

This international sourcing is where companies like Australian Strategic Materials Limited (ASM) (ASX: ASM) come into the picture. Recently, ASM confirmed a five-year contract to provide USA Rare Earth, LLC with neodymium iron boron (NdFeB) magnet alloy from its Korean Metals Plant. This alloy, pivotal for creating permanent magnets in electric vehicles and wind turbines, underscores the intersecting interests of companies spanning continents.

Moreover, ASM isn’t limiting its partnerships to one US-based enterprise. They’ve also inked an agreement to sell a substantial 100 tonnes of this alloy to U.S.-based rare-earths magnet manufacturer, Noveon Magnetics Inc. In tandem, they’re also sourcing rare-earth oxides from Vietnam as feedstock for their Korean Metals Plant while concurrently developing a rare-earths mine in Dubbo, New South Wales, Australia.

From a personal vantage point, I recall my endeavors half a decade ago to bring LG Energy Systems into a partnership with the US Defence Department. The aim was for LG to manage rare earth permanent magnets for the Department of Defense. However, the looming threat of Chinese retaliation led to a withdrawal from LG, emphasizing the geopolitical sensitivity surrounding these minerals.

Now, representatives from Korean tech titans, including LG and Samsung, are traversing the globe in search of rare earths, with endeavors even in metallurgy and possibly magnet production. Additionally, ASM’s joint venture in Korea with Kiron — a domestic, Korean venture, funded by a significant Korean (rare earth permanent magnet end-user) corporation — underscores the collaborative nature of this industry.

To sum up, while the global discourse frequently orbits around China and the US, the Korean rare earth landscape is bustling. Their relentless quest to develop a comprehensive domestic supply chain for rare earth permanent magnets will invariably lead to a demand spike, which may catch many by surprise.

So, as the competition intensifies to secure these critical materials for the next generation of tech and transport, one thing’s clear: don’t underestimate Korea.

In a recent interview with InvestorIntel, Jack Lifton, a well-versed commentator on the economics of critical minerals and the co-founder of the Critical Minerals Institute, discussed his insights about the current state of the rare earth industry, the Biden administration’s approach to mineral economics, and the supply chain for critical minerals in the United States.

Lifton initially spoke about an interesting observation he made while reviewing the first quarter report of the Chinese Rare Earth Industry Association. The report praised “Xiconomics,” a term coined to represent President Xi’s plans to reduce inequality and bring prosperity to as many Chinese citizens as possible. This concept, Lifton noted, preceded the introduction of “Bidenomics” by several months. Lifton interprets the latter term as a branding exercise by the US government, assigning any positive economic outcomes to Biden’s administration and blaming any negatives on opposition forces.

According to Lifton, these economic terms suggest that White House staffers are closely observing Chinese industry updates, particularly on the rare earth industry. This observation reveals the existing divide between the military industrial complex and the civilian economy in Washington. Lifton explained that the military-industrial complex is aware of its critical minerals’ requirements, particularly those used to produce rare earth permanent magnets and computer chips. Despite large amounts of funding invested, it is claimed, into ensuring a secure supply of these resources, the outcomes so far have been lackluster.

Interestingly, he pointed out that the civilian economy, which has much larger needs for these same materials, seems to be overlooked. For instance, the civilian requirement for permanent magnets is approximately four times the military need, and for integrated circuits on chips, it’s likely ten times. However, the focus of the government seems to be on subsidizing production and manufacturing of these components rather than addressing the actual total supply chain challenges.

Lifton accused the central government in Washington of being “obsessed with celebrity” and consumed by political scandals, leaving critical economic and industry matters neglected. Hearings on such crucial matters are infrequent compared to those focused on political controversies, creating an imbalance in policy-making.

Lifton went on to voice his concerns about the lack of practical understanding among Washington policymakers. He expressed exasperation at their inability to comprehend supply chains and their lack of experience in manufacturing high-tech goods. This lack of understanding, Lifton suggests, is leading to inaccurate claims and misguided policies.

As an example, he called out Washington’s claim of reindustrialization, which seems to be happening without consideration for the critical factors such as the required workforce, raw materials, processing, and engineering. He was particularly irked by the apparent ignorance of the term “manufacturing engineering,” which is essential for scaling up production.

Lifton closed by expressing concern about the distribution of grants to people who simply use the correct buzzwords in their applications, a process that lacks organization and understanding. He pointed out the absence of an effective industrial policy in America, and the lack of understanding about the raw material sourcing to justify the building of  new factories. He ended on a rather somber note, stating that good luck might be America’s only hope in this matter.

This revealing interview has shed light on the challenges and misconceptions that exist in American policy-making, specifically when it comes to economics and industrial matters. It also underscores the urgency for policymakers to understand the criticality of an organized and well-informed approach to manage the rare earth industry and secure America’s future in this domain.