While the periodic table may depict rare earth metals in one of the two additional rows thrown in at the very bottom, almost as an ad-hoc afterthought, these elements shouldn't be overlooked. They play significant roles in many large disparate industries and geopolitics alike.
Magnets are perhaps the best-known application for rare earth elements (REEs). Permanent magnets made from alloys of REEs with transition metals and boron enable commercial production of the strongest permanent magnets known today. Stronger magnets allow for smaller, lighter replacements of traditional ferrite-based and alnico magnets. From computer hard drives to neomagnet building set toys to open MRI scanners, rare earth magnets are finding their way in to products all around us both large and small.
In clean energy generation and transportation, rare earth magnets play an enabling role. Inside wind turbines, neodymium and dysprosium magnets are used in the wind-powered electrical generator with estimates of over 100 kg of rare earth metals for 1 megawatt of generation capacity. Hybrid and electric vehicles utilize electric drive motors with rare earth permanent magnets. Replacing heavier and less powerful magnets with rare earths improves fuel efficiency by making the electric motors themselves more efficient and the vehicles lighter.
Beyond magnets, rare earth metals are important components of lasers (e.g. Neodymium and Yttrium in Nd:YAG lasers) catalysts (e.g. Lanthanum for fluid catalytic cracking), phosphors (e.g. Europium for red/blue), and high-temperature superconductors (e.g. Yttrium in YBCO).
Today, about 90% of the world's production of REEs comes from China. The self-imposed export quotas and mine closings in China over the past five years or so have led to both economic and geopolitical concerns culminating in a formal complaint at the World Trade Organization filed in 2012 by the US, EU, and Japan against China. The rationale given by China for its rare earth restrictions is related to environmental protection and concerns around over-exploitation. In March of this year, the WTO ruled that China had in fact violated global trade rules; this ruling is now under appeal.
In 2010 and 2011 the price of most rare earth metals skyrocketed after China announced its reduced export quotas. Since then, prices have dropped significantly and many of the proposed projects during that boom period have been shelved, as they are no longer economical. Politics aside, economically and sustainably recovering rare earth metals is difficult. Despite their name, rare earth metals aren't actually that rare but they typically occur in ores at low concentrations and often in tandem with radioactive elements like uranium and thorium.
Energy, resource, and capital efficiency are important areas of focus for us here at Pangaea. How can we do more with less? And, how can we better use what we've already got or what we've thrown away? In the global search for sustainable solutions to these important questions, a variety of approaches have emerged:
Mines are opening (or in some cases, reopening) outside of China in response to increasing demand and tightening supply. In tandem, mine tailings from US gold rush-era mines along with uranium mines across the globe are being reexamined as economically viable sources for rare earths. Improved separation and refining technologies are also being investigated and could make previously uneconomical deposits commercially feasible. Reducing the carbon emissions produced during the oxide-to-metal conversion step is an important way to clean up an often-overlooked portion of the dirty rare earth supply chain.
Recycling is another avenue being explored. Contained in discarded electronics like computer hard drives, mobile phones, and fluorescent light bulbs are appreciable amounts of REEs not to mention precious metals like silver and gold. Recently, a University of Houston spinout won the United States Department of Energy National Clean Energy Business Plan Competition for their idea to reclaim neodymium and dysprosium from recycled electronics using a low-temperature solvent-based approach. The US government has also recognized the need to replace or reduce rare earth metals content in permanent magnets. ARPA-E has awarded over $30M to projects within the Rare Earth Alternatives in Critical Technologies (REACT) program.
Rare earths represent a class of elements that impact all of Pangaea's focal areas and the operations of many of our Strategic Limited Partners. In energy, electronics, sustainability, and health, a little bit of REEs goes a long way. We continue to proactively assess the landscape for breakthroughs in permanent magnet materials technology as well as rare earth metals production, extraction, and recycling. For both rare earths and venture capital investing, effectively separating out the desired materials and opportunities is absolutely critical.