For the first time since World War II's Manhattan Project, the U.S. military is investing directly into commercial-scale rare earths production.
I've written for years about the U.S. dependence on China - who refines most of the world's rare earths - and the vulnerable position the U.S. is in as a result.
Back in October, I told you that the Department of the Interior announced it would look for new suppliers for both rare earths and the other 34 minerals identified as "critical."
I explained that there is a global scramble to identify, fund, and develop rare earth assets that can help break the Chinese chokehold on rare earths.
Now it finally looks like the U.S. is willing to take a step in the right direction and it's no coincidence that the Army has asked miners for proposals on the cost of a pilot plant to produce the heavy rare earths.
The ones that go into defense and missile systems.
The Army said it will fund up to two-thirds of a refiner's cost and that it would fund at least one project and potentially more. Applicants must provide a detailed business plan and specify where they will source their ore.
Responses are due today and several companies are among the expected applicants.
The plant would be the first step in establishing a U.S.-based rare earths supply chain.
The Army's letter to potential heavy REE producers marks the second branch of the military to ask the mining sector about establishing a domestic supply of rare earths.
The first memo, sent out by the Air Force in July, asked America's rare earth sector for information on both mines and processing facilities.
Title 3 of the Defense Production Act of 1950 provides a U.S. president the authority to incentivize the domestic industrial base with the goal of expanding the production and supply of materials critical to the country. Authorized incentives include loans, loan guarantees, direct purchases and purchase commitments, and the authority to procure and install equipment in private industrial facilities.
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To make such a determination, the material being incentivized must be essential to national defense; U.S. industry cannot reasonably expect to provide the material in a timely manner without presidential action; and actions under the section must be the most cost effective, expedient, and practical alternative method for meeting the need.
The current situation checks all the boxes.
The president sent requisite determinations to the Pentagon and Senate Committee on Banking, Housing, and Urban Affairs that make the case that each of the five segments of the U.S. rare earth supply chain meets the criteria set out under the Defense Production Act.
"Without presidential action under section 303 of the act, United States industry cannot reasonably be expected to provide the production capability for rare earth metals and alloys adequately and in a timely manner," Trump commented in the memos.
A recent Pentagon report estimates that roughly 920 pounds of rare earths go into each F-35 fighter, 5,200 pounds go into every Arleigh Burke DDG-51 destroyer, and a single SSN-774 Virginia-class submarine requires 9,200 pounds of these strategic metals.
Having to depend on a potential rival - China - for the key ingredients necessary for military hardware is not ideal to say the least.
The next several years will hopefully see a reinvigoration of a critical metals supply chain inside of the U.S.
The same can be said of the uranium industry and the now overdue recommendations from the NFWG which could be announced any day now, setting up what could be a very dynamic 2020 in the critical metals and uranium spaces.
To your wealth,
Gerardo Del RealEditor, Junior Mining Monthly and Junior Mining Trader.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.