Inside Vietnam’s plan to break into China’s rare earth dominance

  • Vietnam plans to restart its largest rare earth mine next year
  • Dong Pao, one of the world’s largest mines, attracts foreign interest
  • Australia’s Blackstone eyes $100 million Dong Pao investment
  • Blackstone partner VTRE plans factory with South Korea’s Setopia
  • Concerns rise over China’s dominance over strategic minerals

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

The move would be a step toward the Southeast Asian country’s goal of building a rare-earth supply chain, including developing the capacity to refine the ores into metals used in electric vehicles, smartphones and magnets for wind turbines. Is included.

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 , He cited unpublished information from Vietnam’s Ministry of Natural Resources and Environment, which did not respond to requests for comment.

The timing of the auction may change but the government plans to restart the mine next year, said Lu Anh Tuan, chairman of Vietnam Rare Earths JSC (VTRE), the country’s main refiner and Blackstone’s partner in the project.

The proposed restart of Dong Pao – the timeline, scale and degree of foreign financial support of which has not been previously disclosed – comes at a time when many countries are facing supply disruptions due to China’s hold on strategic minerals and its disputes with the US and its allies. Are concerned about their sensitivity to. , Beijing this year imposed an export ban on trace metals used in semiconductors, which an influential Chinese policy adviser warned was “just a start”.

According to the US Geological Survey, Vietnam has the second largest rare-earth reserves. But they remain largely untapped, with investment discouraged by low prices effectively set by China due to its near-monopoly on the global market. Visiting Hanoi this month to upgrade bilateral ties, US President Joe Biden signed a deal to boost Vietnam’s ability to woo investors for its rare-earth reserves.

In interviews with Reuters, 12 industry executives, investors, analysts and foreign officials described plans for Vietnam, including investments they said were de-risking supply chains, to reduce dependence on China. How that is translating into action. Some acknowledged the difficulties of creating a rare-earth hub, but said addressing strategic concerns could make Vietnam a viable player, even if China remains dominant.

Kutscher said that if Blackstone wins, its investment in the project would be about $100 million. He said the company is talking to potential customers, including electric car makers VinFast and Rivian (RIVN.O), about potential contracts with fixed prices that would protect suppliers from fluctuations and Will guarantee a secure supply chain to buyers.

Sealing such deals will remove hurdles faced by developers in Vietnam. In recent years, Japanese investors Toyota Tsusho and Sojitz abandoned projects in Dong Pao after China increased supply and prices fell. Japanese companies did not respond to requests for comment.

Yet despite the focus on reducing risk, it was unclear whether clients would be willing to pay a premium for Vietnam, said Dylan Kelly of investment firm Terra Capital, adding that the market in general was opaque. .

Asked about VinFast’s potential involvement, a spokesperson for parent company VinGroup said VinES, the group unit in charge of raw material procurement, has no current plans involving rare earths with Blackstone. He did not specifically answer follow-up questions about WinFast.

Rivian did not respond to a request for comment.

rival mountain pass

According to an official at state-controlled miner Lavreco, which owns one of the concessions, effective exploitation of Dong Pao – which has lain dormant for at least seven years – would propel Vietnam into the top league of rare-earth producers.

But refining rare earths is complex, and China controls many processing technologies. According to Blackstone, the estimated deposits of Dong Pao also need to be reevaluated using modern methods.

reuters graphics

Nevertheless, according to Hanoi University of Mining and Geology, rare earths in Dong Pao are relatively easy to access and are mostly concentrated in bastnsite ores.

These are typically rich in cerium, which is used in flat screens, and lanthanides, such as praseodymium and neodymium, which go in magnets.

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

According to the USGS, this would put Dong Pao’s production slightly below that of California’s Mountain Pass, one of the world’s largest mines, which produced the equivalent of 43,000 metric tons of REO in 2022.

Vietnam also plans to develop additional mines. In July, Hanoi set a target to produce the equivalent of 60,000 tonnes of REO per year by 2030. China set a domestic quota of 210,000 tonnes last year.

According to those targets, Vietnam will produce 5% to 15% of China’s projected output by the end of the decade, said David Merriman, a research analyst at consultancy Project Blue, who expects China to increase production over that period.

Vietnam’s goals, he said, were “ambitious, although they are not completely out of the question”.

American stimulus

According to a White House fact sheet, the US agreed to help Vietnam better map its rare-earth resources and “attract quality investments” during Biden’s visit, a move that could help American investors look to Vietnam. Could encourage bidding for new concessions.

Reuters could not determine whether concrete plans involving US investors existed at this stage. The US Embassy in Hanoi, White House and Commerce Department officials did not respond to requests for comment.

But recent U.S. efforts to gain a foothold in Vietnamese industry have not been successful, said John Rockhold, a rare-earth sector consultant and president of the Hanoi chapter of the U.S. Chamber of Commerce, adding that a similar plan involving VTRE collapsed. . Year.

That plan would include shipments of rare earths refined by VTRE to the US and a potential future investment of $200 million in Vietnam, according to a non-public report to unspecified US investors seen by Reuters.

VTRE confirmed that the shipment deal has been concluded.

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

Blackstone, which is a partner in that deal, operates a nickel mine in Vietnam and has determined that its processing facility in the country can handle ore from Dong Pao, according to a company statement.

from ore to magnet

Ultimately, VTRE plans to play a role in the entire rare-earth industry from ore extraction to final products, said Tuan, who owns the majority of VTRE shares with his wife, as he told Reuters at a meeting of shareholders. The list was shown. Blackstone said the ownership information is consistent with its valuation after due diligence.

This is no easy feat. The US currently exports its rare-earth ores to China for processing because it lacks its own facilities.

Reuters Graphics Reuters Graphics

An existing VTRE factory in northern Vietnam specializes in separating rare-earth oxides from extracted ore. Tuan said the plant has the capacity to process 5,000 tons of REO per year, but the company plans to triple that to accommodate the input from Dong Pao.

Once separated, the oxides are turned into metals for use in magnets and other industrial applications. According to the US Department of Energy, the metallization process is controlled by China, which produces 90% of the rare-earth metals.

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

A Setopia official told Reuters the initial combined investment would be about $4 million, mostly from Setopia, and a plant would likely be ready next year.

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

Professor Dudley Kingsnorth, of the Western Australian School of Mines at Curtin University, said Vietnam had some way to go to realize its rare-earth targets, including improving environmental practices.

Still, he said, Vietnam “has the resources, mining and processing expertise to provide an alternative to China”.

Reporting by Francesco Guarascio @fraguarascio and Khanh Vu in Hanoi; Additional reporting by Melanie Burton in Melbourne, Ju-Min Park in Seoul, Trevor Hunnicutt in Washington, Mai Nguyen and Phuong Nguyen in Hanoi; Editing by David Crawshaw

Our Standards: The Thomson Reuters Trust Principles.

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Francesco leads a team of journalists in Vietnam covering the top financial and political news in the fast-growing Southeast Asian country, with a focus on supply chain and manufacturing investments across a range of sectors, including electronics, semiconductors, automotive and renewables. Does. Before Hanoi, Francesco worked in Brussels on EU matters. He was also part of Reuters’ core global team that covered the COVID-19 pandemic and participated in money laundering and corruption investigations in Europe. He is a keen traveller, always keen to backpack to explore new places.

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