EDITOR: | December 8th, 2019 | 24 Comments

The U.S. Military faces the Rare Earths Supply Chain Gallows

| December 08, 2019 | 24 Comments
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“The industry is not mining, but its being directed by the mining industry — and its just not the same” explains an anonymous source that I pistol-whipped with questions on rare earths earlier this morning. Undoubtedly never to answer my calls again in the future, I start with: “I have been in the industry for 10 years and if I don’t understand, how can we expect anyone else too?”

10 years in the business and the reason I cannot quit the rare earths industry is that its like a high level business sudoku puzzle aching for a remedy. And no one can solve it because the rules change depending on what piece of propaganda you want to quote. With media sources texting me daily, the result is a regular agitation mobilizer, a spin cycle of the wrong data rotating around regularly without any resolution thanks to the internet and social media plagued by misinformation. And respectfully, these journalists, who are on a fact-finding mission to sort their message have yet to find a holy grail of information, just endless disjointed content of disinformation to which they cannot sort because even the experts can’t agree.

Determined to be a part of the supply chain remedy, having invested the hours, and well – I do believe that if we do not sort this out, our history books are going to have a lot of chapters that will start with: “we should have done…we could have done…but we didn’t.”

Taking an industry leader to lunch last month, he explained to an esteemed colleague that the real supply chain issue in North America is simple: we cannot produce with the same cost efficiency of the Chinese. Talk to him and one would conclude that the game is over, in fact, it never started. That same week I spoke with an expert in Korea who was explaining how Chinese dealing with significant water issues. Hyper focus for a moment, and the theme of that conversation was that the real reason for the influx in the rare earths media attention is that the Chinese want the North Americans to get an opportunity to pollute their waters and air in the same way they have in taking over the global rare earths industry?

Make no err of understanding that this business is a dirty one, but the rumors of collusion and conspiracy make spy novels pale in comparison. Could this industry be that smart?

I would argue not, but it is indeed complex. And this debate does require a white board, a global map and toss in some basic history — and you too may radiate a false sense of intellectual superiority.

For the sake of this rare earths’ discussion, we are dealing with 4 of the 17 rare earth elements known as the magnetic materials. The 4 magnetic materials heavily in debate in the news are usually about Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy) and Terbium (Tb). And the question we are discussing is how the U.S. military will secure an independent source of rare earths and what will we need to do to create a supply chain to achieve this goal.

Sounds easy, right?

Industry expert Alastair Neill agreed to go on record, he starts, “The challenge is that the military wants to get independence from Chinese sourcing. The problem is that the military does not buy oxides, they buy components with the rare earths in them. What we need is the ability to convert oxides into metals and the metals into alloys and then turn these alloys into magnets.”

Let me add, Alastair also invested 20-minutes reminding me of the 4-stage process for securing rare earths: (1) Mining – Source must be mined, result is ore; (2) Extraction – the ore must be turned into concentrate; (3) Separation – the concentrate is turned into oxides; and finally, (4) Metallization – the oxides through chemical processing are then turned into metals. Now if you re-read Alastair’s quote, he starts at how the U.S. supply chain cannot handle the oxides (reference #3), without the oxides being turned into metal (reference #4), and then the metals being turned into alloys (welcome #5) and then the alloys, then being turned into magnets (final stage? Level #6). How many steps? I count 6 – clearly, this is not the same as mining gold.

To be clear, in the next couple of pieces on InvestorIntel I will examine trying to find the sources to mine, or stage 1 in the supply chain as presently we have only one producing, and the ownership includes Chinese investment. Get ready Hoidas Lake….am going down this road next!


Tracy Weslosky

Editor:

Tracy Weslosky is the CEO for InvestorIntel Corp. and founder of InvestorIntel.com, a trusted source of online market information for investors in the capital markets, ... <Read more about Tracy Weslosky>


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Comments

  • Jack Lifton

    You say that “we cannot produce with the same cost efficiency [as] the Chinese.” Yes, we can, if we capitalize the cost savings we take from ignoring pollution, ignoring the lack of health and safety control, and ignoring state mandated labor costs used by the Chinese. If the Chinese were required to obey all US regulations on mining and refining then they would have no price advantage. Why do we impose a double standard on U.S. Domestic industry? There should be a balancing tariff on all imports produced by non US standards of health, safety, and pollution.

    December 8, 2019 - 4:14 PM

    • Alastair Neill

      Jack – Yes the standards are different but the Chinese recognize that they have to address their pollution issues as this is a legacy that will not disappear. Unfortunately this takes time and commitment at the local level, more so than at the State level. As we have discussed there is a need to reintroduce the complete supply chain in the USA. Less Common Metals in England has been producing metal and alloy outside China for magnet producers so it can be done. Also the Japanese are doing this as well. Maybe it comes down to scale? With regard to balancing tariffs would this be put on any items contains rare earths? The challenge would be where to draw the line.

      December 10, 2019 - 9:53 AM

  • Tracy Weslosky

    Thank you Jack – need to connect. Are you around tomorrow? Note that I personally did not state this, I was quoting ‘someone’ in the industry. Clearly I do not agree with him or I would have not written this piece….— would like to interview you this week!

    December 8, 2019 - 4:23 PM

    • Brian Ecker

      This ridiculous. We can. We have the technology. As the CEO of Headstream Capital Partners. And the largest holder of rare earth elements in the US. I would beg to differ. You are wrong.

      December 9, 2019 - 2:36 PM

      • Tracy Weslosky

        PS. send your technology to [email protected] as your comment has interest percolating…..and we are indeed seeking to identify who the players are in each stage of the game.

        December 9, 2019 - 3:05 PM

  • Tracy Weslosky

    Good afternoon Brian – I just reviewed your LinkedIn account and I see no collaborations, associations or evidence of any critical material experience. No worries, I will take your word for it —- but having run the only rare earth indices in the world recognized by FTSE, and having just completed another 5 interviews today with world renowned rare earths experts confirming that the above is not only NOT ridiculous, but nails it — well, I must respectfully disagree. This said, thank you for visiting InvestorIntel, and do let us know what technology you are referencing…what # in the processing food chain. Merci.

    December 9, 2019 - 3:01 PM

  • Tracy Weslosky

    Afternoon Joe O – we have regularly covered UCORE since 2010, and they are included in the new 5 part series we are about to put out. We would like Jim McKenzie to do an interview with Jack Lifton. As an aside, when I visited the site in 2011 they gave me a jacket that I still wear…

    December 9, 2019 - 3:04 PM

  • Ed More

    It is misleading to claim that the business is dirty. Rather it would be more accurate to say the business is frequently dirty that way it is done today. It is a business choice, not a necessity. Better methods are available, but there is no will to implement them.

    December 9, 2019 - 4:20 PM

    • Tracy Weslosky

      Thank you Ed. Agreed.

      December 9, 2019 - 5:46 PM

  • Jim

    Have you been under a rock? Lynas already has a partner and agreement to develop
    a rare earth processing plant in Texas next year. They will provide the rare earth
    from their own mine. Here is the US solution. Why do you ignore Lynas?
    processing plant in Texas next year.

    December 9, 2019 - 5:21 PM

    • Tracy Weslosky

      The interviews on the deal with LYNAS and Blueline were done by me, I am friends with both company CEOs. Their deal will be handling stage 3 and 4. Thank you for visiting.

      December 9, 2019 - 5:45 PM

  • Rare Earths Investor

    I think those companies who are really interested in participating in any new strategic North American value chain (mine, processing and magnets, etc) better have already identified themselves to those responsible for gathering company interest via the recent US RFI’s for chemical production and magnet manufacture. Lynas and Blue Line as others indicate are already to the forefront of this process (without waiting for formal public US go ahead though sure they have been in talks) and US military RE needs are limited. Thus, IMO only a few proactive companies may be identified for potential strategic matching funds etc; for the majority just waiting around to negotiate later takeoffs from hoped for end of line manufacturers who may or may not arrival, might be just wishful thinking. Those who show they can initiate their own projects, while establishing working relationships with other related entities and finding partners to whom to deliver future product stand the greatest chance of chain participation.

    December 9, 2019 - 6:44 PM

    • Tim Ainsworth

      In simple terms, the prerequisite that applicants be able to demonstrate commercial demand well beyond that of Govt agencies should effectively eliminate the ambulance chasers.

      December 10, 2019 - 3:05 AM

  • Steve Mackowski

    The pollution argument is incorrect. Having designed plants for a number of rare earth hopefuls you can meet standards. Capital cost is the issue.
    As to the supply chain, don’t think in terms of links in a chain. Think of an inverted pyramid. One mine at the bottom, supplies a couple of separation plants, who each supply a few metals plants, who then each supply a number of magnet people who supply any number of component manufacturers. So for magnets, you may have one mine and perhaps a dozen magnet component manufacturers. Same with phosphors, same with catalysts. In summation one mine may need 20-50 end user manufacturers. That’s the supply chain problem.

    December 9, 2019 - 6:52 PM

    • Rare Earths Investor

      If this diagram turns out to be the reality then you have sent a shiver up the backs of several dozen potential RE miners globally and their present investors.

      December 10, 2019 - 6:41 AM

      • Tracy Weslosky

        Dear Rare Earths Investor – more than ever, the industry needs you. So I don’t think any shivers need to occur, as there are some hard working, well educated leaders in this industry that not only understand the formula but they are trying to put it together. The challenge is that no one is close to all 6 stage — and yes, while Lynas and Blueline are considering #3 and #4 together (a separation plant that will turn these metals into saleable chemicals — where will they be getting their concentrate? — #2, and more importantly —— who are they selling it to? #5) After all – we need these chemicals turned into alloys #5, and then, turned into the magnets #6. Like Mountain Pass, will they be resigned to having the Chinese in this process, because it seems we cannot do it without them? The real brass tacks of — can we produce these magnets at a competitive price with China, a-n-d the rest of the world is inevitable the question – and I am happy to say that in my interview with Jack Lifton yesterday, he provides a solution. This 4-part series or 5-part as it was a good hour interview with Jack and Alastair Neill, a rare earth expert of 25 years, will be published shortly as — I wanted to know. Thank you for everyone for your questions, as we do use them to ask our industry leaders.

        December 10, 2019 - 7:23 AM

        • Tim Ainsworth

          #1 & #2 are dead easy, and it will ship to Blueline as carbonate, not concentrate, with ~$10kg cost, initial volumes should be sufficient to meet current ROW needs, and can be ramped 3x/4x relatively easily.

          Long life resource and streams effectively as a by-product.

          Proportional NdPr can follow as demand requires, but looking forward watch for the scale Kalgoorlie C&L, together with the recent suggestion it would be nice to add primary SX, starting to look like an ex Asia supply chain.

          If you look back three years you’ll find perhaps an obvious candidate metals to magnets, one that brings an important economic advantage, Jack will get it, but they’ll still need the right policy by USG to neuter China’s two tier pricing.

          December 15, 2019 - 8:16 AM

          • Mark Senti

            Tim. I invite you to see what AML is doing to address for the first time a more than competitive solution to producing magnets outside of the PRC. http://Www.aml-enables.com. You can check out “Better Magnets” and download our white paper.

            December 15, 2019 - 1:09 PM

    • Tracy Weslosky

      Nice to hear from you as always Steve. And yes, you are correct in the pyramid formula, but this entire process requires each variable for us to formally comply with the requirements of how to really build a supply chain that meets the criteria of the U.S. military for sustainability. Not sure I want to discount my source that is telling me about the issues of water in China. Undoubtedly I communicated his thought less clearly than intended, but this is a complex issue. Its my understanding that the extraction process, the separation process and the turning the metal into chemicals process (2,3,4) all require a great deal of water? Yes? And as such, the Chinese who are according to my sources are dealing with water more like a natural resource these days — are finding the rare earths process to be taxing on this resource. Would love your thoughts on this and will reach out to such water expert for more data. Again, great to hear from you Steve.

      December 10, 2019 - 7:11 AM

      • Steve Mackowski

        Tracy, never found water quantities an issue in developments I have designed. That no more than say uranium or copper SX.

        December 11, 2019 - 8:58 PM

      • Tim Ainsworth

        At the umpteenth Malaysian review of LAMP operations 12 months ago the relevant Govt Dept head produced data showing that the water Lynas returned to the local river was considerably cleaner than that it drew out.
        In fact after six years of operation at the time not a single breach of the operating license was identified, REO can be processed at scale with a benign environmental footprint, despite all the dirty press.

        December 15, 2019 - 7:23 AM

    • Anonymous REE Professional

      Snippets from this website presentation, was presented in Malaysia. My key takeaways – 1) 70+% of the ground water in China is polluted and 2) 25% of the riverways in China are not safe for human touch..
      http://www.chinawaterrisk.org/ — Lots of information

      December 10, 2019 - 8:04 PM

  • Mark Senti, CEO – Advanced Magnet Lab (AML)

    Thank you Tracy. Regarding Step #6, we at AML are developing a unique solution to the design and production of the magnets. Yielding lower costs and significantly high performance for the end product such as EV motors. For the first time, a vertically integrated solution from “mining to magnets” is possible. We invite those interested to download our White Paper at AML-Enabled.com

    December 10, 2019 - 9:49 AM

  • Don

    Nice to see Ucore share price spike today with high volume. Wish I could say the same about search minerals. We have press release good drill results, pea, pilot plant , pilot plant upgrade, separation technology, world class deposits in a rare earth district, all good news but share price flat line for years 3 and 4 cents. If all this rare earth hype is true you would think we would see some interest from the retail investors and brokers. My opinion we should be minimum 30 or 40 cent shares.
    Don

    December 11, 2019 - 11:01 PM

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