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  • Do they have any other business partnerships, other than the Rare Earth Refinery?

  • For an issue that was the storyline for the second season of "House of Cards," one of

  • the most popular shows among Hill staffers.

  • The refinery can't proceed while we're in a trade war.

  • We want you to kill it for good, and we want you to kill it today.

  • You'd think this would be something that we'd be more aware of.

  • The biggest uses of rare earths are for the electronics and auto industries.

  • We want our companies building those products right here in America. But to do that, American

  • manufacturers need to have access to rare earth materials, which China supplies.

  • In your phone, rare earth elements. Whole world runs on this.

  • Neodymium and Samarium help the Abrams tank navigate. They make up night-vision goggles

  • and radar systems. One US government report found element shortages have already delayed

  • some weapons production.

  • Really, guys? You're going to build an entire military based on a mineral element that's

  • wholly controlled by China? I need a drink.

  • Lost in cable news reports and popular entertainment is the most important fact of the ongoing

  • rare earth crisis. The United States was once a world leader in harnessing rare earth technologies.

  • This leadership was not beaten by Chinese rare earth subsidies, nor lax environmental

  • regulations in China.

  • How did China come to not just surpass the United States, but to dominate rare earths

  • so completely? This was a question addressed in a 2014 briefing to congressional staffers.

  • The full briefing was 80 minutes long. This 20-minute summary contains all the highlights.

  • If House of Cards moved this fast, it would have wrapped in a single season.

  • There are no issues here, then.

  • We're prepared to offer the 40-year lease on the Mei Mei Rare Earth Elements Refinery.

  • For appearances.

  • Yes, appearances.

  • Your iPhone that you have in your pocket right now

  • has nine different rare earths in it. Toyota Prius, magnets and the batteries and

  • all the material additives, the lighting, the communication systems, the defense systems

  • and so forth, all of that uses rare earths.

  • As you might imagine, the world demand for rare earths is just only growing. Even though

  • the United States has a considerable supply of rare earths, we are largely dependent on

  • China for these critical metals. The United States holds about 13 percent of the world's

  • rare earths reserves.

  • China, on the other hand, holds about 50 percent of the world's reserves, and China actually

  • accounts for about 95 percent of all rare earths production. About 91 percent of American

  • imports actually come from China.

  • The rest of the rare earths are still coming out of China, but they come to us through

  • France. They come to us through Japan. In the end, it's all coming out of China.

  • Now, at NCPA, we agree with free trade among nations, and so we really have no problem

  • with depending on foreign nations for different goods and services. But in this instance,

  • there is a problem, because China threatens to use their dominance over rare earths as

  • a weapon in trade disputes. They've actually demonstrated this in a dispute that they had

  • several years ago with Japan. Imagine if that were to happen here in the United States.

  • China very soon will use 100 percent of the rare earths they produce. They will legitimately

  • be able to say, "We can't afford to export rare earths anymore. We use them all ourselves."

  • They'd be absolutely right.

  • China's becoming more and more an internal consumer. If the 130,000 tons that are produced

  • a year, 100 million of those tons go back into China, they never get into the market.

  • At some point, China is going to keep all of their rare earths, and it's going to be

  • acceptable that they're going to do this. They'll be using all of it. When is that?

  • 2018.

  • 2018?

  • Yeah.

  • Why is Apple building the phones in China? Because they can procure the rare earths.

  • China has really, in a very clever way, inherited all the manufacturing.

  • One thing our congress is really good at is defending IP, right? You guys are proactive

  • there. You're going to find out that all of those rules and all those laws that we've

  • created, and all the mechanisms for enforcing it, are only going to play into China's hand.

  • China's used this monopoly to strip the world of their IP.

  • They don't design anything in China. They make companies come to China via rare earth

  • minerals and other industries, then they say, "If you're going to come here and you're going

  • to be part of our market, you must turn over your IP." When China signs a 10-year deal,

  • after that 10 years, they boot that company out and it goes to a Chinese company.

  • The CRS, the GAO and the Pentagon keep putting out reports going, "Oh, we're doing great.

  • We're making progress." They reference two mining companies that are mining rare earths.

  • They're taking the really good stuff that matters and they're shipping all that powder

  • to China, and China turns it into the magic. Now, do they own the company in China that

  • does that? Yes, so they tell everybody, "Hey, we're doing everything." But that's not really

  • going to work on that F-35.

  • We've had to get exemptions, a number of exemptions, so that we can import the rare earth materials

  • to configure this airplane. That's very unusual to get these exemptions, and we've got a lot

  • of them.

  • Our defense industry is 100 percent reliant on China. If they control the metal, the alloys,

  • the magnets and the [inaudible 05:15] garnets and components that go onto our military systems,

  • they in fact control procurement.

  • Today, we are announcing an indictment against five officers of the Chinese People's Liberation

  • Army for serious cyber-security breaches against six American victim companies.

  • When pieces of our equipment are manufactured in China, they have access to those specs.

  • If we spend a trillion dollars on the F-35, China spends a million dollars in China to

  • look at the blueprints. They caught up to us really quick.

  • The state-of-the-art defense technology is dependent upon someone we're competing with.

  • We can live without the cell phones, as inconvenient as that would be, but you can't live without

  • that. How did we get here?

  • The US used to lead the world. We owned all the IP, all the technologies, extraction processes,

  • all the metallurgy. The Chinese government was coveting this company called Magnequench,

  • what had the best IP portfolio for rare earths in the world. Deng Xiaoping's direct family

  • members on the down-low said to GM, "You want to build an auto manufacturing facility in

  • China? Give us Magnequench."

  • A government-sponsored process to capture all of the technology. If we aren't willing

  • to fight to get it back, we're left as an extractive economy with basically commodity

  • sales, which, I'll tell you, is a pretty skinny business.

  • You take your ore and you crush that and you dissolve it, and then you use a very, very

  • complicated process. It's probably even more complicated than enriching uranium. That's

  • how hard this is. That's how you get those little powders. But those little powders are

  • pretty useless.

  • You give that powder to Martin Marietta or to Boeing, it's not like they can throw it

  • on an airplane. They can't do anything with it. They take $4 billion in pixie dust, and

  • they turn it into $7 trillion in high-value, high-growth, high-margin value-added goods.

  • That's 10 percent of the economy.

  • Even if US Rare Earths jumps into business tomorrow and starts producing rare earths,

  • all they're going to end up with is those powders. What are they going to do with them?

  • Their only customer is China.

  • GAO did a report a little while ago that says rebuilding a domestic rare earths supply chain

  • would take up to 15 years if we really wanted to ramp up.

  • A company comes along and tells you, "We're going to be a rare earth mine and we're going

  • to build our own value chain." It can't be done by an individual company. There's no

  • way you can take on a country who has got more human beings dedicated to the production

  • and value-adding of rare earths than we had in the Manhattan Project during World War

  • II. They literally have two cities that they call "Rare Earths Cities."

  • People involved in this, we love the free market. We think that is the best way to go.

  • But the first thing you have to recognize is that you are not dealing in a free market

  • when you're dealing with China. Realize that the companies that do do rare earths can take

  • losses all day long, as long as they're supporting a $7 trillion manufacturing base to the government.

  • The United States needs to respond. We need to respond to some things. We can't just be

  • totally passive and say, "Free markets will fix this one." The free markets aren't in

  • the room.

  • You need multiple players to have a free market and we must, in the Western world, step up

  • and participate in this.

  • You're pulling out rare earths and your deposit has, let's say, 8 percent rare earths. It

  • may have 14 percent thorium. Thorium was classified as a nuclear fuel in the early part of the

  • atomic age, as if it would be uranium, plutonium.

  • The liabilities associated with being the proud owner of source material, it is so horrific

  • that no public company I'm aware of will ever take on that risk.

  • In the '80s, the IAEA lowered the threshold for the definition of source material. All

  • of these domestic producers of rare earths who are producing these wonderful rare earths

  • that we had the full spectrum, all the heavy stuff, their customers no longer wanted to

  • accept the material.

  • Because when the customer would take the material and extract out the rare earths they wanted,

  • they had a little pile of thorium, and they didn't want to own that little pile of thorium

  • because nobody knew what to do with it. It's not the kind of stuff you throw out the back

  • door, because people that did that back in the '20s [laughs] are still paying for it.

  • Thorium is a very mild alpha emitter, very easily handled, not dangerous whatsoever and

  • not water soluble, can't get into the ground water.

  • This source material rule crushed the domestic supply of rare earths.

  • Thorium is just always with that material.

  • The value chain guys that used to take the powders and make the metals and the alloys

  • and the magnets, they slowly faded away, went bankrupt or relocated to China.

  • Mining companies today literally try to find deposits that don't have thorium. The problem

  • is, when you don't have thorium, you don't have those heavies. The result of that is

  • they end up with an abundance of material that typically sells at or below cost, causing

  • losses.

  • They have a tendency of putting more lipstick on a pig. We need to thoroughly understand

  • the consumer side -- grades, percentages of concentrations.

  • This is the only US mining company mining rare earths today, and anybody else going

  • into the business trying to avoid the thorium liability is going to end up with the same

  • general deposit. What's the problem with this picture? 83 percent of your product you're

  • selling at a loss.

  • Here's the stuff that matters for the United States. The problem is, they ship all of that

  • stuff to China to be processed into metals, magnets and alloys. What happens to all that

  • material that used to go into the value chain? Today, it's thrown away. They bury it. Companies

  • will really bury it to avoid the liability. How much? Plenty. We've got to deal with the

  • thorium problem.

  • But what if, instead of treating thorium as a waste, what if we treated it as a potential

  • energy resource?

  • There's no such thing as highly-enriched thorium. When you get thorium out of the mining and

  • refining process, it's ready to use as is.

  • How do you not take a perfectly good fuel source and put it back into the ground? If

  • we've gotten the thorium out of the ground and it's in a good form for a fuel source,

  • why not make it a material that we can use?

  • In fact, there's some exciting research underway to develop electricity reactors using thorium

  • instead of uranium.

  • This is not going to be a waste byproduct anymore. This is not going to be a burden.

  • Now, we will take something that has kept us for 30 years from participating in the

  • rare earth industry and turn that into energy.

  • Basically, in the '50s, the light water reactor became the reactor of choice for the Navy.

  • The suppliers of that -- General Electric, Westinghouse -- said, "Hey, we've built up

  • this whole supply chain and expertise. Let's make a civilian reactor out of this military

  • reactor."

  • Thorium can be used in solid fuel reactors, the CANDU reactor. But, by far, the best possible

  • use for it would be in a molten salt reactor. The thorium fuel is dissolved in a salt that

  • doesn't become liquid until about four or five hundred degrees.

  • The standard operating temperature for one of these reactors is 600 degrees Celsius,

  • three times that of a light water reactor. Light water reactors really don't make very

  • good heat. 330 degrees isn't very hot at all. They use water as a coolant. They're under

  • tremendous pressure -- 3,000 PSI.

  • Molten salt reactors can't blow up. They aren't under any pressure. You could actually look

  • into it. It'd be water-clear. You'd see it swirling around like a hot tub. They can't

  • melt down, because they are melted down. The whole point of it is, any time you stop working

  • with a molten salt reactor, it solidifies.

  • We've been well-served by pressurized water reactors, but we could do even better. The

  • cost is one-fifth. You don't have these huge containment vessels, these huge seven- and

  • eight-stage turbines to make your electricity. Everything is more compact, everything is

  • safer.

  • When you burn thorium in a molten salt reactor, you get 99.999 percent burn-up. When you burn

  • uranium in a light water reactor, you get one or maybe three, or if you're the French,

  • you get about five percent burn-up.

  • When you use fuel in a light water reactor, you're leaving 95 percent of that energy sitting

  • in a parking lot in dry cask storage. Molten salt reactor will use 99.99 percent of the

  • available energy.

  • Very simple pieces of legislation, you can read them in just a few minutes, really, create

  • the National Rare Earth Cooperative Refinery. Also, an actual physical storage facility,

  • the literal thorium bank, way beyond belts and suspenders needed to actually store the

  • thorium safely.

  • Multiple mining companies -- providers of apatite, monazite, bastnasite, xenotime -- would

  • now have a facility to process the full spectrum, especially the heavies, which are what we

  • need most of all, because the first thing that comes out of the process is thorium.

  • When you separate rare earths, the heaviest of them all is thorium. The thorium bank would

  • accept that, right at the beginning of the process. We would encapsulate it and pelletize

  • it, put it into stainless steel tanks inside a double-lined concrete building, seismically

  • isolated, that's chilled to minus 40 degrees, so absolutely no off-gassing or anything can

  • come from it.

  • It's very impressive and probably about 100 times more than is really needed. But, because

  • it's radioactive and we understand the sensitivities of the public, we want to make sure that nobody

  • can ever say that we didn't go far, far beyond the call of duty to safely store this material.

  • There's a lot of industrial uses. You can see down there that thorium alloys. The tip

  • of every trident missile is made out of Thor-Mag. All our jet fighters have thorium magnesium

  • gussets in them. Thorium sits right below cerium. You know that elements have similar

  • properties in columns?

  • Thorium might be four times more efficient than cerium at cracking petroleum, so now

  • thorium could help the petroleum industry. Medical isotopes, the DOE and the NIH together

  • put out a plea to start producing these isotopes.

  • Altogether, you'd lower greenhouse emissions by 65 percent. That should excite anyone,

  • from an industrialist to an environmentalist. The good news is, the DOE is working to develop

  • these molten salt reactors. The trouble is, they're doing it in China.

  • Our DOE scientists are in China working with the Chinese Academy of Sciences and China,

  • to their great credit, is spending billions of dollars and employing thousands of people.

  • They have just upped the entry date for the first commercial molten salt reactor to 2024.

  • It had been 2034.

  • That's what great confidence China has in developing the molten salt technology, and

  • yet we have this idea, probably a touch misguided, that China will share this with us. I'm thinking

  • they'll share it with us by selling it to us or renting it to us. One more huge opportunity

  • lost for us. We will become purchasers and renters, and not makers and doers.

  • Our bill helps get us where we need to be so we can be competitive in the world again.

  • How much does that bill cost?

  • The bill doesn't cost anything. The co-op pays for all the admin work. It's one of the

  • few bills in Congress that doesn't cost any money. Actually, the manufacturing jobs it

  • creates -- between bringing Apple back to America, between bringing LG back to America

  • -- it's going to create manufacturing jobs and it's going to expand the tax base and

  • create more tax dollars.

  • These manufacturers are working with the rare earth companies on off-take agreements, so

  • it's happening.

  • Japan just spent $27 million just securing a claim in Canada.

  • They're like, "Oh, it's the resource, it's the resource." We've got the resources. The

  • resources are there. Companies like US Rare Earths, what can they do? First, they have

  • this thorium problem. They've got a liability that's endless.

  • Even if we get them around that problem, their next problem is now they create this awesome

  • concentrate. Are they going to risk a billion dollars to build the factory to make powders?

  • No. The powders end up going to China. We have to replicate the metallurgical value

  • chain on US soil. We have to.

  • What do you think the carrot, the sugar stick would be for us? Jobs, the urgency of a national

  • security matter or energy?

  • The very real and very serious national security issue.

  • That's where we get traction.

  • That seems to be the one place where we can still get traction.

  • If we were to put this into action, how soon could we expect to satisfy our own demand?

  • GAO reported that, organic growth, building a value chain would take about 15 years. I

  • think that's wildly optimistic. But I think, if you could jump-start it by saying to Toshiba,

  • Hitachi, GE, "We can all throw in together and, inside that co-op, we're going to take

  • the raw materials to those magic powders to the metals to the alloys."

  • You can do the oxides very quickly. There's not much to that. Maybe five years is doable.

  • John and I had some very, very high level people from the Japanese government come visit

  • us, about the equivalent of the head of the Department of Energy.

  • We showed him the legislation and he said, with a senator senior staffer in the room,

  • he said, "If you do that, Japanese government will invest in both." We know they will. We

  • know that the Korean government will. We know that the EU government will. Because they're

  • all looking at this as survival, and they have to take action.

  • He said, "We're a free country. We can't keep Fujitsu from moving and leaving the country,

  • but we have to." With Japan, they don't have oil to extract. They don't have rare earths

  • to extract. They have nothing but intelligence and manufacturing and IP. They are particularly

  • desperate.

  • When you think about how many people are entering the middle class world-wide, probably, a round-out

  • total, over a billion people are going into the middle class. Those are cell phones, TVs,

  • cameras, and we're going to be left out of it. That's no US manufacturing. Let's try

  • and get in there, expand our own tax base here in the United States.

  • Telling Hitachi they can safely build magnets in the United States on a campus that guarantees

  • them supply, that's safe, and they can control the distribution and licensing of it? They'll

  • come here. That's true for anybody else who's got IP that wants to protect it.

Do they have any other business partnerships, other than the Rare Earth Refinery?

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