Pentagon races to track U.S. rare earths output amid China trade dispute

Texas Mineral Resources

12/07/2019 17:41

By Ernest Scheyder
    July 12 (Reuters) - The Pentagon is rapidly assessing the
United States' rare earths capability in a race to secure stable
supply of the specialized material amid the country's trade
conflict with China, which controls the rare earths industry,
according to a government document seen by Reuters. 
    The push comes weeks after China threatened to curb exports
to the United States of rare earths, a group of 17 minerals used
to build fighter jets, tanks and a range of consumer
electronics.  urn:newsml:reuters.com:*:nL4N22Y2ND  urn:newsml:reuters.com:*:nL8N23606C    
    The Pentagon wants miners to describe plans to develop U.S.
rare earths mines and processing facilities, and  asked
manufacturers to detail their needs for the minerals, according
to the document, which is dated June 27.
    Responses are required by July 31, a short time frame that
underscores the Pentagon's urgency. The U.S. government's fiscal
year ends in September.
    The U.S. Air Force, which is part of the Pentagon and
created the document, confirmed the document's existence. The
Pentagon's headquarters did not respond to a request for
comment.  
    The responses will be reviewed by two government
contractors, including Northrop Grumman Corp  NOC.N , which did
not respond to requests for comment.
    "The government wants to know how much of these minerals we
could eventually be producing, and how soon," said Anthony
Marchese, chairman of Texas Mineral Resources Corp  TMRC.PK ,
which is working to develop the Round Top rare earth deposit in
the state's western edge.
    Several miners, though, declined to comment when asked if
they will reply to the Pentagon, a sign of the sensitivity
around rare earth mine development during the ongoing U.S.-China
trade dispute.
    The document does not directly promise loans, grants or
other financial support to U.S. rare earths projects. But the
Pentagon's request is derived in part from the Defense
Production Act (DPA), a 1950s-era U.S. law that gives the
Pentagon wide berth to procure equipment necessary for the
national defense. 
    Some type of financial assistance is ultimately expected for
the industry after the Pentagon reviews the responses, according
to industry analysts and consultants.
            
    CHINA DOMINATES
    Although China contains only a third of the world's rare
earth reserves, it accounts for 80% of U.S. imports of minerals
because it controls nearly all of the facilities to process the
material, according to U.S. Geological Survey data.
    It is unclear how much money the U.S. military will spend to
boost America's rare earths industry as the DPA does not set a
financial limit. The June Pentagon letter notes that government
investments usually range from $5 million to $20 million per
project.
    "The overall goal is to secure and assure a viable, domestic
supplier (of rare earths) for the long-term," according to the
nine-page document.
    The Air Force Research Laboratory, which drafted the
request, said it wants information related to U.S. rare earth
"shortcomings, risks, and opportunities which may be addressed
by investments" by the military.
    "There is no guarantee that any submitted topic will"
receive military support, Diana Carlin, the Air Force's
executive agent program manager for the DPA program related to
procurement, said in an emailed statement to Reuters. 
    James Litinsky, co-chairman of MP Materials, which owns the
Mountain Pass mine in California, said the United States needs
"a sustainable supermajor for the Western supply of these
minerals." A supermajor would be a large producer that dominates
the global industry. 
    MP Materials, the only existing U.S. rare earths facility,
ships its ore to China for processing and has been subject to a
25% tariff since last month.
    Some industry analysts have called for the Pentagon to
broaden the scope of its study and commit to direct government
funding of rare earth magnet and motor manufacturing, much like
China's government.
    "The U.S. government doesn't have a holistic approach to the
entire rare earths supply chain, even now, and that's a
problem," Jack Lifton, an industry analyst with Technology
Metals Research LLC, said in an interview this week.
    
    BILLS IN U.S. SENATE
    The Pentagon's request builds on several executive orders
from President Donald Trump on strategic minerals, which he has
said are critical for national defense.  urn:newsml:reuters.com:*:nL2N23B1RE
    Several U.S. senators have sponsored legislation in recent
weeks designed to boost domestic production of lithium, rare
earths and other strategic minerals. On Thursday, U.S. Senator
Marco Rubio, a Florida Republican, introduced a bill that would
let rare earths producers form cooperatives, avoiding U.S.
antitrust statutes.
    None of the bills have passed yet.
    The Pentagon has also held talks with rare earths suppliers
in Malawi and Burundi, department officials told Reuters last
month.  urn:newsml:reuters.com:*:nL2N23C12A
    "There's a heightened sense of urgency on developing a rare
earth supply chain in North America," said Don Lay, chief
executive of Medallion Resources Ltd  MDL.V , which earlier this
month said it was studying potential sites across North America
to develop an extraction plant for rare earths.  urn:newsml:reuters.com:*:nL4N24A34P

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
INTERACTIVE GRAPHIC-Rare earth production    https://tmsnrt.rs/2I9MfL5
GRAPHIC-Rare earth export prices perk up after China rattles
trade war sabre    https://tmsnrt.rs/2Id5tQ2
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Ernest Scheyder in Houston
Additional reporting by Mike Stone in Washington; Editing by
Amran Abocar and Matthew Lewis)
 ((ernest.scheyder@thomsonreuters.com
+1 713 210-8512
Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))