Insight: Inside Vietnam's plans to dent China's rare earths dominance

Toyota Tsusho

25/09/2023 02:00

* 
      Vietnam plans to restart its largest rare earths mine next
year 
    

        * 
      Dong Pao is among world's biggest mines, draws foreign
interest
    

        * 
      Australia's Blackstone eyes $100mln Dong Pao investment
    

        * 
      Blackstone's partner VTRE plans factory with S. Korea's
Setopia
    

        * 
      Concerns mount over China's dominance of strategic
minerals
    

  
    By Francesco Guarascio and Khanh Vu
       HANOI, Sept 25 (Reuters) - Vietnam plans to restart its
biggest rare-earths mine next year with a Western-backed project
that could rival the world's largest, according to two companies
involved, as part of a broader push to dent China's dominance in
a sector that helps power advanced technologies.
    The move would be a step toward the Southeast Asian
country's aim of building up a rare-earths supply chain,
including developing its capacity to refine ores into metals
used in magnets for electric vehicles, smartphones and wind
turbines.
    As an initial step, Vietnam's government intends to launch
tenders for multiple blocks of its Dong Pao mine before the
year's end, said Tessa Kutscher, an executive at Australia's
Blackstone Minerals Ltd  BSX.AX , which plans to bid for at
least one concession. She cited unpublished information from
Vietnam's Ministry of Natural Resources and Environment, which
did not respond to requests for comment.
    The auction's timing could change but the government plans
to restart the mine next year, said Luu Anh Tuan, chairman of
Vietnam Rare Earth JSC (VTRE), the country's main refiner and
Blackstone's partner in the project.
    The proposed restart of Dong Pao - whose timeline, scale and
degree of foreign financial support have not been reported
previously - comes as many nations fret about their
vulnerability to supply disruptions due to China's stranglehold
on strategic minerals and its disputes with the U.S. and its
allies. Beijing this year imposed export curbs on minor metals
used in semiconductors, which an influential Chinese policy
adviser warned was "just a start".
    Vietnam has the second-largest rare-earth deposits,
according to the U.S. Geological Survey. But they have remained
largely untapped, with investment discouraged by low prices that
are effectively set by China because of its near-monopoly on the
global market. Visiting Hanoi this month to upgrade bilateral
relations, U.S. President Joe Biden signed an agreement to boost
Vietnam's ability to lure investors for its rare-earth reserves.
    In interviews with Reuters, 12 industry executives,
investors, analysts and foreign officials described plans for
Vietnam, including investments they said showed how talk of
derisking supply chains to reduce reliance on China is
translating into action. Some acknowledged the difficulties of
forging a rare-earths hub but said the gambit could make Vietnam
a viable player while assuaging strategic worries, even if China
remained dominant.
    Kutscher said Blackstone's investment in the project would
be worth around $100 million if it wins. She added that the
company was talking to potential clients, including electric car
makers VinFast  VFS.O  and Rivian  RIVN.O , about possible
contracts with set prices that would shield suppliers from
fluctuations and guarantee buyers a secure supply chain.
    Sealing such deals would address a hurdle faced by
developers in Vietnam. In recent years, Japanese investors
Toyota Tsusho and Sojitz abandoned projects at Dong Pao after
China ramped up supply, pummelling prices. The Japanese firms
did not respond to requests for comment.
    Yet despite the focus on derisking, it is unclear whether
clients would be ready to pay a premium for Vietnam, said Dylan
Kelly, of investment firm Terra Capital, noting the market in
general was opaque.
    Asked about VinFast's potential involvement, a spokesperson
for parent company Vingroup said the group's entity in charge of
raw-material procurement, VinES, had no current plans with
Blackstone involving rare earths. He did not address subsequent
questions about VinFast specifically.
    Rivian did not reply to a request for comment.
       
        RIVALLING MOUNTAIN PASS
    Effective exploitation of Dong Pao - which has sat dormant
for at least seven years, according to an official at
state-controlled miner Lavreco, which owns a concession - would
propel Vietnam into the top league of rare-earths producers.
    But refining rare earths is complex, and China controls many
processing technologies. Dong Pao's estimated deposits also need
to be reassessed with modern methods, according to Blackstone.
    Still, rare earths at Dong Pao are relatively easy to access
and are mostly concentrated in bastnaesite ores, according to
the Hanoi University of Mining and Geology. 
    These are typically rich in cerium, used in flat screens,
and lanthanides, such as praseodymium and neodymium, which go
into magnets.
    Tuan said VTRE hoped to win a concession that would allow it
to extract about 10,000 metric tons of rare-earth oxide (REO)
equivalent a year, roughly one-third of the mine's expected
annual output. Production could start around the end of 2024, he
said.
    That would put Dong Pao's output slightly below that of
California's Mountain Pass, one of the world's largest mines,
which produced 43,000 metric tons of REO equivalent in 2022,
according to the USGS.
    Vietnam also plans to develop additional mines. In July,
Hanoi set a target to produce up to 60,000 tons of REO
equivalent a year by 2030. China set a domestic quota of 210,000
tons last year.
    Those goals would see Vietnam producing 5% to 15% of China's
projected output by the decade's end, said David Merriman, a
research analyst at consultancy Project Blue, who expects China
to increase production over that period. 
    Vietnam's targets were "ambitious, though they are not
entirely out of the question", he said.
    
    U.S. ENCOURAGEMENT 
    The U.S. agreed during Biden's visit to help Vietnam better
map its rare-earths resources and "attract quality investment",
according to a White House fact sheet, a move that could
encourage U.S. investors to bid for Vietnam's new concessions.
    Reuters could not determine whether concrete plans involving
U.S. investors exist at this stage. Officials at the U.S.
embassy in Hanoi, the White House and Department of Commerce did
not reply to requests for comment. 
    But recent U.S. attempts to gain a foothold in the
Vietnamese industry did not succeed, said John Rockhold, a
consultant to the rare-earths sector and president of the Hanoi
chapter of the U.S. Chamber of Commerce, adding that one such
plan involving VTRE collapsed this year. 
    That plan would have involved the shipment to the U.S. of
rare earths refined by VTRE and possible future investment in
Vietnam of $200 million, according to a non-public report for
unspecified U.S. investors seen by Reuters. 
    VTRE confirmed the shipment deal had foundered.
    Instead, VTRE in April announced a deal to supply 100 metric
tons of rare-earth oxides this year to Australian Strategic
Materials  ASM.AX . ASM declined to comment on Dong Pao's
exploitation.
    Blackstone, which is a partner in that deal, operates a
nickel mine in Vietnam and has determined that its processing
facility in the country could handle ore from Dong Pao,
according to a company statement.
    
    FROM ORE TO MAGNET
    Ultimately, VTRE plans to play a role in the whole
rare-earth industry from ore extraction to the final products,
said Tuan, who with his wife owns most VTRE shares, according to
a list of shareholders he showed to Reuters. Blackstone said the
ownership information accorded with its assessment following due
diligence.
    This is not an easy feat. The U.S. currently exports its
rare-earth ores to China for processing as it lacks its own
facilities.
    An existing VTRE factory in northern Vietnam specialises in
separating rare-earth oxides from the extracted ore. The plant
has capacity to process 5,000 tons of REO a year but the company
plans to treble that to accommodate input from Dong Pao, Tuan
said.
    Once separated, oxides are turned into metals for use in
magnets and other industrial applications. The metallization
process is controlled by China, which produces 90% of rare-earth
metals, according to the U.S. Department of Energy.
    But VTRE is running a pilot project to build a metallization
factory with South Korea's Setopia  222810.KQ , said Setopia,
which has no previous experience in the sector.
    The initial combined investment would be around $4 million,
mostly from Setopia, a Setopia official told Reuters, with a
plant possibly ready next year.
    In the downstream industry, South Korean and Chinese magnet
firms are set to open factories in Vietnam, Reuters reported in
August.
    Dudley Kingsnorth, a professor at the Western Australian
School of Mines at Curtin University, said Vietnam had some way
to go, including in improving environmental practices, to
realise its rare-earth goals.
    Still, he said, Vietnam "has the resources, the mining and
processing expertise to provide alternatives to China".

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China's rare earths might     https://tmsnrt.rs/3E6egkq
Global rare earths deposits    https://tmsnrt.rs/3Rf7nF8
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Francesco Guarascio @fraguarascio and Khanh Vu in
Hanoi; additional reporting by Melanie Burton in Melbourne,
Ju-min Park in Seoul, Trevor Hunnicutt in Washington, Mai Nguyen
and Phuong Nguyen in Hanoi; editing by David Crawshaw)
 ((Francesco.Guarascio@thomsonreuters.com;))