ASCF Report | 1.1.18
By Alan W. Dowd

Just before the turn of the year, President Donald Trump issued an important, albeit underreported, executive order directing the Department of Defense, Department of the Interior and other relevant agencies to develop a strategy to secure “certain mineral commodities that are vital to the nation’s security and economic prosperity” and to reduce the nation’s “vulnerability to disruptions in the supply of critical minerals.” Presidential interest in addressing this strategic vulnerability is long-overdue.

Many of these “critical minerals” are known as rare-earth elements (REEs). With other-worldly names like neodymium, lanthanum, europium and thulium, REEs are essential to the manufacture of a range of modern technologies, including cell phones, flat-panel televisions, microwave ovens, hybrid engines, computers, light bulbs, lasers, industrial magnets, batteries, x-ray and MRI equipment, fiber-optics and superconductors. More specific to national security, REEs are used in the navigation system of the M1A2 Abrams tank, missile-guidance systems, fighter-jet engines, missile defenses, satellites, night-vision equipment and military-grade communications gear.

The bad news is that China mines and produces 89 percent of the world’s REEs. According to the Department of Energy (DOE), Beijing has restricted foreign investment in REE development, raised export taxes on REEs, reduced export quotas of REEs, started stockpiling REEs and given priority to its own domestic demand. Beijing also has manipulated the global REE market by slowing and in some cases even halting export of these materials. In fact, after a maritime dispute with Japan in 2010, China stopped supplying REEs to Japanese customers and then reduced global exports 72 percent, before cutting export quotas for the first half of 2011 by 35 percent. As a result, prices for some REEs jumped tenfold.

As the president’s executive order observes, “The United States is heavily reliant on imports of certain mineral commodities…This dependency of the United States on foreign sources creates a strategic vulnerability for both its economy and military to adverse foreign government action, natural disaster, and other events that can disrupt supply of these key minerals.”

The good news is that market forces are at work diversifying the supply chains of this strategic resource. China’s actions have prompted REE consumers to explore alternative sources. Hence, China’s share of the REE market has fallen from 97 percent just seven years ago to under 90 percent today, as REE mines in Mongolia, Malaysia, India, Brazil, Canada, Australia and elsewhere come online. Findings released by Congress conclude that “At least 40 percent of the world’s rare earth reserves are located within the United States and its ally nations.”

One of those ally nations is Afghanistan. The U.S. Geological Survey (USGS) and the Pentagon have discovered huge stores of natural-resource wealth in Afghanistan—the first country to be fully mapped using what’s known as “broad-scale hyperspectral data.” This is a highly precise and highly sensitive suite of technologies deployed by aircraft that, in effect, allowed U.S. military and geological experts to peer beneath Afghanistan’s skin and paint a picture of Afghanistan’s vast mineral wealth.

What USGS and DOD found is jaw-dropping: Afghanistan is veined with copper, cobalt, iron, barite, sulfur, talc, chromium, magnesium, mica, lead, silver, zinc, niobium and 1.4 million metric tons of rare-earth elements. A Pentagon memo calls Afghanistan the “Saudi Arabia of lithium,” which is technically not an REE. However, as a key component in batteries used in computers, cell phones and electric cars, it is extremely valuable and serves some of the same purposes as rare earths.

Citing these finds, Gen. David Petraeus has argued that Afghanistan has a “stunning potential” for development, growth and perhaps the most dramatic reversal of fortune in history.  “Afghanistan is blessed with the presence of what are trillions, with an ‘S’ on the end, trillions of dollars’ worth of minerals,” Petraeus observes.

So, despite all the heartache Afghanistan has endured and spawned during nearly four decades of war, there may be a silver lining in this broken, battered land. However, a note of caution is in order. Building a rare-earth mining system from scratch in one of the most broken countries on earth is not going to happen overnight. The conditions are anything but ideal in Afghanistan: Corruption is high; stability exists only in pockets; and the ingredients that encourage foreign investment—the rule of law, human capital, public infrastructure—are in short supply. In short, those rare-earth resources that the world needs to fuel the 21st-century economy, those trillions in untapped wealth that could help turn Afghanistan around, can be accessed, as Petraeus cautions, “if, and only if, you can get the extractive technology, the human capital operated, the lines of communication to enable you to get it out of the country—a very big ‘if.’”

Here at home, with some $6.2 trillion in mineral resources, the United States possesses 15 percent of the world’s rare-earth reserves. Yet a congressional report points out that the U.S. “depends nearly 100 percent upon imports for rare earth elements…because there are virtually no active REE producers in the United States.”

It wasn’t always this way. Not long ago, the U.S. had a major presence in every segment of the REE supply chain. In fact, from 1965-1985, the United States performed all phases of REE processing, according to a GAO studyThe Wall Street Journal adds that a mine in California was one of the world’s largest rare-earth producers, before shutting down in 2002.

America’s rare-earth riches are still there, of course. A 2017 DOE report indicates that coalmines in Illinois, the Northern Appalachian and Central Appalachian basins, Pennsylvania, and the Rocky Mountain basin contain “high rare-earth element concentrations.” New mines are being developed in Alaska. A DOE report points to REE deposits in Idaho, Montana, Florida and California.

One of the main reasons the U.S. and other Western countries stopped producing rare earths was the environmental side-effects of rare-earth mining, which led to a host of regulations that had the effect of discouraging rare-earth production. This helps explain why the president’s executive order—which points out that U.S. miners and producers are “limited by a lack of comprehensive, machine-readable data concerning topographical, geological, and geophysical surveys; permitting delays; and the potential for protracted litigation”—is so important. “Increasing activity at all levels of the supply chain, including exploration, mining, concentration, separation, alloying, recycling and reprocessing critical minerals,” the executive order concludes, is critical for national security and international markets.

The U.S. can be part of the solution to the world’s REE shortage. It is simply a matter of will.