Rare Earth Elements in National Defense
According to investor analyst Jack Lifton, the rare earth metals are imported from China, then manufactured into military components in the United States or by an allied country. Lifton states that many investors believe that for financing purposes, it is not enough to develop REE mining operations alone without building the value-added refining, metal production, and alloying capacity that would be needed to manufacture component parts for end-use products. According to Lifton, vertically-integrated companies may be more desirable. It may be the only way to secure investor financing for REE production projects.30 Joint ventures and consortiums could be formed to support production at various stages of the supply chain at optimal locations around the world. Each investor or producer could have equity and offtake commitments. Where U.S. firms and U.S. allies invest is important in meeting the goal of providing a secure and stable supply of REEs, intermediate products, and component parts needed for the assembly of end-use products.
Most experts have predicted where new mining capacity for rare earths is likely to come on- stream, but it is just as important to know where new downstream capacity (processing, refining, and metals alloying) is being built or likely to be built in the world as well as the likely investors in downstream capacity for rare earths. Additional questions that could be addressed by Congress include how long would it take to develop the skill set in the United States for downstream production activities? Would an international educational exchange program with those countries already involved in rare earth refining and recycling be appropriate?
Molycorp’s “Mine to Magnet” Vertical Integration Approach for Rebuilding the U.S. Rare Earth Supply Chain
From the mid-1960s through the 1980s, Molycorp’s Mountain Pass mine was the world’s dominant source of rare earth oxides. The ramp up in production had been driven primarily by Molycorp’s higher grade, its relatively low cost, and a rapid rise in the demand for the LREEs, particularly europium used for red phosphors in television and computer monitors, and cerium for glass polishing.31 However, by 2000, nearly all of the separated rare earth oxides were imported, primarily from China. Because of China’s oversupply, lower cost production, and a number of environmental (e.g., a pipeline spill carrying contaminated water) and regulatory issues at Mountain Pass, Molycorp ceased production at its mine in 2002. Since then, the United States has lost nearly all of its capacity in the rare earth supply chain, including intellectual capacity. However, under new ownership since 2008, Molycorp has embarked upon a campaign to change the rare earth position in the United States with its “mine to magnet” (vertical integration) business model.
After major energy producer Chevron purchased Union Oil Company of California (UNOCAL), which included the rare earth mine at Mountain Pass, Chevron wanted to focus on its energy business. They were willing to sell-off its non-energy Molycorp Mountain Pass asset.
When investor groups purchased Molycorp from Chevron in 2008, they did not inherit the environmental liability that resulted from the pipeline spill. Chevron continued the cleanup that resulted from an earlier ruptured water disposal pipeline carrying some chemical contaminants from the oxide separation facility. Since its purchase by the new owners, Molycorp CEO and
Op. cit., Lifton Interview by The Gold Report, December 14, 2009. DOI/USGS, Rare Earth Elements—Critical Resources for High Technology, Fact Sheet, 087-02.
Congressional Research Service