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Rare Earths Crisis: China’s Monopoly Is a Wake-Up Call for The West
May 5, 2025
Justin Chan, Head of Research at SCP Resource Finance, sheds light on China's overwhelming grip on the rare earth market, processing over 90% of heavy rare earth materials. He explains how this dominance affects the pricing of critical technologies like EVs and defense systems. The discussion reveals the harsh reality for junior miners, with many struggling to turn a profit. Chan also highlights the potential of the White Mesa mill in the U.S. to disrupt this monopoly, and examines the cyclical nature of metal prices, particularly uranium.
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Quick takeaways
- China's monopoly on rare earth processing creates significant pricing power, influencing key industries like EVs and defense tech.
- Despite the high demand for rare earths and uranium, mining profitability remains challenging due to execution risks and market complexities.
Deep dives
The Challenges of Mining Profitability
Mining profitability is notoriously difficult to achieve due to various risk factors associated with different stages of mining projects. For example, early-stage exploration often depends on the team's expertise, the geological setting, and timely execution, which can be challenging to align. Many mining companies face significant hurdles in translating successful drilling into cash flow, and historical data shows that out of 4,000 mining companies, many fail to establish profitable mines. As a mine ages, its profitability also tends to decline, necessitating that successful companies continuously replace their resources and invest in new projects to maintain profitability.
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