The US Department of Defense has signed a $120mn deal with Australia’s Lynas Rare Earths to build one of the first US domestic heavy rare earths separation facilities, part of Washington’s push to counter China’s dominance of critical mineral supply chains.
Rare earth elements are vital to making magnets used in military equipment such as lasers and guidance systems, as well as components in electric vehicles, wind turbines, fibre optic cables and consumer electronics.
China is responsible for almost 90 per cent of global refining of rare earths and more than 50 per cent of rare earths mining, according to the International Energy Agency.
The US has no operating commercial-scale processing facilities, raising concerns in Washington that the country could be cut off from these critical minerals in the future if relations with China deteriorate further. Under the deal with Lynas, China would be bypassed entirely from the production cycle. The US defence department is also separately funding a heavy rare earth processing project at a mine in California.
The Australian Securities Exchange-listed company will export heavy rare earth carbonate mined and refined in Australia to the US, where the individual elements will be separated for commercial use. Lynas, based in Perth, is the world’s largest rare earths producer outside China, according to Barrenjoey, an investment bank.
The deal, which expands a pilot scheme first announced in 2020, is part of Washington’s drive to build supply chains and local manufacturing industries in semiconductors, batteries, critical minerals and pharmaceuticals.
Lynas said the $120mn investment would cover the full cost of plant construction, meaning the company would not have to put up any capital itself. The plant is likely to be built in Texas and be operational by 2025. The company also announced plans to build a light rare earths processing facility in the same location last year.
“The really important thing here is there is no heavy rare earths separation outside China at present,” Lynas managing director Amanda Lacaze told the Financial Times.
“Putting aside any geopolitical issues, what we’ve seen from the pandemic is that any singular supply chain has risk associated with it. So this is a terrific opportunity to address that risk,” she said.
Lacaze said she hoped the US government would also work to develop an onshore magnet manufacturing industry. “We like to have our facilities close to our customers and our customers close to our facilities,” she said.
Lynas processes most of its rare earths at a large plant in Kuantan, Malaysia, and is building another plant in Western Australia. However, the Malaysian plant only separates light rare earths, sending the less common heavy rare earths elements to China for processing.
Daniel Morgan, a mining analyst with Barrenjoey, said China’s dominance of this sector was a “strategic vulnerability” for the US.
“As of right now, there are not a lot of options for the US military to get heavy rare earths needed in lasers and guidance systems. Without these heavy rare earths, the US military can’t have these things. It’s a strategic vulnerability,” he said.
Australia has some of the largest deposits in the world of critical minerals needed in electronic devices and the energy transition, including nickel, lithium, cobalt and rare earths.
The Australian government under previous prime minister Scott Morrison developed a critical minerals strategy that attempted to reach deals with non-Chinese trading partners including the US, UK, EU, Japan, India and South Korea while also giving government funding to local mines and processing plants.
In March, representatives from Lynas and a number of other rare earths and cobalt miners travelled to Washington, DC, as part of a delegation with Australia’s trade minister to discuss building stronger trading relationships in these critical minerals.
Source: Economy - ft.com
