The highs Stirred furnaces in steel mills The shrinking roofs and the gleaming chimney of an oil refinery mark the ageing industrial landscape around Concepción in southern Chile. A historic ceramics factory closed its doors here not long ago.
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But the seeds of a potential renaissance lie just beneath the forested hills that dominate this Pacific-facing town. This is where a mining company called Penco, led by Aclara Resourceswhich is listed in Toronto, proposes to mine rare earths, the unique elements needed to make the magnets for everything from electric car motors and wind turbines to the F-35 fighter jet made by Lockheed Martin, jets and MRI machines.
The $130 million Penco project offers a potential “quick win for the West” in need of critical minerals sustainably mined from friendly jurisdictions, Aclara CEO, told Americas Quarterly (AQ). Ramon Barua Costa.
The company and its Chilean partner, steelmaker CAP, have just reapplied for an environmental permit that they hope Chilean authorities will quickly approve after an initial submission stalled to bring the project’s first module into operation by 2028.
Penco is part of a regional trend that is gaining strength (not only in Chile but more prominently in Brazil) to break China’s near-total hold on rare earths. As the United States seeks to wean manufacturing from the Asian giant and global industry shifts to producing new, greener products such as electric vehicles, establishing reliable Western supply chains for rare earth supplies appears to be a strategic imperative.
Miners say ionic clays and monazite rocks in parts of Chile and Brazil contain the ideal mix of rare earths for making magnets. And while China has been criticized for its environmental practices in rare earth mining at home and in Myanmar, the emerging crop of Latin American companies promise to exploit rare earths sustainably.
Car manufacturers, from GGeneral Motors Company to Toyota and budding magnet makershave been touring Chile and Brazil, exploring possible supply alternatives outside China. Particularly attractive are South America’s heavy rare earths, dysprosium and terbium, which are less abundant than the light rare earths found in the United States and Australia.
Carmakers “used to shake our hands and say goodbye. Now they want to know more,” a South American mining executive told AQ, who preferred to remain anonymous due to sensitive commercial issues.
Growing appetite
The data shows why. Between 2015 and 2023the global appetite for magnetic rare earths nearly doubled to 93,000 tonnes and is projected to rise more than 80 percent to 169,000 tonnes in 2040, driven mainly by electric vehicle engines, according to the climate commitments scenario announced by the International Energy Agency (IEA).
The IEA The company says the world faces less risk of a supply deficit for rare earths than for copper and lithium, battery metals, which are also abundant in Latin America. However, rare earths are subject to “an extremely significant level of geographic concentration” of current and future mining and refining projects “that significantly exposes this market to supply disruptions.”
These fundamentals are not reflected in current rare earth prices. Experts say that to maintain its control over 70 percent of global production and 90 percent of processing, Beijing keeps prices artificially low — too low for alternative suppliers to make a profit.
“At current price levels, most Western producers, and probably some Chinese producers, are operating at a loss.”said Brian Menell, chief executive of Dublin-based technology metals investment firm TechMet.
Rare earths in Brazil
Although the The Brazilian government has provided supportoperations there have had a bumpy start. In Goiás, progress by Grupo Serra Verde, an initiative controlled by US private equity, has not lived up to expectations. The company’s problems affect its Chinese buyer, but could further harm its competitors by undermining investor confidence.
Serra Verde has not commented on its operational status.
“Despite Serra Verde’s success in crossing the starting line in first place, it remains a nascent sector that will require continued support to establish itself in a highly competitive market,” said the CEO Thras Moraitis told AQ in an email.
Undaunted, Toronto-based Neo Performance Materials plans to buy 3,000 metric tons per year of rare earth oxide from the Caldeira project of Australian company Meteoric Resources, based in West Perth, Minas Gerais state. The rare earths will supply a magnet plant Neo is developing in Estonia.
In neighboring Bahia state, Lakewood, Colorado-based uranium producer Energy Fuels plans to mine rare earths by 2026. The Brazil mine and projects in Australia and Madagascar will supply the company’s White Mesa mill in Utah, where it can monetize the radioactive materials that accompany the rare earths.
“While uranium is a problem for everyone else, it’s actually a value-add for us,” senior vice president Curtis Moore told AQ. “We can recover it and sell it to the nuclear industry.”Elsewhere in Brazil, Aclara plans to replicate its Chilean project in the state of Goiás. Other contenders include Appia, Viridis and Brazil Rare Earths.
The American side
Magnet manufacturing in the United States has not boomed, largely because China is protecting its technological know-how and raw material prices have plummeted. Since October, prices for Chinese dysprosium oxide have fallen 25 percent to just over $300 a kilogram, according to London-based pricing agency Fastmarkets.
But with an eye on security of supply, Western governments are stepping in. The Biden administration is imposing more tariffs on Chinese high-tech products, including a 25 percent tax on magnets by 2026.
The Pentagon has awarded $430 million to magnet makers such as MP Materials, Lynas and VAC. It is also exploring AI-based commodity pricing as it seeks to establish a domestic mine-to-magnet supply chain to meet all its defense needs by 2027.
The US investment arm abroad, DFC, has opened a shop in São Paulo, defining its mission as “growing its investment portfolio in key mineral resources”, as it has already done with nickel.
For Latin America, rare earths offer an opportunity to diversify and revitalize economies along greener lines. The region could also meet its ambitious industrial aspirations by separating and processing rare earths into metals and alloys. It is now up to Western manufacturers, governments and investors to consider the underlying value proposition behind the strategic resource.
PATRICIA GARIP*
Americas Quarterly
* INDEPENDENT JOURNALIST BASED IN SANTIAGO, CHILE.
SPECIALIZES IN NATURAL RESOURCES, CLIMATE AND GEOPOLITICS IN LATIN AMERICA.
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