The US army has asked companies to submit proposals for developing rare earths processing facilities, with funding to tempt submissions.
The US Army is stepping up to the plate when it comes to the rare earths supply chain by reportedly moving to fund downstream processing capacity in the country in a bid to secure the future delivery of resources vital to defense technology.
As reported by Reuters, the US Army has sought submissions from rare earths-focused companies on the cost of a pilot plant to refine and produce heavy rare earths used in the development and manufacturing of materials vital for guidance systems in missiles, smart bombs and jet fighters.
The supply of the critical minerals needed for these technologies has been high in the minds of US decision makers as the US-China trade war drags on.
China has an iron grip on the production of rare earths, along with the vast majority of downstream processing capacity, making any rare earths-related political overtures from the Chinese Communist Party the subject of sustained attention by western governments, and western rare earths companies.
China has previously shown a willingness to throttle rare earths exports in retaliation over trade disputes, showing form in 2010 when it restricted shipments to Japan over a fisheries dispute.
According to the solicitation by the Pentagon, the US Army will fund up to two-thirds of a refiner’s cost, and will fund at least one project. Responses are due by December 16 — next Monday.
Chris Berry, who is the founder of House Mountain Partners, told the Investing News Network (INN) that while the news is welcome, there are still many questions to be answered, starting with what the criteria for financing would be.
Berry said that how much capital the US Army is going to provide is a major concern, saying that “CAPEX for projects can run into the hundreds of millions of dollars.”
He continued, asking, “Why stop at just getting the heavy rare earths? Wouldn’t it make sense to be self sufficient in all rare earths despite the abundance of some over others?”
Additional questions Berry said need to be answered in order for there to be a decent analysis of whether the news will have an impact surround the sourcing of ores, and what would happen if there was a change in administration in Washington.
“All in all, good news, but an answer to these questions would help,” he concluded.
According to the Reuters report, applicants have been asked to provide a business plan and to specify where the ore for the proposed plant would be coming from.
Speaking with INN, Anthony Marchese, chairman of Texas Mineral Resources (OTCQB:TMRC), said that the report by Reuters is correct, and that Texas Mineral Resources will be submitting an application with the US Army before the deadline.
Texas Mineral Resources is an exploration company focused on developing its Round Top rare earths project in Western Texas.
Marchese was able to shed more light on the solicitation by the US Army, saying that it is in effect open ended when it comes to how much capital the Pentagon would be willing to outlay, meaning the dollars involved could be “very significant.”
“It’s open ended. The government will evaluate the proposal and then make a determination,” he said.
“(And) there’s no limitations to how many people would be given an award … they’ve said so here; if they don’t like what they see they’ll give it to no one, or if they really like what they see they’ll give it to more than one,” he explained.
Marchese said that with the US Army request, the United States government is showing itself to be serious about the rare earths supply chain, and the time for overlapping studies has finally passed.
“It’s study after study, and we’re at the point now where we need to get beyond studying the issue, and actually put some real money to work.”
The US has been keen on developing the critical minerals supply chain that exists outside of China, with a focus on its own resources and infrastructure, as shown by its critical minerals strategy.
What’s more, the US military in particular has been the focus of the administration of President Donald Trump, who has been pushing for greater control of mineral production to end America’s “susceptibility” to foreign states.
Besides pushing for more development, the US government has been creating critical minerals alliances with partner countries, including Australia, with the two countries signing a critical minerals agreement in November of this year.
Marchese disputed the narrative that efforts to establish a domestic rare earths supply chain were in response to current trade tensions, saying that if the trade war ended tomorrow, “nothing changes” in regards to the existing supply chain.
“China still has control or has a monopoly on the rare earth market.”
He went on to add that the Buy American Act of 1933 means that if rare earths projects can get off the ground in the US, they will be guaranteed a market for their product, as defense contractors will be obliged to purchase rare earths from American sources as long as they can compete with Chinese prices and quality.
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.