Exclusive: The Pentagon is considering rare earth reserves in Africa to get away from China

CHICAGO / LONDON (Reuters) – The US Defense Department has had talks with Mkango Resources Ltd of Malawi and other rare earth miners around the world about their strategic mineral supplies. part of a plan to find diversified reserves outside of China, said a department official said Wednesday.

This surge comes as China threatens to limit exports to the United States of rare earths, a group of 17 minerals used in a plethora of high-tech military and consumer electronics equipment.

Although China owns only a third of the world's rare earth reserves, it accounts for 80% of US mineral imports because it controls almost all of the material's processing facilities, according to data from the US Geological Survey.

"We are looking for any source of supply outside of China. We want diversity. We do not want a single-source producer, "said Jason Nie, a materials engineer at the Pentagon's Defense Logistics Agency, on the sidelines of the Argus US Specialty Metals conference in Chicago.

The DLA, which buys, stores and ships a large portion of the Pentagon's supplies – from minerals to aircraft parts, to uniform zippers – also had talks with Burundian company Rainbow Rare Earths Ltd about future supply, and also proposed to present the Earth's projects under development with potential financiers, said Nie.

"We can create links," he said.

The DLA regularly discusses with potential suppliers as part of its duty of care, steps that do not necessarily result in purchase contracts. Nevertheless, surveys show that the Pentagon is increasingly focused on diversifying the sources of critical minerals.

In September 2016, the last Operational Report, the DLA held stocks of many key minerals valued at $ 1.15 billion.

For the 2019 fiscal year in progress, the DLA plans to buy rare earth on the open market (up to a maximum of 416 tons), precursors of lithium-ion batteries (0.02 ton ) and tin (40 tonnes), among other strategic minerals, according to a government report.

Some equipment purchased by the Pentagon, including night vision goggles and airplanes, is made from rare earth minerals. The Pentagon has long supported efforts to compel military contractors to purchase minerals of national origin, although there is currently no rare earth processing facility in the United States.

China, in the context of escalating trade conflict with the United States, hinted through its state-controlled media last month that it could restrict sales of rare earths to the world's largest economy. Such a measure would take precedence, with China having, in 2010, eliminated rare earth exports to Japan after a diplomatic dispute.

"If you put yourself in China's shoes, it will be its main weapon in the trade war," said Mark Seddon, a metals analyst at Argus.

Mkango Resources is developing a rare earth mine and treatment facility in Malawi that is not yet available in several years. Rainbow Rare Earths started operations in Burundi in 2017 and entered into a subtraction agreement with ThyssenKrupp AG.

China dominates the global processing capacity of rare earths. Lynas, Australia, is the only non-Chinese company with significant capacity.

"It's not a good idea to rely on just one major source of material," Amanda Lacaze, CEO of Lynas, told Reuters on the sidelines of the conference. Last month, Lynas signed a memorandum of understanding for the construction of a rare earth processing facility in Texas with private company Blue Line Corp.

Texas Mineral Resources Corp. is striving to develop the Round Top Rare Earth deposit in a remote corner of the western edge of the state, and Rare Element Resources Ltd. is advancing on a Wyoming project.

But these projects will take several years to come, reflecting the fact that efforts to build rare earth plants in the United States are still in their infancy.

Private company MP Materials, owner of the Mountain Pass mine in California, plans to open a treatment facility next year.

The US Department of Commerce Tuesday urged urgent measures to boost domestic production of rare earths.

The report includes 61 specific recommendations – including low interest loans and a US buy provision for defense companies – to increase the supply of rare earths in the United States. He also called for closer cooperation with US allies, which fits perfectly with DLA's exposure to minors in Africa and elsewhere.