As the introduction of electric vehicles (EVs) turbocharges rare earth demand in Canada and the United States this decade, efforts are underway to loosen the region’s dependence on China for the procurement and processing of such critically important energy transition materials.
In Canada and the United States, efforts are being made to shift dependence away from China’s rare earth reserves. There are many reasons why North America wants to offshore its processes, one of the biggest concerns being potential choke points in the supply chain if China decides to cut off rare earth supplies due to geopolitical disputes.
Demand for the material is expected to skyrocket, and an estimated 315,000 tons of rare earth elements will be needed in 2030, most of them for electric cars.
What are North American mines doing to ensure they can keep up with demand without having to rely on Chinese rare earth supplies and Far Eastern extraction plants? What kind of government policy needs to be implemented in order to speed up the support process?
Mountain pass
Based in Las Vegas, MP Materials owns the only operating rare earth mine and processing facility in the United States. The Mountain Pass Mine in California is an open pit mine that supplied 15.8% of the world’s rare earth production in 2020. In late April, MP Materials began purpose-built construction of its first rare earth, alloy and magnet production facility. On fully restoring the US rare earth magnet supply chain. Plans include hydrometallurgy and separation facilities and a production facility at the plant, which is expected to be completed in 2025. A closed-loop operation capable of turning processed materials into metals and alloys would mean the company would no longer need to export its mineral concentrates to China for processing, continuing the process and removing the current supply chain.
MP Materials’ major $700 million investment is the first of its kind in the United States and would be capable of producing approximately 1,000 tons per year of neodymium-iron-boron (NdFeB) magnets, supporting the production of approximately 500,000 electric motors. space in scale. In addition to electric vehicles, NdFeB magnets are used in robots, drones, defense systems, wind turbines and many other rapidly growing technologies.
My progress
Just before mine construction began, the US government’s Department of Defense awarded MP Materials $35 million to refine and separate heavy rare earths to support both the mining and processing processes. Around the same time, MP Materials and General Motors (GM) announced a definitive supply agreement for Mountain Pass to produce alloys and magnets for GM’s electric vehicle programs. Under the long-term agreement, MP Materials will supply US-sourced and manufactured rare-earth materials, alloys and finished magnets for electric motors in more than a dozen GM models, with phased production expected to begin later this year. with the alloy accessory.
That means Mountain Pass is not only expected to produce enough rare-earth elements to meet the Pentagon’s Defense Department requirements, but must also meet the alloy requirements needed to make GM’s electric motors. How is all this possible without significant government support?
More help is needed
Although huge efforts have been made to decouple supply chains from China and move processing to onshore facilities, there remains a significant gap between domestic supply and demand. One solution to this, which should be considered by US President Joe Biden and Canadian Prime Minister Justin Trudeau, is to create upstream investment incentives for suppliers of these critical minerals – especially the metals needed in electric car engines.
In late December, the Canadian government released a strategy to increase the responsibly sourced supply of 31 critical minerals. It was supported in the 2022 budget with $3.8 billion, including $40 million to support northern regulatory processes and a 30 percent prospecting tax credit for target minerals.
The problem is that these budget promises are just smoke and mirrors right now. Brandon Macdonald, CEO and president of Canadian miner Fireweed Metals, says he wants Ottawa to continue the flow-through tax credits because of capital shortages during the lengthy mining permit process.
Flow-through shares
Flow-through shares are shares issued by mining companies at a higher price than ordinary shares. The issuer undertakes to waive the flow-through shares as a tax-deductible benefit under Canadian law related to mining research and development. Instead, investors who buy flow-through shares can claim these tax deductions themselves, and such shares help miners raise funding during capital-intensive exploration efforts.
Macdonald is also urging the Canadian government to invest in infrastructure, including roads, power grids, smelters and refineries. While Ottawa’s strategy aims to accelerate strategic projects, build sustainable infrastructure and enhance assessments, unless the right companies – uniquely positioned to meet national demand within a few years – are financially supported, the nation will be no closer to decoupling supply chains in 2025 than it is now.
Practices Wish List
Much work remains to be done on the ground in the North American rare earth supply chain.
If the U.S. and Canadian governments explore different incentives for junior mining companies, the industry infrastructure and supply chains being decoupled from China could materialize much, much faster. Now is the time to act, as the demand for rare earth metals is expected to rise sharply as North America strives to reduce its carbon footprint by adopting electric cars on a mass scale.
Ultimately, China’s grip on North American supply is expected to loosen over time, especially as new mines such as Mountain Pass become fully operational, but rare earth processing in the country could be further accelerated with appropriate government funding and policy support. factors.
The world outside of China needs more rare earth mines and processing and separation facilities to reduce its dependence on the Far East for critical minerals.
About the author: Dr. Luisa Moreno is president of Vancouver-based rare earth miner Defense Metals Corp. He is an Engineer in Physics with a PhD in Materials Science and Mechanics from Imperial College London, UK. He is recognized as a leading rare earth analyst and has published numerous reports and articles for the investment community. Dr. Moreno has co-authored a book on mineral processing and project finance and authored several advanced industrial and technical reports on several technology minerals.
