Rare earths are critical to the production of smartphones, computer memory, and rechargeable batteries, making them a core component of the world’s digital infrastructure.

However, China’s dominance of the sector has revealed weaknesses in the supply chain — especially after COVID exposed vulnerabilities around the world for all kinds of industries supply lines.

Now, listed Australian company Vital Metals is looking to mitigate the risks of limited or controlled supply. Its managing director, Geoff Atkins, told Which-50 that Vital Metals’ approach will also drive down costs significantly compared to traditional rare earth project approaches. 

Yesterday, Vital Metals announced that its wholly-owned subsidiary, Cheetah Resources, has signed a binding Term Sheet with the Saskatchewan Research Council (SRC), setting out parameters for the design, procurement, construction, commissioning and operation of a rare earth extraction plant.

When operational, the plant will produce a mixed rare earth carbonate product and will be located adjacent to SRC’s recently announced rare earth processing facility, which will produce separated rare earth oxides. 

According to the Vital Metals web site,  the company is targeting production of rare earth oxide at the Nechalacho site in Canada in 2021, with early production from a North T starter pit. “It has completed detailed engineering for the ore sorting plant and defined capital and operating costs. Vital aims to produce a minimum of 5,000 tonnes of contained REO by 2025 at the project.”

Furthermore, SRC’s separation plant will be a potential customer of Cheetah’s mixed rare earth carbonate product. In a statement announcing the deal, Geoff Atkins said the Term Sheet marked an important milestone for Vital and the development of the Nechalacho Project.

The Definitive Agreement is still being finalised however, Atkins said “Being the only rare earth project in Canada with near-term production capability, co-located with Canada’s only separation facility, provides Vital the opportunity to be a cornerstone of the North America Critical Minerals Strategy.”

Atkins told Which-50, “A couple of weeks ago the SRC announced a funding deal where the Saskatoon government is providing them with $C31 million to build a rare earth separation plant. And that obviously provides a big opportunity for us to feed our product into that plant.

“That’s a big thing from a North American supply perspective. The Canadian government and the US government are working very closely together to develop and implement a Critical Minerals Strategy, which is really geared towards establishing supply chains for these critical elements outside of China.”

The facilities are on track to begin production next year, and will be able to go through to separated rare earth products inside Canada, says Atkins.

“This is the first really big step really in establishing that critical minerals supply chain.”

China currently dominates the world’s rare earth markets, as a result of a deliberate and very long-term strategy that has been in place for years.

“They obviously have a lot of raw materials. but the critical thing is that they’ve built up the downstream processing capability,” said Atkins.

Supply chain

To understand the grip China has at the moment, consider the production of rare earth magnets that are used in electric cars. 

The processing steps include mining, concentration, extraction, separation, and then metal manufacturing. From there it goes to alloying, magnet production, and then ultimately into the motor of the electric vehicle. 

According to Atkins, “China really controls all of those final stages — so between metal production, magnet production, and motor production.” 

The deal is significant for Vital Metals, as it will significantly reduce its costs.

“The key thing here is this provides the next level of certainty around what our production process is, and around capital costs. Our strategy is really around achieving near-term production and being very low cost — both operating costs and capital costs.

Geoff Atkins, managing director, Vital Metals

“Now what this does is it provides that framework from a capital cost perspective. It brings down those direct costs for the beneficiation through an ore sorter, and then the extraction facility to around about $A10 million,” he said.

“And that’s just unheard of from a rare earth project. Most of them go into the hundreds of millions of dollars.”

That dramatic cost reduction is also a function of the approach the company is taking, he said. “One of the key things is that with rare earths, because they are specialty products they are not like other commodities where you just produce as much as you can and then sell it. That just doesn’t work with rare earths.”

Instead, he says, you need to go through an extensive customer acceptance process that can take years, where you slowly feed your product into the customer’s production and gradually ramp up the scale. 

“So there are two ways that you can do it. The traditional way is you build your big plant for the final production volumes which you’re hoping your customers will accept — even if it takes you three or four years to actually ramp up to that. But that means you end up with a very large plant and significant costs.”

The approach Vital Metals is taking is to scale its initial plant to the first year of what the customers will accept, but to design it in such a way that it can be easily expanded year on year.

“So that as the customers accept greater volumes of the product we’re able to gradually ramp up our production as well.”

The approach Viral is taking also has positive benefits for the local community, Atkins said.  “By starting small, we’re going to be able to draw a very high proportion of employees from the local communities. The most exciting thing about that is that as we increase our production and as we get bigger, and we need to increase the number of employees and introduce more supervisors and managers, the logical place we will draw those supervisors from will be from our existing employees from the local communities.”

The plant is expected to be fully operational in late 2022, with construction anticipated to commence in Q4 2021. 

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