For decades, the West has been sleepwalking into dependency.
While we built the world’s most advanced fighter jets, smartphones, and electric vehicles, we quietly surrendered the most important component of modern tech. Rare earth elements.
Today, China controls 95% of the world’s rare earth processing capacity…a leverage point so powerful, it could cripple Western economies in a matter of months.
But in the heart of Canada, the tide is finally turning.
Saskatchewan Research Council (SRC), Canada’s second-largest research and technology organization, is building North America’s first fully integrated, AI-powered rare earth processing facility, designed to function with zero reliance on Chinese for its critical technology.
In this exclusive interview, SRC’s CEO explains:
China controls roughly 95% of the world’s rare earths processing capacity, which is a major national security problem for the West.
How SRC is building the most advanced rare earth processing facility in the world.
Why their closest competitors are 5-6 years behind.
How their partnership with REalloys will create the only North American-based supplier of processed heavy rare earths in 2027.
Why there is no replacement for rare earths.
And much more…
James Stafford: Why did SRC actually decide to build this facility? I believe you started construction more than five years ago.
Mike Crabtree: SRC had been involved in the processing of rare earth elements for clients at the pilot and laboratory scale for about 12 years prior to the start of construction. We had a lot of experience in understanding both the analysis of mineral deposits and also the processing of rare earth. We saw the need for rare earths was really going to increase over the coming years so we made a proposition to the Government of Saskatchewan that we could build North America’s, certainly Canada’s, first vertically integrated minerals to metals plant. If we did that, we could then catalyze and encourage the development of that sector, not only in Canada, but here in Saskatchewan. The Government of Saskatchewan gave us the go-ahead and the funding to move forward but that was on the basis of a lot of experience.
JS: How did you actually become aware of the rare earth processing issue so far ahead of everyone else? You seemed to have gotten the jump on the industry. The military, manufacturers, and everyone were caught napping except you. Why is this?
MC: SRC has a deep and broad expertise in working with a multitude of clients across the globe. These clients were coming to us, saying, “here’s a particular mineral from Brazil, Europe, and Canada – we’re looking at how this could potentially be processed in the future.” We gleaned a lot of market intelligence in talking to those clients about what their plans were. We also started to understand what the techno-economics were, what the marketing challenges were, what the technology and certainly the financial challenges were, and through that, we became aware of just how much control the Chinese had over the market.
The 20th century will be looked back on as the century of oil, gas and hydrocarbons. The 21st century, as it moves forward, will be energy metals and energy minerals. It became clear that rare earths were the most critical of those critical minerals, and we thought that we could make a real impact.
JS: You said you became aware of how China controlled the rare-earth market. Can you tell me a little bit more about this manipulation?
MC: In the last 10 to 15 years, the majority of the upstream and midstream supply chain for rare earth has been controlled by China, either within China or within proxy states. That meant that they could dominate the market and dominate the pricing. In fact, there is a thing called Asian metal index pricing, which is a wholly Chinese-owned and controlled index. For years and years, that was used as the benchmark pricing. Recently, that’s changed in three interesting ways.
The first is that the overall demand for rare earths is going up significantly. So the overall demand for these minerals is going up, and that means more than even China could produce domestically and maintain that 95% of the market.
Secondly, whereas in previous years, the majority of the rare earths China exported had been exported as raw materials, China now utilizes 60% of its rare earths for its own OEM manufacturing internally. So its ability to flood the market, dominate the market outside of China, is still there, but it is somewhat reduced and the desire or the need to do that is somewhat reduced because it is utilizing a significant amount of that in its OEM products.
And then thirdly, there has been a realization in the West, that we have abdicated almost all critical minerals to China in that 95% and that is not going to be a sustainable position either economically or from a strategic defense standpoint.
We could see that developing over five years ago so we wanted to build out an ex-China supply chain, and we thought that Canada could play a very significant role in that.
JS: Do you think this was a deliberate long-term strategy by China to control the rare earth market? Or a position they just found themselves in?
MC: What is clear is that since the early two thousands at least, they have seen it as being a key strategic play.
If, for example, China said, we’re not going to supply you with copper, or we’re not going to supply you with some other critical mineral, you could look to other sources. Sure, it would increase the price of copper, increase the price of cobalt, or nickel, or whatever but it is not a catastrophic failure point.
But as we’ve witnessed, when China says, we’re not going to give you rare earths, now that means no F-35s, no missiles. A prime example of this is when the Ford car plant shut down when China switched off the rare earth exports for a short period because of the just-in-time nature of these companies’ operations. So we in the West saw that the impact of this very, very quickly.
But here’s the interesting thing. Japan’s known this for decades and makes up most of the other 5% of the processed rare earths supply chain. But Japanese industry, electric vehicles, wind turbines, electronics, robotics and all of their advanced manufacturing in Japan is still entirely dependent on rare earths and rare earth magnets and they take all of their material from China.
JS: So, what has Japan done to mitigate this reliance on China?
MC: What the Japanese government has done is build stockpiles of these processed materials for between two and three years of the total Japanese offtake. But on top of this, individual companies also have their own stockpiles of two to three years. This gives you an indication of how dependent a modern economy is on rare earths. However, Europe and North America have not built up that type of strategic stockpile because we’ve been born and brought up on the just-in-time process.
JS: Can you explain your partnership with REalloys (NASDAQ: ALOY), how it works, and what you’re actually looking to achieve from it?
MC: The partnership with REalloys is particularly attractive for both parties because SRC’s rare earth processing facility is originally designed as a commercial demonstration plant. It was designed to be something that would be about 25% or 30% of the capacity of what a full-scale plant would look like. Our output will be 400 tons of metals, and you would expect a commercial plant in Japan or in China to be around 2000 tons of metals per year. So about 20-25%. And that was very deliberate because what we wanted to do was prove out technology, market and financial viability and attract DFI into Canada to build a full-size plant.
What became clear was that we would have to design most of our own technology because it was not available outside of China. So, a couple of things happened. One, we understood the fundamentals of how to be able to create that midstream processing refinery, and secondly, we were able to utilize that knowledge to increase both the quality and the quantity of the metals that we were producing.
JS: So, how did you actually get started with the plan?
MC: SRC did what SRC always does, and that’s built our own tech from the ground up.
In building that tech, we used the same processes, the same fundamental chemistry and physics that have been in existence for 50 years. But we applied new control systems, artificial intelligence systems, and a lot of SRC’s knowhow that we’ve built up over the last 20 years of working with clients. What that meant is we were able to build a plant that was very sustainable from an environmental standpoint, but also one that is much more efficient – our conversion efficiency is extremely high, and also the quality of the metal that we’re producing is very high.
JS: Now, how much investment has actually gone into building out your process?
MC: SRC’s facility has been approved for $187 million in funding from the Government of Saskatchewan and project-specific funding from the Government of Canada of $13.5 million. Additionally, SRC has invested $16 million internally. So, by the time the facility is commissioned and is up and running in 2027, it will have been funded to the tune of $216.5 million CAD.
JS: What metals are you providing to REalloys and why are they important?
MC: We will be producing Neodymium Praseodymium (NdPr) alloys, which is the foundational rare earth metal that these magnets are made out of. 90% of the rare earths, sometimes up to 97% of the rare earth metals that are within the magnet are NdPr.
But there are two other metals that are added at much smaller concentrations, Dysprosium (Dy) and Terbium (Tb), and when you add them, you increase the performance of the magnet substantially in terms of the strength of the magnet, but also things like its thermal stability – its ability to operate at very low temperatures and very high temperatures. Basically, it’s something added into the magnet to improve its performance.
What REalloys will be buying from SRC will be both of those. It will be off-taking the bulk NdPr and then also the smaller but highly valuable quantities of Dy and Tb oxides. REalloys will then take those materials and convert them to the magnets that it will be utilizing for its customers. In terms of quantities, REalloys will be taking the majority of SRC’s production.
JS: And so why are these metals so difficult to process?
MC: There are three processes involved in converting the minerals to a purified form of all 17 rare earths.
The initial step of hydrometallurgy is challenging, but it’s a fairly standard process in the mining and processing industry. The next step after that is to take those 17 rare earths and to separate them into the individual rare earths that you want including NdPr, Dy and Tb.
What you want to do in that middle stage is produce those four key elements that go into the magnets. This is really difficult to do because of the actual process and the separation systems.
So building out this intermediate solvent extraction system is a complex process and what we’ve built is an artificial intelligence system and an automation process that does everything.
The third part of the process is to take the NdPr, the Dy and the Tb (which in this case are in the form of oxides so they’re like colored powders) and you then convert those to the metal ingots that subsequently get used to make the magnets.
That process uses a smelting technology – something that’s known and is used pretty much everywhere in metal manufacturing but the only expertise in doing this for rare earth was previously in China. So, we had to extract the basis of that technology and ultimately designed our own fully automated furnaces.
JS: How long did designing your own furnaces take?
MC: From when we got the Chinese furnace in, it took five months to work out how to produce metal and then it took about another year from there to having our own furnace. Our furnaces are designed to be fully automated and AI-controlled. The AI doesn’t care that it’s operating 24/7. In normal circumstances with the old furnace technology, at the end of an eight-hour shift, a human operator just wants to go home so the quality of the metal that would be produced may decline. With our AI, we not only increase the output from the furnaces in terms of productivity, but also the purity of the metal.
This is now proven because we have operated these furnaces commercially, so we can prove that these are much higher purity metals and a much higher output from these furnaces because of the technology that we’ve put into it.
JS: Now you’ve told me about three processing steps, but how many micro-processing steps are there within these larger stages? I’m trying to understand is how complex it really is. How many times will the AI need to adjust the furnaces? How many times will the AI need to add chemicals, etc..?
MC: Across those three phases, there are about a dozen unit operations. Within each unit operation, there are probably anywhere between 10 and 100 individual little stages, so you are talking about 1000s of individual operations across that plan.
And you made a really, really interesting point there. If we just look at the solvent extraction, which is the central piece of the plant that separates of the 17 alloys, the AI takes in probably about 5000 data points on a millisecond basis. This is a very large amount of data coming into the AI from the plant for it to make those decisions and then act upon those decisions.
JS: Now, there has been a huge amount of press coverage on the rare earth shortage and how we are reliant on them for our society to continue functioning. Why are they so important? You mentioned fighter jets, you mentioned cars. What else do these metals go into?
MC: Picture if rare earths suddenly disappeared – they just vanished. First off, our screens would go blank and would disappear. We would literally be sitting on the ground naked, looking at a gray sky. You might ask yourself, “Well, What about my clothes? There are no rare earths in my clothes?” No, but the machines that control the manufacture of your clothes have rare earths in them. “What about glasses? What about lenses?” The coating on your lenses has rare earths. Our phone? It’s probably got about half a gram of rare earths in it. You take that out of the phone, that phone no longer works. Almost everything that you can point to either has rare earths in it to make it work or was produced by something that had rare earths in it to be able to produce that article.
JS: Is there any other supplier of these metals in North America? I’ve read that Mountain Pass is producing certain rare elements, but can they actually do the processing?
MC: Are people trying to do it? Yes. Has anybody done it? No. I think we are ahead of the pack
by about two years in terms of timing. But in terms of technology, I think that’s where we’re significantly ahead, because all of the other organizations are reliant on Chinese tech, and we’re not.
Once we realized that we were going to be forced to develop our own tech, we decided to go all the way and made sure there was no reliance anywhere along the supply chain on China for that critical technology, and that’s what we’ve done.
JS: How long would it take to build an AI similar to yours?
MC: One of the reasons we’ve been able to do that is because SRC is multi-disciplined. We can bring in mineral experts, processing experts, and AI experts into a team to be able to do this. But if you were to start from scratch to build the sort of tech that we were looking at, and you didn’t have that multi-disciplinary capability, and you were trying to outsource it you’re looking at five or six years to build that capability.
JS: And this is where most of your competitors actually are. They don’t have these processes, they haven’t got this technology, and they are reliant on China?
MC: It’s the fundamental knowledge of how these processes work and it’s complex chemistry in that. What we were forced to do, and we had a leg up because we’d been doing it for 15 years, is to go back to the fundamentals and design our own equipment around those fundamentals.
The advantage that we have and I think what REalloys has recognized is that at any stage in our process, we can go back to chemical fundamentals and process fundamentals because we designed the tech, we know exactly how it works, and that, I believe, gives us a fundamental knowledge advantage.
JS: So, when are you actually going to be producing these magnet materials?
MC: In 2024, SRC was the first in North America to produce commercial grade rare earth metals in our in-house designed smelter – we were able to toll manufacture from other sources of oxides to metal. So we know that we can produce extremely high-quality metal. Our facility is in the final stages of construction now and will then be commissioned later this year. So we’re looking to have the system fully integrated and operating beginning in 2027.
JS: Your AI sounds incredible. How many hours went into building it out, and how many people worked on the process?
MC: We’ve got a really smart bunch of around 6 people in industrial AI, within the rare earth division, who have been working on this for about two years. What we did was write the AI coding, attached it to one of the solvent extraction cells, filled it with all of the necessary chemicals, and then disrupted it. From there, we told the AI to fix it. And then did it again. Fix it. Did it again. Fix it. After three months of 24/7 operations, they ran out of ways to challenge the AI to fix it. What they programmed into the AI was to think of all the things they haven’t thought of yet, and then fix them. And then it just went off and operated for about another 10 months for 24/7 operations building up that data set.
JS: So, how much of these metals do you think you’re going to be able to produce in 2027, 2028, 2029?
MC: By the end of 2027, we’ll be running at about 400 tons of metal, and by the end of 2028, into 29, we’ll have increased that by 50%, so we’ll be at about 600 tons of metal.
JS: And there will be more than enough demand for you to immediately sell this supply?
MC: REalloys will purchase the majority of this output and the remaining production output will be available to other domestic and international customers, supporting broader market development and diversification opportunities.
Our objective is to create that sector hub here in Canada, but specifically in Saskatchewan, that is going to be in that midstream market.
JS: You mentioned earlier, at the beginning of the call, that you have an environmentally friendly process. Can you touch on this? Do you use landfills, or do you filter the chemicals? I just want to understand how your process is environmentally friendly, because I’ve seen some horrible footage of complete environmental devastation in China around some of their plants.
MC: These plants, including ours, use vast quantities of water and chemical, so the approach that we’ve taken is all of that water and chemical is going to be recycled and reused as much as we possibly can. Now, what that means is that this is a zero liquid discharge plant, so there is no water or chemical going out of this plant.
Because the feedstock for the facility, monazite, contains uranium and thorium, this creates radioactive tailings that must be disposed of. Saskatchewan is actually the second largest supplier of uranium on the planet. So one of the unit operations we built was to extract the uranium and thorium from the tailings, which means the uranium and thorium from the tailings can actually be sold. So, in that sense, it is one of the most sustainable plants of its type on Earth.
JS: Its been said that the West doesn’t have a rare earth problem. We have a processing problem. Could you maybe expand on this and let us know why the West has a processing problem and why this problem is so severe?
MC: Yes, that’s absolutely right. We don’t have a rare earth problem in the sense that there are accessible resources of rare earths across Canada, right across the US, and Europe. If you were allowed to mine in Europe, you could actually probably produce them.
So rare earths are not rare. There are lots of areas where it could be economically mined. We have plenty of industries that use rare earths or rare earth magnets, so that end of the supply chain, the top and the bottom, you can solve for. It’s the midstream processing that is the real issue because the West abdicated this to China 50 years ago. In that, we lost the ability to be able to design and build those plants. What we want is to be ex-China now, and building out those facilities is going to take time. It’s a very significant investment, of which Saskatchewan and, to be fair, the other players that we mentioned, are looking to do, but it’s going to take time and investment to do that.
Our goal should be to grab that critical 20% plus of the production back into the West, so that we would have a proper market for rare earths, where you can go and find what the London Metal index price is for NdPr. That is something that will develop over the next five to 10 years as the market hopefully matures but there’s going to be billions of dollars of investment needed in that midstream piece to be able to accomplish that.
JS: And that is, as you said earlier, a five-to-10-year process to actually get the expertise to do that efficiently.
MC: It’s like one of those big Canadian trains, where it starts at the front, and it takes five minutes before the back engine moves, and that’s where we are. And this is why I really enjoy doing these interviews, because we’ve got to demystify that midstream piece; it becomes something that people don’t understand or know how to invest in.
JS: Thanks for your time Mike. It was a pleasure speaking with you and I look forward to seeing how things develop.
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