AND recent story in The Wall Street Journal notes the fact that for this energy transition to succeed, the United States will need vast amounts of cobalt, among other energy minerals. Yet the Australian owners of what would become the nation’s largest cobalt mine, despite overcoming the myriad permitting hurdles that delay and increase the cost of opening any US mine, were recently forced to suspend operations and lay off workers due to a slump in commodity prices.
As diary the authors note, China currently dominates supply chains for cobalt and most other critical energy minerals, and companies operating in the U.S. face additional hurdles in the form of much higher environmental standards, permitting delays, activist disputes, higher labor costs and difficulty generating interest from Wall Street. A series of subsidies and tax breaks in last year’s anti-inflation law were supposed to help solve the financial end of things, but doling out the funds has been a predictably tedious process within the federal bureaucracy.
A problem for rare earths
A very similar set of challenges exists in the field of rare earth elements, where China has also dominated the supply chain landscape for decades. The so-called “rare earth” elements are elements that occupy element numbers from 57 to 71 in the standard periodic table. They come with names like lanthanum (La), cerium (Ce), praseodymium (Pr), and the rarest of all, thulium (Tm).
Rare earth elements have been in increasing demand in recent decades due to their use in virtually every high-tech gadget used by the human race. This demand has expanded in recent years due to the key role that rare earths also play in the production of batteries, wind turbine blades and solar panels.
In other words, securing and maintaining a secure and affordable supply of these elements is a crucial aspect in making this so-called “energy transition”. It’s a fact everyone is aware of that makes the apparent reluctance of the Biden administration to help jump-start a project to develop the world’s largest known source of rare earths, the Tanbreez project, located in a compact area on the southwest coast of Greenland, almost inexplicable.
A resource that can help secure the future
“This mine is one that could essentially drive civilization for the next 20, 30, 50 years,” said Christopher Messina, the company’s CEO Tanbreez, he told me in a recent interview. For the United States and its needs, this is probably not excessive given that the resource was recently ranked by Mining.com as #1 on its list of Top 10 rare earth mining projects in the world. A total estimated recoverable resource at Tanbreez of 28.2 Mt compared to the combined resource at No. 4 to No. 8 mines on the list.
It’s a huge potential resource on an island nation off the coast of North America. It can be restored using current technology with minimal environmental disruption, and Greenland’s own government is in favor of moving forward.
Just one problem: No one in the private or public sector seems interested in being the first to take on the risk of financing a project. Messina says he had funding secured in early 2020 from a prominent backer of such projects, but “Irony of irony, he died of a virus in April of that year.” With the global shutdown nearing its end, the Tanbreez team recently restarted fundraising efforts. “It’s a situation where everyone can’t wait to turn 5Thursday jump in,” laughs Messina.
At least he has a good sense of humor about it all.
But wait: Didn’t President Joe Biden give a speech in July 2021 in which he pledged to implement a “whole-of-government approach” to anchor supplies and supply chains for critical energy minerals and rare earth elements that are critical to the expansion of renewable energy and electric cars? And isn’t the US government sitting on huge pots of funding for projects like this that could play a key role in making the entire government project a success?
For those who don’t know, the answer to both questions is “yes”.
But despite repeated meetings with officials at the Department of Defense, the Department of Energy, the Development Finance Corporation and other federal agencies, Messina is frustrated with how the government is lifting. He points to bureaucratic fears still reverberating from the Obama-era Solyndra fiasco, as career officials are reluctant to risk their careers being affected by funding another potential failure. It is this slow-moving nature of bureaucracy that prevents the kind of rapid deployment of capital at which the Chinese, for example, have excelled in the global mineral race.
But if this is the real dynamic within the Biden bureaucracy, then it will take many years for those funds to dissipate, causing the transition to fall even further short of the aggressive goals Biden has set for himself.
One alternative to US funding undoubtedly available to Messina would be to approach companies affiliated with the Chinese government for seed money. China would undoubtedly seize the opportunity to control the world’s largest known deposit of rare earths as part of its Belt & Road initiative. But he considers it the last option.
Messina and his team remain optimistic that the necessary funding will be secured, despite the lack of immediate catalyzing financial support from the US government. They go through a due diligence process in terms of equity financing as well as offtake from a number of sophisticated investors and industrial buyers.
Recently, Messina has been reaching out to current and former independent oil and gas executives, well-known risk takers, as potential funding sources. “Wouldn’t it be a great story if I could find 20 oil and gas people willing to put up $1 million to $10 million each to start the most important renewable energy project in the world?” Messina asks.
Yes, it would be, and it’s a story I’d definitely like to tell here.