00:00For these feeds here, each of these bags hold two metric tons of monazite, and they're 50-plus percent rare earth oxides, so a very, very high-value feedstock here.
00:11Here at the White Mesa Mill in Utah, Mineral Company Energy Fuels is processing rare earth elements.
00:17These materials are crucial to modern-day technology.
00:20Rare earths refer to 17 elements on the periodic table, whose atomic structure gives them special magnetic properties.
00:26Rare earth magnets power everything from electric vehicles and wind turbines to defense equipment, data centers, and high-tech consumer electronics.
00:34So now we're inside our processing facility.
00:37Our rare earth ores enter here.
00:39We left them up with a big crane, and we dump them into these tanks here behind me.
00:44These are 100,000-gallon tanks, and once they get into these tanks, we take them through a variety of processes.
00:50It includes cracking and leaching, solid liquid separations, and some impurity removal.
00:56The United States used to be an industry leader of rare earth production up until the 1980s.
01:01But for the last several decades, the U.S. and the rest of the world have largely depended on China for the majority of their rare earths.
01:07Now escalating trade tensions between the two countries have forced the U.S. to seek to develop a domestic supply chain,
01:13after China enacted stringent export controls of rare earths back in April.
01:16The United States is so dependent on a number of these critical materials, we are absolutely held hostage by companies that are geopolitical foes.
01:28This is the feedstock to physical AI.
01:30We've had, on your air, we've had Jensen Wong, Elon Musk, and many others talking about robotics, drones being the largest industry in the history of the world.
01:38Well, rare earth magnets are essential.
01:40And so if we don't bring this supply chain on now, then we're really leaving trillions of dollars at risk.
01:45This is all hands-on-deck warfare right now between the U.S. and China.
01:50It's a competition that is an existential competition in my view, and so nothing is off the table.
01:56Global demand for rare earth permanent magnets is expected to more than double by 2035.
02:01But can the U.S. wean itself off of Chinese rare earths?
02:06CNBC spoke to experts and stakeholders about what it will take to mine and process rare earths domestically.
02:17Contrary to their name, rare earths are abundant in earth's crust, but they're often found commingled with other elements rather than in large deposits.
02:24Worldwide, China has the highest concentration of rare earth reserves, followed by Brazil, India, and Australia.
02:31The U.S. ranks seventh in terms of available reserves.
02:34The process to separate rare earths from these other minerals is complicated, expensive, and requires specialized equipment and technical skills.
02:41The mining of these minerals also comes with the risk of potentially significant environmental damage.
02:46The mining of rare earths, especially in China, is considered very polluting.
02:52When they extract these heavy rare earths, what they do is they use really harsh chemicals on the ground to extract this material in the form of clay.
03:02And that material ultimately seeps into the ground and pollutes the water body and kills the vegetation.
03:09And if you were to extract light rare earths, which are primarily concentrated in something called as hard rock mines,
03:15you need to use really harsh agents to blast off the rocks, which release clouds of dust, and they potentially pollute the entire environment.
03:27Experts say that lower labor costs, weaker environmental standards, and strong government support have all helped Chinese companies become dominant in the rare earth supply chain.
03:35About 70% of the actual mining of these materials rest in the hands of Chinese companies, and 90% of the processing.
03:45That's an incredible amount of dependency when you think about how important these materials are to running a modern economy.
03:55China has had the monopoly in this market for a really long time.
03:59The reason being is that the cost of production of these separated rare earths and magnets is very low in China.
04:08And any producer outside of China cannot enter the market because these prices are what we call as sub-rational prices.
04:19Experts say that the current U.S.-China standoff with regard to rare earth elements can be traced back to 2018.
04:24During the first Trump administration, the U.S. levied heavy tariffs on Chinese goods in an attempt to hamper China's Made in China 2025 initiative,
04:33which focused on transforming China into a global manufacturing powerhouse, particularly with regard to high-tech industries.
04:39During the Biden administration, the U.S. also enacted restrictions around exports of advanced microchips to China,
04:45though these restrictions have since been reversed.
04:47The final straw in the collapse of trade relations between the two countries seems to have been the enactment of more tariffs by President Trump
04:54during his second administration, with tariff rates on Chinese goods reaching a high of 145% in April.
05:01On April 4th, China decided to retaliate to this tariff escalation by implementing an export control on seven medium and heavy rare earths.
05:12Also, this restriction applies to sending the material for any dual-use items.
05:19What this means is that any military organizations were considered as primary target.
05:25So defense supply was completely cut off.
05:29China has slowly built out this export control toolkit,
05:33really mimicking and copying U.S. export controls to hit back at U.S. and other countries
05:39for actions that China believes are unfair to China.
05:44So although we are seeing it actualized over the last seven months,
05:48China has spent the last several years building out this toolkit.
05:53The Chinese export controls on rare earths disrupted a number of industries,
05:57with the EV sector being particularly hard hit.
06:00Suzuki in Japan had to stop their production.
06:03Ford had to stop their production.
06:05Tesla raised concerns about their supply being disrupted
06:10because they had submitted applications for their humanoid production.
06:15And China assumed that it would be used for military applications.
06:19While initially slow to approve licenses for exports of its rare earth materials,
06:23China has picked up the pace.
06:25This growth in exports came after Washington and Beijing agreed on a trade framework
06:28that included easing controls on Chinese rare earth exports
06:31in exchange for the rollback of some American tech restrictions for shipments to China.
06:36Still, experts say U.S. dependence on Chinese rare earths remains the country's biggest weapon in the trade war.
06:41Once we can reduce it as an effective weapon, then we can get back to normal trade.
06:47But right now, for the Chinese, it's an extremely effective cudgel because we are so dependent.
06:54The United States seems to be getting serious about establishing a domestic rare earth supply chain.
07:00In July, the Department of Defense announced a $400 million investment in U.S. rare earth miner and producer MP Materials.
07:07MP Materials owns the only operational rare earth mine in the U.S. at Mountain Pass, California.
07:13Goldman Sachs and J.P. Morgan also backed the company with a $1 billion loan
07:16to fund the expansion of MP Materials' magnet-making operations.
07:20The deal consists of three main parts. It's an investment in MP.
07:24It is price support for our commodity because, as we know, the Chinese have kept the market well below levels
07:32where anyone can adequately make money or get a return on capital in the free market.
07:37And then lastly is an off-take contract for us to accelerate investment.
07:41And so when you add up this package, what it is, is it is going to significantly accelerate the development of this entire full supply chain.
07:51MP Materials says that this investment will allow the company to ramp up production of its rare earth magnets from 1,000 metric tons in 2025 to 10,000 metric tons by 2028.
08:01The company already has one magnet-making facility in Texas, but is planning a second U.S. plant it calls 10X to help its scale.
08:09The Department of Defense declined to be interviewed for this story, but in a statement to CNBC, a defense official said,
08:15DoD selected a unique approach to this agreement to account for the difficulties in establishing and sustaining production of critical rare earth magnets
08:23in a market environment in which China controls much of the supply chain.
08:26By leveraging preferred equity, loans, price floors, and other approaches, DoD is ensuring access to critical defense capabilities
08:33while also sharing the risk inherent in a commercially dominated market space.
08:37The official went on to say that the Defense Department has invested almost $540 million to support the domestic and allied rare earth element
08:45in critical mineral supply chain.
08:47The Chinese have spent so much time building out their state-owned enterprise in the sector, fully integrated,
08:55you know, from from mines to buyers, you know, price support, all sorts of things.
09:00We have tried to rely on just the pure market mechanism to do this.
09:06MP materials, however, I have to admit is a game changer.
09:10DoD has given a price floor commitment of $110 per kg of NDPR, which is almost double of the current prices.
09:21So this $110 a kg will obviously make MP materials more bankable, but it will also enable a lot of these junior miners
09:29and marginal producers to gain investments and come online at these prices.
09:36Shares of MP materials soared by about 50% following the announcement and have continued to climb.
09:42Other projects are also in the works.
09:44In Wyoming, Ramco Resources is working to extract rare earths from a coal mine the company had purchased about 15 years ago.
09:51Durham, North Carolina-based startup Vulcan Elements has said that it will make rare earth magnets for the U.S. military.
09:56Meanwhile, in San Marcos, Texas, rare earth magnet maker Novion Magnetics has a deal to make rare earth magnets for Japanese motor company Nidek.
10:04Mark Chalmers says his company, Energy Fuels, began refining rare earths about five years ago at their White Mesa facility in Utah.
10:11The company has historically mined and refined uranium, a radioactive material,
10:15and realized they could also use a similar process to extract rare earths from monazite.
10:19This is our most newly arrived monazite.
10:22This comes from Georgia, ChemOar's company.
10:24This is a byproduct of their heavy mineral sand mines in Georgia, and they're shipping it to us.
10:29We're using monazite oars, one, because it's a very cheap feedstock.
10:33It also has a really good distribution of rare earths.
10:36Monazite is radioactive, and not many places in the world are able to process it.
10:41And where we're a uranium facility, you know, radioactivity is something that we're very accustomed to handling.
10:46And so it suited us very well for a lot of reasons.
10:49The stock price of energy fuels has also benefited from general interest in rare earths.
10:54The company produces neodymium-preseodymium oxide, or NDPR, material at commercial scale for use in permanent magnets,
11:01but says that it can expand its offerings to include other rare earth elements with the right financial support.
11:05The company is already running pilot-scale production of some of those other rare earth oxides.
11:10Right now, we have the capability to process up to 1,000 tons of NDPR.
11:16And to put that in a context, that would be approximately a million electric vehicles or hybrid vehicles.
11:23Our plans are, in what we call phase two, to increase that up to 6,000 tons of NDPR,
11:31which would be up to 6 million electric vehicles.
11:34We also have the capabilities and are advancing our abilities to produce a number of the other heavy rare earths,
11:43mainly dysphosium, terbium, and samarium, and other elements as required by the United States government
11:50if they choose to have us recover those products and do course with the proper incentives.
11:56Alternative sources of rare earth mining are also being explored.
11:59One of those is recycling.
12:01Apple is betting on this technology.
12:03In July, the phone maker announced a $500 million investment in MP Materials,
12:07whereby the company would buy rare earth magnets produced at MP Materials' Fort Worth, Texas facility.
12:12The magnets will be made from recycled materials, with shipments expected to begin in 2027.
12:18Deep-sea mining is also being considered,
12:20though that technology is still in its infancy and comes with its own environmental concerns.
12:24Some U.S. companies are confident that they can meet the country's needs for rare earth oxide supply.
12:30We have about 1.7 million tons that we've discovered using about only a third of the site.
12:38So the other two-thirds we expect to have similar type of results.
12:41The U.S. only uses 10,000 tons a year.
12:44So at that basis, we've got probably well over 100 years of supply just in this one spot.
12:49We believe that we will be able to produce between 50 and 100 percent of the United States requirements
12:57of these rare earth elements in approximately three to four years' time.
13:03But experts say the U.S. is far from breaking its dependence on rare earths from China,
13:07especially when it comes to finished rare earth magnets.
13:10There's a lot of effort going on to build a supply chain that is more resilient
13:16and that is diversified from China.
13:19However, this is not enough.
13:21At the moment, USA is importing almost 30,000 tons per annum of magnet.
13:27And that is expected to stay up until 2030 as well,
13:32even though they are building their own capacity.
13:34That is because the demand for rare earth permanent magnets is also increasing.
13:39Additionally, China's chokehold on rare earths extends beyond the minerals themselves.
13:42We talked about earlier reagents and the need to use reagents
13:47in order to separate some of this material to get magnets.
13:50Well, reagents, most of that chemical is still in the Chinese supply chain
13:56or in countries that rely on the Chinese supply chain.
13:59We've lost a lot of our metallurgical labor skills.
14:03Most of that exists in China.
14:05So workforce development is going to have to be a part of this deal at some point.
14:09Despite these challenges, McNeil believes that U.S. commitment
14:13to a domestic rare earth supply chain could pay off.
14:16I don't think that it's realistic to think that this is going to get done
14:20in two or four or five years.
14:22I think the challenges are too great and I think the needs are still very, very high.
14:29If we're showing incremental progress, if we're showing resolve,
14:33if we're taking words, policies, legislation, rhetoric and translating that into real action,
14:41I think the signal that it sends to China is enough to signal China to change its policy approach.
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