It is challenging to refine rare earths for the switch to green energy. Just ask Lynas and MP Materials.

The two largest rare earths firms in the world outside of China are having trouble converting the ore from their mines into the components of the magnets used in products as diverse as Apple’s iPhone, Tesla’s Model 3, and Lockheed Martin’s F-35 fighter jet.

Since Beijing last month placed export restrictions on the strategic metals gallium and germanium, the West’s push to establish independent sources of essential minerals has become more urgent. This is because there are fears that China may soon stop exporting rare earths or processing technology.

According to interviews with more than a dozen consultants, executives, investors, and industry analysts, recent struggles by MP, Lynas, and other companies to refine their own rare earths highlight the challenging task the rest of the world faces to break China’s stranglehold on the crucial group of 17 metals required for the clean energy transition.

Companies’ attempts to take market share away from China, which, according to the International Energy Agency, owns 87% of the world’s capacity for rare earths refining, are being hampered by technical difficulties, partnership tensions, and environmental concerns.

Without Beijing’s assistance, numerous economies might not be able to reach their target of reducing carbon emissions to net zero by 2050 in order to lessen the effects of climate change.

According to two persons acquainted with the situation, plans for Australia’s Lynas to collaborate with a Texas-based partner to develop a rare earths refinery in the United States have fallen through. According to Lynas, it is attempting to complete a rare earths refinery in Western Australia that has run into difficulties and is constructing its own factory somewhere else in Texas.

The COVID-19 outbreak and technical difficulties delayed MP’s plan to refine its own rare earth metals in 2020, pushing the objective back to the end of 2023. On Thursday, when the business is anticipated to release its quarterly results, there may be updates.

As part of a complex calibration process that has so far failed, MP, a U.S.-based firm, said late last year that it was commissioning refining equipment close to its California mine. As a result, the company is now completely dependent on China for refining and the majority of its revenue. Additionally, MP is constructing a Texas magnet facility for General Motors, which will need the California refining machinery to be operating.

“The (rare earths) commissioning process is painstaking, with stops and starts,” Jim Litinsky, MP’s CEO and largest shareholder, told investors in May.

Prior to the release of its results, MP, whose second-largest stakeholder is China’s Shenghe Resources (600392.SS), declined to comment.

“The rare earths refining process can be very finicky,” said Kray Luxbacker, who heads the University of Arizona’s mining and geological engineering department and is unaffiliated with MP or its peers. “There are just so many complex steps.”

Rare earth magnets are crucial parts of an electric vehicle’s motor because they convert energy into motion. Due in part to their special chemical characteristics, they are lighter and more heat-resistant than conventional magnets.

Depending on the geology of a deposit, rare earths refineries must deal with 17 metals that are all about the same size and atomic weight, making separation difficult. This requires that the rare earths be extracted in a particular order, prohibiting MP and its competitors from selecting only the elements they may want.

For instance, MP must first remove the less desirable lanthanum and cerium that make up about 83% of its California deposit before it can extract neodymium and praseodymium to make EV magnets. This process requires a complex concoction of acids, bases, and other chemicals that are tailored to the mine’s geology.

Even though MP purchased Chinese knowledge to restart its mining in 2017, the expertise is less useful for customising refining machinery. Analysts predicted that a dozen additional businesses attempting to independently refine elsewhere in the world may encounter similar problems.

“What’s happened in China over many years is that they’ve invested heavily and cleverly in the processing capacity to convert the (rare earths) material all the way from the mine through to the magnet,” said Allan Walton, a metallurgy professor at the University of Birmingham.

Due of its competence in refining, China has been able to manipulate rare earths prices at many points along the production lines, including low costs for completed goods to stifle global competition, according to analysts.

The refining of rare earths “is not really being addressed even by those who are developing magnet capacity,” according to Ryan Castilloux, a minerals expert with Adamas Intelligence.

Castilloux continued, “Beijing can boost its booming EV industry by strategically focusing on industries that use the magnets—built with rare earths refined in China at profit margins purposely kept low.”

When rare earths prices fell to their lowest point in over three years last month, partly as a result of increased Chinese supply, China’s economic model came into stark contrast.

China furthers its hegemony by providing magnet producers employing its material with a 13% export subsidy.

For many years, Beijing has permitted shipments of raw rock for processing known as rare earths concentration. According to analysts, the method helps to ensure pricing that encourage other nations to develop new mines without constructing processing facilities that could also produce radioactive waste.

Last year, MP sent 43,000 metric tonnes or so of concentrate to China for refinement. According to regulatory records, it has also been making a loss on the sale of China fluoride waste that was left behind at the California location of the company by a previous owner.

Others who ship concentrate to China for refining include Myanmar, Vietnam, and others.

Lynas refines concentrate in Malaysia that it manufactures in Australia, however Kuala Lumpur officials intend to stop the imports the following year due to worries that the Lynas factory emits radioactive waste, which Lynas denies. Later this year, it plans to start up a substitute processing facility in Australia.

The business has traditionally supplied rare earth metals to privately held Blue Line in the US for conversion into specialised products.

According to emails obtained by Reuters, the pair decided to construct refining facilities close to San Antonio, Texas, and discussed their aspirations to become “the only large scale producer of separated (rare earth elements) in the world outside of China” with Trump administration officials in 2019.

However, that endeavour, which was partially supported by the Pentagon, has since failed, two sources told Reuters. It was not immediately possible to ascertain the causes of the collapse, which had not before been recorded.

Blue Line deferred to Lynas for comment. The Pentagon stated that it would not be able to respond right away. Lynas made reference to earlier press releases but refrained from adding more. The Lynas company, which is constructing more refinery facilities along the Texas coast with $258 million in Pentagon money, updated its plans this week.

Other projects in Sweden, South Africa, Australia, and other nations aim to extract rare earths from mine waste and byproducts, which, according to Adamas Intelligence, may successfully supply 8% of the world’s need.

According to Benchmark Mineral Intelligence, a market information supplier, China currently refines 89% of the world’s neodymium and praseodymium, the two primary metals for electric vehicle magnets. By 2028, however, this dominance is predicted to decline to 75%.

Benchmark predicts a decline in China’s global dysprosium refining dominance from 99% in 2023 to 94% by 2028. At high temperatures, dysprosium aids in the retention of magnetization.

According to industry analysts, vital innovation is also required to end China’s monopoly on the market without compromising environmental quality because projects are hampered by worries about the toxic waste produced by current procedures.

Leading Edge Materials’ efforts to develop the Norra Karr rare earths deposit in Sweden were put on hold in 2016 due to worries that chemicals would seep into drinking water.

This year, the company submitted a new environmental application and revised the mine plans to make them more environmentally friendly.

Tesla announced plans to produce EV magnets free of rare earths in May, citing “environmental and health risks” associated with the current method.

“China made a strategic decision decades ago to develop its rare earth processing capability, despite the environmental consequences of the available technology,” said Melissa Sanderson, president of American Rare Earths (ARR.AX), which is developing several U.S. rare earths projects.

In order to create microorganisms that could process rare earths, American Rare Earths is collaborating with American government researchers at the Lawrence Livermore Laboratory. Aether Bio and Locus Mining, both privately held companies, are researching how to use biosurfactants and nanotechnology, respectively.

Other companies researching different processing technologies include privately held USA Rare Earth, Mosaic, and UCore Rare Metals.

Cleaner solutions are still years away from being produced.

“If you can innovate and bring solutions to market that produce rare earths efficiently, you have a tremendous market opportunity,” said Nathan Picarsic, co-founder of the geopolitical consulting firm Horizon Advisory.

(Adapted from Reuters.com)

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