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Australian companies to help US reduce reliance on China for rare earth magnets

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By Colin Hay - 
Australian United States reduce reliance China rare earth magnets ASX Locksley Resources American Rare Earths

It has often been said that the name “rare earths” is something of a misnomer. They are not actually all that rare, as it turns out.

What you can create with those rare earth elements (REE) may be the real story – especially in the USA.

Currently there are thousands of mining projects around the world that have rare earths in their assays.

The dramatic difference amongst all those projects, however, is how much rare earths any given one has and – most critically – what REEs it contains.

Rare earth magnets a ‘critical technology’

This is of particular importance when it comes to rare earth magnets, a technology that the US government has identified as critical for the nation’s future from both a domestic use and defence standpoint.

Rare earth magnets are strong permanent magnets made from alloys of rare earth elements. Developed in the 1970s and 1980s, they are the strongest type of permanent magnets made, producing significantly stronger magnetic fields than others such as ferrite or alnico magnets.

The magnet segment is now the largest rare earth market by volume and forecasts expect continued outperformance over other market segments, accounting for 40-50% of the REE market by the end of the decade.

Over the past few years, the US Department of Energy (DOE) has outlined numerous programs and is now investing billions to help the Biden government dramatically improve the USA’s standings as a rare earth magnet producer in a market that is currently dominated by China.

US puts up $145 million in funds

The US Department of Defense (DoD) has also decided it needs to play a role in improving the nation’s access to rare earth magnets.

An office within the DoD recently issued an award to E-VAC Magnetics to establish a domestic rare earth permanent magnet manufacturing capability.

The agreement will provide $145 million to E-VAC to acquire and install manufacturing equipment, operationalise technical infrastructure and engineer production lines with the aim of establishing high volume rare earth permanent magnet production by 2025.

In granting this funding, the US DoD identified rare earth permanent magnets as being essential components in the F-35 single-seat, single-engine, all-weather stealth multirole combat aircraft, as well as unmanned aerial vehicles and numerous other defense systems.

Dr Laura Taylor-Kale, assistant secretary of defense for industrial base policy (IBP), said these national security-related uses represent a small part of the US commercial need for rare earth element magnets.

“We’re building on previous DoD awards that augment or complement other agency investments for rare earth minerals to help establish an integrated, domestic rare earth supply chain from mine to magnet,” Dr Taylor-Kale said.

“IBP is reinforcing the Administration’s goal to build a rare earth industrial base fully capable of meeting our national defense requirements.”

Tax credit system

Earlier this year a bipartisan bill was introduced into US Congress to offer a tax credit for establishing rare earth magnet production in the country.

The bill will create a production tax credit for rare earth magnets that are manufactured in the United States.

In introducing the bill with fellow political representative Guy Reschenthaler, Eric Swalwell said rare earth magnets are challenging to make and are not readily available in large quantities, also noting that there was currently no domestic manufacture.

“Low-cost, high-quality magnets from China have squeezed the profitability of United States producers, and while industry sources estimate the global rare earth magnet market will nearly double by 2027, China could dominate the market because of low production costs,” Mr Stalwell said.

“The timing of this bill is critical,” he added. “Earlier this month, President Biden proposed a rule that would ensure that two-thirds of new passenger cars and a quarter of new heavy trucks sold in the United States are all-electric by 2032, but if America wants to be a global leader in electric vehicles, we can’t let other nations, like China, control production of vital materials and components.”

“By encouraging domestic production of rare earth magnets, we’re shoring up our supply chain, protecting national security, and combating climate change.”

Australian companies playing a role

A number of ASX-listed companies are actively looking to find and develop a domestic source of rare earths to supply the US market.

The aptly-named American Rare Earths (ASX: ARR) is on the fast-track to commercialising its flagship Halleck Creek project in Wyoming and has declared its intentions to target magnet metals.

Halleck Creek has a currently estimated total Joint Ore Reserves Committee (JORC) rare earths resource of 1.43 billion tonnes, including around 4.7 million tonnes of total rare earth oxides (TREO) with an average grade of 3,309 parts per million.

The company believes the project has significant upside with 75% of identified mineralised zones yet to be drilled in a deposit that remains open at depth and width.

A 2023 development drilling program of 2,389 metres recently identified high-grade zones with X-ray fluorescence grades observed at up to 8,875 parts per million.

Notably, all drill holes in the program confirmed enriched rare earth mineralisation.

American Rare Earths has designed a 3-phase Halleck Creek development strategy and is currently finalising a phase 1 scoping study, which is scheduled for release in Q1 2024.

At the same time, it is pursuing test mine authorisation from the State of Wyoming.

The company believes the test mine and piloting strategy will provide a low-cost path to de-risking the project.

Locksley Resources in prime neighbourhood

Elsewhere, junior explorer Locksley Resources (ASX: LKY) is making its presence felt with its flagship Mojave rare earths project, located just 1.4km from the Mountain Pass project.

Mountain Pass is the only mine currently producing rare earths in the USA and is considered as one of the richest deposits of rare earth elements in the world.

Comprising 201 claims, Locksley’s Mojave project is surrounded by and abutted by the Mountain Pass mine claims.

The company has already identified multiple rare earth element targets within its claim areas.

The prime target is the El Campo prospect, which has returned high grade TREO results of 3.74% to 9.49% within a 6-metre-wide mineralised zone.

A recent surface sampling program returned similarly high-grade assays and also identified an 860m long interpreted prospective horizon associated with high-grade outcropping samples between 1.03% and 12.1% TREO.

Applications for drilling have been lodged with the Bureau of Land Management to undertake 5 to 6 diamond holes to follow-up the high-grade TREOs. Drill holes will target the El Campo ‘lode’.