Inside Vietnam’s plans to reduce China’s dominance of rare earths

HANOI, Sept 25 (Reuters) – Vietnam plans to restart its largest rare earth mine next year with a Western-backed project that could rival the world’s largest, according to two companies involved, as part of a broader effort to reduce China’s dominance in the world. A sector that helps operate advanced technologies.

The move would be a step toward the Southeast Asian nation’s goal of building a supply chain for rare earths, including developing its ability to refine ores into metals used in magnets for electric cars, smartphones and wind turbines.

As an initial step, the Vietnamese government intends to launch tenders to build multiple zones at the Dong Bao mine before the end of the year, said Tessa Kutcher, executive director at Blackstone Minerals Australia Ltd (BSX.AX), which plans to bid for at least one concession. . It cited unpublished information from Vietnam’s Ministry of Natural Resources and Environment, which did not respond to requests for comment.

Le Anh Tuan, president of Vietnam Rare Earth JSC (VTRE), the country’s main refiner and Blackstone’s partner in the project, said the timing of the auction could change but the government plans to restart the mine next year.

The proposed restart of Dong Pao – the timeline, scale and degree of foreign financial support have not been previously reported – comes at a time when many countries are concerned about being exposed to supply disruptions due to China’s grip on strategic minerals and its disputes with the United States and its allies. . This year, Beijing imposed restrictions on the export of secondary metals used in semiconductors, which an influential Chinese political advisor warned was “just the beginning.”

Vietnam has the second largest rare earth deposits, according to the US Geological Survey. But it has remained largely untapped, with investment discouraged by the low prices effectively set by China due to its near-monopoly of the global market. During his visit to Hanoi this month to improve bilateral relations, US President Joe Biden signed an agreement to enhance Vietnam’s ability to attract investors for its rare earth reserves.

In interviews with Reuters, 12 industry executives, investors, analysts and foreign officials described plans for Vietnam, including investments that they said showed how talk of de-risking supply chains to reduce dependence on China translates into action. Some acknowledged the difficulties of setting up a rare earth center, but said the maneuver could make Vietnam a viable player while allaying strategic concerns, even if China remains dominant.

Kutcher said Blackstone’s investment in the project would be about $100 million if it wins. She added that the company is in talks with potential customers, including electric car makers VinFast and Rivian (RIVN.O), about potential contracts at fixed prices that would protect suppliers from fluctuations and guarantee buyers a secure supply chain.

Concluding such deals would address the hurdle faced by developers in Vietnam. In recent years, Japanese investors Toyota Tsusho and Sojitz abandoned projects in Dong Bao after China boosted supply, pushing down prices. The Japanese companies did not respond to requests for comment.

However, despite the focus on de-risking, it is unclear whether clients would be willing to pay a premium for Vietnam, said Dylan Kelly, of investment firm Terra Capital, noting that the overall market is murky.

Asked about VinFast’s potential involvement, a spokesman for parent company Vingroup said the group entity responsible for purchasing raw materials, VinES, had no current plans with Blackstone related to rare earths. He did not address subsequent questions about VinFast specifically.

Rivian did not respond to a request for comment.

Competitive mountain pass

Effective exploitation of the Dong Bao mine — which has been idle for at least seven years, according to an official at state-controlled mining company Lafrico, which holds the concession — would push Vietnam into the top tier of rare earth producers.

But refining rare earths is complex, and China controls many processing technologies. Estimated deposits at Dong Bao also need to be re-evaluated using modern methods, according to Blackstone.

However, rare minerals in Dong Bao are relatively easy to access, mostly concentrated in bastnasite ores, according to the Hanoi University of Mining and Geology.

They are usually rich in cerium, used in flat panel displays, and lanthanides, such as praseodymium and neodymium, which are used in making magnets.

VTRE hopes to win a concession that will allow it to extract about 10,000 metric tons of rare earth oxide equivalent (REO) per year, roughly a third of the mine’s expected annual production, Tuan said. He added that production could begin around the end of 2024.

This would put Dong Pao’s production just below that of California’s Mountain Pass, one of the world’s largest mines, which produced 43,000 metric tons of renewable energy equivalent in 2022, according to the US Geological Survey.

Vietnam also plans to develop additional mines. In July, Hanoi set a target to produce up to 60,000 tons of renewable energy equivalent annually by 2030. China set a domestic quota of 210,000 tons last year.

These targets will result in Vietnam producing between 5% and 15% of China’s expected output by the end of the decade, said David Merriman, a research analyst at consultancy Project Blue, who expects China to increase its production during that period.

He added that Vietnam’s goals are “ambitious, although not entirely far-fetched.”

Encourage us

The United States agreed during Biden’s visit to help Vietnam better map its rare earth resources and “attract high-quality investments,” a White House fact sheet said, a move that could encourage American investors to bid for Vietnam’s new concessions.

Reuters was unable to determine whether there are concrete plans involving American investors at this stage. Officials at the US Embassy in Hanoi, the White House and the Commerce Department did not respond to requests for comment.

But recent American attempts to gain a foothold in the Vietnamese industry have not succeeded, said John Rockhold, a rare earths sector consultant and president of the Hanoi branch of the U.S. Chamber of Commerce, adding that one such plan involving VTRE collapsed this year. year.

That plan would have included shipping rare earths to the United States refined by VTRE and a potential future investment in Vietnam worth $200 million, according to a non-public report by unidentified U.S. investors seen by Reuters.

VTRE confirmed that the shipping deal had fallen through.

Instead, VTRE in April announced a deal to supply 100 metric tons of rare earth oxides this year to Australian Strategic Materials (ASM.AX). ASM declined to comment on the Dong Pao exploit.

Blackstone, a partner in that deal, operates a nickel mine in Vietnam and decided that its processing facility in the country could handle ore from Dong Bao, according to a company statement.

From ore to magnet

VTRE eventually plans to play a role in the entire rare earth industry from ore extraction to finished products, said Tuan, who along with his wife owns most of VTRE’s shares, according to a list of shareholders he showed to Reuters. Blackstone said the proprietary information was consistent with its due diligence assessment.

This is not easy. The United States currently exports its rare earth ores to China for processing because it lacks its own facilities.

The VTRE plant in northern Vietnam specializes in separating rare earth element oxides from mined ore. The plant has the capacity to process 5,000 tons of renewable energy annually, but the company plans to triple that to accommodate input from Dong Bao, Tuan said.

Once separated, the oxides are transformed into metals for use in magnets and other industrial applications. China controls the mineralization process, producing 90% of rare earth metals, according to the US Department of Energy.

But VTRE is running a pilot project to build a mining plant with South Korea’s Setopia (222810.KQ), said Setopia, which has no previous experience in the sector.

An official in Setopia told Reuters that the initial combined investment will amount to about four million dollars, most of it from Setopia, and that the factory will likely be ready next year.

In the manufacturing industry, South Korean and Chinese magnet companies are set to open factories in Vietnam, Reuters reported in August.

Vietnam has a long way to go, including improving environmental practices, to achieve its rare earth goals, said Dudley Kingsnorth, a professor at the Western Australian School of Mines at Curtin University.

However, Vietnam “possesses the resources and expertise in mining and processing to provide alternatives to China,” he added.

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