Exclusive: U.S. Army will fund rare earths plant for weapons development
Reuters
Ernest
Scheyder
The U.S. Army plans to fund construction of rare earths processing
facilities, part of an urgent push by Washington to secure domestic supply of
the minerals used to make military weapons and electronics, according to a
government document seen by Reuters.
The move would mark the first financial
investment by the U.S. military into commercial-scale rare earths production
since World War Two’s Manhattan Project built the first atomic bomb.
It comes after President Donald Trump
earlier this year ordered the military to update its supply chain for the niche
materials, warning that reliance on other nations for the strategic minerals
could hamper U.S. defenses.
China, which refines most of the world’s
rare earths, has threatened to stop exporting the specialized minerals to the
United States, using its monopoly as a cudgel in the ongoing trade spat between
the world’s two largest economies.
“The
U.S. rare earths industry needs big help to compete against the Chinese,” said
Jim McKenzie, chief executive officer of UCore Rare Metals Inc (UCU.V), which is
developing a rare earths project in Alaska. “It’s not just about the money, but
also the optics of broad support from Washington.”
The Army division overseeing munitions last
month asked miners for proposals on the cost of a pilot plant to produce
so-called heavy rare earths, a less-common type of the specialized minerals
that are highly sought after for use in weaponry, according to the document.
Responses
are due by Dec. 16. UCore, Texas Mineral Resources Corp (TMRC.PK) and a
joint venture between Lynas Corp (LYC.AX) and privately-held
Blue Line Corp are among the expected respondents, according to company
officials and sources familiar with the matter.
The Army said it will fund up to two-thirds
of a refiner’s cost and that it would fund at least one project and potentially
more. Applicants must provide a detailed business plan and specify where they
will source their ore, among other factors.
This latest move by the Army, a division of
the Pentagon, comes after a military study earlier this year on the state of
the U.S. rare earths supply chain.
The rare earths tension between the U.S.
and China goes back to at least 2010, when China limited exports to Japan after
a diplomatic dispute, sending prices for the niche metals spiking and fueling
concerns across the U.S. military that China could do the same to the United
States.
The U.S. Army Combat Capabilities
Development Command Chemical Biological Center and the U.S. Army headquarters
did not respond to requests for comment.
The request does not give a specific
financial amount the Army could fund, though it is derived in part from the
Defense Production Act (DPA), a 1950s-era U.S. law that gives the Pentagon wide
financial latitude to procure equipment necessary for the national defense.
A rare earth processing pilot plant could
cost between $5 million and $20 million, depending on location, size and other
factors, with a full-scale plant potentially costing more than $100 million to
build, industry executives said.
“It’s
great to see interest in financially supporting the industry from the Department
of Defense,” said Jon Blumenthal, CEO of Blue Line Corp, which earlier this
year signed a memorandum of understanding to build a rare earth processing
facility in Texas with Australia-based Lynas Corp (LYC.AX).
Blumenthal declined to comment when asked
if Blue Line will respond to the Army’s request. Lynas declined to comment.
It is not clear how the Army will rank the
responses given that much of the rare earths industry expertise is now located
in China, though the modern rare earths industry itself had its genesis in the
United States decades ago.
“Instead of providing funds for yet another
study, this allocates money toward establishing a U.S.-based rare earth supply
chain,” said Anthony Marchese, CEO of Texas Mineral Resources, which is
developing the Round Top mine in Texas with USA Rare Earth.
After processing, however, rare earths need
to be turned into rare earth magnets, found in precision-guided missiles, smart
bombs and military jets and China controls the rare earths magnet industry,
too. The Pentagon has not yet launched an effort
to finance domestic magnet manufacturing.
“Closing the magnet gap would do more to
address the nation’s defense needs, and as well the needs of electric vehicle
makers and others,” said Ryan Castilloux, managing director with Adamas
Intelligence, a research firm that closely tracks the rare earths industry.
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