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April 23, 2025 - The David Knight Show
20:51
China's Rare Earth Stranglehold: A Wake-Up Call for America
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Joining me now is Josh Ballard.
He's CEO of USA Rare Earth.
They're traded on NASDAQ.
They have a website as well on NASDAQ.
Their symbol is USAR on the web.
You can find them at usare.com, if I got that correct.
If I didn't, Josh, you can correct me.
And I want to talk to him because he's been on the forefront of this Rare Earth issue.
And that is really kind of at the forefront of what is going on in this trade dispute with China.
We hold all the cards when it comes to tariffs and who's going to buy what from who, but there are other ways that they can strike back, and one of the things that they have done is to use their position of dominance in rare earth minerals to essentially shut down supply of critical things.
So thank you so much for joining us, Josh.
We've got a lot of questions about rare earth minerals.
Thank you for joining us.
Yeah, thank you for having me.
I appreciate it.
First of all, tell us a little bit about what rare earth minerals are.
Why do we call them rare?
Rare earth minerals, for the most part, actually aren't rare.
They are pretty abundant, but what's difficult about them is you don't have a vein of them in the ground.
So when you go get coal, you have a vein of coal, you can dig it straight out.
Rare earths are dispersed throughout the rock.
So there's a lot of science that goes into pulling it out of the rock so that you can then separate out the minerals into ores that can be used in the metals and the magnets and so forth.
So it's hard.
Some are super rare, some are not so rare.
China, by the way, focused on the super rare ones, you know, to your point, that they could really control.
But they're critical to modern technology and they're critical to, you know, really how we live today in surprising ways.
Yeah, especially because we see a lot of these, you know, it's gotten to the point where we have these super magnets that are very small.
Of course, we use them in all kinds of things.
You can have it with an earbud speaker.
It's just so many different things.
And the fact that you can make very, very small, very strong magnets, I think that's a large part of that.
And, of course, with everything going electric.
Magnets are absolutely essential to convert electricity into some kind of movement or some kind of transducer, whether it's moving a speaker or whether it's moving a car, you know, the motor or something like that.
So it's really key.
To the kind of devices that we have.
It's really key to a lot of consumer electronics, key to military things especially.
How did China...
Now, tell me, you probably know more.
I thought it was somewhere around 70% of the minerals they've got control of, but of the refinement, they've got like nearly 90%.
Those are the figures I've seen.
Is that correct or correct me if not?
That's correct.
Yeah, that's correct.
Now, then you have to separate into what rare is.
And so, we'll take one step back.
The context of this is in the early 90s, there was a vice premier in China who said, Middle East has oil, China has rare earths.
This has been their focus for over 30 years.
And they've been very deliberate about it and built up a pretty strong supply chain.
To your point, today it used to be over 90% mining as well.
It's now about 70% mining.
We have about 15% of it here in the U.S. of certain light rare earths that are a little bit more abundant.
Over 90% of the processing happens in China.
Not only 90% of the processing, which is just to get the ore, but they also have over 90% of the metal making.
And they also have over 90% of the magnet making for all those magnets you were just describing.
So they really control a lot of the supply chain.
And then when you focus it into specific minerals, this export list, for example, that just occurred about two weeks ago that went into play.
Those minerals, they control for the most part, not every one, but for the most part, over 98%.
And the critical ones, gadolinium, dysplosium, terbium, those are over 98% for sure.
These are names that I never, I don't know.
I got an electrical engineering degree.
I've never heard of these things.
Yeah, and they're so critical to our lives.
Gadolinium, by the way.
Is the mineral that we use when you get an MRI scan, it's the mineral that creates the contrast around our organs.
This is going to affect millions of MRI scans around the country.
It becomes personal.
This isn't just political.
There's other minerals in that list that are used to fight cancer.
And then there's minerals like dysprosium and terbium that are used.
They can handle a lot of heat, so they're used in rocket systems.
They're used in high-performance magnets that you'd use not only in EV, but in high-performance machinery in defense or in drones.
So these are really important minerals and important magnets and technologies for our society today.
Now, they've been very strategic.
One of the things that I've heard, and you talked about the fact that they're not so much rare as they are difficult to get.
I guess, you know, we could marvel at unobtainium, you know, if we want to get one of those things there.
But that's not a real one, but that's straight out of Marvel Comics.
But it is kind of like that.
It's really hard to get this stuff.
And one of the things that I've heard that China has done is...
You know, using very crude and dirty methods of extraction, using slave labor and a lot of other places, that's helped them to get a monopoly on this as well as just the geographical location of this stuff.
So from that standpoint, where do we stand in the United States?
Because we also have...
Voluntarily in the West, we have given China a huge advantage on energy costs.
They can, again, do as cheap and dirty a coal as they wish.
We're not allowed to even have clean coal plants and that type of thing in many places in the West.
Everybody's shutting down their manufacturing facilities.
So we have a real issue with this.
And so how do we get out of this situation, even if we've got 15% of them?
How is that going to affect our country if our costs of manufacturing went higher because our energy costs are higher, if we are going to have a clean and responsible way to handle these things rather than just doing it and who cares what happens approach that the Chinese have had in other countries?
Yeah, and I think that's a great question.
And, you know, as Americans, as humans, we want to do this as responsible as possible as we bring it back to the U.S. We can.
There's ways to do it much cleaner.
So for example, in rare earth mining, of course you're mining, you're taking things out of the ground.
You can't avoid that for sure.
But what you can do is you can reduce dust levels.
You can use a lot of acids and reagents within this process to get the minerals out of the rock and to separate them.
You can recycle those reagents.
There's ways you can recycle the water that you're using within the plant.
So there's things that we can do.
To be much more responsible about it than certainly they are in China.
And then in China, not only are they responsible, but then of course the government's also subsidizing and just accelerating.
And what we can do here in the U.S. is, one, we can be more responsible, but then we have to create a moat, though.
We have to protect the industry that we're trying to build here now, because we do need it domestically.
You can argue in favor or not of the current tariff regime.
What I can tell you is, when it comes to rare earths, rare earth magnets, Not only rarest, but also other critical minerals that have been in the news a lot lately.
We do need to create a moat.
We need to build this industry back here in the U.S. It's too important to our day-to-day lives.
It's too important to our defense.
And to rely on one single choke point like China is just a mistake.
Love or hate China, that moment there is a mistake that we need to fix.
And creating this moat, whether it's through support through the government, whether it's through a tariff regime, whether it's through making it less onerous to build a mine, for example, permitting and so forth.
While making sure we're still responsible humans, you know, we still need to be responsible, but we don't need to kill a business to be responsible, which is what we've been doing in the mining world for all these decades.
Oh, yeah, yeah.
I guess my question is, as I look at it, is how do we get from where we are right now to a position of, you know, where we have some self-sufficiency in this?
And, you know, that would apply to pretty much everything.
But in the rare earth situation, we, you know, we look at this abrupt, Change that is here.
And, you know, being shut down right away by China.
How do we get through this transition?
What does the interim situation look like?
You say we've got 15% supply here.
How much pain is that going to cause in the U.S. during a transition period?
Because there's going to be a period of time that you've got to get your mining up and working.
You've got to get manufacturing up and working.
That's not going to happen overnight.
So what happens in the interim?
Are we going to see sky-high prices in the interim?
Before I answer that, it's 15% of overall rare earths, but fortunately we have 15% of the easiest.
The ones in this export list, we have zero.
Wow. So this is a challenge for us, and it's going to affect us in the very short term.
I mean, there's some stockpiles, right?
I wouldn't call it a stockpile.
There's some inventories of these minerals and these metals here in the U.S. Are there some in friendly countries, for instance, like Australia or whatever?
Aren't there some there?
Or do they have the important ones?
Yeah, they don't have this export list necessarily.
There's some coming out of Brazil, but they get sent to get processed in China.
And all the processing goes through China.
So we're going to have this period.
I don't know what we're going to do.
I mean, maybe we're going to work out ways to do it through intermediaries.
Maybe we'll come to some kind of agreement so we can start to get some of these minerals back for a while.
The short term is tough because there's no short term answers.
And if you break apart this supply chain, and this is what we're working on as a company, is this entire supply chain.
Trying to do it domestically.
If you start, I'm going to start with metals and magnets.
Those, you know, what I've been talking to the government about is it's time for a Marshall Plan.
We need to look at this as something that has to happen quick.
We need to invest in it.
We need to bring private investment.
This has to be a private-public partnership.
We need to make this happen as quickly as possible.
And on the metals and magnets side, we can surge that.
And over the next year or two, make a big difference, right?
Not solve the entire problem that we have, but we can make a big dent in it for sure over the next couple of years.
Certainly, we have a plan that we could uplift this within a couple of years.
We could build our whole magnet facility, which will make hundreds of millions of these magnets.
We could build metal making here in the U.S. This can happen.
We can be the first domestically, you know, full domestic source of this here in the U.S. But on the deposit side, on the mining side, on the processing side, You can build a mine.
You know, that might not take so long to break up rock and grind it.
But the processing of that rock to get out the minerals, there's a science behind that that we've lost.
We've been working on it for years.
A couple of our peers have been working on it the last few years.
We've made progress, but there's still work to do.
And that doesn't happen overnight.
You know, even if you have a great deposit, like our deposit in West Texas is...
An incredible deposit with all these rare earths on this export list.
That's what we're heavy in.
We're heavy in the heavies is what I call.
These are called heavy rare earths.
50-70% heavy rare earths.
But we still have to work through the science of that.
Then we have to build the processing techniques we're going to use.
We are building it.
We have to build that first demo plant and then build a mine.
None of that happens overnight, right?
But we can surge it.
We can get support from the government.
We can shorten that cycle.
It's not decades.
I think it's over the next few years we can build it.
That's going to take a little bit of time.
So we've got this period we've got to figure out for sure.
So what you're saying is, even though we have some in Texas that we know of, the minerals there, the whole processing, refinement, manufacturing process, we don't have that.
We don't have that knowledge, and we've got to discover that, right, as well as build the factories.
Is that correct?
That's right.
That's correct.
Every deposit's different as well, right?
There's different mix of minerals, there's different impurities, there's different science you have to use to approach it.
So it's a, you know, it's a puzzle.
You gotta uncrack at every deposit.
So it's just not an overnight thing, but we have to rebuild this in the U.S. There's absolutely no doubt we've got to figure out a way to do it.
Really caught us flat-footed, didn't they?
I mean, they thought strategically about this, and we've just been kind of taking the path of least resistance for quite some time.
And all of a sudden, because of trade dispute, it looks like it's going to be shut down, and it's going to take years for us to get this thing together.
So your company is working on the entire supply chain then, right?
That's right.
From getting it out of the ground to processing and refining it and then manufacturing.
Into finished product, maybe even into magnets.
Is that correct?
That's right.
In fact, we're looking at taking out of the ground in West Texas, processing in West Texas, and then metal making and magnet making here.
I'm in Oklahoma today, out here in Oklahoma.
We're in the process of building a large 300,000 square foot facility, magnet making facility, and future metal making facility here in Oklahoma.
It's going to be the first largest facility, really, to serve the entire magnet market here in the U.S. It's going to make hundreds of millions of magnets, and we're commissioning our first line beginning of next year.
And we're already making magnets.
We have a big lab, industrial lab, that we're working through to start working with customers that we commissioned last month.
So we're moving pretty quickly, and the question is now how quickly can we move?
It's all about capital and execution.
And we need to get the capital in, government, private, all together, to push this fast.
We can build as fast as we can get capital in to build it.
But we'll be a significant asset here in the U.S. here in the short term, for sure.
You know, of course, I think back to World War II.
We got caught flat-footed in a lot of critical things like rubber.
Stuff like that, and we lost the supply of those types of things that came up with synthetic rubbers and stuff like that.
Is there any possibility that these things can be replaced, just like they replace natural rubber with synthetic rubber?
Are you looking at alternatives to rare earth that might be substitutes that could get there?
It's hard.
You know, what's special about rare earths are, if it's a metal alloy, is the properties that they have.
They have special properties that can withstand heat that have superconductivity.
You take a critical metal like gallium, which was also banned a few months ago.
Also, we're very rich in gallium in our deposit.
Gallium is used in the Patriot missile system, for example, which is why China targeted it.
It's also used in semiconductor because of its conductivity and its ability to withstand heat.
It helps miniaturize.
Semiconductors and speed them up.
So, yeah, we can still make semiconductors.
Yeah, I'm familiar with gallium.
That's been used in semiconductors for quite some time, yeah.
Yeah. And we just never bothered to have a supply of it.
That's pretty amazing.
We never bothered.
Yeah, and it's plain on the plains day that we should have done this.
So, this is not a surprise to the industry at all, by the way.
Wow. But when it comes to rare earth magnets, the key is, in some areas you can replace them, but the key is they're so powerful.
And so small, the power and how small they are, you know, it's like 10 times smaller.
So when you think about a drone and the magnet it needs in a drone, like there's limitations because you can't put something too big.
It makes it too heavy.
If you think about a speaker, same problem, right?
Now you can make a less, a speaker, you can just make it, we didn't always use these magnets, you can just make it a less powerful speaker.
You know, a permanent magnet, these rarest magnets in the speaker are super small.
They create 50% more base and they're like a third or tenth the size or something.
There's a huge difference in power with these.
If you think about Tesla, you put it in beast mode and you put it on the accelerator and it feels like you're in a roller coaster.
That's these magnets, these permanent rare earth magnets.
Turn that on and turn that drive and boom!
You're off, right?
And you can't do that.
The weight and the size are going to be too big.
So there's limitations in terms of how far we can take it.
That's why these are important.
I think we just need to figure it out here.
Not domestically.
Yeah, it is amazing.
I mean, we're in, I guess, you could say we're in a tight spot now with this stuff.
Let me just ask you, this is kind of a wild question.
You know, I'm always looking at this Greenland stuff, and everybody's like, there's a lot of stuff out there.
But I also hear that it's extremely hard to get the stuff out of the frozen ground and everything.
I mean, that's not going to factor into anything, is it?
Or is that a factor, do you think?
No. I think it's great marketing, but the reality is Ukraine, Greenland, they do have a lot.
Greenland has a lot, right?
Ukraine doesn't have any rare earths much, and what they do have is in Russian-controlled territory.
But most of those countries, they're decades away.
So what we need to do is work on what we have right here.
We have it here.
I mean, we have, when you break apart the light rare earths, which are...
Cerium and lanthanum are used in a lot of technologies and ceramics and these LCD screens we're looking at now.
All sorts of places you use these.
Lanthanum is also used in batteries.
Very important.
We have a ton of that stuff.
And we make a lot of it here.
We just don't process it here.
Neodymium, presiodymium are the key minerals that go in ore that goes into these magnets.
We make some here.
We have other deposits that we can develop that we know of.
And then we have a heavy deposit like ours that we know we can develop.
Yeah, it's going to take two or three years or four years.
We can do it a lot faster than the decades away that will happen in a Greenlander.
Or Ukraine, or choose your other country.
There's lots of known deposits.
Not many of them are close.
We have a few here.
Let's go for it.
Well, it's good to hear you verify that.
That's what I reported, too.
I've had a lot of sources that said, you know, there's not that much in Ukraine, and what's there is not in the territory that's being controlled by the Ukrainian government.
And so, yeah, there seems to be a real disconnect.
With reality in many cases as we look at this stuff.
But the reality is that it's going to be a difficult position.
And they've really got a strategic advantage in this, and they're willing to use that as leverage.
And we have given them, not only have we walked away from these things like Gallium, for example, that is something that we have been used for decades in semiconductors, and yet we didn't bother to secure a supply of it.
Incredible. It's amazing that we let ourselves get into this kind of a situation, and it's going to be very difficult, especially just going cold turkey, and that's really what's happening now.
It's going to be cold turkey to do this and to create an entire supply chain.
Again, your company is usare.com.
It's where people can find you.
It's USA Rare Earth, and so it's USA Rare Earth.
R-E as in rareearth.com.
And on NASDAQ, you were there at USAR.
Is there anything else that you would like to tell us about this as we look at this monumental task in front of us?
Yeah, I'd just like to tell everybody, we're working hard to solve this.
We want a domestic supply chain.
We want to be the first to have a fully domestic supply chain.
We're very serious about it.
And we're going to execute on it.
And it's an exciting time for us, for sure.
It's been very interesting, but we're going to deliver on it for the American people and for our shareholders.
That's great.
We're going to make it happen.
Well, as I say, you know, the Chinese curse is that may you live in interesting times.
And I guess the Chinese are cursing us by giving us some real interesting times to try to adapt to things on the spur of the moment.
Without any preparation or forethought.
It seems to be where we are right now.
But I hope you're successful.
I hope you get this through very quickly.
Thank you so much for joining us again.
USARE, as in USA Rare Earth.
USARE.com and on NASDAQ at USAR.
Thank you so much, Josh.
I appreciate it.
Thank you for having me, Dan.
Appreciate it.
You have a great one.
Best of luck to you.
Thank you.
*music*
The common man.
They created common core to dumb down our children.
They created common past to track and control us.
Their commons project to make sure the commoners own nothing.
And the communist future.
They see the common man as simple, unsophisticated, ordinary.
But each of us has worth and dignity created in the image of God.
That is what we have in common.
That is what they want to take away.
Their most powerful weapons are isolation, deception, intimidation.
They desire to know everything about us while they hide everything from us.
It's time to turn that around and expose what they want to hide.
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