Saskatchewan, a global breadbasket and a world leading producer of potash and uranium, is set to add another dimension to its strategic importance in the great resources competition between the US and China: rare earths processing.
North America’s latest rare earth processing centre opens in the city of Saskatoon this week, part of an effort to counter China’s global dominance in the supply of the critical minerals needed for the green technology, defence and aerospace industries.
The Saskatchewan Research Council (SRC), a 75-year-old government-funded scientific research and development institute, has built the commercial venture that will process rare-earth minerals from Australia, Brazil and Vietnam until large-scale Canadian mines are operating.
The SRC Rare Earth Processing Facility marks a small but important step in western countries’ efforts to undermine China’s dominance in the critical minerals industry.
China controls about 60 per cent of the world’s rare earth mining production, but close to 90 per cent of processing and refining, according to the International Energy Agency. Rare earths are a set of 17 elements commonly found in the earth’s crust but are hard to extract affordably in large quantities.
The Saskatchewan centre’s opening comes as a slump in rare earths prices over the past two years has knocked the business case for projects that can challenge China’s dominance over the minerals essential for electric cars and wind turbines.
Australia’s Lynas Rare Earths and Nevada-based MP Materials are two linchpins of rare earths production outside of China. But the west remains dependent on Asia’s largest economy for processing the elements as demand for rare earths used in magnets are set to increase fivefold by 2040, according to Adamas Intelligence, a consultancy.
The new C$100mn (US$73.8mn) hub will produce enough metal inputs for the production of 500,000 electric vehicles a year, Mike Crabtree, the facility’s chief executive, told the Financial Times. He said the plant can be replicated and licensed across North America.
“What we are proving is that a fully vertically integrated refinery can be competitive with pricing and robust enough to resist market manipulation from China,” he said.
The ability to operate every part of the rare earths supply chain, from mining to processing, alloying and turning them into final products such as permanent magnets, is a strategic challenge for Canada and the US.
Beijing has reinforced its dominance over rare earth supply chains with export bans on technology and minerals such as antimony — moves analysts interpreted as retaliation for the growing trade restrictions and tariffs imposed by western governments on Chinese-made products.
Russia’s war in Ukraine and China’s unofficial embargo of rare earth exports to Japan in 2010 have amplified the concerns.
Over the past four years, the US Pentagon has invested close to US$1bn around the world in rare earth projects through the Defense Production Act — a cold war-era tool used to guarantee the supply of materials and technologies essential to the US’s economy and defence.
It is also investing US$258mn in a similar plant to the SRC facility that is being built in Texas by Australia’s Lynas Rare Earths, and is expected to be operational this year.
Washington has invested tens of millions of dollars in rare earths projects in its northern neighbour as part of these efforts to secure vital minerals.
This year Canadian companies such as Fortune Minerals and Lomiko Metals have benefited from Pentagon support worth US$14.7mn to enhance North American cobalt and graphite supply chains. In August, Ontario-based Electra Battery Materials received US$20mn to build North America’s first midstream cobalt sulphate refinery, needed for batteries.
Robin Goad, chief executive of Fortune Minerals, said despite the positive talk and support, the huge capital investment needed in cobalt mining made its investors wary. “We are in a trade war, like it or not,” he said.
Recently, Australian-owned Vital Metals Canada, touted as Canada’s first rare earth project, went bust and caused an outcry when it tried to sell its mineral stockpile to China.
The Canadian government intervened and bought the stockpile for C$3mn. The minerals will be processed by the new facility in Saskatchewan. Vital Metals, which runs another rare earth project in Canada’s Northwest Territories, did not respond to a request for comment.
Heather Exner-Pirot, special adviser to the Business Council of Canada, said Pentagon support in Canada had been “modest,” compared to what it gives to other countries.
She noted that the Export-Import Bank of the United States provided funding packages in the hundreds of millions to other allies such as Australia to develop similar projects.
“The US Department of Defense and their contractors could play a role in buying products, creating the demand and the purchase agreements that Canadian miners need to attract investors,” she said.
Trent Mell, chief executive of Electra Battery Materials, said Chinese competitors receive significant government subsidies, which cut their capital costs and create an uneven playing field.
“Interim government incentives are crucial for the west,” he said.
Exner-Pirot said North America needs to adopt and adapt the Chinese model. “We can match the Chinese strategically for sure but only if we bother to play the game. Sitting on the sidelines being optimistic isn’t going to cut it any more.”