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Reuters Econ World: Is the inflation battle really over? Join Carmel Crimmins
for a discussion about possible interest rate cutsClose
 * Commodities


BRAZIL JOINS RACE TO LOOSEN CHINA'S GRIP ON RARE EARTHS INDUSTRY

By Melanie Burton and Fabio Teixeira
June 18, 20243:34 AM GMT+2Updated 23 days ago
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Item 1 of 2 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
[1/2]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 Purchase
Licensing RightsNew Tab, opens new tab
ChevronChevron
 * Summary
 * Companies

 * Brazil attractive for its cheap labour, clean energy
 * Western governments offer incentives
 * Price slump, technical challenges hinder growth

MELBOURNE/RIO DE JANEIRO, June 17 (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.
Advertisement · Scroll to continue

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, Serra Verde, started commercial production this year.
Advertisement · Scroll to continue


Reuters Graphics Reuters Graphics
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.

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 once ramped up 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 (MEI.AX)New Tab, opens new tab,
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 (NEO.TO)New Tab, opens new tab.
Brazilian Rare Earths (BRE.AX)New Tab, opens new tab, 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 (IXR.AX)New Tab, opens new tab, which has a pilot
recycling plant in Belfast and a tie up with Brazilian developer Viridis Mining
and Minerals (VMM.AX)New Tab, opens new tab, 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)
(This story has been corrected to clarify that Serra Verde will produce 5,000
tons of rare earth oxides once ramped up, not this year, in paragraph 11)

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newsletter. Sign up here.

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

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