Analysis-Brazil joins race to loosen China's grip on rare earths industry

analysis-brazil joins race to loosen china's grip on rare earths industry

FILE PHOTO: Jars containing rare earth minerals produced by Australia's Lynas Corp from its Mount Weld operations are seen near Laverton, northeast of Perth, Australia, August 23, 2019. Picture taken August 23, 2019. REUTERS/Melanie Burton/File Photo

By Melanie Burton and Fabio Teixeira

MELBOURNE/RIO DE JANEIRO (Reuters) - Mining giant Brazil has big ambitions to build a rare earths industry as Western economies push to secure the metals needed for magnets used in green energy and defence and break China's dominance of the supply chain.

Working to its advantage are low labour costs, clean energy, established regulations and proximity to end markets, including Latin America's first magnet plant which would provide a ready buyer for the metals.

But low rare earths prices, technical challenges and nervous lenders pose challenges to the Latin American nation's hopes to propel itself into the world's top five rare earths producers.

The pace at which Brazil's rare earths projects come together will be a test for how successful the West may be at building a new advanced industry almost from scratch to break China's grip.

Brazil holds the world's third-largest rare earth reserves. The country's first rare earths mine, Serre Verde, started commercial production this year.

Output is set to grow, analysts, mining CEOs and investors say, supported by Western government incentives that are also accelerating a global rare earths refining and processing industry.

"Brazil as a source of potential rare earths is a very exciting proposition because there have been some very meaningful discoveries made in the past couple of years," said Daniel Morgan of Barrenjoey investment bank in Sydney.

"I do think outside of China, Brazil’s projects are the most economic greenfield projects available."

The U.S. and its allies, almost entirely dependent on China for rare earths metals and magnets, set out to build a separate supply chain by 2027 after deliveries were disrupted during the COVID-19 pandemic early this decade.

LONG HAUL

China produced 240,000 metric tons of rare earths last year, more than five times the next biggest producer, the United States, according to U.S. Geological Survey data. It processes around 90% of the global supply of rare earths into permanent magnets used in everything from wind turbines to electric vehicles and missiles.

analysis-brazil joins race to loosen china's grip on rare earths industry

FILE PHOTO: A Lynas Corp worker walks past sacks of rare earth concentrate waiting to be shipped to Malaysia, at Mount Weld, northeast of Perth, Australia August 23, 2019. Picture taken August 23. REUTERS/Melanie Burton/File Photo

For countries like Australia, Vietnam and Brazil looking to catch up, progress is slow. Serra Verde has taken 15 years to get into production. It is expected to produce 5,000 tons this year and could double output by 2030, its CEO said.

"Serra Verde and Brazil have significant competitive advantages that could underpin the development of a globally significant rare earths industry over the long term," Serra Verde CEO Thras Moraitis told Reuters.

Those include attractive geology, access to hydropower, established regulations and a skilled workforce, he said.

"It is still a nascent sector which will require continued support to establish itself in a highly competitive market. Key processing technologies are controlled by a small number of players," he said.

Brazil could have two or three more rare earths mines by 2030, potentially exceeding Australia's current annual output, said Reg Spencer, an analyst at broker Canaccord.

BASEMENT PRICES

One major obstacle is a 70% slump in rare earths prices over the past two years that has made it difficult for companies to raise funds for mines and processing.

"Getting money at the moment is tough," Nick Holthouse, chief executive of Australian-listed developer Meteoric Resources, told Reuters.

Meteoric is targeting an investment decision in late 2025 for its Caldeira project in Brazil’s Minas Gerais state which will produce light and heavy rare earths.

In March, the U.S. Export-Import Bank (EXIM) expressed interest in providing Meteoric up to $250 million for the project. The company also has a preliminary deal to supply rare earth oxides to a separation plant in Estonia run by Toronto-listed Neo Performance Materials.

Brazilian Rare Earths, too, is in the early stages of developing a large rare earths deposit in the country's northeast, backed by Australia's richest person, Gina Rinehart.

Its CEO, Bernardo Da Veiga, highlighted Brazil's low operating costs as an advantage over rivals like Australia, where he said a truck driver at an iron ore mine would earn up to A$200,000 ($133,200) a year plus food and accommodation.

"That same truck driver in Brazil, doing the same job, earns like $15,000 a year and he rides his bike to work and brings his lunch. There's just no comparison."

COMPLEXITIES

While labour is cheap, developers face technical hurdles. Unlike in China, many Western companies are still perfecting the complex processes for producing rare earth metals, a costly challenge that has stalled projects for years.

To spur developments, the Brazilian government launched a 1 billion reais ($194.53 million) fund in February to finance strategic minerals projects, including rare earths.

It also wants to build an industry for transforming these minerals into alloys for batteries, wind turbines and electric motors, the Ministry of Mines and Energy said in a statement.

The challenge is to stimulate production and build partnerships to promote element separation technologies and supply chain development, the ministry said. It is also looking into rare earths recycling.

Among companies talking to the government about recycling technology is Australia's Ionic Rare Earths, which has a pilot recycling plant in Belfast and a tie up with Brazilian developer Viridis Mining and Minerals, its CEO Tim Harrison said.

Brazil is also building a magnet factory due to start operating later this year as a proof of concept, Flavio Roscoe, president of Minas Gerais' state Federation of Industries (FIEMG) said.

"Our objective is to be a developer, a multiplyer of this technology," Roscoe said.

"Brazil has the opportunity to be the world's option to China."

($1 = 1.5015 Australian dollars)

(Reporting by Melanie Burton in Melbourne and Fabio Teixeira in Rio de Janeiro; Editing by Sonali Paul)

OTHER NEWS

8 minutes ago

Hawks sign wing Vit Krejci to 4-year deal after showing promise on 2-way contract

8 minutes ago

Josh Brolin Says He's Only Let Two People Read His Upcoming Memoir: 'Raked Me Over the Coals'

8 minutes ago

Clifton Suspension Bridge latest: Police name suspect after remains of two men found in suitcases in Bristol

8 minutes ago

We all bear a duty to be better neighbours, including the Orange Order - The Irish News view

8 minutes ago

Biden Buys Campaign More Time but Pays a Steep Price

8 minutes ago

Tendulkar hails 'inspirational' Anderson after England great's last Test

8 minutes ago

After Record-Setting Year, What is The Ceiling For Miami Receiver Xavier Restrepo?

8 minutes ago

'I'm As Good As Anybody' in NFL! Bengals' Joe Burrow's Boast

8 minutes ago

Gareth Southgate has proved that quiet competence can lift a nation – it’s a lesson that goes far beyond sport

8 minutes ago

There is no fundamental right to change one's sex in birth certificates, federal appeals court rules

8 minutes ago

Ex-NRL WAG and reality TV contestant Arabella Del Busso emerges after jail stint

8 minutes ago

Son of Asia's richest man in year's most lavish wedding

8 minutes ago

Samsung unfazed by Huawei's top spot in foldable phone segment

8 minutes ago

Sol Campbell and David James make England v Spain Euro 2024 final predictions

8 minutes ago

Keir Starmer's family find surprise left behind in Downing Street flat

8 minutes ago

US: Biden says 'I'm running' as his campaign struggles

8 minutes ago

How to Install a Ceiling Fan Mounting Bracket

8 minutes ago

New Orleans Chef Ashley Jonique Is Putting A Tasty Twist On The City’s Classic Dishes

8 minutes ago

Russian-born Australians charged with spying

8 minutes ago

Patrick Murphy: Welcome to New Labour and its New English vocabulary

8 minutes ago

‘Prisoners to serve even less time’ because Sunak rejected early release plan

11 minutes ago

Colds and flu can be kept at bay by nasal spray, new study finds

11 minutes ago

How to watch Wallaroos vs Black Ferns? TV channel and live stream for Australia women's rugby

11 minutes ago

The Pantry Ingredient You Should Start Adding To Your Bird Feeder (& One To Avoid)

11 minutes ago

KKR batting sensation apologises for 'Bumrah bouncer at Saina Nehwal's head' comment

11 minutes ago

Met Office Saturday morning weather forecast 13/07/2024

11 minutes ago

Wigan Warriors suffer key loss for St Helens derby as surprise option named at hooker

11 minutes ago

Philadelphia Eagles History: Randall Cunningham Years

11 minutes ago

Over and out for James Anderson as England thrash West Indies by an innings at Lord’s

11 minutes ago

30 Wayfair Products That'll Have You Spending All Your Time On Your Balcony

11 minutes ago

6 conclusions from Wigan Warriors’ win over St Helens: Trio’s enormous effort, Harry Robertson debut..

30 minutes ago

Video: Alec Baldwin flashes winning smile with brother Billy outside restaurant after judge dismisses charge in Rust shooting

30 minutes ago

Video: Bill Maher predicts the EXACT date Biden will step down for historic reason... before making hilarious comparison

30 minutes ago

The DIY cleaning paste you can make for less than $2 to transform both ovens and grout

30 minutes ago

Complaint against Daily Maverick Steinhoff stories dismissed

30 minutes ago

Elon Musk claims EU offered an 'illegal secret deal' as X charged with DSA breaches

30 minutes ago

Shoprite invites applications for bursaries for 2024/2025 academic year

30 minutes ago

Automation trends to future-proof HR

30 minutes ago

SA beats go global: Spotify's top 25 songs rocking the world in 2024

30 minutes ago

Lower interest rates don’t lure buyers back to housing market