Background on Rare Earths and Their Importance
Rare earths are a group of 17 chemical elements that are challenging to extract and refine. Some of these elements serve as raw materials for manufacturing essential magnets used in technologies related to the energy transition. The United States aims to reduce its reliance on China, which currently dominates 60% of global rare earth extraction and 90% of refining capacity.
Financing Agreements Between Brazilian Mining Companies and US DFC
Despite the Brazilian and US governments not yet reaching an agreement on critical minerals, two Brazilian mining companies, Serra Verde and Aclara, have signed financing contracts with the US state-owned Development Finance Corporation (DFC). These agreements could potentially grant the United States priority access to their rare earth production.
Serra Verde and Aclara: Key Players in Brazil’s Rare Earths Sector
Serra Verde and Aclara, both located in Goiás, have entered into financing agreements with DFC. These deals could lead to larger projects in the future.
Impact on Brazil’s Negotiating Power
Brazil, which holds the third-largest global reserves of rare earths after China and Vietnam, faces reduced bargaining power due to these agreements with the United States. Serra Verde, the sole operational rare earths mining company in Brazil and one of the few outside China, is owned by two US investment funds and a British fund.
DFC’s Strategy for Securing Critical Minerals
The DFC aims to ensure that the United States diversifies its supplier base beyond China for critical minerals. The specifics of Serra Verde’s contract with DFC remain undisclosed, but sources suggest that Serra Verde likely committed to supplying part of its production to the US market.
Current State of Rare Earths Refining
Currently, only Chinese refineries and one in Malaysia can separate rare earths, a crucial step in obtaining oxides demanded by automotive and defense industries. However, US companies, with government support, have invested billions to develop their own rare earths industries.
Key Questions and Answers
- What are rare earths? Rare earths are a group of 17 chemical elements that are difficult to extract and refine. They serve as raw materials for manufacturing essential magnets used in technologies related to the energy transition.
- Why is the US seeking alternative sources for rare earths? The United States aims to reduce its reliance on China, which currently dominates 60% of global rare earth extraction and 90% of refining capacity.
- Who are Serra Verde and Aclara? Serra Verde and Aclara are two Brazilian mining companies with advanced rare earths projects. Serra Verde is the only operational rare earths mining company in Brazil and one of the few outside China.
- What is DFC’s strategy regarding critical minerals? The DFC aims to ensure that the United States diversifies its supplier base beyond China for critical minerals, such as rare earths.
- Who are the key players in the US-Brazil rare earths financing agreements? Serra Verde and Aclara, both Brazilian mining companies, have signed financing contracts with the US state-owned Development Finance Corporation (DFC).
