U.S. companies vie for funds in rare earths industry

An effort by the Trump administration to break China’s stranglehold on the production of coveted metals vital to national security and many industries has ignited a battle among domestic mining companies and their political allies to win millions of dollars in federal aid.

The metals, known as rare earths, are used in products as diverse as smartphones, electric vehicles and wind turbines as well as military hardware. Concern about ensuring access to them has grown intense since the trade dispute between the United States and China, which dominates global production, escalated.

The administration’s eagerness to foster more domestic capacity has set off a scramble in the industry, enticing a number of upstart companies with no track record of mining or refining rare earths, some of which have backing from powerful friends in Congress.

With China supplying about 80% of rare earths to the United States as of 2018, the Trump administration has set a goal of moving the entire supply chain of rare earth metals to U.S. soil. And as political interest in the industry has grown, so has interest from Wall Street.

The United States has only one operational rare earths mine, in Mountain Pass, Calif. The site was acquired out of bankruptcy in 2017 by MP Materials, a U.S. company that is working to refurbish a processing facility there that dates to the 1950s. The company currently sends the ores it mines to China for processing.

MP Materials announced a deal to go public in July, merging with a blank-check company and opening itself up to outside investment. MP Materials expects to raise about $490 million through the deal.

For years, a number of fledgling companies have been working to develop sites. They include Ucore in Alaska, Texas Mineral Resources Corp. in Texas and Rare Element Resources in Wyoming. Despite sitting on rare earth deposits for years, none has broken ground or begun processing the metals in meaningful amounts.

In April, MP Materials was one of two companies selected for a Pentagon award focused on production of rare earth metals critical to many military devices. Funding was also awarded to Lynas Corp., an Australian company already extracting ores from a mine in Australia, which entered its bid in partnership with Blue Line Corp., a processing company based in Texas. The amount of the award was not disclosed.

After the announcement, Sen. Ted Cruz, R-Texas, wrote to Secretary of Defense Mark Esper protesting the selection. He was joined by five other Republican lawmakers, including Sens. Michael Enzi and John Barrasso of Wyoming, whose state is home to the Bear Lodge mine owned by Rare Element Resources. The letter argued that the Pentagon should direct funding only to companies operating entirely in the United States.

Industry experts have cautioned that the few other companies that could conceivably meet the ideal of purely domestic production are almost certainly many years away from that stage and face considerable challenges in getting there.

“For the U.S. to really be able to support itself, it can’t really be waiting on projects that are going to take six, seven, eight, maybe up to 10 years to really come to completion,” said David Merriman, a manager at Roskill, a commodities analysis company in London.

To help spur the industry’s development in the United States, President Donald Trump issued directives a year ago authorizing funding for domestic companies working across five different stages of rare earth production.

According to a Defense Department proposal obtained by The New York Times, the Pentagon has already designated at least $125 million under the Defense Production Act for funding rare earth projects through this year. By law, the department can spend $50 million in each of the five categories identified by the White House. The administration has pressed Congress, so far unsuccessfully, for more.

The Energy Department is also offering nearly $160 million for rare earths research and development this year.

In July, the Pentagon invoked the Defense Production Act to award nearly $30 million to Urban Mining Co., a small company in Texas, which has said it can manufacture finished rare earth products by recycling the metals from scrapped electronics containing them.

In May, Cruz introduced a bill that would set aside $50 million for the Pentagon to fund rare earth projects every year through 2024 and would use tax incentives to let manufacturers write off double the cost of any domestic rare earths they bought. Companies like USA Rare Earths, which owns a 70% stake in Texas Mineral Resources, have been aggressively making the case that they can turn their mines into success stories.

From 2019 through the beginning of this year, USA Rare Earth was represented by Jeff Miller, a Republican lobbyist who served on Trump’s inaugural committee and helped direct Rick Perry’s presidential campaign in 2016.