US Army to fund rare earths plants for weapons, electronics development

In a photo taken on June 29, 2015, a piece of ore containing rare earths is shown during a tour of a California mine.
In a photo taken on June 29, 2015, a piece of ore containing rare earths is shown during a tour of a California mine.PHOTO: REUTERS

WASHINGTON (REUTERS) - The United States Army plans to fund construction of rare earths processing facilities, part of an urgent push by Washington to secure domestic supply of the minerals used to make military weapons and electronics, according to a government document seen by Reuters.

The move would mark the first financial investment by the US military into commercial-scale rare earths production since World War II's Manhattan Project built the first atomic bomb.

It comes after President Donald Trump earlier this year ordered the military to update its supply chain for the niche materials, warning that reliance on other nations for the strategic minerals could hamper US defences.

China, which refines most of the world's rare earths, has threatened to stop exporting the specialised minerals to the US, using its monopoly as a cudgel in the ongoing trade spat between the world's two largest economies.

"The US rare earths industry needs big help to compete against the Chinese," said Mr Jim McKenzie, chief executive officer of UCore Rare Metals Inc, which is developing a rare earths project in Alaska.

"It's not just about the money, but also the optics of broad support from Washington."

The Army division overseeing munitions last month asked miners for proposals on the cost of a pilot plant to produce so-called heavy rare earths, a less-common type of the specialised minerals that are highly sought after for use in weaponry, according to the document.

Responses are due by Dec 16. UCore, Texas Mineral Resources Corp and a joint venture between Lynas Corp and privately-held Blue Line Corp are among the expected respondents, according to company officials and sources familiar with the matter.

The Army said it will fund up to two-thirds of a refiner's cost and that it would fund at least one project and potentially more.

 
 
 

Applicants must provide a detailed business plan and specify where they will source their ore, among other factors.

This latest move by the Army, a division of the Pentagon, comes after a military study earlier this year on the state of the US rare earths supply chain.

The rare earths tension between the US and China goes back to at least 2010, when China limited exports to Japan after a diplomatic dispute, sending prices for the niche metals spiking and fuelling concerns across the US military that China could do the same to the US.

The US Army Combat Capabilities Development Command Chemical Biological Centre and the US Army headquarters did not respond to requests for comment.

The request does not give a specific financial amount the Army could fund, though it is derived in part from the Defence Production Act (DPA), a 1950s-era US law that gives the Pentagon wide financial latitude to procure equipment necessary for national defence.

A rare earth processing pilot plant could cost between US$5 million (S$6.8 million) and US$20 million, depending on location, size and other factors, with a full-scale plant potentially costing more than US$100 million to build, industry executives said.

"It's great to see interest in financially supporting the industry from the Department of Defence," said Mr Jon Blumenthal, CEO of Blue Line Corp, which earlier this year signed a memorandum of understanding to build a rare earth processing facility in Texas with Australia-based Lynas Corp.

Mr Blumenthal declined to comment when asked if Blue Line will respond to the Army's request. Lynas declined to comment.

 
 

It is not clear how the Army will rank the responses given that much of the rare earths industry expertise is now located in China, though the modern rare earths industry itself had its genesis in the US decades ago.

"Instead of providing funds for yet another study, this allocates money towards establishing a US-based rare earth supply chain," said Mr Anthony Marchese, CEO of Texas Mineral Resources, which is developing the Round Top mine in Texas with USA Rare Earth.

After processing, however, rare earths need to be turned into rare earth magnets, found in precision-guided missiles, smart bombs and military jets and China controls the rare earths magnet industry, too.

The Pentagon has not yet launched an effort to finance domestic magnet manufacturing.

"Closing the magnet gap would do more to address the nation's defence needs, and as well the needs of electric vehicle-makers and others," said Mr Ryan Castilloux, managing director with Adamas Intelligence, a research firm that closely tracks the rare earths industry.