Rare Earths, Rare Opportunity

 NetworkNewsWire Editorial Coverage: Indispensable for production of cell phones, wind turbines and electric vehicles, rare earth elements (“REEs”) have rocketed in importance as demand for electronics and EVs continue to surge. In addition, rare earths play an essential role in national security and commercial applications. For cell phones to vibrate or EV motors to provide power, they need powerful magnets, and REEs are critical to the manufacture of these powerful permanent magnets. However, serious supply chain concerns have arisen with REEs, because China has a stranglehold on global supply. This is of particular concern due to the need for REEs by the military. The typical F-35 fighter contains nearly 1,000 pounds of rare earths. The United States used to be a large producer of REEs, but Chinese REE producers gradually drove U.S. mines out of business; China now controls more than 80% of world production and dominates nearly every stage of the global REE supply chain. Reliance on China jeopardizes U.S. national security, and growing demand has EV makers on edge. Initiatives are underway to rectify the imbalance, and Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) (Profile) is leading the effort to tilt the balance back to American shores. UUUU just announced a new rare earth production initiative spanning European and North American critical material supply chains. Already the country’s largest producer of uranium and a leading producer of vanadium (both designated as critical minerals), Energy Fuels has all the necessary technical know-how, licenses, production facilities, production capacity and resources to bring REEs production back to the United States. And this is all happening in 2021, while other initiatives are years away. Energy Fuels’ initiative will produce value-added rare earth products from natural monazite sands, a low-cost byproduct of heavy mineral sand operations that mainly produce zircon and titanium. There are heavy mineral sand operations in the United States, Australia, Africa and elsewhere, and they are all selling their monazite sands into China’s rare earth industry. This new non-Chinese supply chain can’t happen soon enough for automakers, which are rapidly turning to all-electric vehicle production. The world’s most recognized EV company, Tesla Inc. (NASDAQ: TSLA), has shifted to a magnetic motor using neodymium in its Model 3 Long Range car, which adds to pressure on already strained supplies of a rare earth metals. General Motors Company (NYSE: GM) plans to end production of its fossil-fuel-powered vehicles and exclusively offer electric vehicles by 2035. Ford (NYSE: F) has pledged that all its cars sold in Europe will be electric by 2030 and is adding more EVs to its U.S. lineup. On a similar electric-powered path, Honda Motor Company Ltd. (NYSE: HMC) intends to electrify two-thirds of global automobile unit sales in 2030 and is planning a global electric vehicle platform for larger EVs across select global markets. These automakers represent just the tip of the iceberg for the coming demand for REEs.

• Rare earth elements (“REEs”) are crucial for production of clean energy, electric vehicles, consumer electronics, national defense and more.
• China controls more than 80% of global production and supply, putting supply chains and national security at risk.
• S.-based Energy Fuels has established a new, integrated rare earth supply chain and aims to meet 50% of U.S. demand for REEs.

Rarity of Non-Chinese Rare Earth Elements

While rare earths are not actually rare in the Earth’s crust, rare earth supply chains not dominated by China are extremely rare. The global rare earth magnet market reached $14.4 billion last year and is expected to see a huge uptick in demand. Several rare earth elements, such as neodymium and dysprosium, are critical to the motors used in electric vehicles. Beyond EVs, the demand for REEs is booming across multiple sectors. Rare earths are instrumental components in a myriad of high-tech devices such as smartphones, cameras, computer hard disks, fluorescent and LED lights, batteries, flat screen TVs, computer monitors and more. Large quantities of some REEs are also crucial for defense technologies and clean energy.

Demand for REEs is currently outstripping supply by about 3,000 tons per year according to Julie Klinger, the author of “Rare Earth Frontiers.” Demand is likely to accelerate further and strain access since the EV market alone is projected to increase nearly tenfold over the next ten years. Exacerbating the situation, the prices of all major Chinese-sourced rare earths have recently spiked, especially those used in permanent magnets.

Prices for neodymium and praseodymium oxide (NdPr), which are the most common rare earths used in making magnets, are up by more than 40% in 2021. Several other key rare earths also jumped in value this year, including dysprosium (+53%), gadolinium (+39%) and terbium (+39%). This follows significant increases in prices for these products in 2020. BMO Capital Markets says that the surge in the price of rare earth metals last year reflected geopolitical tensions in a tug of war between China and the developed world.

Bringing It Home

Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR)  is attempting to break this cycle of dependence on foreign sources and bring REE production home to the United States. Already a leading U.S. uranium and vanadium producer, the company announced on March 1, 2021, that a new fully integrated, non-Chinese rare earth supply chain has been created by Energy Fuels and Neo Performance Materials (NEO.TO). Late last year, Energy Fuels strategically secured a supply of natural monazite ore, mined in the Southeast by The Chemours Company. Energy Fuels will process the natural monazite sands into a mixed rare earth carbonate at its White Mesa Mill in Utah in the next couple months. This is a product ready for the next stage of rare earth production: separation. Monazite is one of the highest-value, rare, earth-bearing minerals in the world, comprised of 50% to 60% of total rare earth oxides, of which 22% to 24% is neodymium-praseodymium oxide, an REE that is vital to producing the powerful permanent magnets used in multiple applications, including EVs, wind turbines, electronics and more.

Energy Fuels is initially processing 2,500 tons of monazite (roughly 8% of current U.S. REE demand) but aims to meet 50% of total current U.S. demand by processing 15,000 tons of monazite per year. Processing that much monazite would represent only about 2% of the company’s White Mesa Mill’s existing throughput capacity and less than 1% of its existing tailings capacity. Energy Fuels is also actively looking to secure additional quantities of monazite ores, and significant quantities are available around the world as a byproduct of zircon and titanium production. Sources are readily available from heavy mineral sand operations in the United States, Australia, India, South Africa and other nations. This puts Energy Fuels in an enviable position, especially as both demand and prices for rare earths continue to surge.

As part of the announcement, Energy Fuels will produce a product called a “mixed rare earth carbonate” and ship a portion of that production to Neo Performance Materials’ rare earth separations facility in Estonia, which is a NATO member and US ally. Energy Fuels will sell the mixed rare earth carbonate to Neo, which will then produce separated rare earth oxides and other value-added rare earth products for European and U.S. markets.

Expertise Matters

Energy Fuels is in a unique position because it is already an experienced U.S.-based uranium mining company, supplying U3O8 to major nuclear utilities. Because of this expertise, the company can process natural monazites derived from heavy mineral sands, usually sold to China because they contain small amounts of naturally occurring radioactive elements. Upon successful ramp-up, this will become a new non-Chinese REE supply chain, one of only two in the world today. While Energy Fuels does not seek to supplant China, the pieces are falling into place for the company to potentially become the lowest-cost, non-Chinese supplier of REE products.

This new agreement to produce and deliver mixed rare earth carbonate also provides a tactical bridge for Energy Fuels, allowing the company to develop further separation and value-added rare earth capabilities at its White Mesa Mill in Utah over the next couple years while ramping production. Energy Fuels is currently evaluating this opportunity. If successful, Energy Fuels will have developed a fully integrated U.S. rare earth supply chain that can supply both the United States and global markets; Energy Fuels may well be the first U.S. company to achieve this.

Speaking to the import of this new rare earth supply chain, Mark S. Chalmers, president and CEO of Energy Fuels stated: “Together, Energy Fuels, Neo and Chemours have successfully created an integrated rare earth supply chain based in the U.S. and Europe. Monazite is coveted globally as one of the highest-value rare earth minerals in the world, due to its excellent distribution of neodymium and praseodymium (NdPr), as well as ‘heavy’ rare earths. It is already mined here in the U.S. and elsewhere around the world. However, until now, there has been no integrated ability to process monazite in the U.S. or Europe into the rare earth materials needed to supply the rapidly increasing demand for electric vehicles, renewable energy systems, and other clean energy and advanced technologies. . . . We plan to supply all or a portion of our mixed rare earth carbonate to Neo for several years, while also developing our own separation, metals, alloys, and other downstream rare earth capabilities at the White Mesa Mill for supply into the U.S. as domestic markets grow.”

Creating a new supply chain for scarce, high-demand resources heralds a bright future for the company, especially as companies seek to diversify some of their supply chains away from China. Not only is this initiative expected to begin production almost immediately, but it also lays the groundwork for future growth and expansion in a sector begging for solutions.

Reliant on Rare Earths

The auto industry is rapidly becoming completely electrified, and it needs REEs to get there. Due to unique magnetic, phosphorescent and catalytic properties, rare earths are the elements that make possible everything from the miniaturization of electronics to powering EVs.

Tesla Inc. (NASDAQ: TSLA) engages in the design, development, manufacture and sale of fully electric vehicles, energy generation and storage systems. Tesla also provides vehicle service centers, supercharger stations and self-driving capability. The company shifted to a magnetic motor using neodymium in its Model 3 Long Range car, adding pressure to already strained supplies of a rare earth metals.

Founded in 1908, legacy automaker General Motors Company (NYSE: GM) designs, manufactures and sells cars, trucks and automobile parts. The major auto maker also provides automotive financing services. GM plans to exclusively offer electric vehicles by 2035 and end production of its fossil-fuel-powered vehicles.

Ford (NYSE: F) designs, manufactures, markets and services a range of Ford trucks, cars, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles worldwide. Ford has pledged that all its cars on sale in Europe will be electric by 2030 and is adding more EVs to its U.S. lineup.

Honda Motor Company Ltd. (NYSE: HMC) engages in the manufacture and sale of automobiles, motorcycles and power products across the world. The company intends to electrify two-thirds of global automobile unit sales by 2030.

As our economy becomes electrified, demand for REEs is expected to continue unabated. By establishing its new integrated rare earth supply chain, Energy Fuels aims to break the cycle of dependence on foreign sources for these valuable commodities. The company’s unique nuclear expertise allows Energy Fuels to process abundant supplies of monazite sands despite the presence of natural radioactive elements. Given the demand and the foreign chokehold, Energy Fuels’ rare earth initiative may present a rare opportunity.

For more information about Energy Fuels Inc., please visit Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR).

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