Tags: China | rare | earths | myopic

Pentagon Is ‘Myopic’ on Rare Earths, US Lawmaker Coffman Says

Monday, 01 Nov 2010 02:32 PM

The U.S. Defense Department is short- sighted in its assessment that China’s monopoly on rare-earth materials, which are used in military hardware, poses no threat to national security, said U.S. Representative Mike Coffman.

The Pentagon’s report, on which some members of Congress have been briefed prior to its release, notes that rising prices and supply uncertainties are spurring private investment in new mining operations outside of China that will help meet American military needs, a person familiar with the findings said. Military use accounts for less than 5 percent of U.S. rare-earth consumption, according to the report.

“I strongly disagree” with the report’s conclusions, said Coffman, a Colorado Republican who received a briefing today on the Pentagon’s yearlong study. “It’s a very myopic view and it’s certainly not looking at the economic security of the country,” he said in a phone interview. “It’s only looking at the Department of Defense.”

The Pentagon assessment does not take into account the shortages and supply constraints faced by makers of batteries and magnets used in products, such as wind-turbines, as a result of China controlling 97 percent of the world’s rare earths, Coffman said.

Coffman said he plans to sponsor new legislation that he hopes that the House of Representatives will consider when it convenes after the midterm elections Nov. 2. The measure would assist U.S. mining companies such as Molycorp Inc. to “create a competitive supply chain from mining to processing.”

Defense Department Help

Molycorp, based in Greenwood Village, Colorado, Coffman’s home state, and backed by shareholders including Resource Capital Funds, Pegasus Capital Advisors LP and Traxys North America, plans to raise $450 million to $500 million to resume mining by 2012.

The Pentagon study recommends, among other steps, an examination of how the Defense Department could aid companies such as Molycorp, the person familiar with the findings said. The company has applied to the Energy Department for $280 million in U.S. government loan guarantees to help finance restarting its open-pit, rare-earths mine in Mountain Pass, California, in the Mojave Desert.

Rare-earths are a group of 17 metals that includes neodymium, samarium, and dysprosium. While the elements aren’t as rare in nature as the name implies, they are difficult to find in profitable concentrations, expensive for Western producers to extract and often laced with radioactive elements. China has come to dominate the market because it has been able to produce the elements more cheaply and with fewer environmental restrictions than its competitors.

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