USA Rare Earth (USAR) FY Conference August 12, 2025 03:30 PM ET Speaker0Good afternoon everyone. I'm George Genericas, one of Canaccord Genuity's sustainability analysts. We're incredibly pleased to have with us today the team from USA Rare Earths. Rob Steele, CFO Lionel McBee, VP of Investor Relations, a company that's geared to helping us secure a US magnetic supply chain. So with that, Rob, please go ahead.Speaker1Great. Thanks everybody. As George said, I'm Rob Steele, the CFO of the company. USA Rare E ...

Core Points - The ongoing economic and geopolitical rivalry between the US and China has created significant uncertainty in the global economy, affecting ordinary citizens with high prices and economic instability [1] - The trade conflict is rooted in long-standing tensions that escalated after the Trump administration adopted a comprehensive strategy to pressure China, starting from January 2025 [2] - The US has implemented a series of tariffs and trade restrictions on Chinese goods, significantly increasing the total tariff level and impacting Chinese exports [2] - In response to US actions, China has enacted strong countermeasures, including export bans on critical materials and increased tariffs on US goods, which have disrupted US supply chains [6][10] - The trade war has led to a rise in effective tariff rates in the US, reaching the highest level since 1934, and has resulted in market volatility and negative employment data [12] Trade Policies - The US imposed a 10% tariff on all Chinese imports in March 2025, which escalated to a total tariff level of 54% by April 2025, affecting various sectors from agriculture to electronics [2] - The US further increased tariffs on Chinese goods to 104% and initiated investigations into Chinese maritime logistics and shipbuilding, targeting key industries [2] - China's countermeasures included banning exports of gallium, germanium, and other critical materials to the US, which are essential for various advanced technologies [6] Geopolitical Dynamics - The US has sought to strengthen alliances in the Indo-Pacific region to counter China's influence, criticizing China's actions in the Taiwan Strait and South China Sea [5] - Despite tensions, there remains potential for cooperation between the US and China in areas such as climate change and technology exchange, depending on the US's approach [14] Economic Impact - The trade war has resulted in an additional tax burden of approximately $1,300 per American household due to the tariffs imposed by the Trump administration [2] - The escalation of tariffs has led to increased costs for US consumers and businesses, contributing to economic instability and market downturns [12]

Core Viewpoint - The prices of rare earth elements, particularly terbium, have reached record highs, with significant implications for industries reliant on these materials, such as electric vehicles and wind power generation [2][4]. Group 1: Price Trends and Export Controls - Terbium reached a new high price in July, indicating ongoing supply constraints despite discussions of easing export controls by China [2][4]. - As of July 31, the price of dysprosium was $805 per kilogram, approximately three times higher than pre-control levels, while terbium peaked at $3,150 per kilogram, the highest since May 2015 [4]. - China's customs data for June showed nearly zero exports of dysprosium-related products, with terbium-related exports down by 90% compared to March, leading to production halts in some automotive sectors in Europe and Japan [6]. Group 2: Demand and Future Projections - The demand for rare earth elements is expected to grow, with the International Energy Agency (IEA) projecting that by 2050, the demand for rare earth elements used in magnets will be 2.2 times that of 2024 under net-zero emissions scenarios [6]. - Efforts are underway in the U.S. and Japan to reduce dependence on Chinese rare earth supplies, with MP Materials partnering with the U.S. Department of Defense, which is expected to acquire a 15% stake in the company [6]. Group 3: Supply Diversification Efforts - Japan's Ministry of Economy, Trade and Industry has highlighted the need for diversification in supply sources, not just for rare earths but for other minerals as well [7]. - Japan is exploring projects to develop heavy rare earths outside of China, but challenges remain due to high costs associated with securing alternative production sites [7]. - Despite efforts to establish production outside of China, experts believe that China's dominance in high-value rare earth mining will not be easily disrupted [7].

Summary of Australian Strategic Materials (ASM) Conference Call Company Overview - **Company**: Australian Strategic Materials (ASM) - **Industry**: Rare Earths and Critical Minerals Key Points Industry Dynamics - The rare earths industry is experiencing exciting times due to geopolitical uncertainties, creating opportunities for companies like ASM [3][4] - Over 90% of midstream processing and production in the rare earths supply chain is dominated by China, highlighting vulnerabilities in the supply chain [4] - Recent U.S. tariffs led to China imposing export restrictions on heavy rare earth materials, prompting urgency in establishing alternative supply chains [5] ASM's Strategic Position - ASM is building a global rare earths and critical minerals business to meet the needs of emerging downstream markets in the Western world [3] - The company has a strategy that encompasses the entire supply chain from mining to metal production, positioning it well to take advantage of shifts in global dynamics [6] Project Developments - ASM's Dubbo mine in New South Wales is a key asset, with plans to refine and separate materials for metal production [6][19] - The company has an operational metals plant in Korea, producing light rare earth NDPR metal since 2022, and is expanding its capacity [10][15] - ASM is exploring options to accelerate rare earth production at Dubbo while lowering initial capital costs, with a focus on a heap leach option that reduces capital expenditure by over 50% [22][23] Financial Position - ASM has raised approximately $25 million recently, adding to a cash position of $19 million at year-end, enabling focus on production delivery [9] - The company has secured over $1.5 billion in conditional export credit agency support for its projects, indicating strong governmental backing [22] Customer and Market Engagement - ASM has established agreements with various customers, including Noveon Magnetics and Vacuum Schmelzer, to supply rare earth materials [11][12] - The company is actively engaging with the U.S. Department of Defense for funding support for its U.S. facility, with plans to finalize state selection soon [16][18] Future Outlook - ASM anticipates commencing construction at Dubbo in 2027, with a pathway designed to increase production capacity significantly [15][24] - The company is the only ASX-listed entity providing exposure to rare earths from mine to metal, with ongoing developments expected in the coming year [24] Additional Insights - The Dubbo resource is polymetallic, containing both light and heavy rare earths, which are essential for producing specialized alloys for magnets [19] - The company has been working on technologies for separation and refining for over 20 years, ensuring a strong foundation for its projects [21]

Investment Rating - The report provides a positive investment rating for the industry, indicating a "Buy" recommendation based on expected stock performance relative to the benchmark index [17]. Core Insights - The report highlights a significant increase in rare earth oxide (REO) production, with a year-on-year growth of 47% to 3,212 tons in Q2 2025, and a quarter-on-quarter increase of 68% [1]. - The average selling price of REO reached A$60.2 per kilogram, reflecting a 19% increase from the previous quarter and a 42% increase year-on-year [1]. - The company has successfully launched the separation lines for heavy rare earth elements, dysprosium, and terbium, with substantial customer inquiries for the new capacity [4]. - Lynas is actively pursuing projects to achieve an annual production capacity of 10,500 tons of mixed rare earth carbonate (MREC) by 2025, with ongoing improvements in processing quality at its facilities [2]. Production and Sales Performance - In Q2 2025, Lynas reported a total REO production of 3,212 tons, with NdPr (neodymium-praseodymium) production at 2,080 tons, both showing a 38% increase compared to the previous quarter [3][12]. - The sales volume of REO was 2,828 tons, which represents a 16% increase from the previous quarter but a 12% decrease year-on-year [1]. Financial Performance - The company achieved sales revenue of A$170.2 million in Q2 2025, marking a 38% increase quarter-on-quarter and a 25% increase year-on-year [7]. - Cash and short-term deposits at the end of Q2 2025 were A$166.4 million, down from A$268.9 million at the end of the previous quarter [13]. Growth Projects - The Mt Weld expansion project is in its final stages, with successful commissioning of the crushing circuit and ongoing preparations for initial production [8]. - Lynas is also addressing wastewater management challenges at its Seadrift site in the U.S. and is in discussions with the U.S. government regarding additional capital expenditures [9]. Strategic Partnerships - Lynas has signed two non-binding memorandums of understanding (MoUs) to develop new upstream and downstream rare earth projects in Malaysia, including a collaboration with JS Link to build a 3,000-ton neodymium-iron-boron permanent magnet production facility [6][10].

Core Viewpoint - The article highlights the urgent need for national security measures to combat the smuggling of rare earth elements, which are critical for military applications, as illicit activities have surged following tightened export regulations [1][3][5]. Group 1: Smuggling Activities - Smugglers are increasingly sophisticated, using advanced techniques to disguise rare earth elements as other materials, such as "high-purity iron oxide" that turned out to be rare earth dysprosium [3][5]. - Significant quantities of rare earth elements are being hidden in containers labeled as "mineral waste," with customs officials discovering over a billion worth of rare earth elements like neodymium [3][5][7]. - The black market for rare earth elements has seen prices surge by nearly 80% due to a 21% drop in official export volumes in the first half of 2024 compared to the previous year [5][7]. Group 2: Government Response - The Chinese government has rapidly implemented measures to detect and prevent smuggling, including deploying "rare earth component detection devices" at major ports [7][9]. - A coordinated crackdown by the National Security Department led to the dismantling of multiple smuggling rings, with estimated case values exceeding 3 billion [7][9]. - The government is also focusing on technological advancements and alternative materials to reduce reliance on rare earth elements, with significant investments in deep-sea exploration for rare earth resources [9]. Group 3: Strategic Importance - Rare earth elements are vital for military technology, including components in advanced weaponry like the J-20 fighter jet and intercontinental missile guidance systems [5][9]. - The article emphasizes that controlling rare earth resources is not just about export restrictions but also about maintaining technological superiority and national security [9].

Core Insights - The U.S. is taking significant steps to reduce its dependence on rare earth elements, marking a strategic shift in its approach to resource management and national security [1][4][5] - The establishment of the new rare earth mine in Wyoming, the first in over 70 years, signifies a critical move towards building a domestic supply chain for rare earth elements [1][3] - The U.S. Department of Energy emphasizes the importance of developing both mining and processing capabilities domestically to ensure a secure supply chain [1][3] Group 1: U.S. Rare Earth Initiatives - The U.S. has initiated the construction of the La Macoc Brook rare earth project, which is expected to tap into significant domestic resources [1][3] - The Brook coal mine is estimated to contain up to 1.7 million tons of rare earth oxides, including valuable elements like neodymium and dysprosium, essential for various technologies [3][7] - The U.S. Department of Defense has acquired a 15% stake in a key rare earth mining and refining company to secure supplies for military applications [4][7] Group 2: Market Dynamics and Competition - China remains the largest producer of rare earth elements, supplying nearly 90% of the global market, which raises concerns for the U.S. regarding supply security [5][7] - The U.S. is currently reliant on imports for approximately 80-85% of its rare earth needs, with a staggering 83.7% dependence on China for these materials [7][10] - The geopolitical landscape is shifting, with the U.S. aiming to establish a diversified supply chain for rare earths, potentially leading to increased competition with China in the coming years [7][10] Group 3: Future Outlook - The U.S. is accelerating the development of additional rare earth projects, including the Colosseum project and the expansion of the Mountain Pass mine, to enhance domestic production capabilities [7][10] - A collaborative initiative with Japan, Australia, and India aims to create a "de-China" rare earth supply chain by 2025 [7][10] - The long-term goal is to reduce reliance on Chinese rare earths, which may lead to heightened tensions and competition between the two nations [10]

Group 1 - China's strict control over rare earth resources has effectively targeted the industrial lifelines of certain countries, particularly impacting the high-tech sectors of the US and Western developed nations [1] - Despite agreeing to resume civilian rare earth supplies to the US within six months, China has set clear boundaries, allowing only compliant civilian exports while maintaining strict controls on military applications [1][2] - The introduction of a tracking system for the rare earth magnet industry requires producers to submit real-time data on transaction volumes and customer names, raising concerns among Western companies about the implications for the global supply chain [1] Group 2 - The concept of "rare earth weaponization" has emerged in Western media, highlighting the strategic importance of rare earth elements in defense, aerospace, electronics, and renewable energy sectors [2] - Rare earth elements are critical for military applications, such as precision-guided missiles and stealth aircraft, making their control a matter of national security for China [2][6] - There are ongoing attempts by foreign entities to bypass China's export controls, with reports of organized efforts to illegally transport rare earths out of the country [2][4] Group 3 - Smuggling methods for rare earths have become increasingly sophisticated, with criminals disguising high-purity rare earths as low-value products to evade export controls [4] - The Chinese government has launched a series of actions to combat rare earth smuggling, successfully disrupting multiple illegal channels and demonstrating its commitment to resource security [6] - Protecting rare earth resources is viewed as a long-term systemic project, requiring collaboration among various government departments to ensure comprehensive protection from source to endpoint [6][8] Group 4 - The strategic significance of protecting rare earth resources has grown amid increasing global resource competition, with a shift from resource advantages to industrial chain advantages in China's rare earth industry [9] - The importance of public participation in reporting suspicious smuggling activities is emphasized, as community vigilance can contribute significantly to national security efforts [8][9] - The ongoing battle for rare earth resources is framed as a crucial aspect of national destiny and future development, underscoring the need for collective action to safeguard these vital materials [9]

Group 1 - China's sudden requirement for export licenses for heavy rare earths led to a 74% drop in rare earth magnet exports in May, causing significant concern among U.S. military and renewable energy companies [1][3] - The Chinese government has strategically opened a green channel for the EU and granted temporary licenses to U.S. car manufacturers, indicating a nuanced approach to international relations [1][3] - The policy shift is seen as a response to previous WTO rulings against China's quota system, now framed under national security and non-proliferation, allowing for more flexible control over exports [3][5] Group 2 - The U.S. and its allies, including Japan and Australia, are reacting strongly, with the Pentagon discussing "decoupling" from China and Australian companies seeing stock price surges [5][7] - Rebuilding supply chains is expected to take at least five years, during which China may further solidify its position in the rare earth market [5][7] - The current situation highlights a broader geopolitical strategy where China uses rare earths as leverage against U.S. defense industries, with implications for future regulations in biomedicine and lithium batteries [5][7] Group 3 - The U.S. faces a dilemma: imposing similar controls could harm domestic companies, while negotiating could undermine political standing ahead of midterm elections [7] - The EU is proactively working on the Critical Raw Materials Act to mitigate risks while benefiting from China's green channel [7] - The situation serves as a lesson in modern economic warfare, emphasizing the importance of using export licenses to adjust supply chains rather than outright bans [7]

Core Viewpoint - Recent revelations about rare earth smuggling highlight the complexity and secrecy of international rare earth trade, with significant increases in imports from Thailand and Mexico raising suspicions of "label washing" from China to the US [1][3]. Group 1: Smuggling Mechanisms - Chinese agents are reportedly labeling controlled rare earth minerals like gallium and antimony as "iron ore" or "zinc concentrate" to facilitate illegal exports through Mexico and Thailand [3]. - Mexico's geographical proximity to the US and low customs inspection rates make it an ideal smuggling route, while Thailand's busy transshipment ports and regulatory loopholes further enable these activities [5]. - Smugglers can earn commissions of 12%-15% per ton of rare earths transported, significantly higher than standard rates for regular goods [5]. Group 2: Legal and Regulatory Environment - The US has been criticized for allowing companies to exploit legal loopholes, as evidenced by a court ruling that exempted third-country transshipments of rare earths from the Clean Supply Chain Act [5]. - Recent smuggling cases have revealed collusion between Chinese companies and US military contractors, with advanced technologies being used to disguise shipments [7]. Group 3: Price Dynamics and Smuggling Incentives - The price of key rare earth elements has surged by 200% since China implemented export controls, with dysprosium and terbium reaching $3,000 per kilogram, driving smuggling activities [9]. - Smuggling operations are more cost-effective and efficient compared to legal imports, with profit margins reaching 55% due to lower logistics costs and fewer regulatory hurdles [9]. Group 4: Regulatory Responses - Regulatory authorities have initiated measures targeting false declarations and third-country transshipments, with technological upgrades aiding in detection efforts [11]. - The implementation of the new Mineral Resources Law has increased penalties for rare earth smuggling, establishing a national traceability platform for rare earths [11]. Group 5: Impact of Regulatory Measures - Since May, the volume of rare earth imports through non-standard channels in the US has decreased by 67%, indicating a weakening of smuggling networks [12]. - The development of recycling technologies for rare earths is reducing the incentive for smuggling, with costs only 18% of those for new mining [12].