Critical and Energy Minerals
Energy transition and resource security bring a sense of urgency amidst inflationary pressures
The “green revolution” will not occur without a strong supply chain of critical and energy minerals to manufacture and store the electricity needed for a successful transition away from fossil fuels. After a tumultuous path through Congress, the Inflation Reduction Act was adopted in August 2022. The landmark law represents the US’ most significant effort to date to tackle climate change, and marks a new chapter in America’s climate policy. A vast array of tax credits, loan guarantees and grants will contribute to the drive towards electrification, as Bloomberg predicts that battery-powered car sales will likely grow from 10% in 2021 to 40% by 2030. The development of lithium, rare earth elements and uranium projects are key to achieving electrification, from the baseload to the motor of the vehicle.
Uranium: Black Swans and opportunities
Could the main beneficiary of the 1973 oil embargo be the key to achieving the green transition? Uranium is today deemed crucial to answering the energy crisis, but this will not come without challenges for the US: self-sufficient in the radioactive element in the 1980s, the country now imports most of its uranium. And as close to 75% of nuclear power is generated between Europe, America and Asia, and Kazakhstan holds the lion’s share of global uranium production with 40%, the uranium supply chain is more than ever impacted by the geopolitical turmoil that emerged on the Old Continent and resonated worldwide.
Still recovering on a reputational standpoint from the 2011 Fukushima disaster, the nuclear industry appears to be in a Renaissance period. A point of contention for the environmental movement for the past decade, uranium has in recent months taken center stage in conversations deeming the fuel to be a crucial green energy source. Arizona is believed to contain about 500 breccia pipes, some of them likely containing high-grade uranium.
Positive strides in terms of nuclear waste management appear to be outweighing public perception setbacks. Mark Chalmers, CEO of Energy Fuels, the leading US producer of uranium and vanadium, commented on the company’s approach to reducing carbon emissions: “Our recycling programs allowed us to recover 6 million pounds (lbs) of uranium that would have been lost to disposal”.
Energy Fuels’ White Mesa Mill is capable of recovering uranium through an “alternate-feed recycling program”; alternate-feeds are uranium-bearing materials that, if not recycled, are destined to become waste.
Processing radioactive residues to produce electricity will likely be a key factor in uranium producers maintaining their social license to operate. Acknowledging controversies around Energy Fuels’ Pinyon Plain mine, a uranium mine located seven miles south of Grand Canyon National Park, Mark Chalmers said: “Pinyon Plain could produce up to one year of Arizona’s total electricity (…) a state that currently gets a third of its electricity from nuclear power.”
Several factors indicate that the US nuclear industry is gaining ground against its global competitors. Although industry leaders recognize that more governmental support is needed for the US to restore its competitive advantage in uranium production, disruptions on a global scale have presented unexpected – almost Black Swan like – opportunities for US and Arizona-based uranium producers.
“The main highlights are going to be that Energy Fuels will advance its rare earth program faster than anybody else in the world. We restarted our uranium production in the U.S., and plan to continue be the largest producer in uranium there.”
Mark Chalmers, CEO, Energy Fuels
The Southwestern Gold Rush – for lithium
A key component in EV batteries is lithium carbonate, and this element highlights the US’ deficiency at the production and midstream processing level for critical minerals. In March 2022, US Energy Secretary Jennifer Granholm emphasized the importance for the US to reduce its reliance on foreign countries for the import and the processing of the “white oil”. The US currently accounts for 1% of global lithium production, with the entirety of the mineral being produced at a single brine operation: Albemarle’s Silver Peak in Nevada. This urge to reduce reliance is not trivial: as the lithium-ion battery revolution gains momentum, Benchmark Mineral Intelligence, a price reporting agency, anticipates the exceptional demand will only be met by putting into production 74 new lithium mines with an average size of 45,000 t/y by 2035.
Bradda Head Lithium’s recent intercept at its San Domingo project and the commencement of drilling demonstrate that Arizona’s role in the lithium space will grow in the coming years. Charles FitzRoy, CEO of Bradda Head Lithium, explained: “The results we gathered at San Domingo are really encouraging. So far, the program proves we have a viable pegmatite production that has a much lower capex than our clay programs.”
Arizona Lithium’s Big Sandy project also appears ideally placed to assist with the government’s goals, having an Indicated and Inferred JORC resource of 32.5 million t grading 1,850 ppm lithium.
A vital need to strengthen the domestic supply chain for REEs
From EVs to F-35 fighter jets, the future of US’ economy and security also depends on rare earth elements (REEs). In February 2022, the Biden Administration pleaded to “break dependence on China” regarding critical minerals. In August, China raised its annual output quota of REEs by 25%, for the fifth consecutive year. REEs are vital to both the manufacturing and defense industries and are crucial for the electric traction motors in EVs. On the defense side, Arizona is one of only two US states that produces rhenium, a key component in alloys used in jet aircraft engines.
Western Rare Earth’s Marty Weems, president North America, commented: “China currently is the largest holder of REE reserves and is a net importer of the minerals as Chinese control about 80% of all midstream processing.”
“The US is keen to collaborate with its allies, particularly in North America, to make a more complete supply chain here. The Bipartisan Infrastructure Law, the Chips-Plus Package and the Inflation Reduction Act also bring about substantial incentives and resources.”
Marty Weems, President North America, Western Rare Earths
North of Phoenix, Western Rare Earth’s La Paz project has the potential to be the largest rare earth project in North America, representing a beacon of hope – although an isolated one - for the defense industry at a time when military tensions between the US and China have reached their highest point in years, following US House Speaker Nancy Pelosi’s Taiwan gambit in August. “Should China constrain our defense industry, we could have difficulties providing the necessary components for the fabrication of weapons (using electric motors, such as cruise missiles, submarines and fighter jets) within 90 days,” warned Weems.
The endowment of the Arizonian soil alone will not be enough to secure a domestic supply chain of critical minerals, and the government has recognized the need for its intervention to tackle the US void at the midstream level, where foreign countries still control extraction, separation and purification processes. New Department of Energy (DoE) and Department of Defense (DoD) programs to operationalize this supply chain are a step towards breaking foreign dependence. As the US and Western partners seek alternatives to Chinese REEs and Washington aims to boost its midstream process, the opportunity for Arizona to lead the charge for critical minerals is there for the taking.