Focus: California rare earths miner races to refine amid U.S.-China trade row

Texas Mineral Resources

23/08/2019 21:33

By Ernest Scheyder
    Aug 23 (Reuters) - The owner of the only U.S. rare earths
mine is going on a hiring spree as it looks to significantly
boost production, part of a strategy to build out American
refining capability after China raised tariffs on the minerals
amid an escalating trade war.
    By next year, MP Materials aims to be the first U.S. company
to refine rare earths since 2015 when Molycorp Inc, the former
owner of California's Mountain Pass mine, went bankrupt,
executives said.
    The mine has relied on China for rare earth processing,
fueling national security concerns. China is the world's largest
processor and producer of the 17 specialized minerals used to
build weapons, consumer electronics and a range of other goods.
There are no known substitutes.
    In June, China more than doubled tariffs on U.S. rare earths
imports for refining to 25 percent. On Friday, Beijing said it
would add an additional 10 percent on top of that tariff rate
starting next month, the latest tit-for-tat exchange in a
protracted dispute between the world's top two
economies. urn:newsml:reuters.com:*:nL4N25J301
    The Trump administration has labeled rare earths critical
for national defense and ordered the Pentagon to support
domestic production.  urn:newsml:reuters.com:*:nL2N24N1LH
    "What China has recognized is that this is a strategic
industry," said James Litinsky, co-chairman of MP Materials. 
    The company plans to boost its headcount by next year to
about 400, up from about 200, and is already producing 68
percent more rare earth concentrate than under Molycorp. 
    But that concentrate - more than 50,000 tonnes per year - is
today shipped to China for processing.
    To resume refining in California, privately-held MP
Materials is spending $200 million to restart mothballed
equipment at the mine and build a large roasting oven.
    "The tariffs are very painful, but we remain profitable,"
Litinsky said.
    After processing, rare earths need to be turned into rare
earth magnets, found in precision-guided missiles, smart bombs
and military jets. But China controls the rare earths magnet
industry, too. urn:newsml:reuters.com:*:nL8N23Q3W7
    Litinsky and peers are betting that by bringing rare earths
refining back to the United States, it will encourage other
investors to build magnets and other related parts in the
country as well.
    The mine originally opened in 1948 and has gone through a
series of owners, including Chevron Corp  CVX.N , before
Molycorp went bankrupt. 
    MP Materials also plans to re-open the Mountain Pass
chlor-alkali facility, which was built by Molycorp, Litinsky
said. 
    The facility will recycle wastewater and produce
hydrochloric acid and caustic soda to use in the rare earths
separation process, saving the facility the added cost of buying
the chemicals on the open market.
    The company's new roaster will bake rare earth ore at high
temperatures to effectively leach out the high-value minerals.
    
    'SMART PLAY, CHINA'
    It's not clear if the group will be able to re-start the
processing equipment by next year or instead will face delays
common in construction projects.
    "Call me cynical, but history just shows if you look back on
metals projects, most don't start when they were slated to come
online," said Mark Seddon, an Argus metals analyst.
    Once the refining equipment does switch online, the goal is
to use that material on site to make more than 5,000 tonnes per
year of neodymium and praseodymium (NdPr), two of the 17 types
of rare earths that are used to make magnets.    
    Friday's tariff news means that MP Materials will need to
find more customers outside of China once it restarts its
California processor, pitting it against Australia's Lynas Corp
 LYC.AX , the largest rare earths miner and processor outside of
China. 
    Lynas CEO Amanda Lacaze has vowed not to cede her company's
market share outside of China. urn:newsml:reuters.com:*:nL2N23D0ZP
    "This will put MP Materials in direct competition with
Lynas. Smart play, China," said Ryan Castilloux, managing
director with Adamas Intelligence.
    MP Materials is majority controlled by Chicago hedge fund
JHL Capital Group and New York's QVT Financial LP, with China's
Shenghe Resources Holding Co  600392.SS  holding a 9.9 percent
stake. 
    The group bought the mine out of bankruptcy in 2017 for
$20.5 million, a far cry from billions that Molycorp had
invested in the facility over the years.
    Litinsky says that despite the Shenghe stake, China has no
control over Mountain Pass or where its products will go.
    "If the (U.S.) Department of Defense came to us and said,
'We need product,' we'll sell there first," he said. "We'll sell
wherever we want to sell."

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Rare Earth Production    https://tmsnrt.rs/2I9MfL5
EXPLAINER-U.S. dependence on China's rare earth: Trade war
vulnerability     urn:newsml:reuters.com:*:nL2N23A1H6
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Ernest Scheyder; Editing by David Gregorio)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))