Analysis: Brazil joins race to loosen China's grip on rare earths industry

Meteoric Resources NL

17/06/2024 23:00

(Repeats story, no changes to text)

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      Brazil attractive for its cheap labour, clean energy
    

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      Western governments offer incentives
    

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      Price slump, technical challenges hinder growth
    

  
    By Melanie Burton and Fabio Teixeira
       MELBOURNE/RIO DE JANEIRO, June 17 (Reuters) - Mining
giant Brazil has big ambitions to build a rare earths industry
as Western economies push to secure the metals needed for
magnets used in green energy and defence and break China's
dominance of the supply chain.
    Working to its advantage are low labour costs, clean energy,
established regulations and proximity to end markets, including
Latin America's first magnet plant which would provide a ready
buyer for the metals.
    But low rare earths prices, technical challenges and nervous
lenders pose challenges to the Latin American nation's hopes to
propel itself into the world's top five rare earths producers.
    The pace at which Brazil's rare earths projects come
together will be a test for how successful the West may be at
building a new advanced industry almost from scratch to break
China's grip. 
    Brazil holds the world's third-largest rare earth reserves.
The country's first rare earths mine, Serre Verde, started
commercial production this year.    
     
     
    Output is set to grow, analysts, mining CEOs and investors
say, supported by Western government incentives that are also
accelerating a global rare earths refining and processing
industry.
    "Brazil as a source of potential rare earths is a very
exciting proposition because there have been some very
meaningful discoveries made in the past couple of years," said
Daniel Morgan of Barrenjoey investment bank in Sydney.
    "I do think outside of China, Brazil’s projects are the most
economic greenfield projects available."
    The U.S. and its allies, almost entirely dependent on China
for rare earths metals and magnets, set out to build a separate
supply chain by 2027 after deliveries were disrupted during the
COVID-19 pandemic early this decade.
     
    LONG HAUL
    China produced 240,000 metric tons of rare earths last year,
more than five times the next biggest producer, the United
States, according to U.S. Geological Survey data. It processes
around 90% of the global supply of rare earths into permanent
magnets used in everything from wind turbines to electric
vehicles and missiles.
    For countries like Australia, Vietnam and Brazil looking to
catch up, progress is slow. Serra Verde has taken 15 years to
get into production. It is expected to produce 5,000 tons this
year and could double output by 2030, its CEO said.
    "Serra Verde and Brazil have significant competitive
advantages that could underpin the development of a globally
significant rare earths industry over the long term," Serra
Verde CEO Thras Moraitis told Reuters.   
    Those include attractive geology, access to hydropower,
established regulations and a skilled workforce, he said. 
    "It is still a nascent sector which will require continued
support to establish itself in a highly competitive market. Key
processing technologies are controlled by a small number of
players," he said.
    Brazil could have two or three more rare earths mines by
2030, potentially exceeding Australia's current annual output,
said Reg Spencer, an analyst at broker Canaccord. 
     
  
    
    BASEMENT PRICES
    One major obstacle is a 70% slump in rare earths prices over
the past two years that has made it difficult for companies to
raise funds for mines and processing.
    "Getting money at the moment is tough," Nick Holthouse,
chief executive of Australian-listed developer Meteoric
Resources  MEI.AX , told Reuters. 
    Meteoric is targeting an investment decision in late 2025
for its Caldeira project in Brazil’s Minas Gerais state which
will produce light and heavy rare earths.
    In March, the U.S. Export-Import Bank (EXIM) expressed
interest in providing Meteoric up to $250 million for the
project. The company also has a preliminary deal to supply rare
earth oxides to a separation plant in Estonia run by
Toronto-listed Neo Performance Materials  NEO.TO .
    Brazilian Rare Earths  BRE.AX , too, is in the early stages
of developing a large rare earths deposit in the country's
northeast, backed by Australia's richest person, Gina Rinehart.
    Its CEO, Bernardo Da Veiga, highlighted Brazil's low
operating costs as an advantage over rivals like Australia,
where he said a truck driver at an iron ore mine would earn up
to A$200,000 ($133,200) a year plus food and accommodation.
    "That same truck driver in Brazil, doing the same job, earns
like $15,000 a year and he rides his bike to work and brings his
lunch. There's just no comparison."
     
    COMPLEXITIES      
    While labour is cheap, developers face technical hurdles.
Unlike in China, many Western companies are still perfecting the
complex processes for producing rare earth metals, a costly
challenge that has stalled projects for years.
    To spur developments, the Brazilian government launched a 1
billion reais ($194.53 million) fund in February to finance
strategic minerals projects, including rare earths.  
    It also wants to build an industry for transforming these
minerals into alloys for batteries, wind turbines and electric
motors, the Ministry of Mines and Energy said in a statement.
    The challenge is to stimulate production and build
partnerships to promote element separation technologies and
supply chain development, the ministry said. It is also looking
into rare earths recycling.
    Among companies talking to the government about recycling
technology is Australia's Ionic Rare Earths  IXR.AX , which has
a pilot recycling plant in Belfast and a tie up with Brazilian
developer Viridis Mining and Minerals  VMM.AX , its CEO Tim
Harrison said.
    Brazil is also building a magnet factory due to start
operating later this year as a proof of concept, Flavio Roscoe,
president of Minas Gerais' state Federation of Industries
(FIEMG) said.
    "Our objective is to be a developer, a multiplyer of this
technology," Roscoe said.      
    "Brazil has the opportunity to be the world's option to
China."
     
($1 = 1.5015 Australian dollars)

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FACTBOX-Western rare earths supply chain springs into gear   
 ID:nL5N3GP09U 
Global rare earths deposits    https://tmsnrt.rs/468fFmr
Rare earth global mining output    https://tmsnrt.rs/3w7vvki
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 (Reporting by Melanie Burton in Melbourne and Fabio Teixeira in
Rio de Janeiro; Editing by Sonali Paul)
 ((melanie.burton@thomsonreuters.com Twitter: @MelanieMetals;
+613 9286 1421; Reuters Messaging:
rm://melanie.burton.thomsonreuters.com@reuters.net/))