Insight: Western start-ups seek to break China's grip on rare earths refining

Defense Metals

04/12/2023 19:06

(Adds Ucore stock reaction in last paragraph)
    By Ernest Scheyder
       ALEXANDRIA, Louisiana, Dec 4 (Reuters) - Start-up tech
firms are racing to transform the way rare earths are refined
for the clean energy transition, a push aimed at turbocharging
the West's expansion into the niche sector that underpins
billions of electronic devices.
    The existing standard to refine these strategic minerals,
known as solvent extraction, is an expensive and dirty process
that China has spent the past 30 years mastering. MP Materials
 MP.N , Lynas Rare Earths  LYC.AX  and other Western rare earths
companies have struggled at times to deploy it due to technical
complexities and pollution concerns.
    Rare earths are a group of 17 metals used to make magnets
that turn power into motion for electric vehicles, cell phones
and other electronics. While U.S. scientists helped develop
solvent extraction for rare earths in the 1950s, radioactive
waste from the process gradually made it unpopular in the United
States.
    China began to rapidly expand in the industry starting
during the 1980s and now controls 87% of global rare earths
refining capacity, according to the International Energy Agency.
That prowess has helped propel the country's economy to the
second-largest in the world.
    Emerging Western rivals now offer the tantalizing prospect
of processing the minerals in faster, cleaner and cheaper ways,
if they can successfully launch. 
    "The existing rare earths refining process is a nightmare,"
said Isabel Barton, a mining and geological engineering
professor at the University of Arizona. "That's why there are so
many companies promising new methods, because we need new ones."
    Interviews with nearly two dozen industry consultants,
academics and executives show that if one or more of these novel
processing technologies succeed as hoped by 2025, they could
slash reliance on Chinese rare earths technology and its toxic
by-products while also bolstering plans by Western firms to
charge premium prices for the strategic minerals.
    While none have launched commercially - and some industry
consultants and analysts question whether they will be able to
do so soon - a cadre of firms are pushing forward with
aggressive development plans.
    On a former U.S. Air Force base in Louisiana, Ucore Rare
Metals  UCU.V  aims to process rare earths by mid-2025 using a
technology known as RapidSX that it says is at least three times
faster than solvent extraction, produces no hazardous chemical
waste and requires only a third of the physical space.
    "Our goal is to re-establish a North American rare earths
supply chain," Michael Schrider, Ucore's chief operating
officer, said during a visit to the site. 
    Formed in 2006, Ucore initially planned to mine a rare
earths deposit in Alaska. But the company changed tack in 2022
to focus on refining, not mining, a pivot born from what two
executives said they saw as a flaw in the West's strategy to
weaken China's minerals dominance by trying to master both steps
simultaneously. 
    Ucore, which has been testing its process with Pentagon
funding, is in talks now with 17 mining companies to buy lightly
processed supplies of rare earths known as concentrate, ship
them to the Port of New Orleans, then truck them to a
80,800-square foot warehouse that will be outfitted with the
RapidSX technology beginning in January.
    Rare earths miners increasingly say they are content to
focus on digging up rock - rather than compounding their
operations with the added step of processing.
    "Mining companies should focus on finding new deposits,"
said Luisa Moreno, president of Defense Metals  DEFN.V , which
aims to open a rare earths mine in British Columbia within four
years and is interested in licensing Ucore's technology. "You
probably should let refining be handled by others that
specialize in that."
    Rainbow Rare Earths  RBWR.L  plans by 2026 to deploy rare
earths refining technology in South Africa developed by its
Florida-based partner K-Technologies that uses a process known
as continuous ion exchange, used by some lithium producers. 
    Startup Aether is developing nanotechnology that programs
proteins to selectively bind with and extract rare earths from
ore deposits. 
    In Norway, privately-held REETec says its proprietary
refining process emits 90% less carbon dioxide than solvent
extraction and should be operational by late 2024. 
    And privately-held Phoenix Tailings earlier this year began
refining small amounts of rare earths in Massachusetts using a
process that it says is free of emissions and waste.    
    "There are technologies that can be developed that are far
better than solvent extraction," said Robert Fox, a scientist at
the U.S. Department of Energy's Idaho National Laboratory. The
lab last month agreed to research new refining techniques for
privately-held U.S. Critical Materials, which is developing a
rare earths deposit. 
    
    SKEPTICISM
    Despite the hunger for new refining techniques, industry
consultants warned that manufacturers may be expecting too much
and too soon from this so-far unproven group of nascent
technologies, especially given the world's aggressive
electrification targets.
    Ucore's technology, for example, has never worked at
commercial scale and is not expected to gain patent protection
until next year, a timeline that industry consultants flagged as
a cause for concern given strong rivalries for intellectual
property.
    "The time horizon needed to develop all these new refining
technologies will be longer than many expect," said Frank
Fannon, a minerals industry consultant and former U.S. assistant
secretary of state. Talks of production within a few years
"creates a false sense of security for policymakers."
    Yet the need for alternatives is rising, especially in the
wake of Beijing's decision earlier this year to curb exports of
germanium, graphite and other metals. That has sparked concerns
that rare earths could be next.
    Fannon and several U.S. politicians have called for Western
governments to create central rare earths processing hubs, a
plan already being pursued by Canada.
    In Saskatchewan, government scientists are working to launch
their own rare earths processing technology after attempts to
buy Chinese technology sputtered in 2020.
    "We looked at existing technologies and said, 'There's a
better way of doing this,'" said Mike Crabtree, CEO of the
Saskatchewan Research Council (SRC), which is funded by the
provincial government. "We wanted to put our own spin on it."
    Using artificial intelligence, the company designed
processing equipment it believes is more efficient than Chinese
rivals. Rather than needing up to 100 people to run, as with
traditional solvent extraction, the SRC estimates that only four
people will be needed to run its plant, which it hopes to open
by the end of 2024.
    While the SRC's goal is to spur mining across Canada,
Crabtree said he is open to licensing the technology for use
anywhere in the world. 
    "This entire sector as a whole needs to grow outside of
China in order to support the energy transition," he said.
    Crabtree and the SRC expect their facility to cost more to
build than Chinese rivals but less to operate, a function of
their desire to make processing equipment that has no waste and
recycles acid and other key chemicals.
    And while MP Materials and others have struggled to tailor
their processing equipment to specific geological deposits, SRC,
Ucore and others say they believe their new refining processes
will be able to process the critical minerals from multiple
locations across the globe. 
    "These new sources for rare earths are going to be paramount
if we're going to reach global net zero targets," said Steve
Schoffstall of the Sprott Energy Transition Materials ETF
 SETM.O , which holds shares in several rare earths companies.
    Shares of Ucore rose more than 6% on Monday in Canadian
trading after the Reuters story, while shares traded
over-the-counter in the United States gained nearly 8%.
    
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 (Reporting by Ernest Scheyder; Editing by Veronica Brown and
Claudia Parsons)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))