This Is How The US Can Become a Player in Rare Earth Metals

0:00UKG, their HR, pay, and workforce management tools help business leaders empower their people. Because when work works, everything works. Learn more at ukg.com slash work. Bloomberg Audio Studios. Podcasts. Radio. News.

0:29Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Allaway. Tracy, you know, we do these episodes on various areas of technology in which China is perceived to be ahead of the U.S. They're very interesting and I learn a lot. It's not obvious to me like what lessons there are or anything. Some of these things is like we're really far behind. I don't think we're ever going to catch up. This is very interesting and academic. But what exactly is the point of talking about all this? I don't know if there's anything to do with this information. You know what I thought you were going to say is that we are sometimes accused of identifying strategic choke points or areas of difficulty on the podcast and then coming up with absolutely no solutions for how to fix them.

1:15I will be the first to admit I have no solutions. If someone accuses me of saying you have not offered any solutions, you know what? I just say that's not my job. I'm just a mere podcaster. I'm just asking questions. We enunciate the problem and leave it to others to figure out. We leave the problem to others to figure out. But there are people who are doing more than identifying choke points. There are people who are identifying areas and vulnerabilities, et cetera. Some people actually are thinking about solutions. They're not all pie in the sky. I've seen people on Twitter. It's like, oh, I know how to be more like Chinese.

1:50Why don't we just adopt? How to be more. You've seen people on Twitter talking about how to be more Chinese. Is it Chinese Joe Weisenberg? No, they just say, why doesn't the U.S. just adopt Marxist-Leninism with Chinese characteristics? It's really that simple. And then we can do that. On a serious note, the one you see most often is, well, why doesn't the U.S. just ease up on some of its regulation like China in order to get things done quickly? That's the trope. Spend more money or something like that. Encourage actors to pursue things that aren't necessarily so short term, et cetera. Yes, there are, in theory, solutions.

2:22Anyway, let's have a conversation which we actually talk about ideas that may be somewhere in the realm of feasible. Excellent. I'm ready. And this is also this is on an interesting topic that's come up a number of times on all thoughts at this point. That's right. So we're going to be talking about a very core topic. And of course, this is the U.S. vulnerability to strategic minerals, rare earths, et cetera, which we know that China dominates, which in theory of China were to completely shut off access, you know, military, high tech, et cetera, all kinds of problems. what could actually be done to alleviate this vulnerability.

2:55And China's dominance was also a crucial turning point in the trade negotiations with the U.S. And also, I think you get a sense of, I don't want to say desperation on the U.S. side, but like maybe urgency on the U.S. side just by looking at the headlines that seem to come out on a nearly daily basis about like, oh, we found a huge critical mineral deposit in Utah. So, you know, we're all saved. It's also worth noting before we go further, This is an area in which there's probably a decent amount of overlap from the last administration to this one. We did an episode a little while ago with Peter Harrell, who talked about some of these deals that the administration is making with equity stakes and private companies.

3:35I think Vulcan came up as one of them. And so, yes, we're going to be talking about where further we can go in terms of actually having a healthy, robust domestic environment for our own strategic commodities, et cetera. Anyway, we really do have the perfect guest. We're going to be speaking with Heidi Kribo-Redeker. She's a senior fellow at the Council on Foreign Relations, a former chief economist at the State Department, and she is the co-author of a brand new report for the CFR looking at exactly this question, what can the U.S. do in this realm? So Heidi, thank you so much for coming on the Odd Lots podcast.

4:08Thanks for having me on. Tell us, what's this new report all about? So you're right that everyone's identified the problem and that it's been a long time coming. This is like a slow train coming at us for decades at this point. It's not a surprise that China has dominated this market for a variety of reasons. And it's not a surprise that they've weaponized it. They've done it over the years. We did pay attention, but we forgot about it in many ways. But right now we have an inflection point where we really need to get this sort of Damocles off of the United States. And actually, our challenge is the same challenge that a lot of other advanced economies have right now with this incredible chokehold, not just on critical minerals, but particularly rare earths, particularly heavy rare earths that are the foundation of magnets, which go in everything.

4:58Can I just back up in history for a second, because I think it will help us contextualize where we are right now. But what were the conditions that allowed China to basically gain dominance in this particular area? Did they make a strategic decision at some point saying, We're going to be the world's, not manufacturer of rare minerals and rare earths, but we're going to make this a priority for ourselves. Yes. Made in 2025 was their big strategic plan. They had invested a lot in rare earths, particularly their domestic rare earths, many, many years before that. But they decided they wanted to dominate.

5:35And they really did a very smart job of creating an entire ecosystem. So both domestic China extraction, processing, and then they came up with all of the products that would be the leading demand, which you really need to have for the creation of a market. And the demand, meaning the new energy, wind turbines, particularly their EVs, and also defense. So you have a whole demand pull. And you also have state companies that don't have to be profitable. And that's pretty key if you're competing around the globe to actually mine and process. They also have a lock hold on the technology for processing.

6:18And so in traditional mining, they've made a massive strategic investment. And we, for a variety of reasons, did not. Joe, this reminds me of the episode we did with Dan Wong, where he made sort of similar points about the tech ecosystem that's developed around Shenzhen and how that allows innovation to really thrive. And then also this idea that, well, if you don't necessarily care about returns on capital as much as the U.S., certainly, then you kind of have a leg up when you're developing something like this that might not pay off for a very long time. And this always seems to be an issue when we're talking about matters of national defense, because when it comes to national security, you have this other priority that is not profit related.

7:01Everything that we've done, every episode we've talked about, this comes up, whether we're talking about literally the defense industries and the defense suppliers or other strategic things. Here's this other goal that you have in which you have at least two bottom lines, one's related to security and one's related to profit. And so you have this tension. Tell us, how did you do this report? What was the process by which you researched this? Who did you talk to, et cetera, so that you could publish this? The report itself is on how, while we put all of the emphasis on mining, on the extraction, coming up with the processing and the end products, for example, magnets.

7:40The thing is we can't actually out-mine, out-process and out-spend China, certainly not at scale and not in a cost-effective way. So what is another, we have basically a huge timing mismatch. Will we get there eventually with friends, allies, all of the different countries that are working on the same problem together eventually. But it's going to take a very long time, and we don't really have time. So we looked at how innovation could actually leapfrog the China chokehold on critical minerals, and particularly rare earths. And so that was really the starting point. How do you solve for national and economic security in a way that really plays to U.S.

8:22strength in innovation? And then when we took a look around, we found there were some really exciting companies that had taken research and development from like 15 years ago, and they were ready to scale and starting to scale. And so that was really what the excitement was about. Just real quickly, would you say you took a look around? Like, who did you talk to and how did you identify the people who pointed you to, look, there's a lot of interesting, genuine science and tech that can be scaled up? How did that process work? So I started with the national labs because we don't give enough credit to the fact that a lot of the great innovations that come out and are commercialized that we all know and love actually had their origin in our national lab system.

9:04It's sort of a national jewel. And so Ames National Lab has this critical material innovation hub. And a lot of the companies that are doing the various types of breakthrough technology came out of or are working with Ames National Lab. And so I started like poking around from there and then really word of mouth. As soon as we got the word out that we were working on this, it's a very enthusiastic, mission-driven community that wants to all leapfrog this challenge through innovation. Plus, people like talking about their problems, right? Describe for us the state of the U.S., I guess, rare earths industry at the moment.

9:44And then also what you would describe as the key choke point in this particular strategic choke point. Like, where is the biggest source of trouble or inability to actually do this at scale? So in terms of – there are two different parts. The U.S. used to produce a significant amount of rare earths, primarily light rare earths. MP materials in Mountain Pass mine had a variety of challenges, including not being commercially viable, but that was not the only reason. But we do actually have rare earths in the United States, and we were a mining powerhouse many years ago. I mean, remember like California 49ers and people going out with picks and shovels.

10:25Many, many years ago. Many years ago. So we do have mines and we have resources, but there are always consequences and tradeoffs. To mine is often toxic. You have environmental concerns. You have a lot of waste that through traditional mining gets generated. So we were more than happy for the Chinese to take on those set of problems and then sell them to us at a very low cost. That's how we all became dependent on them. And I think where we are right now, we do have a lot of partnerships that are being formed. And with Saudi, with South Korea, Australia, I mean, we're doing what we can to go the traditional mining route.

11:10But I think the really interesting thing is how we can get there much faster, much cleaner, and with much more cost effectiveness and even competitiveness, cost competitiveness with China through some of these new technologies mining in the US. Let's talk about them. When you talk about the technologies that could actually get us to parity or something like that, are they more on the mining side? Are they more on the refining side or both? Let's talk about these technologies. Okay. So let me give you a couple of examples. So back when China cut off Japan's rare earth access in 2010, the Department of Energy, I mean, people don't know ARPA-E generally, they think of DARPA, but Department of Energy has its own research grant facility and they do big problems and put them out there.

12:00So they did this in 2011. They sprinkled around a lot of grant research funding for materials that you could create a magnet with that did not require rare earths. And lo and behold, a scientist in Minnesota, University of Minnesota, created a rare earth-free magnet. So there's a material design approach to this that either drastically reduces how much rare earths you actually need in magnets, and there's a company called Niron Magnetics that actually is, it's commercialized, it's scaling, it actually is scaling up massively a new facility in Minnesota. So that's sort of the material engineering approach to it.

12:38And then there's this whole other basket of biotech innovations. And if you want me to go into this. Please, please. Yeah. Okay. So there are companies like Alter Research Technology, and they, again, are affiliated with this Ames National Lab. They have programmed proteins. So those proteins are basically like robots that go into waste. And I'll get to the importance of waste in a minute. But they will go into waste or other types of tailings, things that come out of mines. And they will go in and specifically target, the protein will target a specific rare earth and extract it. And so it is clean.

13:24It's fast. It relies on a very large resource that we have. We have a lot of waste. So it's a domestically sourced resource. There are a number of other ways that we are in a very clean, fast, and cost-competitive way using technology to actually mine waste. And that's actually one of our... It's like we shouldn't consider waste at this point to be a liability. It's literally America's next mine. So I have a serious question. But first, no, first, I'm so curious about the little protein robots. What does that process actually look like? So I don't know. I'm not a I'm not a molecular, you know, technologist and molecular technologist listening.

14:09That'll be the follow up episode. But this is something that's been, again, long in the making in terms of the tech that's been developed. And so it's basic, you know, This particular company is commercializing the technology, but it's a protein that is altered so that it can go in and sort of micro-target specific rare earth elements. And that is, I think, it's kind of revolutionary. It's super disruptive. And the same with all of these companies that were part of this study that we did. They are at the cusp of being ready to scale and scale fast. All right. This is my next serious question, which is, you know, all of this sounds great.

14:52Protein robots sounds amazing. Why aren't we doing this already if the technology exists? So we're focused on, and this takes a strategy and a strategy that focuses on the innovation side. We're very focused on the how do we compete head on with traditional mining. And that's good and it's important. This is a huge complement to that. We haven't really done it yet. We've done it piecemeal. So you have a lot of people in this community that are highly focused on the technology, commercializing at early stage, and then figuring out how to go from there. I think we have, again, it's a huge opportunity that's out there.

15:36When I think about where we are, I think about the shale revolution and how we had fracking technology for like decades. And then we reached a point where that technology unlocked an energy revolution in the United States. And it was like an overnight switch flipped, and suddenly we're an energy giant, an energy-producing giant. And so I do feel there's something similar in what we're seeing right now in the technology around critical minerals and rare earths. I think we could really use a big switch flip to suddenly have abundance. Those don't come along very often. People have to appreciate that more.

16:12I'm reading this press release from Berkeley. As reported in Nanoletters, the researcher has genetically engineered a harmless virus to act like a, quote, smart sponge that grabs rare earth metals from water and with a gentle change in temperature and acidity, releases them for collection. Sounds really cool. I'll have to go watch YouTube later. Talk to us about one of the themes that comes up in a lot of these conversations is the importance of offtake agreements. So right now, American companies, they currently do have access to Chinese rare earths. And so it might be very risky for anyone to invest in these technologies, knowing that at least for the beginning years, before the cost curve has come down, the competitors might be cheaper.

16:55The proverbial valley of death. Yeah. How do you solve that problem of guaranteeing that there is demand when these companies release harmless viruses that act like a smart sponge and grab rare earth metals? from water? So first, there has to be, this is not just on government to do. I mean, a lot of people point at the massive, very muscular industrial policy that the Trump administration is using right now. And I think that is a very good thing. But it also takes companies actually coming together more in a consortia type of arrangement to have collective offtake agreements. You have certain companies that have been very forward leaning in their offtake agreements with certain, I mean, Niron is a good case that they have some auto OEMs that have been working with them for years now.

17:44You have, I mean, Vulcan, you brought up earlier, but Vulcan is kind of the poster child for when you get the technology, the industrial policy and the commercial all together working to solve. And they actually are, I think they're the first innovation-targeted industrial policy scale-up, rapid scale-up. Vulcan's only three years old. They closed their Series A in August. I mean, we're talking about$1.4 billion that they got in a consortium together with a company called ReElement that recycles magnets. They take the rare earths and they actually manufacture magnets. That is incredibly interesting.

18:26They're doing it on a super fast scaling time horizon. I think they are aiming for 2027 to start rolling product out and have been going through the validation process with all of their different types of magnets. So they're doing this on an accelerated basis. They got funded by every branch in the military. So they have a built-in supply, a demand from the U.S. military right there. They also have semiconductor and aerospace. They're really looking to target the national security and the top economic security challenges, and they have the partners to do that. So I think that's a good example of how we want to do this moving forward.

19:22UKG. Their HR, pay, and workforce management tools help business leaders empower their people. Because when work works, everything works. Learn more at ukg.com slash work. Adjacent to the offtake issue, who actually owns the wastewater that we could potentially be, you know, extracting valuable things from? So we have lots of different types of waste. So we have industrial waste that comes from mines where you have primary metals that are extracted, but you have the piles of tailings that sit there on the side because they are either, there's no commercial viability to extract them, or they are, you know, they're just considered, they're considered piles of waste, both in operating mines and in mines that have closed down.

20:10You have coal ash that is toxic leftover waste from coal mining. You have e-waste, which is, I think, one of the more promising areas. We actually, if you look at old hard drives and cell phones and batteries and the like, there are tons of rare earths that are in there and actually magnets that are in there from years, you know, when we actually had much greater rare earths, you know, intensity in those magnets before we started to like having to have to scale back. So if you look at the waste ecosystem, we have a lot of domestic opportunity. And that's actually why I think Vulcan is a really good example.

20:54They pull from domestic, recycled e-waste, and then they process and manufacture magnets in a completely domestic cycle. Joe, that's interesting about coal ash. I could have been mining my ashes from burning the coal stove in Connecticut that first year, mining them for rare earths. If only I had known. Yet another missed opportunity to exploit that. To monetize my natural resources. To monetize the natural resources on your land that you had in Connecticut. Let's talk about, okay, so we understand there's various measures and opportunities and resources and technological opportunities and things that work in a lab, things that are already scaling up, et cetera.

21:32Talk to us more like from a policy perspective, what do we need to do to get from what we already have cooking and what's already in the works to where we feel good about where we are? And from this policy, would it need to happen in the form of legislation or does the government, the federal government as currently constituted, have the cash and the policy levers to pull without new laws being passed? So policy plays an enormous role. And the first thing we need to do is actually understand that we can't do a fragmented approach to this because you end up losing innovation that might actually change the chessboard entirely with China.

22:14You also have to deal with waste from a policy basis because we actually don't track waste. It's very hard to find data on how much e-waste the U.S. produces. We ship some of it to Asia. That is very likely fed back into China's massive recycling machine. We shouldn't be exporting, if you consider this as America's next mine, there are ways to address policy that can provide the data, maybe restrict the exports till we know exactly what value is hidden inside all of the stuff that we're exporting. And then come up with a whole strategy that is a critical minerals innovation strategy that sits alongside our other critical minerals strategy and develop that through not only the policy tools around waste, but also financial tools.

23:03Where are the valleys of death? Where do we find them? How can we solve them? How can we use government as a pull to get companies together in consortia to actually have those offtake agreements early on and also work with the material engineers to design what they're going to need earlier on in the process? There are a lot of good ways to do this. One of the big takeaways is that there is a specific equity valley of death that a venture-like entity could help solve this for because you don't have the venture outside of some really big frontier risk takers that will invest in difficult technology.

23:48So I think having some kind of a counter that we have now in the instruments that DOD has, we have a whole range of different agencies that have all loan-based. They're almost all loan-based instruments. And these are tech companies. And they really can't sustain debt. You need to have that VC come in early on and help them through various series of fundraising, partner with others, bring in other private VCs throughout the process. And we do have one of those right now. That is In-Q-Tel. It is not technically – I don't know if you've heard of In-Q-Tel before. Is that the CIA's VC? It is. Okay.

24:34Very good. They are actually – they recognize this gap in the capital structure and the actual ability for these breakthrough technologies to fundraise. And so they actually created a separate fund within In-Q-Tel called their Compass Fund. And they're not just – it's not just the CIA. They're a nonprofit. They work sort of across the intelligence agencies and they've grown over the past 25 years from what they started out, which was really a very – like a boutique VC for specific – solving specific problems for the intelligence world. So they have invested in actually, going back to one of your earlier questions, how did I find these companies?

25:11Well, it ends up that they have invested. They invested in two companies that I had found through Ames National Lab. And so I think they were extremely helpful in thinking through what the gaps actually were. And we really nailed this early stage VC needing to come from government. It's a market failure. until we have solved for that market failure. These will just lie on the shelf. In-Q-Tel has one mission to be the most sophisticated source of strategic technical knowledge and capabilities to the U.S. government and its allies. That's through capital. That's an interesting one. We should do an episode on it.

25:48Yeah, we should, for sure. Okay, so since we're talking about the CIA and you brought up the military earlier, this is going to be a natural segue, I promise. You bring up a historical analogy in your paper, a previous choke point that was militarily very, very significant for the U.S. at a very, very historical time, which we actually managed to solve through industrial policy. How much relevance does that particular analogy have to our current situation? Well, I love this analogy because as we were contemplating entering World War II, the Japanese cut off the supply chain for natural rubber in Southeast Asia.

26:27And we were dependent on this flow for 90 % of our rubber. Right. And we can't grow rubber trees, right? Rubber came from Southeast Asia for a reason. And what we did was we actually, we took technology, synthetic rubber technology, and we scaled it like crazy. So we actually were able to provide for trucks and tanks and everything that rubber goes into that we had never even thought about until it was gone. And we were not able to actually enter World War II without the ability to provide something in replacing that rubber supply. And so we did it both through a rapid warp speed Manhattan project.

27:16I mean, we think of Manhattan project for the atomic bomb, But at the same time, I think there's a good case to be made that without synthetic rubber, we would not have won World War II. The other side of that was that we did a huge, you know, all of the population should chuck in their extra rubber tires and their raincoats and their garden hoses and whatever you could for the war effort so that we could actually use and recycle rubber that we had already here. So it's a two-pronged, I think, analogy that works. There are some great posters from World War II about recycling your tires and things like that.