US challenges China’s rare earth grip with $120m deal

THE US Department of Defence has struck a $120m (£100m) deal to build the first major rare earth metals refinery on American soil as part of efforts to break China’s stranglehold on the crucial industry.

Australia’s Lynas Rare Earths confirmed yesterday it had signed a contract with the Pentagon to build a commercial heavy rare earths separation facility in the Gulf Coast area of Texas. A second light rare earth separation facility is being half-funded by the Pentagon.

Rare earth minerals are vital to making components for everything from iphones to computers and military hardware such as F-35 fighter jets.

At the moment, around 90pc of rare earth metals globally are processed in China. Joe Biden, the US president, has made establishing home-grown supply chains a priority.

Lynas is the world’s only processor of rare earth minerals outside China. The new US contract builds on earlier “Phase 1” funding for a facility that was announced in July 2020.

The Texas plant will be the first outside China that is able to separate heavy rare earths, said Amanda Lacaze, the chief executive of Lynas.

“That’s why this is such an important step,” she told Reuters. The project is expected to be operational by 2025.

Sydney-based Lynas mines rare earths in Western Australia and ships the material to Malaysia where it produces rare earth oxides. International interest in the business has grown after Covid disrupted supplies.

Western nations, Japan, the EU and others increasingly now recognise the risk of relying on China as their sole source of supplies, Ms Lacaze said.

“We are certainly highly engaged with governments who are concerned about supply chain security, and we’ll continue to do so,” she said.

The company aims to boost its output by 50pc by 2025 but that would not be enough to meet rising global demand, Ms Lacaze added.

The Lynas deal comes after the Pentagon separately awarded $35m to MP Materials to separate and process heavy rare earth elements at its facility in Mountain Pass, California, establishing a US supply chain for permanent magnets used in many kinds of technology.

In the integrated review of British defence and foreign policy, the Government last year warned there would be “increased competition for scarce natural resources such as critical minerals, including rare earth elements, and control of supply may be used as leverage on other issues”.