We're Losing The Resource War
While the world waits to see if a deal can be reached between China and the U.S., there is another war that has a clear winner… the war for the next generation of resources.
For decades, China has not so quietly monopolized the next generation of resources, specifically rare earths.
The United States is nearly 100% reliant on China’s rare earths production and exports.
It was reminded of that back in May when Chinese president Xi Jinping visited a rare earths plant amid trade negotiations with the United States.
Consider this: the only operating U.S. rare earths mine has to ship its product to China for processing.
For years, we’ve seen and heard the United States talk about establishing its own critical metals supply chain.
It now appears there is a global scramble to identify, fund, and develop rare earth assets that can help break the Chinese chokehold on rare earths.
Recently, the Department of the Interior announced it would look for new suppliers for both rare earths and the other 34 minerals identified as “critical.”
According to the Commerce Department’s critical minerals strategy, published in June, it plans to form alliances with friendly (their words, not mine) suppliers.
The newly-established Energy Resource Governance Initiative (ERGI) is focused on identifying and securing stable sources of lithium, cobalt, and copper. The metals that will power the future.
Renewable energy systems, such as wind turbines, need rare earths because they produce the best permanent magnets. Those systems rely on those magnets just like electric cars do.
“We are looking for any source of supply outside China. We want diversity. We don’t want a single-source producer,” Jason Nie, a material engineer with the Pentagon’s Defense Logistics Agency (DLA), told Reuters on the sidelines of the Argus U.S. Specialty Metals conference in Chicago.
In December 2017, President Trump signed an executive order to create a federal critical minerals strategy which would cut red tape and boost resources for exploration.
Since July, the U.S. and Canada have held meetings for the two countries to secure access to minerals ranging from uranium to lithium, cesium, and cobalt.
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This past May, Sarah Maryssael, Tesla's global supply manager of battery metals, told U.S. officials that demand for electric vehicles and insufficient investment in mines could result in a global shortage of minerals needed to manufacture rechargeable batteries in a few years’ time.
Approximately half of the world’s electric vehicles are sold in China, and most of the components for rechargeable batteries are manufactured there.
Australia is also advancing separate talks with the U.S., Japan, and South Korea over the development of local rare earths mining projects.
Among the topics being discussed are access to financing and how to secure long-term supply deals.
A bill has been introduced to allocate finances to the Department of Energy and its National Energy Technology Laboratory (NETL) in order to develop technologies that could extract REEs from coal and coal byproducts from mines in the U.S.
Despite the white papers, the committees, meetings, and talks, one thing is clear: China has a multi-decade head start that will require concrete action backed by dollars, not just words, in order for North American and European rare earth supply chains to be established.
To your wealth,
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.
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