Pentagon eyes rare earth supplies in Africa in push away from China

Texas Mineral Resources

05/06/2019 23:01

By Ernest Scheyder and Zandi Shabalala
    CHICAGO/LONDON, June 5 (Reuters) - The U.S. Department of
Defense has held talks with Malawi's Mkango Resources Ltd
 MKA.V  and other rare earth miners across the globe about their
supplies of strategic minerals, part of a plan to find
diversified reserves outside of China, a department official
said on Wednesday.
    The push comes as China threatens to curb exports to the
United States of rare earths, a group of 17 minerals used in a
plethora of military equipment and high-tech consumer
electronics.  
    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. urn:newsml:reuters.com:*:nL2N236017
    "We are looking for any source of supply outside China. We
want diversity. We don't want a single-source producer," Jason
Nie, a material engineer with the Pentagon's Defense Logistics
Agency, said on the sidelines of the Argus U.S. Specialty Metals
conference in Chicago.
    The DLA, which buys, stores and ships much of the Pentagon's
supplies - ranging from minerals to airplane parts to zippers
for uniforms - has also held talks with Burundi's Rainbow Rare
Earths Ltd  RBWR.L  about future supply, as well as offered to
introduce the several U.S. rare earth projects under development
with potential financiers, Nie said.
    "We can make connections," he said.
    The DLA routinely talks with potential suppliers as part of
its due diligence, steps that do not necessarily result in
purchase agreements. Still, the inquiries show that the Pentagon
is increasingly focused on diversifying supplies of critical
minerals. 
    As of September 2016, the most recent operational report,
the DLA held stocks of many critical minerals worth $1.15
billion.
    For the current 2019 fiscal year, the DLA expects to buy
rare earths on the open market (up to a maximum 416 tonnes),
lithium ion battery precursors (0.02 tonnes) and tin (40
tonnes), among other strategic minerals, according to a
government report.
    Some of the equipment the Pentagon buys, including
night-vision goggles and aircraft, are made using rare earth
minerals. The Pentagon has long supported efforts to require
military contractors to buy domestically sourced minerals,
though there are no current U.S. rare-earth processing
facilities.
    China, as part of the escalating trade conflict with the
United States, implied through its state-controlled media last
month that it could restrict rare earth sales to the world's
largest economy. Such a step would have precedence, as China in
2010 culled exports of rare earths to Japan after a diplomatic
dispute.
    "If you put yourself in China's shoes, this is their main
weapon in the trade war," said Mark Seddon, an Argus metals
analyst.
    Mkango Resources is developing a rare earths mine and
processing facility in Malawi that is still several years from
coming online. Rainbow Rare Earths began operating in Burundi in
2017 and has an offtake agreement with ThyssenKrupp AG
 TKAG.DE .
    China dominates global processing capacity for rare earths,
with Australia's Lynas Corp  LYC.AX  the only non-Chinese
company with any significant capacity.
    "It is not a good idea to be reliant on a single major
source of any material," Amanda Lacaze, chief executive of
Lynas, told Reuters on the sideline of the conference. Lynas
last month signed a memorandum of understanding to build a
rare-earth processing facility in Texas with privately held Blue
Line Corp. urn:newsml:reuters.com:*:nL2N236017
    Texas Mineral Resources Corp  TMRC.PK  is pushing to develop
the Round Top rare earth deposit in a remote corner of the
state's western edge, and Rare Element Resources Ltd  REEMF.PK 
is moving forward on a Wyoming project. urn:newsml:reuters.com:*:nL2N236017
    But those projects will take several years to come online,
reflecting the reality that efforts to build rare earth
processing plants in the United States are still in the early
stages.
    Privately held MP Materials, which owns the Mountain Pass
mine in California, aims to open a processing facility by next
year.
    The U.S. Commerce Department on Tuesday recommended urgent
steps to boost domestic rare earth production. urn:newsml:reuters.com:*:nL2N23B1RE
    The report includes 61 specific recommendations - including
low-interest loans and a buy American provision for defense
companies - to increase U.S. rare earths supply. It also called
for closer cooperation with U.S. allies, which dovetails with
DLA's outreach to miners in Africa and elsewhere.

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Rare earth production    https://tmsnrt.rs/2I9MfL5
EXPLAINER-U.S. dependence on China's rare earth: Trade war
vulnerability     urn:newsml:reuters.com:*:nL2N23A1H6
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 (Reporting by Ernest Scheyder and Zandi Shabalala
Editing by Leslie Adler)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))