Mining News: Pentagon orders an about-face on REEs

Department of Defense reverses its public stance on rare earths, recommends building a US$130M stockpile of the strategic minerals

Shane Lasley

Mining News

About face; forward; march! The U.S. Department of Defense recently issued this order in the field of rare earth elements.

The unique properties of REEs – a group of 17 previously obscure metals that include scandium, yttrium and the 15 lanthanides – are key ingredients in a number of military applications such as guided missiles, lasers, radar systems, night vision equipment and battlefield communications.

China is estimated to supply between 90 and 95 percent of the world’s rare earth oxides, according to a September 2012 report penned by Congressional Research Service.

Though these Sino-mined elements are key ingredients to much of the U.S. Military's advanced weapons systems, Pentagon officials have never considered REEs rare enough to need a stockpile of them.

“I wouldn’t run out and buy a bunch of rare earths,” DoD Industrial Policy Director Brett Lambert proclaimed during a defense conference held in New York late in 2010.

Today, the Pentagon proposes to do just that. In a 189-page report, the DoD recommends investing US$130 million to establish near-term strategic stockpiles of seven rare earth elements – dysprosium, terbium, yttrium, erbium, thulium, scandium and one classified REE.

All told, the defense agency found “insufficient supply to meet demand” for 23 of 72 metals and minerals it studied and is recommending that US$1.24 billion be earmarked to build strategic stores of materials on the list.

According to Dan McGroarty – one of the few people outside of the Pentagon and the U.S. House Armed Services Committee to have seen the report – the DoD named 19 of the mined materials that are in shortfall, the remaining four are classified.

The list of non-rare earth materials deemed in short enough supply to warrant stockpiling include antimony, bismuth, gallium and tantalum.

McGroarty told Mining News that China is a common thread that binds all of the unclassified metals and minerals on the stockpile list.

“China is a top-tier supplier for all 19 metals and minerals that they identified as being in shortfall,” the president of American Resources Policy Network explained.

About face

“Clearly, rare earth supply limitations present a serious vulnerability to our national security. Yet early indications are the DoD has dismissed the severity of the situation to date,” the lawmakers wrote in a January 2011 letter to then U.S. Secretary of Defense Robert Gates.

The senators urged the Pentagon to take inventory of the U.S. military’s anticipated REE demand and establish policies to ensure an uninterrupted supply of these critical materials.

In their letter to Gates, the trio wrote, “In our view, it is a fundamental responsibility of DoD industrial policy to have a comprehensive understanding of the security of our defense supply chain, which requires understanding detailed knowledge of the sources and types of components and materials found in our weapon systems.”

The DoD Office of Industrial Policy is charged with sustaining an environment that ensures the industrial base on which the Pentagon depends is reliable, cost-effective, and sufficient to meet its requirements.

The Alaska and Colorado legislators said the Pentagon should require its weapons contractors “to provide a detailed accounting of the various rare earth-containing components within their weapons system.” This information could then be used to create policies that would ascertain that the military would have these vital minerals on-hand.

The American Security Project, a bi-partisan think-tank focused on national security issues, also weighed in on the risks posed by the U.S. military’s dependence on China as its primary supplier of rare earths.

In a February 2011 report titled, “Rare Earth Metals and U.S. National Security,” the Washington D.C.-based research group wrote, “Rare earth metals are essential for the United States’ military and economic well-being. Yet the U.S. has been particularly lax when it comes to securing the supply of these metals.”

Emily Coppel, author of the report, said, “Rare earth metals present a weak link in our defense supply chain. These metals are critical for national security, as they are essential for our most powerful weapons. The U.S. was once the world’s top producer and supplier of these metals, but now China controls over 90 percent of the rare earths market. This means the U.S. is now completely reliant on China for the production of our most powerful weapons. While the U.S. has taken some steps to reduce this reliance on China, we have not done enough.”

The Alaska and Colorado lawmakers requested the DoD provide Congress with a written report on its REE demand and “propose real solutions on rare earth availability.”

“For example, one policy may be for the DoD to establish a limited stockpile of rare earth alloys that are in danger of supply interruption to ensure security of supply of both metals and magnets,” the policymakers suggested.

The Pentagon’s initial response to the congressional request was a scant seven-page report in March 2012 that reflected its position that REE projects outside of China, such as MolyCorp’s Mountain Pass Mine in California, and other adjustments in the Western rare earth markets should ensure that there is no military or commercial shortage of these strategic elements in the United States.

“Over the past year, there have been a number of positive developments with regard to both supply and demand within the rare earth materials markets,” the Pentagon wrote in the belated report to Congress. “Reactions to market forces have resulted in positive developments, such as prices decreasing by half from their peak levels in July 2011, increased investment and domestic supply of rare earth materials, corporate restructuring within the supply chain, and lower forecasts for non-Chinese consumption. By 2015, the department believes this will help to stabilize overall markets and improve the availability of rare earth materials.”

Capitol Hill, however, did not share the military’s optimistic outlook.

“Although new mine production may be able to make up the difference for some lighter elements (there may be an excess supply of the lighter elements such as cerium, lanthanum, and praseodymium), several forecasts show that there will likely be shortfalls of other light rare earths and several heavier rare earth elements, such as, dysprosium, terbium, neodymium, europium and erbium,” according to the June 2012 report penned by the Congressional Research Service. “This potential shortfall has raised concerns in the U.S. Congress,” the report added.

Forward march

As a result, beyond the US$130 million suggestion to accumulate a stash of heavy rare earth elements, the report details the need to build a US$1.11 billion stockpile of 13 non-REE metals and minerals.

“The question now, in a Washington where the government is funded from month to month, and strategic thinkers are savants who see an hour into the next news cycle, is whether the U.S. government can muster a sustained policy to reverse our metals dependency – before the shortfalls posited in the Pentagon’s hypothetical scenarios become all too real,” McGroarty wrote in a recent article for Real Clear World.

This is not only an about-face for the Pentagon but is also a reversal of a Washington, D.C. trend of diminishing its stockpile of minerals.

“Even experts in the industry are hard-pressed to recall when the U.S. government last added to its metals and minerals inventory – and for good reason,” wrote McGroarty. “Since the implosion of the Soviet Union in December 1991, the U.S. defense stockpile has been treated as a kind of raw materials garage-sale, with nearly all metals marked for a phased sell-off – calibrated so as not to unduly undercut current metal prices. Stockpile silver went to the U.S. Mint for the striking of silver dollars, an almost literal swords-into-plowshares swap.”

While heartened by the Pentagon’s about-face on the importance of having a reliable supply of heavy rare earths, The Strategic Materials Advisory Council – a Washington, DC-based nonprofit group comprised of former U.S. government leaders and strategic materials experts – does not believe buying rare earths from China to place in a U.S. stockpile goes far enough.

“The root cause of these material shortages is our ongoing dependence on Chinese suppliers,” said Strategic Materials Advisory Council Executive Director Jeff Green. “While it is encouraging that DoD acknowledges these risks, we urge DoD to move from theoretical studies to the only appropriate and permanent solution – the creation and nurturing of a U.S-based rare earth supply chain.”

Close ranks

In October, the DoD entered into a contract with Ucore Rare Metals Inc. to conduct a mineralogical and metallurgical study on the heavy rare earths-rich Bokan Mountain project in Southeast Alaska.

The six-month program, managed by the U.S. Defense Logistics Agency, is investigating the possibility of developing Bokan Mountain into a mine and processing facility that could supply the U.S. military with a domestic source of heavy rare earths.

While Bokan Mountain is rich in yttrium, dysprosium, terbium and a suite of other prized heavy rare earths, the Pentagon’s interest in Ucore seems to be as much about the state-of-the-art extraction technology that Ucore is pioneering as it is about the strategic metals stowed at its Southeast Alaska deposit.

Ucore has been working with Montana-based IntelliMet LLC to develop a method for processing the rare earths, referred to in scientific circles as solid-phase extraction. This avant-garde technique of turning concentrates into individual rare earth oxides is a key component to establishing a complete heavy rare earths supply chain on U.S. soil.

Under the agreement with the Defense Department, Ucore will provide the Pentagon with the most up-to-date data on this nanotechnology research.

“The Department of Defense’s investment in the Bokan deposit and Ucore’s proprietary SPE technology represents a significant step toward recapturing the rare earths technological lead surrendered to China decades ago,” said McKenzie. “What’s more, the DoD relationship adds a great deal of credibility to Ucore’s domestic supply chain development, representing one of the largest purchasing capabilities amongst prospective customers worldwide.”

In addition to gaining an insider’s perspective on the technology being developed by Ucore, the Pentagon made similar investments in Great Western Minerals Group Ltd., a rare earth processor with subsidiaries in the United States and United Kingdom., and Thomas & Skinner Inc., an Indiana-based producer of high performance magnetic materials.

DoD’s investment in Great Western is to conduct a supply chain assessment for high-purity yttrium oxide.

Thomas & Skinner was contracted to carry out an assessment of “the requirement for competitive domestic neodymium-iron-boron (neo) magnets, or their substitutes, to support defense supply-chain manufacturing capability.”

“China currently produces about 75 percent of the world’s neo magnets, not including other unlicensed production,” said Thomas & Skinner President and CEO Vern Detlef. “The (Defense) Department’s investment into our research represents the ideal type of partnership in a first step toward re-establishing a competitive supply of domestically produced neo magnets.”