West faces daunting task to compete with China in critical minerals race, says Neo Performance CEO

Engaging in the global critical minerals market means facing up to the huge challenge presented by China, says Neo Performance Materials‘ (TSX: NEO) CEO and president Constantine Karayannopoulos. 
 
Speaking during an exclusive Q&A session at the Critical Minerals Summit 2022, held at the National Club in downtown Toronto on Nov. 9, Karayannopoulos outlined the task ahead for Western countries and companies. 
 
“We should do a session just on that alone,” the CEO told moderator and summit organizer Tracy Weslosky, who is also the CEO of InvestorIntel. 

China poorly understood

While the CEO said that Neo has four plants, including two rare earth refineries in China, many Westerners have failed to understand the how and why of the east Asian country’s industrial development. 
 
“For the last 20 years there has been a very rational, deliberate industrial strategy that would have been very easy to predict today if you had been following how each successive five-year plan plays into that industrial strategy,” he said. 
 
“They’re absolutely determined to dominate the electric vehicle market [and] 34% of all EVs are made and sold in China…in order to achieve that they need raw material security.” 

Maplegrow Capital president and Critical Minerals Institute director Peter Clausi, far left, moderates the Extraction & Processing Timeline Advantage panel. Blair McBride photo

 
For China to achieve its decarbonization and electrification targets will require trillions of dollars of investment, as it will for the rest of the world, Karayannopoulos explained. 
 
“That’s mind boggling. There’s a massive task ahead of us and I don’t think governments around the world really appreciate how complex this is. I consider myself an environmentalist. [But] you can’t have your cake and eat it too. If you want to decarbonize…we need more factories to take whatever comes out of the mines and make them into the products that will allow us to decarbonize.” 
 
But such enormous industrial development in the West will have to be done by skilled professionals, and Weslosky asked Karayannopoulos where they would come from.  
 
“It has taken two decades for the supply chains to migrate from North America to Asia,” he said. “It will take at least as long for them to come back. And it starts with education. China graduates more engineers than in North America we’re graduating graduates!” 

Diversify supply, but wisely

The Neo president also touched on where critical minerals might be mined in the coming years, and gave the example of his company’s efforts to source rare earths from Greenland. 
 
In August, it announced it had secured a licence from Hudson Resources (TSXV: HUD) for its Sarfartoq Carbonatite Complex to explore for neodymium and praseodymium at relatively high ratios of 25%-40% total rare earth oxides, according to a 2011 preliminary economic assessment. 
 
He acknowledged that the largely undeveloped country guards its resources closely, and permits no oil and gas development and no uranium mining. 
 
But he added that Neo took the time to consult properly with the Greenlandic government. 
 
“We really need to understand the lay of the land, to make sure that you’ve done all the right things. Don’t walk into people’s geography and expect to be in business just like that,” he said. 
 
Karayannopoulos spoke at the summit just hours after it was announced that his company was awarded a grant of up to €18.7 million ($25.3 million) from the Estonian government under Europe’s Just Transition Fund for its rare earth permanent magnet manufacturing plant in the Baltic state. It was reportedly the first ever grant given out to a critical minerals company in the European Union. 
 
Both that facility and its Greenland project are part of the Toronto-based company’s aim to diversify rare earth sources and expand supply chains. 

Karayannopoulos’ talk was among several presentations and panel discussions held at the summit where the subject of China was prominent.  

Beijing’s top-down advantage 

Of the many ways by which China has climbed to the top of the critical minerals market, its political system – unburdened by electoral mandates – is a major factor.  

“[China] has a longer term outlook than we do in the U.S. and we teeter totter more than China because of the political structure,” said Jacob Koelsch, a research associate at government relations firm J.A. Green, on a panel about government investment in critical minerals.  

“We can’t match their continuity of planning and development,” he said.   

And China’s massive critical minerals development can be organized through longer planning periods than in democratic countries, explained Alastair Neill, director of the Critical Minerals Institute, on a panel about critical mineral extraction and processing timelines.  

“The Chinese don’t look at the next quarter. They look at the next decade. Two decades down the road.”  

Even though China “dominates” the global market for mining nine out of 13 critical minerals, Neill said, the country also excels in the processing of cobalt and tin.  

Positive developments in West 

However, the summit speakers weren’t all rending their garments over the tough competition with China.  

Some, like Kirl Mugerman, president and CEO of Geomega Resources (TSXV: GMA) noted some steps in the right direction in the West.  

To begin to compete with China on mineral extraction and production, Mugerman said North America companies have to find ways of making their processing more economical.  

“[With] production and processing technologies, we need to make them 50% better [or] 75% better. Change the rules of the game. Innovation,” he said.  

“Universities have to be getting involved in research. There really has to be a different mentality going forward,” he said, noting that the Saskatchewan Research Council (SRC) has been a strong player in driving innovation.   

In 2020, the SRC signed a binding term sheet with Vital Metals (ASX: VML) to negotiate agreements for the construction and operation of a rare earth extraction plant in Saskatoon, Sask. to produce mixed rare earth carbonate. Through its Canadian subsidiary Cheetah Resources, Vital operates Canada’s only rare earths mine, the Nechalacho project in the Northwest Territories.  

In the U.S., the Critical Materials Institute, founded in 2013 by the Department of Energy is working to help cultivate domestic skills to overcome what Marty Weems, president of American Rare Earths Limited called “a desert of talent in processing in America.”  

The combination of investment in skills with political developments like the Inflation Reduction Act could lead to “one of the greatest industrial actions since World War Two,” Weems said.  

“Two words you will always see out of this [Biden] administration are ‘and allies.’ They’re not looking to do this alone. It is why we engage with SGS labs and… the Saskatchewan Research Council. We know the talent is going to have to be global among the allies, especially to solve the processing piece. And we want to be a part of that in a disruptive, environmentally friendlier way than the current tech sector.”