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US Military Funds Rare-Earth Plant for Weapons Development

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WASHINGTON, D.C. – The US Army plans to fund construction of rare-earth processing facilities, part of an urgent push by Washington to secure domestic supply of the minerals used to make military weapons and electronics, according to a government document seen by Reuters.

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The move would mark the first financial investment by the US military into commercial-scale rare-earth production since World War Two’s Manhattan Project built the first atomic bomb. It comes after President Trump earlier this year ordered the military to update its supply chain for the niche materials, warning that reliance on other nations for the strategic minerals could hamper the US arms industry.

China, which refines most of the world’s rare-earth, has threatened to stop exporting the specialized minerals to the United States, using its monopoly as a cudgel in the ongoing trade spat between the world’s two largest economies.

“The US rare-earth industry needs big help to compete against the Chinese,” said Jim McKenzie, chief executive officer of UCore Rare Metals Inc, which is developing a rare-earth project in Alaska, adding, “It’s not just about the money, but also the optics of broad support from Washington.”

The army division overseeing munitions last month asked miners for proposals on the cost of a pilot plant to produce so-called heavy rare-earth, a less-common type of the specialized minerals that are highly sought after for use in weaponry, according to the document.

Responses are due by December 16. UCore, Texas Mineral Resources Corp and a joint venture between Lynas Corp and privately-held Blue Line Corp are among the expected respondents, according to company officials and sources familiar with the matter.

The army announced 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, among other factors.

This latest move by the army, a division of the Pentagon, comes after a military study earlier this year on the state of the US rare-earth supply chain.

The rare-earth tension between the US and China goes back to at least 2010, when China limited exports to Japan after a diplomatic dispute, sending prices for the niche metals spiking and fueling concerns across the US military that China could do the same to the United States.

The US Army Combat Capabilities Development Command Chemical Biological Center and the US Army headquarters did not respond to requests for comment.

The request does not give a specific financial amount the Army could fund, though it is derived in part from the Defense Production Act (DPA), a 1950s-era US law that gives the Pentagon wide financial latitude to procure equipment necessary for the national defense.

A rare-earth processing pilot plant could cost between $5 million and $20 million, depending on location, size and other factors, with a full-scale plant potentially costing more than $100 million to build, industry executives said.

“It’s great to see interest in financially supporting the industry from the Department of Defense,” stated Jon Blumenthal, CEO of Blue Line Corp, which earlier this year signed a memorandum of understanding to build a rare-earth processing facility in Texas with Australia-based Lynas Corp.

Blumenthal declined to comment when asked if Blue Line will respond to the Army’s request. Lynas declined to comment.

It is not clear how the Army will rank the responses given that much of the rare-earth industry expertise is now located in China, though the modern rare-earth industry itself had its genesis in the United States decades ago.

“Instead of providing funds for yet another study, this allocates money toward establishing a US-based rare-earth supply chain,” noted Anthony Marchese, CEO of Texas Mineral Resources, which is developing the Round Top mine in Texas with USA Rare Earth.

After processing, however, rare-earth need to be turned into rare-earth magnets, found in precision-guided missiles, smart bombs and military jets and China controls the rare-earth magnet industry, too. The Pentagon has not yet launched an effort to finance domestic magnet manufacturing.

“Closing the magnet gap would do more to address the nation’s defense needs, and as well the needs of electric vehicle makers and others,” said Ryan Castilloux, managing director with Adamas Intelligence, a research firm that closely tracks the rare-earth industry.

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