US Defense Department seeks to fund mining and processing in UK and Australia

In a bid to reduce its reliance on China for critical metals, the US Department of Defense is seeking Congressional approval to finance mining and processing of strategic metals, particularly, lithium and rare earths, in Australia.

The US department also wants the United Kingdom to be similarly classified, as it now refines the key battery metal nickel along with plans to process lithium and rare earths.

This comes at a time when the Australian Government in Canberra has put money into supporting downstream processing of key minerals rather than having them shipped to China.

Australia already has the only primary rare earths mine outside China’s control, the Mt Weld mine owned by Lynas Rare Earths (ASX: LYC).

In the US, the Mountain Pass mine in California ships all its rare earth concentrate to China for final processing there.

Meantime, in Australia, mineral sands giant Iluka Resources (ASX: ILU) has signed off on building an integrated rare earths processing plant in Western Australia that will not only handle the company’s own product but process third-party rare earths – saving any new players huge capital costs.

Australian election could see change in minerals, China policies

The US Defence Department’s request to alter the Cold War-era Defense Production Act (DPA) came as part of the Pentagon’s recommendations to Congress for how to write the upcoming US military funding bill, known as the National Defense Authorization Act.

However, the announcement from Washington comes as Australia is nearing a federal election, with the country’s Labor now favourites to win.

It is not clear whether a Labor government, supported in the House of Representative by climate change independents and in the Senate by the Greens, will continue to support the critical metals drive and maintain the standoff with Beijing.

Moreover, the Australia-Pentagon cooperation is also not without its hitches.

The Pentagon last year awarded a DPA grant worth US$30.4 million to Lynas to build a processing facility in Texas with privately held Blue Line Corp.

Last month, Lynas chief executive officer Amanda Lacaze complained that those funds have yet to be dispersed, citing ongoing negotiations over protection of her company’s intellectual property.

US moves to reduce dependence on China

Washington is trying harder to reduce America’s dependence on China for lithium, rare earths and other minerals used to make a range of technologies.

Existing law bars DPA funding from being used to dig new mines, but they can be used for processing equipment, feasibility studies and upgrades to existing facilities.

Currently, only facilities in the United States and Canada are eligible for DPA funding.

Ionic clay REE now in play in Australia

Australia’s critical metals production is now on a sharp rise, with a host of lithium, copper, nickel, rare earths, graphite and other projects in various stages of the development pipeline.

This includes rare earths where there has been a key development of late, with several new projects involving ionic clay-hosted rare earths showing promise. These are mainly in South Australia, and are a quite different proposition to extracting the elements from hard rock deposits.

These clay deposits are shallow, require negligible blasting, there is no crushing or milling involved, and no radioactive tailings to deal with.

Moreover, the right clays contain all the four key elements for magnets: neodymium, praseodymium, dysprosium and terbium.