According to a report by The South China Morning Post on August 27th, a senior American diplomat stated at the largest mining exhibition in Latin America that Brazil has not yet responded to two proposals from the United States regarding the formal establishment of key mineral cooperation relations.
While Washington is intensifying the construction of a rare earth supply chain outside of China, this means that the United States has yet to reach a bilateral agreement with Brazil.
American Embassy in Brasília economic counselor Matthew Lowe stated that Washington had invited Brazil to join the “Minerals Security Partnership” several years ago. This American-led initiative aims to coordinate investments in the mineral supply chain, but the US has not received any response from Brazil.
In February of this year, the United States also submitted a draft framework agreement to Brazil, which did not receive any response either.
On Zhou Er, during a meeting with attendees in Belo Horizonte, Luo Zhou said: "Whether what happens is of significance or not, we may have to wait until the election." He was referring to the presidential election scheduled for October in Brazil.
Luo made these remarks at the Exposibram Mining Conference hosted by the Brazilian Mining Association. Officials from France, Canada, Australia, and the United Kingdom were also present. Most of these countries have already signed similar agreements with the United States, yet Washington has been unable to get Brasília to sign such agreements.
During the entire meeting, representatives from these five countries discussed how they planned to weaken China's dominance in the mining processing industry. However, they never directly named China.
Brazil has the second-largest reserves of rare earths in the world, after China. It is this resource base that attracted representatives from the five countries mentioned above to Brazil’s interior to attend this mining exhibition.
When it comes to the "separation" process, Luo was very close to directly naming China. The so-called separation involves using chemical processes to divide the mined ore into various single metals that are used to make magnets. Nearly 90% of this work worldwide is carried out by China.
He said, “Many of our countries are developing this technology from scratch. This technology is in the hands of a country that has a long history in the rare earth industry. And this is a problem we all face together.”
French cross-sectoral representative for strategic minerals, Benjamin Gallezot, stated that the bottleneck lies in refining, not in mining. He described this market as being influenced by "someone's dominance or certain restrictions."
When asked whether it is realistic to establish such processing capabilities outside China, he stated that Brazil has the necessary energy, labor force, and approval conditions. Galzó said, “There is nothing special about processing.”
American Rare Earth company (USA Rare Earth) is expected to complete the acquisition of Brazilian mining company Serra Verde within a few days following shareholder vote on Friday.
On Monday, the company completed a financing of $1.55 billion. This funds will be used to establish a company jointly owned by U.S. government agencies and private investors. The company will purchase all the production from this mine in a manner that guarantees the lowest possible price over the next 15 years.
Serra Verde operates the Pela Ema mine in Goias state, central Brazil. The mine will start production in 2024 and is the only mine outside Asia capable of producing all four rare earth elements required for permanent magnets.
These magnets are used in electric vehicle motors, wind turbines, drones, and guided weapons. Currently, no other alternative materials can achieve the same performance.
Pela Ema mine also produces dysprosium and thulium. These two heavy rare earth elements can prevent magnets from losing their magnetism at high temperatures, while most Western rare earth projects are unable to produce these two elements at all.
This difference can be explained by the local geological conditions: these metals are loosely present in soft clay near the surface, rather than being locked within hard rocks. This geological structure is similar to that found in southern China, and it is an important foundation for China’s dominance in the field of heavy rare earths.
On June 22, Beijing listed the American rare earth company on the export control list. Additionally, MP Materials and eight other American companies were also included in the list. As a result, Chinese companies are prohibited from selling military-military dual-use equipment to these companies. China stated that this measure is a countermeasure to Washington's expansion of its so-called list of Chinese companies with military connections.
Nevertheless, the mining site at the heart of this deal still relies on China, as Serra Verde has previously committed to supplying the production of Pela Ema mine to Chinese processing companies through a ten-year contract.
The company renegotiated the contract in December last year, shortening the contract period by nearly 8 years. However, these semi-finished products are still being transported to China, where they are further processed into various single metals.
Some left-wing lawmakers in Brazil have requested that the court declare this acquisition transaction invalid, while the Brazilian antitrust regulator approved this transaction just this month.
Meanwhile, the U.S. Embassy has been trying to promote relevant agreements at the state level in Brazil. In March of this year, the U.S. signed a memorandum of understanding with the state of Goias. Luo said that this matter “raised some issues,” as critics questioned whether the governor had the authority to reach mineral agreements with foreign governments. He said that the U.S. hopes to try similar cooperation again in other parts of Brazil after the elections.
Lo also criticized a bill currently under consideration in the Brazilian Senate. The bill would authorize a newly established presidential committee and mining regulatory agencies to approve or prevent changes in control over mining rights held by companies.
He said, “As long as it is not influenced by political factors and is predictable, there is no problem. But this mechanism should not change with every four-year government turnover.” The bill was passed by the Brazilian House of Representatives in May, and is currently listed as part of the agenda for the last parliamentary session before the vote in October.
On the same afternoon, at a discussion held on the other side of the venue, Carlos Eduardo Braga Filho, who is in charge of Jervois’ Brazilian operations in the cobalt and nickel processing industry, argued that mineral processing should be kept within Brazil.
Braga Filipe said in Portuguese: "You cannot move a mine to another country, but the processing step can be moved. So, why process it here? You must create value and also have competitiveness."
Subsequently, he directly pointed to China, and in a move unprecedented by any of the five-nation diplomats at the venue's other side.
He said, “I hope we have rare earths here, but I also hope to have rare earths that can be sold to China. We might ultimately decide to do so, but in our understanding, this is not the best course of action.”
