Materials

<p style="text-align: justify;">Over the last couple of years, politically, there has been an enormous groundswell of interest from the business community and numerous investment entities in reestablishing the Rare Earth (RE) supply chain to the US/North America. Much effort and resources have been spent on reports, articles, and meetings. In particular, wresting away China's stranglehold on these critical materials and products has become the Holy Grail. &nbsp;</p><p style="text-align: justify;">However, one thing is clear, this is a complex problem, and it will require a holistic approach from all stakeholders, from miners, alloy producers, magnet makers, R and D institutions, investors, government, and arguably most critical, the magnet using (particularly the large OEM's) community. Also, since the NdFeB industry left the US over 25 years ago, we have a shortage of skilled technical and manufacturing people at all levels, which may be the most difficult nut to crack.&nbsp;</p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Investments in NdFeB Magnet Facilities</span>&nbsp;</h2><p style="text-align: justify;">During 2022 we have seen some major announcements regarding investments in significant NdFeB magnet facilities in the US. Press releases from MP Materials and Vacuumschmelze announcing supply agreements with General Motors sourcing magnets for their EV motor production. MP Materials has now broken ground on a 300,000 sq foot facility in Fort Worth, TX, that is claimed will be a fully integrated sintered NdFeB magnet facility. &nbsp;</p><p style="text-align: justify;">Very recently, Quadrant Magnetics surprised the industry by announcing they would be making a $95 million investment in a NdFeB magnet plant in Kentucky along with USA Rare Earth, LLC Rare Earths' similar investment in Oklahoma.&nbsp;</p><p style="text-align: justify;">Below is a graphic I've modified from Walt Benecki's original version of his Magnetics 2017 presentation. &nbsp;</p><p style="text-align: justify;">This shows the dramatic decline in the US PM industry from the late 1990s through today and what the magnet industry in the US may look like in 2025. &nbsp;</p><p style="text-align: justify;">As can be seen, the permanent magnet industry went through a significant downsizing in the late 1990s and early 2000s. The US went from 4 NdFeB producers (in blue) to none today (Urban Mining's/Noveon Magnetics Inc. production status remains unknown). &nbsp;</p><p style="text-align: justify;">However, we could have five or more NdFeB plants in 2025; quite an exciting turnaround! Unfortunately, I also have to acknowledge the announcement of the closure of the last remaining US hard ferrite plant by Hitachi Metals America, Ltd.</p><p style="text-align: justify;">Looking further afield to include North America, Yicai Global reported that JL Mag Rare Earth is planning to invest $100 million to construct a recycling plant in Mexico that will turn scrap alloy and magnets into custom NdFeB permanent magnets and assemblies as part of the Chinese producer of rare earth materials' carbon-neutral strategy amid surging global demand for rare earth magnets. &nbsp;</p><p style="text-align: justify;">The Monterrey, Nuevo Le&oacute;n state facility will have an annual recycling capacity of 5,000 tons of scrap alloy/magnets and a production output of 3,000 tons of high-end magnetic products a year.&nbsp;</p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 14pt;">Highlights on the Processing&nbsp;</span></h2><p style="text-align: justify;">Further upstream processing announcements include Lynas USA LLC, which signed a follow-on contract for approximately $120 million with the U.S. Department of Defense (DoD) to establish a Heavy Rare Earths (HRE) separation facility in the United States. &nbsp;</p><p style="text-align: justify;">Lynas plans to co-locate the HRE separation facility with the proposed Light Rare Earth separation facility (announced on 22 January 2021), which is sponsored, and half funded by the U.S. DoD Title III, Defense Production Act office. &nbsp;</p><p style="text-align: justify;">Following a detailed site selection process, the facility is expected to be located within an existing industrial area on the Gulf Coast of Texas and is targeted to be operational in the financial year 2025. Feedstock for the facility will be a mixed Rare Earth carbonate produced from material sourced at the Lynas mine in Mt Weld, Western Australia. Lynas will also work with potential 3rd party providers to source other suitable feedstocks as they become available.&nbsp;</p><p style="text-align: justify;">Earlier this year, DoD awarded a $35 million contract to MP Materials Corp. (MP) of Las Vegas, Nevada, to design and build a facility to process heavy rare earth elements (HREE) at the company's Mountain Pass, California production site. &nbsp;</p><p style="text-align: justify;">This project will establish its first processing and separation facility for HREEs to support defense and commercial applications in the United States.&nbsp;</p><p style="text-align: justify;">Some amount of recycling has always been part of manufacturing NdFeB since commercialization in the mid-1980s. Today this is a minor contribution to the overall supply but needs to grow rapidly between 2025 and 2030 to become an important source of REEs. Another area of interest is recycling scrap, recovered RE magnets, and other waste streams. In the future, the key will be the development of an economically viable EOL recovery and recycling process. &nbsp;</p><p style="text-align: justify;">Several startup businesses in North America have announced their intention to use novel/proprietary processes to extract the RE content from multiple waste streams and scrap magnets, e.g., ReeCycle Inc., American Resources Corporation, Geomega Resources, and Phoenix Tailings.&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;"><strong>End of Life (EOL) Recycling</strong>&nbsp;</p><p style="text-align: justify;">I want to make an important point regarding End of Life (EOL) recycling. We have many innovative technologies developed by researchers that can cost-effectively convert recovered magnets and recycle them as separated REE compounds using hydrometallurgy, pyrometallurgy, electrometallurgy, biological agents, etc. &nbsp;</p><p style="text-align: justify;">These offer cost-effective recycling solutions. However, I want to distinguish recovery from recycling. By recovery, I mean extracting the EOL device and recovering the magnets. In my view, this area has not received enough attention because, today, it remains a very labor-intensive and expensive step.&nbsp;</p><p style="text-align: justify;">Finally, the politicians have also decided this subject deserves attention. Recently the Biden Administration completed a 270-day Commerce Department investigation which found that U.S. reliance on imports of the RE magnets is a threat to U.S. national security and recommended several steps to increase domestic production.&nbsp;</p><p style="text-align: justify;">One major outcome is that President Joe Biden has decided against restricting imports of neodymium magnets, the White House announced on September 21. The decision avoids a new trade fight with Beijing, as well as with Japan, the European Union, and other countries that export magnets or have hopes of doing that to meet an expected upsurge in demand in coming years. It also should allay the concerns of U.S. automakers and other manufacturers who rely on imports of the magnets to produce finished goods.&nbsp;</p><p style="text-align: justify;">The Commerce Department's suggestions included:</p><ul style="text-align: justify;"><li>Making investments in key segments of the magnet supply chain</li><li>Incentivizing domestic production</li><li>Working with allies and partners on supply chain resilience</li><li>Supporting the development of a skilled workforce to produce neodymium magnets in the United States</li><li>Supporting ongoing research to mitigate supply chain vulnerabilities, the administration said</li></ul><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">All the above is just a snapshot of the current interest level in the REEs and RE magnet supply chain here in the US. One cannot help but wonder how many of these RE magnet supply chain ventures will be implemented and generate a return for the investors. As always, the challenge is separating the REEs and the winners from the also-rans!&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;"><span style="font-size: 10pt;"><em>This article was contributed by our expert <a href="https://www.linkedin.com/in/jormerod/" target="_blank" rel="noopener">John Ormerod</a></em></span><br />&nbsp;</p><p style="text-align: justify;">&nbsp;</p><h3 style="text-align: justify;"><span style="font-size: 18pt;">Frequently Asked Questions Answered by John Ormerod</span> &nbsp;</h3><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">1. Why are Rare Earth prices rising? </span></h2><p style="text-align: justify;">The forecast demand for Rare Earth permanent is driven by the electrification of transportation, wind generators, and high-efficiency motors in HVAC, appliances, and factory automation/robotics. This is predicted to lead to a shortfall in the arability of the key rare earth elements of neodymium, praseodymium, and dysprosium through this decade.&nbsp;</p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">2. How does the use of new technology in industry benefit producers more?&nbsp;</span></h2><p style="text-align: justify;">The substitution of more available rare Earth, e.g., Cerium, and the development of grain boundary diffusion technologies will reduce dysprosium for higher temperature grades of magnets.&nbsp;</p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">3. Why are there difficulties in recycling rare Earth?&nbsp;</span></h2><p style="text-align: justify;">Many techniques exist to recycle Rare Earth effectively. The challenge is to effectively cost recover the EOL device and then remove the magnets from the device.&nbsp;</p><p style="text-align: justify;">&nbsp;</p><h2 style="text-align: justify;"><span style="font-size: 12pt;">4. Who are the key players in the global rare-earth metals market, and what is the market trend?&nbsp;</span></h2><p style="text-align: justify;">Today the rare earth supply chain is dominated by China. However, major investments are being made in the US, Europe, and South Korea to establish an integrated rare earth magnet supply chain.&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p><p style="text-align: justify;">&nbsp;</p>