Molycorp Inc. and potential rivals in rare-earth mining are competing for advantage as lawmakers seek to revive U.S. production of the minerals used in products from “smart” bombs to wind turbines and mobile phones.
The company, which is preparing to reopen a shuttered mine in California, wants federal loan guarantees to convert the elements into metals, alloys and magnets, Jim Sims, Molycorp’s vice president for public affairs, said in an interview.
U.S. officials and lawmakers are calling for development of domestic rare-earth supplies after China’s announcement in July that it would cut its export quotas by more than 70 percent. China produced about 97 percent of the world’s supply of rare earths in 2009, according to the U.S. Government Accountability Office. Companies are lobbying Congress for legislation that would favor them, said mine owner James Kennedy.
“It’s a very jealous industry,” said Kennedy, owner of Wings Enterprises Inc. of St. Louis, which is developing a mine in Missouri. “Nobody wants to see anything that would bring more production online” by competitors.
Rare earths, a group of 17 minerals that share similar properties, became a political and legislative issue after China’s move to reduce exports. Supplies are “at risk” of being disrupted, the U.S. Energy Department said in a report last year.
Total demand may expand to 190,100 metric tons in 2014, while supply will be 170,000 tons, Lynas Corp., a Sydney-based developer of rare earths, said in an October presentation. The 2010 supply was about 136,100 tons, according to the company.
China has about 36 percent of global rare-earth reserves and the U.S. has 13 percent, according to the Energy Department.
The Bloomberg Rare Earth Mineral Resources Index of 14 companies that mine rare-earth minerals more than doubled last year, and climbed 0.6 percent in the first nine trading days this year. The index fell 1.2 percent yesterday.
While pushing for loan guarantees, Molycorp says it opposes efforts backed by other companies to shorten environmental reviews that it has already completed.
Greenwood Village, Colorado-based Molycorp hired Jonathan Etherton, a former Senate Armed Services Committee staff aide, in December to assist in its Washington efforts, according to a lobbying registration report filed with the Senate. McBee Strategic Consulting in Washington also is helping Molycorp.
Kennedy’s St. Louis-based company plans in 12 months to start producing rare-earth minerals from holding ponds left by previous mining at the Pea Ridge mine in Washington County, Missouri. Underground mining may extract as much as 5,000 tons of rare earths in three years, Kennedy said. Glencore International AG of Baar, Switzerland, is backing the project, which will also produce iron ore.
Wings Enterprises is lobbying Congress to help create an industry-backed cooperative to act as a repository for thorium, a radioactive element often found with rare earths that raises environmental challenges for producers.
Pea Ridge will produce heavy rare earths that Molycorp’s Mountain Pass mine in California won’t, Kennedy said. Heavy rare earths are used in magnets that can operate in high-heat environments, such as car engines, missiles and wind turbines, according to Jim Hedrick, head of Hedrick Consultants Inc. in Burke, Virginia.
Companies developing rare-earth mining disagree about who should be eligible for federal loan guarantees, a form of aid that gained popularity in Washington as credit markets tightened during the economic downturn.
The House passed a bill last year that may have aided Molycorp’s efforts to secure as much as $280 million in guarantees from the Energy Department. The Senate never took up that measure.
Federal support should be targeted to smaller companies that have greater difficulty securing private financing, said Jeff Green, president of J.A. Green & Company LLC in Washington, who represents miners and users of the elements.
“There is tension in the industry,” Green said in an interview.
Representative Mike Coffman, a Colorado Republican, said he plans to introduce legislation by the end of the month providing loan guarantees only to those companies that can’t secure private backing.
“Without any qualifications, loan guarantees are a non-starter in the House,” Coffman said in an interview Jan. 12.
‘Mine to Magnets’
Molycorp wants to use federal guarantees for its Rare Earth Magnet Manufacturing Project, part of the company’s “mine to magnets” business plan to close gaps in the domestic supply chain, Sims said. Molycorp said in December it planned to form joint ventures with Japan’s Hitachi Metals Ltd. to produce alloys and magnets in the U.S.
“If loan guarantees are limited only to those projects that are unable to attract any private capital, then one has to question the viability of such projects in the first place,” Sims said in an e-mail.
While rare earths are used in clean-energy projects, mining the minerals creates toxic wastewater. Senator Lisa Murkowski, an Alaska Republican, introduced legislation last year that would have directed federal agencies to take “appropriate actions” to expedite permits for rare-earth mines consistent with environmental regulations.
Donald Ranta, chief executive officer of Rare Element Resources Ltd. of Vancouver, said his company may be able to start mining at Bear Lodge, Wyoming, in 2014, a year earlier than now planned, with Washington’s help.
“The way they could help us the most is with a fast-track on permitting,” Ranta says.
Having spent hundreds of millions of dollars to reopen Mountain Pass and comply with environmental standards, Sims said Molycorp opposes short-circuiting reviews for other companies.
Doing so “will almost certainly backfire” by undermining public support for rare-earth mining in the U.S., Sims said in an e-mail.