The United States has made an investment of more than US$1.5 billionto secure and expand its domestic rare earths production capacity, which is essential for the manufacture of technologies such as smart phones, wind turbines, advanced weaponry and aerospace systems.
The deal saw significant spikes in share prices across the growing number of ASX-listed companies focused on rare earths exploration or development, including rare earths miner Lynas Corporation. The deal may also become a catalyst for similar investments in Australian rare earths capacity. Lynas – which saw its share price increase by more than 17 per cent – has agreements with the US government to develop rare earths separation plants in Texas.
Rare earth elements have unique physical, chemical, magnetic, and luminescent properties, and there is currently a scramble to secure supply following trade tensions between the US and China, which saw the imposition of reciprocal tariffs on each side as well as new Chinese export controls on rare earths. China processes approximately 90 per cent of the world’s rare earths into usable products, while accounting for about 60 per cent of global rare earths mining.
The United States’ Department of Defense (DoD) inked the 10-year agreement with MP Materials, which owns and operates North America’s sole producing rare earths mine, the Mountain Pass open-pit mine near the Mojave Desert in California, to sell and stockpile rare earths for the US market.
The orebody at Mountain Pass holds 8 to 12 per cent rare earth oxides and in July 2020 had proven and probable reserves, at a 3.83 per cent total rare earth oxide cut-off, of 18.9 million tonnes containing 1.36 million tonnes of rare earth oxides, at an average grade of 7.06 per cent. MP Materials’ share price jumped 51 per cent following the deal’s announcement.
The deal comprises a US$150 million DoD loan to expand heavy rare earth separation capabilities at the mine’s existing processing facility, and a US$400-million DoD equity investment in preferred stock and warrants, making the department likely the largest holder with an interest of about 15 per cent. It also includes a US$1-billion financing commitment from banks JPMorgan Chase and Goldman Sachs for a second US magnet facility expected to be commissioned in 2028, and a 10-year purchase commitment for 100 per cent of the magnets produced at the new facility.
Notably, the agreement features a pricing regime with a guaranteed price floor of US$110 per kilogram of neodymiumpraseodymium (NdPr), which is about twice the price of NdPr oxide produced in China. This is an important decision for the United States in the wake of China’s new export rules, which do not outright ban the export of samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, but do limit their export and, at a minimum, will likely slow down exports significantly.
These minerals are crucial for the production of electric vehicles (EVs), smartphones, fighter jets, satellites, and missiles. The reduced supply of samarium, dysprosium and terbium in particular will have significant global effects, as the production of permanent magnets – used in high-performance applications such as EV motors and wind turbines – requires considerable amounts of them.
In a breakdown of the new restrictions, Mining Analyst Reg Spencer from Canaccord Genuity said they would likely impact Japan more than the US, with the latter having existing rare earths production capacity. He also noted Europe was a much larger export market for Chinese permanent magnets. However, the export controls would nonetheless be disruptive to fragile global rare earths supply chains, which are integral to the manufacture of high-tech components used in defence, manufacturing, and energy sectors.
Rob Rutherford, Managing Director of Red Metal, said the US investment was potentially a big win for low capex and opex projects worldwide, and expressed confidence the company’s granite-hosted Sybella rare earths deposit near Mt Isa would “sing” at the US$110 NdPr floor price. He said: “It is now up to other manufacturing nations like South Korea, Japan, Europe and even Australia to invest in expanded magnet capacity with rare earth oxide supply guaranteed with similar price flooring mechanisms.
“I strongly believe the Australian government should jointly fund and build magnet plants in these resource-poor manufacturing nations, government to government, on the provision that they utilise Australian raw rare earth oxide materials.” A recent investment in the sector was made to Australian company Iluka Resources, which received $400 million in government funding to support the construction of its rare earths facility in the Western Australian town of Eneabba. This facility will also benefit Lynas due to its proximity to the Mt Weld mine near Laverton. Iluka, a mineral sands miner, routinely produces the rare earth-bearing minerals monazite and xenotime as by-products of its mineral sands processing, and has reached the final investment decision stage for the project.
The new refinery will establish WA as a strategic hub for the downstream processing of rare earths, according to Iluka, and is expected to produce neodymium, praseodymium, dysprosium, terbium and others from 2027.
The proposed facility will produce around 17,500 tonnes a year of individual rare earth oxides and carbonates, utilising existing Eneabba monazite concentrate from Iluka’s Eneabbamine site as well as future Iluka and third-party feedstocks.
Another significant Australian project is Arafura Rare Earth’s fully-approved Nolans project in the Northern Territory, which iss et to become Australia’s first ore-to-oxide rare earth’s processing operation and is expected to account for about 4 per cent of the world’s NdPr demand from 2032.
Earlier this year, the WA government funded a new collaborative study to investigate the extraction of rare earths in the state, which could help unlock under utilised rare earth resources. It could also help in gaining a better understanding of them, supporting the development of processing industries and advanced manufacturing.
The Minerals Institute of WA (MRIWA) awarded $175,000 to the research team led by geological specialists RSC and includingCurtin University Resources Technology and Critical MineralsTrailblazer, Narryer Metals, Dreadnought Resources, TerrainMinerals and Pluto Resources.
Previous MRIWA-supported research has already identified and characterised valuable rare earths and other strategic elements – including gallium and niobium – within a range of clay-hosted mineral deposits in WA.
This newly announced study will build on these findings with a focus on deposits within the mineral-rich Yilgarn region.WA Mines and Petroleum Minister David Michael said the state’s leadership in minerals research gave it a unique opportunity to play a key role in decarbonising the critical minerals supply chain.
He added: “This research collaboration between the WA Government, industry and universities demonstrates the commitment of the Cook Government to a responsible and sustainable minerals industry.”
