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Wyoming may hold the key to the rare earth minerals trade war with China

Key Points
  • In May, China threatened to cut off supply to the U.S. as part of the U.S.–China trade war.
  • America depends on China for 80% of its rare earth imports.
  • The global rare earth market will grow in value from $8.1 billion in 2018 to more than $14.4 billion by 2025 as demand for electric vehicles, cellphones and other products rise.
  • Wyoming could play a key role in making the U.S. more rare-earth independent.
Rare earth metals are used in cellphones, electric-vehicle batteries, fluorescent lights, defense, clean energy and much more. The global rare earth market is expected to grow in value from $8.1 billion in 2018 to more than $14.4 billion by 2025.
Photo: Heinrich Pniok

Wyoming is best known for its picturesque views and towering mountain ranges, but if Randy Scott has his way, it'll become famous for something else: rare earth minerals. These resources have been in the spotlight since China, the country that dominates global supply, threatened in May to cut off supply to the U.S. as part of the U.S.–China trade war.

Since 2011, when Scott became the president and CEO of Littleton, Colorado-based Rare Earth Resources, the veteran mining executive and metallurgical engineer has been trying to get a massive stash of rare earth — a metallic element that's used in cellphones, electric vehicle batteries, fluorescent lights, defense, clean energy and much more — out of Bear Lodge, a small mountain range tucked away in the northeast corner of the state, about 40 miles from South Dakota's border.

According to mining experts, Bear Lodge is home to one of the richest and highest-grade rare earth deposits in the U.S., with an estimated 18 million tons of rare earth inside. Scott thinks there could be more than that. "It's an enormous, and enormously important, deposit," he says.

But despite efforts to get the metal out of the ground — Rare Earth Resources has been exploring the area since 2004, while others have tried here and there to mine it since the metal was first discovered in the area in 1949 — it remains stuck in the mountain. "It's a great resource," says Scott. "But we keep hitting a brick wall."

The quest for rare-earth independence

Many people, especially in the mining community, are excited about Bear Lodge because, other than at the massive, high-grade deposit in Mountain Pass, California, no one's mining rare earth in America. According to the U.S. Geological Survey, China produces about 70% of rare earth in the world, while 80% of America's rare earth imports come from the Red Giant. In 2018 China produced 120,000 metric tons of rare earth, while the U.S. produced just 15,000 metric tons, up from zero in 2017, according to Investingnews.com.

The open pit mine at Molycorp's rare earths mining and processing facility in Mountain Pass, California
Jacob Kepler | Bloomberg | Getty Images

Rare earth isn't actually rare — there's an estimated 99 million tons of it in the Earth's crust — though it is hard to find large quantities of the metal in one spot. Before about 1995, barely anyone paid attention to the mineral, but demand has skyrocketed since. Why? Because each mineral contains one or more rare earth elements, many of which are now used in everyday products. For instance, neodymium, when combined with iron and boron, makes a powerful magnet that's used in cellphones, headphones, electric-vehicle motors and more. Lanthanum is used in lighting and camera lenses; cerium is used in self-cleaning ovens.

As more cellphones get made and as more electric vehicles hit the roads, demand for rare earth will only rise. According to Zion Market Research, the global rare earth market will grow in value from $8.1 billion in 2018 to more than $14.4 billion by 2025. "They're literally the building blocks of all modern technologies and electronics." says Ann Bridges, the Silicon Valley-based co-author of "Groundbreaking!: America's New Quest for Mineral Independence."

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Naturally, many Americans are worried about the outsized impact China has on this market. In 2010, China temporarily banned rare earth exports to Japan during a diplomatic dispute, and some think they could do the same here if the U.S.–China trade war escalates. "Laser-guided missiles, sophisticated weaponry, car batteries — all these components come from China," says Bridges.

Wyoming, ranked No. 26 on CNBC's 2019 America's Top States for Business list, has a key role in making the U.S. more rare-earth independent, she says. "We won't have all the minerals we'll need, but the issue now is that we're depending on China for our military and 21st-century lifestyle," she says. "We need to get America mineral-independent."

Regulatory delays

With a rare earth deposit that's ready to be mined and a growing demand for these elements, you'd think that everyone would be itching to pull these metals out of the ground. Yet Rare Earth Resources hasn't been able to move forward despite locating deposits in Bear Lodge and providing environmental assessments.

One issue is regulation — it takes a while to get the proper permits, says Scott. From 2010 to 2014, the company collected all sorts of environmental data, which it then showed to the U.S. Forest Service. In January 2016 it received a draft environmental impact statement from the government agency, which recommended that the project go ahead. Before it could receive the final impact statement, though, rare earth prices cratered — neodymium fell from about $85/kg to about $46 in 2016 (it's now at $75/kg) — and the project had to be put on hold.

The Bear Lodge property is situated east of the crest of the Bear Lodge Mountains, a relatively small northwesterly trending range. The project area is flanked to the west by the Powder River Basin, famous for its extensive coal mines, and is surrounded by the Great Plains.
Source: Rare Element Resources

In addition to regulation, Bridges blames environmental litigation as reasons for more delays. While Bear Lodge hasn't seen any lawsuits, other mines have. "We have a real problem in this country where even though there's a defined process under environmental protection acts that have been passed, lawsuits can halt a project in its tracks," she says.

More mining ahead?

Over the last couple of years, the prospects for rare earth mining in Wyoming has started to improve. In December 2017, President Donald Trump signed an executive order to create a federal critical minerals strategy, which would cut red tape and boost resources for exploration. In June the government released its Federal Strategy to Ensure a Reliable Supply of Critical Minerals document, which, according to a press release, "directs the U.S. Department of the Interior to locate domestic supplies of those minerals, ensure access to information necessary for the study and production of minerals, and expedite permitting for minerals projects."

In April, U.S. Senators Joe Manchin, Shelley Moore Capito and Lisa Murkowski introduced the Rare Earth Element Advanced Coal Technologies Act, which would allocate $23 million a year to the Department of Energy and its National Energy Technology Laboratory (NETL) through 2027 to help develop technologies that could extract rare earth elements from coal and coal by-products in U.S. mines.

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That could help Scott Quillinan, director of research at the University of Wyoming's School of Energy resources. He's found high rare earth element content in coal seams — coal deposits that can be seen inside of rocks — and coal ash. This is important because Wyoming is the largest producer of coal in the U.S. It produces two-fifths of all coal mined annually.

If Quillinan can figure out a way to extract rare earth from coal — that's the next step in his research — then Wyoming could produce a lot more rare earth than originally thought. "This is significant," he says. "Coal seams here are much thicker than they are in the East, and if you start to develop this unconventional source of rare earth, then there's a lot of potential here."

While the bill has yet to be passed, and it's still unclear as to whether you can mine rare earth from coal in a clean way, Quillinan is hopeful that additional funding will push this part of the industry forward. "Thanks to the financial support made available through NETL, creating new industries and markets for coal looks quite promising," he says.

Despite Trump's executive order and an increase in attention on the importance of rare earth independence, Bear Lodge remains idle. However, Rare Earth Elements secured a new investor in 2017, which allowed it to kickstart the project again. It's updated its environmental assessment and has the permits it needs to move forward. Now it needs approval, which it's still waiting on. It's also developing a technology that will allow it to process rare earth at the mine site, a key component for getting the metal out of the ground and into products.

Naturally, Scott is anxious to get started, and he thinks the state of Wyoming is, too. "I know the people of Wyoming are looking to diversify its economic base and move away from carbon-based products," he says. "This will happen at some point, because if the U.S. doesn't do something, then we are going to find ourselves in big trouble."

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Key Points
  • The impact of the U.S.–China trade war is greatest in states that export agricultural products, electronics and chemicals directly to China.
  • California has taken the biggest hit, followed by Texas, Illinois and Louisiana.
  • Export volume for the first four months of 2019 from California is down roughly 13%, according to the U.S. Census Bureau.