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Let’s do an experiment. Grab your AirPods, or whatever Bluetooth ear-buds you have. Put them on the counter so they sit flat. Now, move one of the buds closer to the other. The second one moved away right? Magnetism! The magnets inside are made of rare earth minerals and its likely they came from China.
These magnets, known as permanent magnets, are critical for building electric vehicles (EVs), wind turbines, and some defense systems (F-35, Tomahawk Cruise Missiles, and Predator Drones). The Pentagon doesn’t like the idea that China controls 80% of the rare earth mineral market and 90% of permanent magnet production.
GM electric motor which uses permanent magnets. (Credit: GM)
SUPPLY CHAINS
I’ve written about the government’s move to help build out a battery supply chain in the US, as well as moving supply chains from competitors to friends. Now, the Biden Administration is using the Cold War era Defense Production Act (DPA) to spur a domestic rare earth supply chain to cut the amount of minerals imported. The rare earth mineral that is of greatest interest right now is neodymium.
Biden's Director of the National Economic Council Brian Deese recently told the Economic Club of New York that the President took activated the DPA to, “address immediate security risks.” He said the US government investment in an end-to-end supply chain of rare earth metals could create enough magnets for 500,000 EVs.
National Economic Council Director Brian Deese speaking about the Defense Production Act and rare earth minerals in April 2022. (Credit: The Economic Club of New York)
This was very good news for a company based in Las Vegas. MP Materials received $35 million from the Pentagon. The company says that it will “compliment” its effort to mine and refine “heavy rare earth minerals.” During the previous administration the company was awarded nearly $10 million for “light rare earth mineral” extraction. This is a bipartisan effort to create a domestic supply chain of rare earth permanent magnets.
Mountain Pass mine in California. (Credit: MP Materials)
RARE EARTH
The MP in the company’s name stands for Mountain Pass. It’s a California mine in an area first prospected for gold and silver in the mid-1800’s. The real value was discovered after World War II as the US government was looking for uranium. What geologists found instead in 1949 was one of the largest rare earth deposits in the world.
Geologists who discovered the rare earth minerals in 1949 at what became Mountain Pass mine. (Credit: MP Materials)
The 17 rare earth metals are not that rare. But finding large deposits to mine is unusual. So, Mountain Pass was a “gold rush” of sorts for rare earth metal extraction. From the 1960s into the 1990s those metals were mined aggressively at Mountain Pass, which is less than an hour west of Las Vegas.
The 17 rare earth elements. (Credit: DOE)
It is neither easy nor inexpensive, to extract the metal from ore. Enter the Chinese. The company that operated Mountain Pass back then decided to mine the ore and ship the raw material to China for refinement and magnet making because it was cheaper. That effort was profiled by CBS’s 60 Minutes.
That company ran into trouble and filed for bankruptcy. Mining halted in 2015 and Mountain pass was left with a crew of just 8 to maintain the facility.
NEW PLAN FOR MOUNTAIN PASS
In 2017, the new company MP Materials reopened the mine with grander ambitions. It wants to create that end-to-end supply chain.
Part of an MP Materials promotional video. (Credit: MP Materials)
MP Materials will do metal extraction at the mine and it just broke ground on a Fort Worth, Texas plant that will refine and make magnets. The company says the $45 million it has been given from the government is essentially a grant. The company says it is spending $700 million for the Texas plant and improvements at the mine. MP has done a deal with General Motors and plans to start delivering magnets in 2025.
Ground-breaking on MP Materials $700 million rare earth permanent magnet manufacturing facility in Texas. (Credit: Fort Worth Morning News)
For now, the majority of ore from Mountain Pass is still being sent to China. In fact, the Chinese reseller owns 8% of Mountain Pass. The company’s CEO says that deal is just a bridge to his plan for MP Materials.
VERTICAL INTEGRATION
CEO Jim Litinsky is on a mission to fix what he sees as a vulnerability for the US. “A single source, outside of region supply-chain, is a significant security risk, “ he said on MP’s earnings call. He also believes it’s a good business.
“The evolution of the electrification economy offers enormous opportunities,” he said, adding, “we can succeed while also helping bring about more security and sustainability.”