Do they have any other business partnerships, other than the Rare Earth Refinery?
For an issue that was the storyline for the second season of "House of Cards," one of
the most popular shows among Hill staffers.
The refinery can't proceed while we're in a trade war.
We want you to kill it for good, and we want you to kill it today.
You'd think this would be something that we'd be more aware of.
The biggest uses of rare earths are for the electronics and auto industries.
We want our companies building those products right here in America. But to do that, American
manufacturers need to have access to rare earth materials, which China supplies.
In your phone, rare earth elements. Whole world runs on this.
Neodymium and Samarium help the Abrams tank navigate. They make up night-vision goggles
and radar systems. One US government report found element shortages have already delayed
some weapons production.
Really, guys? You're going to build an entire military based on a mineral element that's
wholly controlled by China? I need a drink.
Lost in cable news reports and popular entertainment is the most important fact of the ongoing
rare earth crisis. The United States was once a world leader in harnessing rare earth technologies.
This leadership was not beaten by Chinese rare earth subsidies, nor lax environmental
regulations in China.
How did China come to not just surpass the United States, but to dominate rare earths
so completely? This was a question addressed in a 2014 briefing to congressional staffers.
The full briefing was 80 minutes long. This 20-minute summary contains all the highlights.
If House of Cards moved this fast, it would have wrapped in a single season.
There are no issues here, then.
We're prepared to offer the 40-year lease on the Mei Mei Rare Earth Elements Refinery.
For appearances.
Yes, appearances.
Your iPhone that you have in your pocket right now
has nine different rare earths in it. Toyota Prius, magnets and the batteries and
all the material additives, the lighting, the communication systems, the defense systems
and so forth, all of that uses rare earths.
As you might imagine, the world demand for rare earths is just only growing. Even though
the United States has a considerable supply of rare earths, we are largely dependent on
China for these critical metals. The United States holds about 13 percent of the world's
rare earths reserves.
China, on the other hand, holds about 50 percent of the world's reserves, and China actually
accounts for about 95 percent of all rare earths production. About 91 percent of American
imports actually come from China.
The rest of the rare earths are still coming out of China, but they come to us through
France. They come to us through Japan. In the end, it's all coming out of China.
Now, at NCPA, we agree with free trade among nations, and so we really have no problem
with depending on foreign nations for different goods and services. But in this instance,
there is a problem, because China threatens to use their dominance over rare earths as
a weapon in trade disputes. They've actually demonstrated this in a dispute that they had
several years ago with Japan. Imagine if that were to happen here in the United States.
China very soon will use 100 percent of the rare earths they produce. They will legitimately
be able to say, "We can't afford to export rare earths anymore. We use them all ourselves."
They'd be absolutely right.
China's becoming more and more an internal consumer. If the 130,000 tons that are produced
a year, 100 million of those tons go back into China, they never get into the market.
At some point, China is going to keep all of their rare earths, and it's going to be
acceptable that they're going to do this. They'll be using all of it. When is that?
2018.
2018?
Yeah.
Why is Apple building the phones in China? Because they can procure the rare earths.
China has really, in a very clever way, inherited all the manufacturing.
One thing our congress is really good at is defending IP, right? You guys are proactive
there. You're going to find out that all of those rules and all those laws that we've
created, and all the mechanisms for enforcing it, are only going to play into China's hand.
China's used this monopoly to strip the world of their IP.
They don't design anything in China. They make companies come to China via rare earth
minerals and other industries, then they say, "If you're going to come here and you're going
to be part of our market, you must turn over your IP." When China signs a 10-year deal,
after that 10 years, they boot that company out and it goes to a Chinese company.
The CRS, the GAO and the Pentagon keep putting out reports going, "Oh, we're doing great.
We're making progress." They reference two mining companies that are mining rare earths.
They're taking the really good stuff that matters and they're shipping all that powder
to China, and China turns it into the magic. Now, do they own the company in China that
does that? Yes, so they tell everybody, "Hey, we're doing everything." But that's not really
going to work on that F-35.
We've had to get exemptions, a number of exemptions, so that we can import the rare earth materials
to configure this airplane. That's very unusual to get these exemptions, and we've got a lot
of them.
Our defense industry is 100 percent reliant on China. If they control the metal, the alloys,
the magnets and the [inaudible 05:15] garnets and components that go onto our military systems,
they in fact control procurement.
Today, we are announcing an indictment against five officers of the Chinese People's Liberation
Army for serious cyber-security breaches against six American victim companies.
When pieces of our equipment are manufactured in China, they have access to those specs.
If we spend a trillion dollars on the F-35, China spends a million dollars in China to
look at the blueprints. They caught up to us really quick.
The state-of-the-art defense technology is dependent upon someone we're competing with.
We can live without the cell phones, as inconvenient as that would be, but you can't live without
that. How did we get here?
The US used to lead the world. We owned all the IP, all the technologies, extraction processes,
all the metallurgy. The Chinese government was coveting this company called Magnequench,
what had the best IP portfolio for rare earths in the world. Deng Xiaoping's direct family
members on the down-low said to GM, "You want to build an auto manufacturing facility in
China? Give us Magnequench."
A government-sponsored process to capture all of the technology. If we aren't willing
to fight to get it back, we're left as an extractive economy with basically commodity
sales, which, I'll tell you, is a pretty skinny business.
You take your ore and you crush that and you dissolve it, and then you use a very, very
complicated process. It's probably even more complicated than enriching uranium. That's
how hard this is. That's how you get those little powders. But those little powders are
pretty useless.
You give that powder to Martin Marietta or to Boeing, it's not like they can throw it
on an airplane. They can't do anything with it. They take $4 billion in pixie dust, and
they turn it into $7 trillion in high-value, high-growth, high-margin value-added goods.
That's 10 percent of the economy.
Even if US Rare Earths jumps into business tomorrow and starts producing rare earths,
all they're going to end up with is those powders. What are they going to do with them?
Their only customer is China.
GAO did a report a little while ago that says rebuilding a domestic rare earths supply chain
would take up to 15 years if we really wanted to ramp up.
A company comes along and tells you, "We're going to be a rare earth mine and we're going
to build our own value chain." It can't be done by an individual company. There's no
way you can take on a country who has got more human beings dedicated to the production
and value-adding of rare earths than we had in the Manhattan Project during World War
II. They literally have two cities that they call "Rare Earths Cities."
People involved in this, we love the free market. We think that is the best way to go.
But the first thing you have to recognize is that you are not dealing in a free market
when you're dealing with China. Realize that the companies that do do rare earths can take
losses all day long, as long as they're supporting a $7 trillion manufacturing base to the government.
The United States needs to respond. We need to respond to some things. We can't just be
totally passive and say, "Free markets will fix this one." The free markets aren't in
the room.
You need multiple players to have a free market and we must, in the Western world, step up
and participate in this.
You're pulling out rare earths and your deposit has, let's say, 8 percent rare earths. It
may have 14 percent thorium. Thorium was classified as a nuclear fuel in the early part of the
atomic age, as if it would be uranium, plutonium.
The liabilities associated with being the proud owner of source material, it is so horrific
that no public company I'm aware of will ever take on that risk.
In the '80s, the IAEA lowered the threshold for the definition of source material. All
of these domestic producers of rare earths who are producing these wonderful rare earths
that we had the full spectrum, all the heavy stuff, their customers no longer wanted to
accept the material.
Because when the customer would take the material and extract out the rare earths they wanted,
they had a little pile of thorium, and they didn't want to own that little pile of thorium
because nobody knew what to do with it. It's not the kind of stuff you throw out the back
door, because people that did that back in the '20s [laughs] are still paying for it.
Thorium is a very mild alpha emitter, very easily handled, not dangerous whatsoever and
not water soluble, can't get into the ground water.
This source material rule crushed the domestic supply of rare earths.
Thorium is just always with that material.
The value chain guys that used to take the powders and make the metals and the alloys
and the magnets, they slowly faded away, went bankrupt or relocated to China.
Mining companies today literally try to find deposits that don't have thorium. The problem
is, when you don't have thorium, you don't have those heavies. The result of that is
they end up with an abundance of material that typically sells at or below cost, causing
losses.
They have a tendency of putting more lipstick on a pig. We need to thoroughly understand
the consumer side -- grades, percentages of concentrations.
This is the only US mining company mining rare earths today, and anybody else going
into the business trying to avoid the thorium liability is going to end up with the same
general deposit. What's the problem with this picture? 83 percent of your product you're
selling at a loss.
Here's the stuff that matters for the United States. The problem is, they ship all of that
stuff to China to be processed into metals, magnets and alloys. What happens to all that
material that used to go into the value chain? Today, it's thrown away. They bury it. Companies
will really bury it to avoid the liability. How much? Plenty. We've got to deal with the
thorium problem.
But what if, instead of treating thorium as a waste, what if we treated it as a potential
energy resource?
There's no such thing as highly-enriched thorium. When you get thorium out of the mining and
refining process, it's ready to use as is.
How do you not take a perfectly good fuel source and put it back into the ground? If
we've gotten the thorium out of the ground and it's in a good form for a fuel source,
why not make it a material that we can use?
In fact, there's some exciting research underway to develop electricity reactors using thorium
instead of uranium.
This is not going to be a waste byproduct anymore. This is not going to be a burden.
Now, we will take something that has kept us for 30 years from participating in the
rare earth industry and turn that into energy.
Basically, in the '50s, the light water reactor became the reactor of choice for the Navy.
The suppliers of that -- General Electric, Westinghouse -- said, "Hey, we've built up
this whole supply chain and expertise. Let's make a civilian reactor out of this military
reactor."
Thorium can be used in solid fuel reactors, the CANDU reactor. But, by far, the best possible
use for it would be in a molten salt reactor. The thorium fuel is dissolved in a salt that
doesn't become liquid until about four or five hundred degrees.
The standard operating temperature for one of these reactors is 600 degrees Celsius,
three times that of a light water reactor. Light water reactors really don't make very
good heat. 330 degrees isn't very hot at all. They use water as a coolant. They're under
tremendous pressure -- 3,000 PSI.
Molten salt reactors can't blow up. They aren't under any pressure. You could actually look
into it. It'd be water-clear. You'd see it swirling around like a hot tub. They can't
melt down, because they are melted down. The whole point of it is, any time you stop working
with a molten salt reactor, it solidifies.
We've been well-served by pressurized water reactors, but we could do even better. The
cost is one-fifth. You don't have these huge containment vessels, these huge seven- and
eight-stage turbines to make your electricity. Everything is more compact, everything is
safer.
When you burn thorium in a molten salt reactor, you get 99.999 percent burn-up. When you burn
uranium in a light water reactor, you get one or maybe three, or if you're the French,
you get about five percent burn-up.
When you use fuel in a light water reactor, you're leaving 95 percent of that energy sitting
in a parking lot in dry cask storage. Molten salt reactor will use 99.99 percent of the
available energy.
Very simple pieces of legislation, you can read them in just a few minutes, really, create
the National Rare Earth Cooperative Refinery. Also, an actual physical storage facility,
the literal thorium bank, way beyond belts and suspenders needed to actually store the
thorium safely.
Multiple mining companies -- providers of apatite, monazite, bastnasite, xenotime -- would
now have a facility to process the full spectrum, especially the heavies, which are what we
need most of all, because the first thing that comes out of the process is thorium.
When you separate rare earths, the heaviest of them all is thorium. The thorium bank would
accept that, right at the beginning of the process. We would encapsulate it and pelletize
it, put it into stainless steel tanks inside a double-lined concrete building, seismically
isolated, that's chilled to minus 40 degrees, so absolutely no off-gassing or anything can
come from it.
It's very impressive and probably about 100 times more than is really needed. But, because
it's radioactive and we understand the sensitivities of the public, we want to make sure that nobody
can ever say that we didn't go far, far beyond the call of duty to safely store this material.
There's a lot of industrial uses. You can see down there that thorium alloys. The tip
of every trident missile is made out of Thor-Mag. All our jet fighters have thorium magnesium
gussets in them. Thorium sits right below cerium. You know that elements have similar
properties in columns?
Thorium might be four times more efficient than cerium at cracking petroleum, so now
thorium could help the petroleum industry. Medical isotopes, the DOE and the NIH together
put out a plea to start producing these isotopes.
Altogether, you'd lower greenhouse emissions by 65 percent. That should excite anyone,
from an industrialist to an environmentalist. The good news is, the DOE is working to develop
these molten salt reactors. The trouble is, they're doing it in China.
Our DOE scientists are in China working with the Chinese Academy of Sciences and China,
to their great credit, is spending billions of dollars and employing thousands of people.
They have just upped the entry date for the first commercial molten salt reactor to 2024.
It had been 2034.
That's what great confidence China has in developing the molten salt technology, and
yet we have this idea, probably a touch misguided, that China will share this with us. I'm thinking
they'll share it with us by selling it to us or renting it to us. One more huge opportunity
lost for us. We will become purchasers and renters, and not makers and doers.
Our bill helps get us where we need to be so we can be competitive in the world again.
How much does that bill cost?
The bill doesn't cost anything. The co-op pays for all the admin work. It's one of the
few bills in Congress that doesn't cost any money. Actually, the manufacturing jobs it
creates -- between bringing Apple back to America, between bringing LG back to America
-- it's going to create manufacturing jobs and it's going to expand the tax base and
create more tax dollars.
These manufacturers are working with the rare earth companies on off-take agreements, so
it's happening.
Japan just spent $27 million just securing a claim in Canada.
They're like, "Oh, it's the resource, it's the resource." We've got the resources. The
resources are there. Companies like US Rare Earths, what can they do? First, they have
this thorium problem. They've got a liability that's endless.
Even if we get them around that problem, their next problem is now they create this awesome
concentrate. Are they going to risk a billion dollars to build the factory to make powders?
No. The powders end up going to China. We have to replicate the metallurgical value
chain on US soil. We have to.
What do you think the carrot, the sugar stick would be for us? Jobs, the urgency of a national
security matter or energy?
The very real and very serious national security issue.
That's where we get traction.
That seems to be the one place where we can still get traction.
If we were to put this into action, how soon could we expect to satisfy our own demand?
GAO reported that, organic growth, building a value chain would take about 15 years. I
think that's wildly optimistic. But I think, if you could jump-start it by saying to Toshiba,
Hitachi, GE, "We can all throw in together and, inside that co-op, we're going to take
the raw materials to those magic powders to the metals to the alloys."
You can do the oxides very quickly. There's not much to that. Maybe five years is doable.
John and I had some very, very high level people from the Japanese government come visit
us, about the equivalent of the head of the Department of Energy.
We showed him the legislation and he said, with a senator senior staffer in the room,
he said, "If you do that, Japanese government will invest in both." We know they will. We
know that the Korean government will. We know that the EU government will. Because they're
all looking at this as survival, and they have to take action.
He said, "We're a free country. We can't keep Fujitsu from moving and leaving the country,
but we have to." With Japan, they don't have oil to extract. They don't have rare earths
to extract. They have nothing but intelligence and manufacturing and IP. They are particularly
desperate.
When you think about how many people are entering the middle class world-wide, probably, a round-out
total, over a billion people are going into the middle class. Those are cell phones, TVs,
cameras, and we're going to be left out of it. That's no US manufacturing. Let's try
and get in there, expand our own tax base here in the United States.
Telling Hitachi they can safely build magnets in the United States on a campus that guarantees
them supply, that's safe, and they can control the distribution and licensing of it? They'll
come here. That's true for anybody else who's got IP that wants to protect it.