At the forefront of the North American mining conversation is the US government’s emphasis on securing domestic supply of critical minerals and ending reliance on China. The Trump administration’s over arching policy is “America First,” and while so far the results are not amazing, they have attempted to balance the trade relationship with China while bringing back manufacturing to America. More recently though, Covid-19 has demonstrated to us the magnitude of the risk of supply chain disruption, and it is time to take action.
Ambitions like this one necessitate more than just a presidential decree, which is why the President ordered a A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals back in December 2017, the resulting report contained 6 calls to action, 24 goals, 61 recommendations, and a few startling facts including:
- The United States is import-reliant (imports are greater than 50 percent of annual consumption) for 31 of the 35 minerals designated as critical by the Department of the Interior.
- The United States does not have any domestic production and relies completely on imports to supply its demand for 14 critical minerals.
America can’t afford to risk supply chain disruptions when it comes to materials found in essential products used by military, industry or consumers yet currently those disruptions seem inevitable unless the strategy is executed on. Defense is of course number one and rare earth metals have many applications from weapons systems, jet fighters, wind turbines, and electric vehicles and there is very little capacity to process and build parts from these minerals outside China.
Additional applications range from automobiles to smartphones, tablets, and ventilators. While you might not see smartphones as essential, consider the integration of mobile devices in business, health care and education, and the economic benefits and technological advancements they proliferate. If America wants to secure their way of life, they need to secure the supply of these essential materials. If you’re still not convinced, see what happens when you confiscate your teenager’s smartphone and you will begin to feel your personal security at risk!
In addition to the direct uses today, technologies that will ensure the country’s long-term competitiveness are essential and many of these rely on the uninterrupted availability of rare earth metals.
“There’s an overall strategy to just end this dependence on China for critical materials across the board, including rare earths, and that has been voiced by various members of Congress over the past couple of weeks.” According to Pini Althaus, CEO of USA Rare Earth in an interview with Core Consultants in April 2020.
The topic of domestic production came up many times in the recent round of executive interviews Core Consultants hosted. Robin Goad, CEO of Fortune Minerals who operates a polymetallic (cobalt, bismuth, gold, and copper) project in the Northwest Territories, Canada, told us that they “are in discussions with both the US government as well as the Canadian government on critical mineral supply”. He further pointed out that 70% of cobalt supply comes out of the DRC and 80% of the cobalt chemicals are produced in China, putting European and North American industries at a disadvantage.
Alex Holmes of Plateau Energy Metals said “What COVID has identified is the reliance of the supply chain on, one or two countries, and that presents a bottleneck and a risk”
Ross Mcelroy, President of Fission Uranium Corp. pointed out the “fragile nature of the supply of uranium” from questionable jurisdictions in Africa, may not be what long term focused firms, like utility companies are looking for. In addition to the stable political climate in Canada, the healthy trade relations and the ease of transporting materials to the US, he points out the advantage for being in Canada and the Athabasca basin, “because of these high grade deposits you tend to be the lowest operating on the cost curve. …if you can get your mine into production, it’s probably the most inexpensive uranium to get out of the ground.”, which is music to the North American nuclear power plants’ ears.
Pini Althaus, CEO of USA Rare Earth pointed out that the challenges of the US gaining independence from China, come from downstream capabilities too, not just the raw materials. That’s probably why he was excited about their recent equipment purchase of processing equipment, for whose operation they’re currently exploring joint ventures.
The Federal government has already begun executing their plan, and the money is beginning to roll out.
Investors might consider looking at producers of materials deemed essential by the US government (see list at end) and assess their ability to take part in this initiative. Do they have a history of taking initiative and taking advantage of government programs? If they do, these companies are worth taking a closer look at since this secular trend is now a matter of national security and considered high priority.
How to access capital: Companies who have an edge in bringing this work to the US (or even Canada), have embraced new technologies to do so, and have experience accessing government programs needed to make sure potential investors are aware. When competing for investment dollars with other short term plays, showing the size of a potential reward for patience is not enough. You need to demonstrate that you can take advantage of secular trends, have the capital and management skills to weather the storm, and communicate your achievements of shorter-term milestones. This will give your investors a reason to keep providing capital, rather than moving on to one of the more short-term plays out there. These days there is no shortage of them. Communicate frequently, in plain language and manage short term risks so you can plan and run your business for the long run.
If you’re prepared to take advantage of these coming opportunities, Core Communications services may be what your company needs to get your message out to investors.
The final list includes: Aluminum (bauxite), antimony, arsenic, barite, beryllium, bismuth, cesium, chromium, cobalt, fluorspar, gallium, germanium, graphite (natural), hafnium, helium, indium, lithium, magnesium, manganese, niobium, platinum group metals, potash, the rare earth elements group, rhenium, rubidium, scandium, strontium, tantalum, tellurium, tin, titanium, tungsten, uranium, vanadium, and zirconium. This list of critical minerals, while “final,” is not a permanent list, but will be dynamic and updated periodically to reflect current data on supply, demand, and concentration of production, as well as current policy priorities. This final list will serve as the Department of Commerce’s initial focus as it develops its report to comply with
