The Supply Crisis for Rare Earth Elements Intensifies

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07 Jun, 2023, 08:30 ET

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NEW YORK, June 7, 2023 /PRNewswire/ -- The transition from fossil fuels to electrification has created a huge increase in demand for rare earth oxides and demand is expected to get much larger. Rare earth oxides are irreplaceable elements integral to permanent magnets, critical components in electric vehicles and sustainable power generation equipment, especially windmills. About 90% of all permanent magnets are currently produced in China, which is now considering banning or restricting exports of technology to process and refine rare-earth elements. Beijing is also pondering provisions prohibiting or limiting exports of alloy technology used in making high performance magnets made from rare earths minerals. As the transition to a cleaner world grows, China is restricting exports of permanent magnets and related tech in favor of feeding domestic demand, thus strangling the global transition. Governments in North America and across the world have voiced extreme urgency in reshaping supply chains to reduce dependence upon China and achieve clean energy mandates. Only a few companies can be called leaders in a nascent yet potentially explosive market. Ucore Rare Metals Inc. (TSX.V: UCU) (OTCQX: UURAF) (Profile) stands out with its transformative technology, RapidSX(TM), for separating and purifying critical metals. Also in the hunt for market share in this burgeoning new market is MP Materials Corp. (NYSE: MP), Neo Performance Materials Inc. (TSX: NEO), Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) and Li-Cycle Holdings Corp. (NYSE: LICY), all of which have established footholds and expanding operations in a concerted effort to shift away from reliance upon China and achieve energy independence.

Click here to view the custom infographic of the Ucore Rare Metals Inc. editorial.

China Threatens Bans on Critical Exports

In September 2020, President Xi Jinping announced that the People's Republic of China will "aim to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060," perhaps one of the most impactful pledges of any of the more than 90 countries that are aiming for net-zero emissions around mid-century. Against this backdrop, China's domestic market is experiencing a remarkable boom in the rare earth oxide (also often called rare earth elements, or REE) sector. The surge in domestic demand is expected to outpace the country's REE production, leading to a potential supply crunch that will affect the globe under the current supply chain structure.

The fear of China disrupting the global supply chain has stimulated innovation and encouraged the exploration of sustainable alternatives to capture share in a booming rare earth minerals market forecast to grow 12.3% annually to $9.6 billion by 2026. The United States, as part of its commitment to the Paris climate accord, promises to reach net-zero emissions by 2050, which means cutting the country's greenhouse gas emissions in half by 2030. To meet this ambitious goal, the International Energy Agency estimates electric vehicle sales need to reach around 60% of total vehicle sales by 2030 to reach net-zero CO2 in 2050, while the NRDC says buildings "must rapidly move away from fossil gas." Little wonder there is newfound urgency to change the curve of an existential crisis facing humanity and a new emphasis on technologies that utilize rare earth oxides.

For more than 15 years, Ucore Rare Metals Inc. (TSX.V: UCU) (OTCQX: UURAF) has been an important part of the rare earth market, developing technology to disrupt the status quo of rare earth elements. The company is now in a position to help solve the impending supply crisis by assisting with the creation of an independent supply chain of rare earth oxides for North American manufacturers. Ucore has differentiated itself with a unique approach that focuses on the most profitable sector of the supply chain, processing material and avoids the risks of large CAPEX requirements.

Ucore is fast approaching a launch point as it commissions a commercial demonstration plant in Canada that uses RapidSX(TM) (SX is short for "solvent extraction"), a proprietary metals separation technology wholly owned by Ucore that is not merely an alternative to Chinese technology but is also potentially better than anything in use today. Going forward, Ucore is also designing a full-size plant in the United States to supply rare earths to North American customers. Ucore is collaborating with suppliers of rare earth mixed concentrates from outside China, as well as end users of these oxides including OEM Automotive manufacturers.

And now, Ucore has caught the attention of what could be a milestone "company maker" partner: the U.S. government.

$4 Million Contract to Explore RapidSX

This month, Ucore announced that it has been awarded a $4 million contract by the U.S. Department of Defense (DoD), specifically, the US Army Contracting Command – Orlando. The DoD represents an enormous and prestigious contracting marketplace. Securing a DoD contract not only brings in a substantial funding stream, but it also conveys a significant amount of credibility and visibility. Further, the contract notes that, upon successful completion of the initial project, a follow-on production award may be awarded to Ucore in order to offer a streamlined method for transitioning to follow-on production.

The objective of the new project is to help the DoD understand Ucore's new innovative separation processes that increase the ability to create domestic rare earth processing plants and the capability to source a sustainable domestic processing facility for these important materials. In short, the U.S. government knows it must maneuver away from China and establish a robust domestic supply chain and is actively exploring companies and cutting-edge technology that can support making it happen in short order.

For its part, Ucore will utilize its RapidSX Commercial Demonstration Facility in Kingston, Ontario, to deliver a number of technical requirements under the contract. "We believe that Ucore has one of the West's most compelling rare-earth-supply chain business models," said Ucore chair and CEO Pat Ryan. "This U.S.-DoD project will allow us to demonstrate the RapidSX technology platform for rare earth element separation and will include original equipment manufacturers' qualification trials in coordination with our commercial development activities at the company's planned Louisiana SMC. The rare earth element processing opportunity afforded Ucore through this sward is pivotal as the company continues to seek out and collaborate with like-minded upstream and downstream partners as part of a Western rare-earth-element supply chain solution."

RapidSX: A Superior Technology

The DoD wants to see first-hand the capabilities of RapidSX, as a potential paradigm shift away from conventional metal separation technology such as that used in China. Ucore will be showcasing several benefits of its technology. These include demonstrating rare earth separation processing at a rate more efficient than conventional solvent extraction and the separation of both light and heavy rare earths (an industry innovation).

To understand the value of this takes some clarity on light and heavy REEs.

REEs represent a group of 17 chemically similar elements with unique properties essential for modern technologies. Four of these elements are critical inputs to rare earth permanent magnets. These four elements must be separated from the rest in order for their unique properties to be captured. However, effectively separating these elements is a daunting task for current technological approaches. The primary challenge arises from the similar chemical and physical properties shared among REEs, making them hard to isolate. The minimal differences in atomic radii and ionic charge among the REEs complicate the separation process.

Benefits Abound with RapidSX

Being able to efficiently separate heavy and light REEs is a differentiator for RapidSX on its own. But that is not all that Ucore's proprietary tech offers. There is also an environmental impact from current extraction technology, because it generates large volumes of toxic waste. RapidSX overcomes an additional layer of complexity by making the process far more environmentally friendly.

RapidSX also has a much smaller carbon footprint than other metal separation technologies. Its smaller footprint uses less power, and all the solvents are recycled. These features effectively westernize a process that will enable an environmentally safe and very economically robust business plan.

Still More to Show Off

Ucore intends to prove to the DoD that its construction design is a continuous process working facility capable of processing many metric tons of feedstock. The demonstration facility in Kingston will speak volumes to the opportunity and potential of RapidSX and give a hint as to what is upcoming when Ucore builds its planned full-size Strategic Metals Complex in Alexandria, Louisiana. The full-scale production plant is scheduled to initially process 2,000 tonnes of total rare earth oxides by the end of 2024, increasing to 5,000 tonnes in 2026. Management believes that the cost of the company's facilities will be supported by local and state government incentives as well as prepurchase (off-take) agreements from major manufacturers currently under development.

All of this aligns with the final primary purpose of the $4 million DoD contract. Along with all the other benefits, Ucore will provide the DoD with a techno-economic analysis of RapidSX versus conventional solvent extraction.

Structured for Growth

Ucore is structured for rapid growth in a sector that will provide products critical to the successful electrification of the North American economy. The sector has plenty of room for multiple players and different avenues for investor exposure.

MP Materials Corp. (NYSE: MP) produces specialty materials that are vital inputs for electrification and other advanced technologies. The company is currently expanding its manufacturing operations downstream to provide a full supply chain solution from materials to magnetics. In February, MP struck a deal with Sumitomo Corp. to diversify and strengthen rare earth supplies in Japan. Under the agreement, Sumitomo will serve as the exclusive distributor of NdPr (neodymium-praseodymium) oxide produced by MP to Japanese customers.

Neo Performance Materials Inc. (TSX: NEO) manufactures the building blocks of many modern technologies that enhance efficiency and sustainability. Neo's advanced industrial materials — magnetic powders and magnets, specialty chemicals, metals and alloys — are critical to the performance of many everyday products and emerging technologies. In April, Neo acquired a controlling interest in SG Technologies Group Limited, one of Europe's leading advanced, specialty manufacturers of rare-earth-based and other high-performance magnets for industrial and commercial markets.

Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) is a Colorado-based critical minerals company that mines uranium and produces natural uranium concentrates that are sold to major nuclear utilities for the production of carbon-free nuclear energy. Energy Fuels recently began production of advanced rare earth element materials, including mixed REE carbonate, and plans to produce commercial quantities of separated REE oxides in the future. Energy Fuels recently completed the acquisition of 17 mineral concessions in Brazil that has the potential to supply 3,000 to 10,000 metric tons of natural monazite concentrate per year for decades to Energy Fuels' White Mesa Mill in Utah for processing into high-purity REE oxides and other materials.

Li-Cycle Holdings Corp., (NYSE: LICY) an industry leader in lithium-ion battery resource recovery and the leading lithium-ion battery recycler in North America, is taking a different approach to meet rare earth oxide demand. The company is leveraging its innovative Spoke & Hub Technologies(TM) to provide a customer-centric, end-of-life solution for lithium-ion batteries, while creating a secondary supply of battery-grade materials. In April, Li-Cycle and VinES Energy Solutions teamed-up via a long-term recycling relationship. Starting in 2024, Li-Cycle will become VinES' strategic and preferred recycling partner for VinES' Vietnamese-sourced battery materials.

It is past time to look beyond China and develop strategies specific to breaking its monopoly on REE processing. The green energy surge is fueling an exponential rise in domestic demand, a fact that may be unnoticed by the mainstream investing public, but could make rare earths a rare opportunity.

For more information Ucore Rare Metals, please visit Ucore Rare Metals.

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