NEW YORK, Dec. 16, 2020 /PRNewswire/ -- The United States was once a thriving producer of rare earth elements (REEs), a group of 17 elements deemed critical to clean energy and modern technologies. REEs are used in a bevy of applications including cell phones, computers, electric vehicles, defense equipment, renewable energy systems and more. China has dominated global rare earth markets, driving out competitors and controlling nearly all of the world's processing capacity. China has wielded this monopoly of the REE supply chain to influence foreign policies, a weaponization that threatens the economic and national security of the U.S. and other countries around the world. Against this backdrop, the U.S. government is committed to ending its dependence upon China for REEs, and Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) (Profile) is among the leaders with projects that intend to re-ignite REE production in the U.S., which in Energy Fuels' case, is expected as soon as early 2021. In December 2020, the company advanced its entry into the REE market by inking a three-year supply agreement with the Chemours Company (NYSE: CC) to acquire a minimum of 2,500 tons per year of natural monazite sand ore, one of the highest-grade and highest-value rare earth minerals in the world. Yet, the relatively tiny quantity of natural monazite the company will be acquiring from Chemours contains close to 10% of total U.S. demand for rare earths. Chemours is the nation's leading miner of monazite, a reddish-brown phosphate mineral sand containing high concentrations of REEs and uranium. Companies are looking to shift their supply chains away from China, as EV maker Tesla Inc. (NASDAQ: TSLA) recently did by becoming a lithium miner in Nevada to supplement its other material feeds. Tech juggernaut Apple Inc. (NASDAQ: AAPL) is following a different path, using recycled REEs in its latest products with plans for the entire corporate footprint to have net zero climate impact by 2030. Siemens Gamesa Renewable Energy SA (OTC: GCTAF) has challenges of its own as a major supplier of wind turbines, which requires REEs in their construction.
- Rare earth elements are critical for clean energy, advanced technologies and national security.
- The U.S. imported more than $2.6 trillion of finished products containing REEs in 2018.
- The federal government is supporting domestic production of REEs for national security and tech independence.
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Reviving the U.S. REE Market
The U.S. Department of Energy estimates that in 2018 the global REE market was valued at approximately $8 billion. The U.S. imports all of the REEs it consumes, about 80% of which comes from China. In 2018, the DOE said that the nation imported about $160 million worth of rare earth compounds and metals, excluding yttrium and scandium. However, the real economic cost of REEs is deceptive insomuch that the nation imports nearly all of its REEs in the form of finished goods rather than raw material. When put in these terms, the U.S. Department of Energy estimates that the U.S. imported $2.6 trillion of finished goods containing REEs in 2018.
Insatiable consumer appetite for technology and growing environmental consciousness suggest that demand for REEs will continue to rise. The increase will be spearheaded by renewable energy, namely wind and solar, and an automobile industry where REEs are used in 93% of the permanent magnet traction motors in electric vehicles (EVs). Magnets using REEs are integral to both of these markets. For a bit of context, consider just the EV market. Each fully electric vehicle requires 1–2 kilograms of neomagnets. If there are 125 million EVs on the road by 2030 as the International Energy Agency predicts, REE use for EVs will increase from approximately 180 to 360 tons in 2017 to somewhere between 6,000 and 13,000 tons in the next decade.
An Undisputed Leader in Uranium, Vanadium — and Now REEs
Since the late 1990s, the nation has effectively ceased processing any REEs, while China established a commanding global position controlling 90% of global production. Last year, the Pentagon began changing that dynamic by committing to provide funds to REE mines and processors through the Defense Production Act. Then, in a milestone moment for the industry and country, in October 2020,Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) produced a mixed REE concentrate from monazite sand at its wholly owned White Mesa Mill in Utah.
While REE ore is currently mined and beneficiated in the U.S. by MP Materials, Energy Fuels' production of a mixed REE carbonate will represent the first product of its kind produced in the country in several years. The company also states that it intends to evaluate producing separated REE oxides, and perhaps other high-value downstream REE products, including metals, alloys and possibly magnets.
Energy Fuels is already distinguished as the name in U.S. uranium, with assets that have produced more than 33% of all U.S. uranium over the past 15 years, as well as more production capacity (11.5-plus million pounds of U3O8 annually) and in-ground resources than any other miner in the country. Energy Fuels also weighed in as the nation's biggest producer of vanadium in 2019, another critical element used in steel, advanced alloys and grid-scale batteries.
Now the company intends to lead the re-emerging U.S. REE market. REEs are complementary to the company's uranium business, as natural monazite ore contains high concentrations of both uranium and REEs. UUUU's announcement regarding its supply agreement with Chemours included the company's plan to process the monazite ore at its White Mesa Mill starting in Q1 2021, recover the contained uranium and produce a marketable ~71% TREO (dry basis) mixed REE carbonate, ready for separation.
The announcement represents an important step toward re-establishing a fully integrated U.S. REE supply chain. "We estimate that the amount of REEs contained in the monazite sands to be supplied by Chemours will equal close to 10% of total current U.S. REE demand, as contained in end-use products," the company noted in the announcement.
Energy Fuels made relatively inexpensive process tweaks at the White Mesa Mill to add monazite ore processing to its portfolio. The company actually has considerable experience in handling REEs and other materials, having produced uranium from feeds that also contained similar metals, tantalum and niobium at the mill. The company also recruited leading REE experts to provide strategic advice in its expansion into REEs. The decision to process natural monazite may prove prescient, as the phosphate mineral is known as one of the highest-value REE ores in the world, containing over 50% total rare earth oxides (TREO) as well as uranium.
First Mover, Lightning Pace
Once it announced its intention in April 2020 to build its footprint in REEs, Energy Fuels moved quickly to complete a pilot-scale monazite production run just seven months later. The company was able to accomplish this milestone so fast because it utilized existing resources, infrastructure and technologies, providing the company with a competitive advantage. The company believes it can enter commercial REE production more quickly and inexpensively than others because of its existing licensed and constructed assets and experience.
If successful in using existing infrastructure and technologies at the White Mesa Mill to recover the uranium and the REEs from monazite sands, Energy Fuels will avoid the years of permitting and development that others may be faced with, and will enjoy materially reduced capital costs.
Energy Fuels is finalizing negotiations to sell its mixed REE concentrate to separation facilities. With commercial production targeted for early 2021, the company anticipates being the first to bring a critical portion of the monazite REE supply chain back to the U.S. As a complement to its commercial REE initiatives, earlier this year, Energy Fuels and a team from Penn State University were awarded a contract by the U.S. Department of Energy to develop a conceptual design for producing rare earth oxides from coal-based resources. Many of the REE minerals associated with coal are similar to natural monazite. This could further cement Energy Fuels' leadership position in the domestic REE industry.
A Sea Change Happening
Momentum is building towards bringing back REE production to North America, domestically producing the raw materials required for clean energy and advanced technologies, and reducing China's leverage. Energy Fuels is in an enviable position with its existing infrastructure and experience that align with Washington's support of a domestic supply chain for critical metals, including REEs. Backstopped by government initiatives, many companies are following Washington's lead supporting changes to supply sources for these important, and irreplaceable materials.
The Chemours Company (NYSE: CC) isn't a name that most associate with REEs, but Chemours is one of the biggest U.S. miners of natural monazite ore through its subsidiary Southern Ionics Minerals. Southern Ionics Minerals mines sand deposits in Southeast Georgia to produce titanium and zirconium. In the process, REEs are a byproduct of the sand separation process. Historically, the rare earth ore has been exported to China for processing. "Chemours is pleased to support the developing rare earth supply chain in the United States," said Chemours president Bryan Snell. "Our partnership with Energy Fuels came from a deliberate process of customer selection and developing sustainable solutions for our critical minerals."
Shares of Tesla Inc. (NASDAQ: TSLA) continue to soar as investors keep bidding up electric vehicle makers as the wave of the future. Tesla CEO Elon Musk has a quest to bring an EV to market at a $25,000 price point, which may mean securing a reliable, low-cost supply chain that isn't totally dependent upon the trade whims of China. REEs are important building blocks of EVs, used in electric motors, batteries and other components. In a bid to fulfill its mission, Tesla is pushing into the mining sector, securing 10,000 acres of lithium-rich clay deposits in Nevada. Clay has proven to be a great challenge for lithium extraction, but Musk says that he has plans for employing a new, sustainable process for producing the silvery white metal for its rechargeable batteries.
Apple Inc. (NASDAQ: AAPL) may be eking its way out of China, although evidence remains to be seen to what extent. What is for sure is that the company is on a path towards sustainability in its operations and products. About one-fourth of the REEs in an iPhone goes for the "taptic engine," a part that serves as a button, even though it is on the flat part of the screen. Other uses of REEs in Apple's electronics include speakers and actuators, for which Apple is using an anonymous third-party recycler for its supply.
Siemens Gamesa Renewable Energy SA (OTC: GCTAF) is a recognized leader in the wind turbine industry with its rare earth neodymium iron boron direct drive generators for both inland and offshore windfarms. These generators, which are also growing in popularity on new airplane technologies, are the product of choice because of their reliability, power-to-weight ratio and low-maintenance qualities. Even in a challenging COVID-19 economy, Siemens Gamesa completed fiscal 2020 with record order intake, providing evidence the movement towards wind energy is gaining traction.
The United States was once home to a robust rare earth element market, ultimately letting it slip away, and the country is now paying the price. Lesson learned. Now in the early stages of a groundswell to address the need for new supply channels of critical minerals, the nation has recognized that there's simply no substitute for critical REEs and they must be produced domestically again.
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