As was laid out in Mission Critical's two-part series on rare earths, it's come as no surprise that China's export ban on rare earth minerals and refined products to the United States has shot a rocket under the share price of juniors in the space. The bigger picture at play here, however, is the lack of ex-China rare earths refining capability.
Azzet’s Mission Critical is a weekly column that lays out the ebbs and flows around critical minerals supply chains - from pricing, production, refinement and mergers & acquisitions, to manufacturing and consumer products.
Everything, everywhere, all at once is happening in the world of rare earths; with China suffocating global supplies and deals being made in South America, Africa and between nations such as the U.S. and Ukraine to shore up new supply chains.
REE juniors are also benefitting from the trade war attention, with Gina Rinehart's Brazilian Rare Earths (ASX : BRE) rising >20% in value in a month.
So too neighbour Meteoric Resources (ASX : MEI), which shot up over 35% upon releasing a stonker 388Mt at 2,204ppm REE maiden resource estimate for the Bara do Pacu license at its Caldeira project.
Yet the US-China trade war has escalated to the point where Western governments have banned rare earths companies from selling processed mine production to the only customers that are willing to buy it.
And that's a really, really big problem.
ICYMI: China's rare earths play underlying Trump's tariff war: Part 1
ICYMI: China's rare earths play underlying Trump's tariff war: Part 2
A whole lotta rare earth oxide and nowhere to refine
In response to China’s retaliatory tariffs and export controls, America's sole rare earths producer and also Rinehart-backed MP Materials (NYSE : MP) has ceased shipments of rare earth concentrate to China.
The Middle Kingdom has a veritable monopoly over the rare earths value chain, and the miner's decision lines up with the Trump administration's wish to rebuild the United States' manufacturing capabilities.
The mine currently spins out about 15% of the world's rare earths and achieved record production of 45,455 tonnes of rare earth oxide (REO) concentrate last year - including a record 1,294t of highly sought-after NdPr oxide (magnet REEs).
Yet about 32,000t of that bundle went to China via its 8.3% major shareholder Shenghe for downstream processing.
“Selling our valuable critical materials under 125% tariffs is neither commercially rational nor aligned with America’s national interest,” the company said in a statement.
“We have been preparing for this moment since day one. Our mission, capital strategy, and execution reflect a long-term vision built to withstand short-term dislocation and emerge stronger.”
These moves may be a lot bigger deal than just a “short-term dislocation”, since basically all of the world's rare earths refinement is done in China - so who are they going to sell their mines' product to?
MP Materials does say it's in the process of upgrading its Mountain Pass facility to expand manufacturing operations downstream from materials to magnetics and everything in between.
That's a hefty call, as China has also put a ban on selling or giving away downstream intellectual property surrounding the separation, processing and refinement of rare earths as part of trade war retaliations.
To counter the major loss of revenue, the company says it will move into the separation of heavy rare earths and magnet production - however, that may take years.
MP Materials has invested about US$1 billion to restore the mining operation, and its California refinery - accounting for about half the company's production - says it will now sell virtually all of its REE material into markets ex-China, including Japan, South Korea, and domestically.
“We continue to produce and are stockpiling concentrate while accelerating downstream operations: ramping oxide production, fast-tracking heavy rare earth separation, and bringing magnet production online in Texas.,” the REE producer said.
It also says manufacturers across a number of critical industries have urgently reached out to them in search of a secure source of REE materials and magnets.
“We are uniquely positioned to answer that call… and are in close contact with federal leaders and encouraged by their determination to support American industry - now and in the long term.”
It remains to be seen how a company with US$280 million in the bank and nearly US$1 billion in debt will be able to turn that around as it stockpiles REO material waiting for a buyer that isn't from China.
Caught in the act
Intruders - including two Chinese nationals - have been caught snooping around junior Lindian Resources' (ASX : LIN) Kangankunde REE project in Malawi.
The ASX junior said the event was an ‘act of industrial trespass’, with reports they were attempting to collect geological samples without consent.
“Lindian considers this a serious breach of site security and a concerning act of industrial trespass, particularly given the strategic nature of the Kangankunde asset,” the company said in a market release.
"The project is recognised as one of the world’s largest and highest-grade undeveloped rare earths resource, with an estimated stage 1 mine life exceeding 45 years.
“The deposit is uniquely characterised by its exceptionally high grade mineralisation and absence of deleterious radioactive elements.”
Shares in the $144 million Lindian are riding high on the latest rare earths buzz, up >60% since the start of the year to trade at 12.5 cents.
