US Politics

What Does It Take to Break Chinas Rare Earths Dominance?

Narration: Beijing tried to weaponize its dominance in the rare earth elements production in the US-China trade war.

Simone Gao: So the question is, if China cuts its rare earth elements supply to the US today, what will happen?

David Wilcox: We arent able to actually bring manufacturing back to the US. We dont have the key ingredient or one of the key ingredients to make that product.

Simone Gao: As far as I know, rare earth elements are scattered around the globe, but reports say 70, 80, even 90% of the production is dominated by China. How did that happen?

David Wilcox: One person subsidizes it on the other side, but youre not being subsidized here, all of a sudden you end up with something that no one is funding anymore. That business goes into bankruptcy.

Simone Gao: So what caused your company to go back to the rare earth elements business?

David Wilcox: It was really the Trump administration.

Narration: The trump administration pledged to ensure a reliable supply of critical minerals. Whats the prospect and the challenges in this process? My interview with David Wilcox, who sits on the advisory board of Central America Nickel whose innovative extracting technique might help break Chinas dominance in the rare earth elements production.

Host: Im Simone Gao and you are watching Zooming in.

What Does It Take to Break Chinas Dominance in the Rare Earth Elements Production?

Simone Gao: Thank you, David, very much for being with us today.

David Wilcox: Nice to see you, Simone.

Simone Gao: Okay. So why dont you tell us a little bit about, for the audience members who are not familiar with rare earth elements, what are rare earth elements and (what is) the mining and extracting process of it?

David Wilcox: Yeah. So youd have to get your periodic table back out back to school. But youve got a number of rare earth (elements) so most people sum them up in about 17. But then theres also critical minerals, which the United States has identified. So Ill give you a couple of examples. So erbium, right? Erbium E R B I U M. This is key to the development of fiber optic cables which is key to developing 5G networks. So if we start right there in the beginning, Huawei mightve lost the battle, but Chinas winning the war because China has 100% control around the erbium market. Okay. And so when youre asking what are rare earths, these rare earths are in everything that we use today. So without tantalum, you cant make a cellphone. Okay so start there, Okay? Scandium, it makes aluminum alloys lighter or stronger depending on how you make the blend. These things are so critical to our day to day lives and (are critical to) how we can advance our technologies (and this is not known to) the average person and they just go unnoticed (but the rare earth elements are) what weve been using and how were using those things today.

Simone Gao: As far as I know, rare earth elements are scattered around the globe, but reports say 70, 80, even 90% of the production is dominated by China. How did that happen?

David Wilcox: So Chinas had a very specific strategy over the past few decades. If we look back at our history book the US was the lead supplier, the lead manufacturer, the lead refiner of rare earth minerals for a very long time. And I believe China saw the importance of where these were going and during our times in the United States where we had the California Mountain Pass mine which has a number of rare earths in it, these areas, (the mines) were shunned or it was said, “This is very bad, it uses a lot of acids…” Where China took that production from us. And anytime there is a rare earth production facility around the globe, China seems to have owned the market.

Simone Gao: Why did that happen? When did they take over California?

David Wilcox: Sort of the late nineties, early two thousands, but you know, more recently we see them everywhere. So every time we turn around, from it being, you know, the California Mountain Pass Mine or MoliCorp…(when they) went bankrupt, you know, they lowered the prices of these minerals to the point that you would go to the best, cheapest, most economical possible supply.

Simone Gao: China lowered the prices.

David Wilcox: So all of a sudden, you know, you wake up one day and China has, some estimate, 90% some estimate 95% of the total supply of rare earths. And within the critical mineral lists from the United States strategy that theyve developed, 14 out of 35 of these minerals are a hundred percent controlled or market dominated by China. Its a very scary number.

Simone Gao: If China cuts its rare earth elements supply to the U S today, what will happen?

David Wilcox: Well Id go back to the story around erbium or the story around tantalum. Okay? So if we were cut off from a supply where they control a hundred percent of those two markets, right? Those two minerals, their strategic minerals those rare earths. We arent able to actually bring manufacturing back to the US. We dont have the key ingredient or one of the key ingredients to make that product. So if China does this to us, you can understand in todays world that we live in, you cant operate a business. You cant operate your life without a cell phone. So take a step back and think, China has us by almost a noose…theyve weaponized rare earths. And its a really scary thing to think about.

Simone Gao: In 2010, there was an episode. There was a territory dispute between China and Japan, and China was threatening to cut off rare earths supply to Japan. And I think from that time,starting from that time, there have been talks about alternatives to rare earth elements. And so the world wont solely depend on Chinas supply. Whats your opinion?

David Wilcox: Simone, I think youre completely correct. It had been talked about by professors and industry experts for a very long time before that, but once that dispute was ongoing with Japan, (rare earths were) weaponized and all of a sudden youre sitting back and going, “Oh my God, something that is not worth something much on paper, in terms of its value, because China has driven down the value of…the price point of the asset so low, it doesnt look like an expensive piece to your product, but without it you cant actually have a product”.

Simone Gao: Right.David Wilcox: And thats a very scary thing to think about. China identified

this many, many years ago, decades ago, and they said, we know that we can be a key player in this market and so were going to take market share, subsidize this business, and all of a sudden you see around the world Niobec Inc going out of business, Molicorp going out of business.

David Wilcox: I mean, the list is too long to go on. And this is because anytime someone got close (to competing) they would drop the price of the asset, usually buy the company itself and ship the equipment back to China. And over a period of time, Simone, you lose expertise. And something that we have in Quebec because of some of our mines there, we have a lot of expertise in this mining business. But our business had never really focused on rare earths. And thats because of the value to it, right? You go in mine a bunch of rare earths, you get them ready to sell. So youve refined them and spent all of your CapEx there and then China lowers the price. Well no one buys from you because your products too expensive.

Simone Gao: It sounds like this is not a profitable business.=

David Wilcox: It would depend on how you define profitable, right? So if you subsidize a product and then youre paying someone to actually do something, where do you define profitability? In a competitive landscape and free markets, capital markets, absolutely not (profitable). And that is why, if you drop one thing and you subsidize it… One person subsidizes it on the other side, but youre not being subsidized here, all of a sudden you end up with something that no one is funding anymore. That business goes into bankruptcy. Which leads me into what the White House has done through their executive orders is they said, “Weve got to get a hold of this problem.”

Simone Gao: Right.

David Wilcox: And when the administration, the Trump administration issued their executive order, I believe its 13817 which is a strategy for critical minerals, in December, 2017,

Simone Gao: Federal Strategy to Ensure…

David Wilcox: Reliability and Sustainability of this business…I think your question was, “can the government force change?”

Simone Gao: Before I go there, I was wondering if there is a replacement for rare earth elements. Can we not depend on Chinas supply? Is there an alternative to the rare earth elements?

David Wilcox: Absolutely. So thats what weve been doing at Central American Nickel. We have deposit sites in about seven countries around the globe. Central America Nickel being the name, (we are) mainly in Central America, but weve got them in the Congo, the Dominican Republic, Brazil, Guatemala, lets just talk about Guatemala. Cuba. Guatemala is a very friendly country to the United States. Theyre doing a number of things for us from a refugee status point. Why dont we turn around to their nickel deposits? Buy Nickel or rare earths from them and reward them for helping us out so much as a nation. Why are we buying them from China, even if theres a bit of a subsidy to actually get the cost basis of the business (down to) where someone actually wants to do the business to make sense from a CapEx perspective.

Simone Gao: So what caused your company to go back to the rare earth elements business?

David Wilcox: It was really the Trump administration because they identified, through executive orders, and then the response, which was championed by the Department of Commerce, which is a federal strategy and response, which was by a number of different agencies and government institutions, the Department of Commerce, the Department of Defense, the Department of Interior…and it outlines a strategy. But as we were just mentioning, how can the government implement that strategy and force buyers to not buy from China? So if this is not recognized, at a leadership level and across all the different industries that we have, I believe that the…and you would have to talk to government officials in the United States to get the exact answer, but in a republic, I dont believe that they could force, an Airbus or Boeing or a Tesla, where they can buy their product from.

Simone Gao: So with the current political environment, are you getting a lot of support from the government?

David Wilcox: We have been. I think that Washington DC is a very complicated structure to operate in. Were doing our best to speak to anyone that we can, to be completely frank. But weve gotten some really good feedback…not just feedback, weve gotten more action within the private sector. So the development of these products that maybe the government might be buying. And so Ill go back to the defense sector. Weve gotten some really good response there because as I alluded to and pointed out, if youre doing what the government wants you to do, have the diversified, robust and resilient supply chain and actually have access to things that maybe you didnt have access to before. And I go back to our scandium instance, you know, you can develop a better product and you can be a market leader versus our competitors and our foreign actors in China and Russia, et cetera.

Simone Gao: I think in the 1990s the US was dominating the rare earths elements industry. And since that time, things have changed a lot and now I think a number of U S companies are moving back to that area and numbers are picking up. But to me its not fast enough. I think in the last 10 years, eight or nine years, the number has grown, the percentage has gone up like 10% or something. Maybe Im wrong.

David Wilcox: You dont know how fast China could pull the lever and say were going to cut off the supply of erbium to you. We dont know. The way that the trade war has gone so far, its been very aggressive towards each other. Right? How can we operate with more speed? Well, you cant get around the existing processes that China uses for refining. A lot of this stuff is really nasty. Its acids, it leaks into river beds. Its really bad for the environment. So we have the EPA here in the US for a reason. What weve discovered, and our partners, is that by using a combination of ultrasound and a few different acids, which we have patented, we can extract things in 30 minutes to an hour, which was taking 24 hours to a week to get out.

David Wilcox: So every minute that youre spending in this type of business and refining is CapEx, I go back to that. So its costly. And also if youre taking a huge mass, and youre pouring acid all over, its leaking, we can do that in contained facilities, right? So were not harming the environment, right? Its still never going to be perfect. And we have to learn to continue to make things more and more green and more friendly to the environment but weve got to wake up and say, “Weve gotta have this stuff” I am not going to say that if China, on the other side, which they are, is destroying their end of the planet, which we all know…It doesnt mean that we should do that to ours, but weve got to get a grip on this market.

David Wilcox: And so weve found that our technology is resilient. We found that we can scale it. And now were just looking for demand. Like I said, if tomorrow in the trade war, the administration says, “well, were going to give them three or four pieces of business, which are neodymium magnets, niobium…”, st name a couple off, and they say were getting all that supply there. Okay, well what if we were in that business and we just spent $500 million building out plants to supply that to the United States? And all that supply was now given back to China. Or what if China drops the price? And no one now buys from us? Right? So when you start to think about it in that way, you do have to pay for insurance. You do have to, at some point get a grip on reality (and realize that) everything costs money in life. But where the subsidies are coming from and how theyre working. If we want to fight China in that battle, were going to need help from the government to subsidize it, so we can have a fair market price.

Simone Gao: So government plays a critical role in this battle. Do you think that without the support of the U S government, you wouldnt be able to do it?

David Wilcox: I dont know if it would even be feasible to make the change. Lets just pretend youre two different cell phone companies and youre trying to build two different equivalent Android types of phones and one of your costs is associated as 500% higher, but you have the exact same product. At the end of the day, youre going to buy the least expensive product, the Amazon (for example). And so we have to realize that if we continue to funnel all of our capital, all of our business to China, China will begin to own us. I think that process has already started and this administration has said, weve got to get ahold of this. Weve got to turn it around, weve got to tackle it head on, which is what theyve been doing. So theres assistance, but also a directive from the government.

Simone Gao: Whats your cost compared to the Chinese products?

David Wilcox: Because we have this refining technology thats revolutionary to say the least, if you look at just CapEx expenditure, if were in one hour instead of 24, thats one 24th of the cost. Now, thats not exactly how it works, but,the deposits of these minerals…Its really the refining cost. And then its the refining capability. We believe we can be extremely fair in the current market prices, but if the prices were continued to be dropped because we now enter the market as what happened with Molicorp out in California at the mine, thats reopening again, right? Thats having to ship all of their sludge, all of their rare earths to be refined in China. If they dropped their prices and we spend all of the money, right? Were out of business. Weve repeated the same mistakes that we have repeated in the past.

Simone Gao: Are you saying naturally you would have a competitive advantage over China because you have better technology and that will allow you to lower your price. Unless China does something dramatic like subsidiaries.

David Wilcox: Chinas definitely subsidizing it already because its not an all encompassing, profitable business for them to be in. Its other areas that theyre making profitable or strategic for their government. But will we be at an advantage or a disadvantage? Its such a complex argument when you think about it on the scale of…Were better than them from the existing refining that goes on in the world because by the way, were not harming the planet as much. Okay? It is revolutionary compared to what theyre doing. So would we like them to stRead More – Source

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