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Vol. 16, No. 9 Week of February 27, 2011
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Lawmakers sound alarm at lax REE policy

U.S. security think-tank joins U.S. senators in urging Department of Defense to step up efforts to secure vital rare earth elements

Shane Lasley

Mining News

U.S. Sens. Mark Begich, D-Alaska, and Lisa Murkowski, R-Alaska, and Rep. Mike Coffman, R-Colo., are up in arms over the U.S. Department of Defense’s apparent laidback approach to ensuring it has an ample supply of the rare earth elements critical to many of the weapons systems in the U.S. military’s arsenal.

“Clearly, rare earth supply limitations present a serious vulnerability to our national security. Yet early indications are the DoD (Department of Defense) has dismissed the severity of the situation to date,” the lawmakers wrote in a Jan. 28 letter to U.S. Secretary of Defense Robert Gates.

The unique properties of REEs – a group of 17 previously obscure metals that include scandium, yttrium and the 15 lanthanides – are a key ingredient to a number of military applications such as guided missiles, lasers, radar systems and night vision equipment. The metals are also widely used in high-tech consumer goods like mobile phones and iPods; and green technology applications such as wind turbines and hybrid cars.

The technological metals emerged into the mainstream when China, which mines around 97 percent of the global supply of REEs, dramatically reduced its exports of these minerals. The lawmakers worry that further restrictions in Chinese exports coupled with growing private sector demand will leave the U.S. military short of the REEs vital to building its weapons.

The American Security Project, a bi-partisan think-tank focused on national security issues, also believes an REE shortage poses security risks to the U.S. The Washington D.C.-based research group released a report titled “Rare Earth Metals and U.S. National Security,” outlining their concerns about the economic and national security risks resulting from the United States’ dependence on China for these strategic metals.

The national security think-tank wrote, “Rare earth metals are essential for the United States’ military and economic well-being. Yet the U.S. has been particularly lax when it comes to securing the supply of these metals.”

Emily Coppel, author of the report, said, “Rare earth metals present a weak link in our defense supply chain. These metals are critical for national security, as they are essential for our most powerful weapons. The U.S. was once the world’s top producer and supplier of these metals, but now China controls over 90 percent of the rare earths market. This means the U.S. is now completely reliant on China for the production of our most powerful weapons. While the U.S. has taken some steps to reduce this reliance on China, we have not done enough.”

Stocking up

Begich, Murkowski and Coffman are urging the Department of Defense to take inventory of the U.S. military’s anticipated REE demand and establish policies to ensure an uninterrupted supply of these critical materials.

In their letter to Gates, the trio wrote, “In our view, it is a fundamental responsibility of DoD Industrial Policy to have a comprehensive understanding of the security of our defense supply chain, which requires understanding detailed knowledge of the sources and types of components and materials found in our weapon systems.”

The Department of Defense Office of Industrial Policy is charged with sustaining an environment that ensures the industrial base on which the Department of Defense depends is reliable, cost-effective, and sufficient to meet its requirements.

The Alaska and Colorado legislators told Gates that the Department of Defense should require its weapons contractors “to provide a detailed accounting of the various rare earth-containing components within their weapons system.” This information could then be used to create policies that would ascertain that the military would have these vital minerals on-hand.

The report written by the American Security Project points out that REEs are not only vital to the weapons systems themselves but are needed for the communication systems and computers “critical to operating current military platforms.”

The lawmakers have requested DoD provide Congress with a written report on its REE demand and “propose real solutions on rare earth availability.”

“For example, one policy may be for the DoD to establish a limited stockpile of rare earth alloys that are in danger of supply interruption to ensure security of supply of both metals and magnets,” the policymakers suggested.

The American Security Project echoed the lawmakers call for building up a store of REEs.

“While stockpiling rare earths is not a long-term solution (eventually stockpiles will run out), it is a good stop-gap measure until new technologies or mines are available,” Coppel wrote.

DoD Industrial Policy Director Brett Lambert does not share the view that stockpiling REEs is necessary.

“I wouldn’t run out and buy a bunch of rare earths,” he said at a November defense conference in New York.

Critical of Lambert’s apparent attitude that the REE markets will fix themselves and supplies outside of China will become available, the policymakers pointed out that DoD is not certain of its REE needs and near-term production will supply primarily light rare earths, leaving the more vital heavy rare earths in short supply.

“Therefore, the new sources may not alleviate the supply shortages faced by DoD. Additionally, manufacturing capabilities required to convert materials into the components needed for our defense systems are virtually non-existent in the United States today and to our knowledge, no prime contractor has long-term supply agreements to ensure access in a fully secure supply chain. Given the dwindling domestic supply chain and struggle to accurately identify DoD consumption of rare earth elements, we respectfully disagree with Director Lambert’s initial assessment,” the lawmakers wrote.

In A Feb. 7 article the Wall Street Journal reported that China may well be preparing to build up its own REE stores. Though China has not gone public with stockpiling plans, the business publication said a myriad of state-controlled sources report “that storage facilities built in recent months in the Chinese province of Inner Mongolia can hold more than the 39,813 metric tons China exported last year.”

Domestic supply

Compiling information on potential domestic sources of REEs, the United States Geological Survey reports that Mountain Pass (California) and Bear Lodge (Wyoming) – the only two U.S. deposits with a defined resource that meets NI 43-101 standards – contain a combined 1.5 million metric tons of the critical metals.

Molycorp Inc.’s Mountain Pass deposit is the largest, highest grade and most advanced REE deposit on U.S. soil. The USGS reports that the deposit contains 13.59 million metric tons of reserves averaging about 8.24 percent total rare earth oxides, or about 1.12 million metric tons of rare earth oxides. About 99.5 percent of the REEs at Mountain Pass are considered light rare earths.

By reprocessing tailings from past production, the mine is currently producing 3,000 metric tons of commercial rare earth materials per year. Molycorp said it will be mining fresh ore in 2011 and expects to produce around 19,050 metric tons of rare earths per year when phase-1 construction of a manufacturing facility is complete in 2012. Phase-2 expansion, expected to be finished in 2013, will double the capacity at the Mountain Pass Mine.

The balance of the defined resources in the USGS report is located at Bear Lodge in Wyoming. This REE deposit owned by Rare Element Resources Ltd., contains and estimated 17.5 million metric tons averaging 3.46 percent TREO, or about 380,000 tons TREO. 96.73 percent of the REEs at Bear Lodge are light rare earths.

The USGS said “these two potential mines may not be able to meet domestic needs for heavy REE with the production plans currently proposed.”

Jack Lifton – considered to be the leading authority on the sourcing and end-use trends of rare and strategic metals – agrees with the USGS. The REE expert proposes that Ucore Rare Metals Inc.’s Bokan Mountain project in Southeast Alaska is the key to supplying the critical heavy REEs.

“For the USA to be self-sufficient in critical rare-earth metals, it will be necessary for the Alaskan Bokan Mountain deposits of Ucore Rare Metals to be developed as quickly as possible, along with either Molycorp’s Mountain Pass mine and/or Rare Element Resources’ Bear Lodge property in Wyoming. Only in this way can the USA become self-sufficient in the critical rare earths in the near term,” Lifton wrote upon his return from Cambridge House International Inc.’s inaugural Critical Metals Investment Symposium held in Vancouver B.C. in January.

Lifton is co-founder of Technology Metals Research, a firm founded in 2010 to provide information on rare commodities such as REEs, lithium, tellurium, gallium and other technology metals.

Ucore is expecting an inaugural NI-43-101-compliant resource estimate to be completed for the Dotson and I&L Zones at Bokan Mountain by the end of March. It is estimated these zones contain between 3.5 million to 6.5 million metric tons averaging between 0.76 percent to 1.42 percent total rare earth oxides. Though the size and the grade of the conceptual deposit is less than its Lower 48 counterparts, heavy rare earths comprise about 40 percent of the total rare earth content in the targeted areas.

“The Bokan Mountain site is one of the largest known REE deposits in North America and has significant deposits of the highly valued ‘heavy’ REEs such as dysprosium,” Alaska Gov. Sean Parnell said in a Feb. 22 letter to President Barack Obama.

Parnell asked Obama to direct the USGS to join the Alaska Department of Natural Resources in seeking additional sources of REEs in Alaska.

“Alaska has already identified some of the most promising REE sites in the nation and we should be working to find more,” Parnell said.

DoE builds REE strategy

While DoD has taken a wait-and-see approach to procuring the REEs vital to many of the advanced weapons systems in the U.S. military’s arsenal, the U.S. Department of Energy has laid out a comprehensive strategy examining the role of rare earth elements and other materials vital to the clean energy economy.

“Critical Materials Strategy,” a 166-page report released by the Department of Energy in December analyzed 14 elements used in the manufacturing of wind turbines, electric vehicles, solar cells and energy-efficient lighting. The report identified five rare earth metals (dysprosium, neodymium, terbium, europium and yttrium) as well as indium as most critical based on importance to clean energy technologies and supply risk.

Commenting on the strategic study completed by the DOE, Ucore President and CEO Jim McKenzie said, “Strikingly, Ucore’s U.S.–based Bokan Mountain project has exhibited anomalously high content of four of the five rare earth elements set out by the US DOE as being at greatest risk: dysprosium, terbium, europium and yttrium, all of which are classified as heavy rare earths.”

“Each day, researchers and entrepreneurs across the United States are working to develop and deploy clean energy technologies that will enhance our security, reduce carbon pollution and promote economic prosperity. This strategy is an important step in planning for growing global demand for clean energy products that will help strengthen the U.S. economy and create jobs,” said Secretary of Energy Steven Chu. “Ensuring reliable access to critical materials will help the United States lead in the new clean energy economy.”

Building on this strategy, DoE said it will work closely with its national labs, other federal agencies, Congress and international partners to develop its first integrated research agenda on critical materials and strengthen its information-gathering capacity to proactively address supply and demand for products that contain these critical metals. An updated report by the energy department is due out by the end of 2011.

Parnell offered the use of the University of Alaska’s Arctic Region Supercomputing Center to DoE’s REE research.

“With the ability to solve up to 30 trillion arithmetic calculations per second, the supercomputing center provides a broad range of high performance computer services that could possibly be directed at research related to REEs,” the Alaska governor informed Obama.

Additionally, Parnell urged the president to work with Congress to review the merits of amending existing federal statutes to provide DoE with the authority to provide loan guarantees, grants, and tax credits for the general mining and processing of REEs.

Begich, Murkowski and Coffman – who are actively advancing REE legislation on Capitol Hill – pointed to the role green energy and high-tech devices are playing on the overall demand of rare earth elements.

“Our modern technological economy, from hybrid cars to direct drive windmills to consumer electronics, requires rare earth dependent components and will impact product availability,” the legislators wrote in their letter to Gates. “Fully understanding the aggregate demand for rare earth materials and necessity of the demand will be essential to understanding the supply limits, the future market and formulating U.S. policy on these materials.”



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