Hugh Broadhurst: Aclara Resources Building a Western Heavy Rare Earths Supply Chain | EV Magnets, Dysprosium & Terbium

0:00I'm Michael Fox and this is a Prospector podcast and I have joining me today. I'm going to get an interesting guess. I have Hugh Broadhurst who is the COO of a company called a Clare Resources. Welcome to the podcast you. Michael, great to be here. Yes. I'm happy to have you on here. We talk a lot about critical metals. We talk about rare errors but we don't talk about them specifically. We kind of lump them in with everything else within the discussion and you guys are a rare earth processing company and this is an opportunity for us to learn more about the significance of rare errors and some of the challenges that are being faced but before we get into too far into the weeds in that discussion let's talk about a Clare Resources. Let's

1:04explain to everybody who you guys are and what you're doing. Absolutely. So a clara is developing two mines in South America. These are a very special class of rare earth mine called Ionic clays where we are focused on heavy rare earth feedstock and perhaps later in the show we can talk about the differences between heavy and light rare earths and we are generating a vertically integrated supply chain all the way from mine. So those two mines in South America to alloys. So the next step in the chain is in Louisiana. We are developing a separation plant to separate the individual rare earths into their oxides and then also a metals and alloys plant that will reduce the oxides to their metals and then produce the alloy. Okay. So if my listeners are like me that was literally Clare's mine for all of us which you know you're laughing because heavy

2:07rare earths actually kind of are like a mud. So let's start and break this down to its basic acids. When somebody's talking about rare earths and general terms what are they talking about and how does it break out like I know it's multiple elements we've just talked about heavy rare rare earths versus light rare earths. I think there's a third category if I'm not mistaken. How does this all break out so that if someone is having a conversation they kind of can get a general just to what's what people are talking about. Absolutely. So the rare earths are a block of elements in the at the bottom of the periodic table that you'll see them. So they're called the lanthanides and the 15 of them atomic numbers 57 to 71. So it's a whole group of elements

3:08and I think something that you know we we'd like to group them together and talk about the rare earths but they all have different properties different applications different supply characteristics different deposits that you you find different ratios of them in. So it it it all does become a bit opaque but I think the I can demonstrate it a little bit by talking about what rare earths are used for and the principal use are for magnets. So an an EV is a good example but they're also used a lot in robotics these humanoids you're seeing drones, uh, feet old drones you know. So anywhere where electric motors exist to convert power into motion when you need high torque. So an EV is a good example so in the motors the traction motors that drive an EV you have rare earth magnets so that you can get that torque when you hit the accelerator. So these are rare earth

4:13magnets that are produced predominantly with near-denium and precedentium. So these are two of the light elements. However when you're driving an EV you're putting a lot of energy through those motors and so they heat up and if you only had near-denium and precedentium in there you would or NDPR it's a little bit easier. If you only have NDPR around a hundred degrees Celsius they'll lose magnetism. So if you put two to three percent of heavy rare earths so these and we're just talking about molecular weight in terms of light versus heavy. On the heavier side of the chain you have turbium and disproseium. If you put two to three percent of these elements into your magnet alloy then you can run at the higher temperature. So these when a claris says we're talking about we're interested in the heavy rare earth supply chain these are the ones we're interested in. And in

5:15particular when you read in the news about China controlling the rare earth supply chain these are the two that are in particular the focus because over 99 percent of the world's dy and tb supply is coming from China which gives them tremendous tremendous control. And in terms of your vehicle perhaps you only have sixty dollars also of disproseium and turbium in a vehicle get 99 percent of that comes from China gives tremendous control hence the interest in developing a completely new heavy rare earth supply chain. Okay so rare earths are on the critical metals list for most western companies. You know we talk about it in terms of electric vehicles that's that's key to the supply chain but these same metals are they not used in military drones

6:21and guidance systems as well and is that not the the real critical reason that they're on the on the critical metals list. Yeah I mean I think that's one of it but a huge part of the economy is attached to it as well. So it's just incredible they did things like a gadolinium shows up in in electronics very linked to AI so that it's just a huge number of different uses. Okay so electric vehicles might use the most but that's not everywhere that's not exactly exactly. So for instance you also have a different class of magnet, Samarium cobalt these are so Samariums the rare earth and that it sits between NDPR and dy tv in a kind of middle group that those Samarium cobalt magnets can be used at ultra high temperatures.

7:28So it's really application specific but it's remarkable how often these elements show up in high technology applications. Okay because one of the arguments that I always hear with regards to rare earth it's an argument I personally have a hard time wrapping my hair around that that's why they're a critical metal and if you always talk about your cell phone and that's what causes your cell phone the vibrate when it's ringing and I'm thinking to myself going so by cell phone doesn't vibrate am I not gonna you know still hear the rain and still pick up the phone. Really how important is that but it's not just that it's all these other applications is what's making it critical. Absolutely and I can't remember the exact values right now but if you look at the USGS's critical mineral reports there's just a huge proportion of our economy tied to rare earths

8:34where they're critical and so even though they're used in very small amounts it becomes an absolute you know enabling technology to enable our economy. So if you remove some of them the impact is much larger than what you would guess. Yeah that's that's true it's like we don't realize how critical these elements are because they're used in very small quantities across a lot of things in the value chain and as we say China currently controls 90% of the rare earths in the world that are entering into the supply chain but we really need to start to clarify what that actually means. It's not the China mind study percent of the rare earths therefore we need to mind more rare earths in the West. It's that they have cornered the market on the processing of the

9:38rare earths they have taken and they can process these rare earths very efficiently and effectively and then reintroduce them into the supply chain at the manufacturing level where they where they are required and when some of these rare earths are used for defense purposes China can weaponize that processing monopoly to keep these magnets from being able to be created in the West. Is that a good way to kind of look at rare earths strategically? Yeah I believe so and for elements that go saying like dysprocium and terbium it's over 99% so it just gives tremendous control and then there's another element that's not technically a rare earth but is adjacent is yitrium. It's in a very similar supply characteristic and yitri is used in coatings on gas turbines so with a growth in AI

10:48and the need for gas turbines for power this is another element that's tied to other strategic technology so lots in this space of just the importance of how important these are to today's world it's critical that we develop a supply chain that you can rely on. So rare earths themselves are not that rare they're everywhere the challenge is having enough of them to be able to process it to the point where you can you can get usable product at the back end. Well we talk about China having 90% of this and 98% of that and then I hear in some cases the annual use for a specific rare earth could be just like a wheelbarrow fall of the rare earth.

11:50So when we're talking about these types of rare earths how much of it is needed in a given year that needs to be processed you know worldwide and then in order to break the Chinese monopoly how much of that do we need to be looking to be processed in western hands. Yeah that's a very good question I can think a good example would be like this prosium and terbium where in 2024 it's estimated because the numbers on fully clear but it's estimated that the little over 3000 tons here were produced in terms of dy-tb supply but that's growing dramatically so you know we believe by 2030 it'll be approaching 5000 tons of year requirements so there's rarely two sides of it is you know supply and getting replacing the current supply chain with one

12:58that can be dependent on and the second is just the tremendous growth that's occurring and largely driven by technology so I think there's two sides to it there's some of the rare earths that are more rare or more scarce they're not used as much in in applications there is a very low demand for however absolutely critical and then for the ones that are used more in these magnet applications there's much more supply that is required. So each of these rare earths when you're at a mine level like when we mine for other things there's like a copper mine or there's a gold mine or there's less silver mine but then there's by products within the actual you know find most copper mines have the liven of them in them you know

14:02gold generally has silver with it silver generally has lead and zinc with it. Is there such a thing as a dysperia mine as you as you say or is it a byproduct of other things that we're currently mining or are we looking at a I feel the miscellaneous rare earths where that is part of it? It's exactly the last one you said it's a basket that you get and what you have to do depending on what market you're going going after you have to look at the ratio of the rare earths so if you look at like like an EV for instance perhaps the the use rate of lights to heavies is 15 or 20 to 1 and then what you'd have to do like for a clara is when we

15:03evaluate deposits we're looking at the ratio of the lights the NDPR to the heavies the dy-tb so if you go to a typical hard rock rare earth mine that deposit will be over 100 lights to one heavy whereas if you go to ionic clays like at a clara you we are running at seven lights oh one heavy so we have a high concentration of the heavy rare earths and that's driven you know it's really driven by your deposit and and what you go after but it's very very much dependent on deposit types so the ionic clays not all but some ionic clays have a very high concentration in dy and tb and interestingly for a clara actually we're we're 30 or depending one deposit 30

16:03percent your trim and the other one 40 percent your trim so you really have to assess across all the different elements what the different ratios are and that then you know you can project to economics but also has a huge impact on how you process them so it's quite a complicated evaluation process yeah that's one of the other things that i've heard is that not nowhere earth deposit is the same each one has unique characteristics and i've been led to believe that because of these unique characteristics each deposit has to be processed differently from one another is is that true or is there some commonality deep amongst deposits that can act as kind of an initial way of dealing out things i i would say by far each you have to tune your separation to the deposit because you have you know 15 different elements that you're

17:09balancing the ratios of them to each other and they vary across the deposit as well that then drives how you how you separate them which is quite tricky so i would say definitely it's it's not a cookie cutter product that you're producing and each mine is going to produce a different mix and that mix is going to drive how you have to how you have to separate them and it's not just about changing different settings that it actually drives the equipment required for that separation so if you're while you are a rare earth miner you're looking for very specific types of deposits that you're going to be able to process more cleanly as opposed to say you're a gold miner and happen to have a little bit of rare earth that's going to have less value just to somebody then

18:09somebody has an actual rare earth mine and we're pulling rare earths out yeah i mean if i if i could you have to break it down at an element by element level and and look at the ratios and what you're producing and that and that's going to govern the value of the deposit so you said it was from 54 to 71 so that's 27 different rare earths did i do my math correct so in in the lanthanide group there are 15 so 57 to 71 okay so no i didn't do my math correctly so when you're looking at a rare earth deposit do you have all 15 elements and in there in various quantities of percentages or do the you know is there something that you know aren't in you know like

19:14this doesn't go with that and that doesn't go with that other thing is there kind of a relationship that way or is it you know everybody's in this suit together i i think every deposit is unique and there are some rules that you can apply to it but essentially you have to do a case by case basis and evaluate all of the elements so to give you an idea like our carina deposit you know we have 7 to 1 ratio NDPR to dy tb and then almost no cerium which is wonderful because this not a big demand for it and difficult to separate out so you just have to look at it on a case by case basis and because you're dealing with separating elements that are adjacent to each other on the periodic table is tricky so it's really just depends on where it falls and you know how

20:16fortunate you've been you are in identifying a deposit with favorable characteristics because the ratios of the two if you have a lot of homeyum next to dysprosium that means you've got a lot of work to do on the separation if your homeyum is low that helps you on dysprosium much like for precedentium if you have high cerium you've got more work to do there every deposit is different and that's really what drives a lot of the complexity okay so not only do you line you guys process as well that is correct and it's because of this processing why the processing challenge that a cloud is working on a vertically integrated supply chain we want to look at it holistically where we have these two mines feeding a common separation plant and we can then look at optimizing the output of the separation plant by controlling the mine plants and having

21:20these two mine plans work together to support the separation it's very complicated and we lack having total control over the full supply chain so that we can optimize that separation plant which is the most difficult part to to operate so we feel that gives a clearer a good advantage I like that holistic view because one of the arguments that often comes up when people are discussing this and people that kind of have some degree of understanding is we can mine as much as we want but of all the processing is in China they're still in charge absolutely and we we mustn't underestimate how difficult how complex that separation is and hopefully I've been able to describe that a little bit how all these deposits are different and they're going to drive

22:21a different separation plant that you're going to need so vertically integrating we feel is absolutely you have to have control of each step in the way otherwise we're not going to achieve the objectives we need okay so should all rare earth miners be looking to vertically integrate so that they're able to process their own ore and separate it for market rather than package it and shipping it over to China and then that leads me to another question which is how does China take rare earth from all over the world and be able to maintain a monopoly within a sense of efficiency given that each ore body is unique and has to be processed differently yeah I think it's it's been done since the 70s so China's built up the knowledge of what needs to be done for each ore body so they essentially

23:29have that in their control and that's what we're trying to recreate I just think it's it's the duration they've built the supply chains even if they don't control the mine however on the heavy side they do control the mines as well so I would I would say they've that whole supply chain has been built out of decades and that's what we need to recreate ourselves so it's a question that they've been doing this for a very long time and they have the intellectual property to do this efficiently and we in the west are actually lagging behind them because we've kind of dismissed it and sent all of our errors over there yeah and and the other side of it is is it's not just know how it's also the plants have been built and are there and so if you have a hard rock deposit

24:29with a high ratio of NDPR they have the facilities to separate that they have different facilities to separate the concentrates coming from the ionic clay deposits in the south of China and Myanmar so I'd say it's just a it's just a fully developed supply chain and that's what we need to recreate in the west okay so you're a part of recreating that supply chain there's there's others there's you core as well you have MP materials that that's doing some stuff in Nevada I believe there's a group in Oklahoma who it is is eluding me at the moment so we're starting to make some head roads into this when we say we're far behind 98% versus 2% I guess that's you know they're a dot in the horizon

25:29or far away from us as to what they've accomplished is there a speedy path to catch up or is this going to be a marathon rather than a sprint to catch up well I think we we can start making step changes and it's going to take some time to to catch up but implementing a supply chain such as a clara's proposing makes makes very meaningful inroads and I think we can do that relatively quickly we are working very hard at a clara to have capacity online at the end of 2028 and it's going to make a significant difference so I think we're government supporting us as well in doing this we recently had an announcement that the Exam Bank of the United States has issued a letter of interest to support a clara with a loan for the separation plant that we're building in Louisiana so I think

26:37there's there's a lot of momentum in this area and we're looking to catch up and that's going to happen it's going to take a few years to do it but it's I do believe that it is it is coming now it's it's when not if okay we've through the discussion of the broader rare earths we talked about the heavy rare earths versus the lighter rare earths but they both seem to go into the same manufacturing at different levels you guys are processing the heavier rare earths so do you need to have a partner that is processing the lighter rare earths or is that a problem for further up the supply chain where they need to have both someone like yourself it does the heavy and someone else it does the light and in fact both of this has to be you know brought brought home to the west otherwise we you know we can solve the problem on one front

27:43but China still controls it on the other front and we're still kind of stuck in the same boat I think the that in terms of when you look at a magnet supply chain you have to solve for every every element or rarely for for any technology supply chain if you're missing one you're exposed so in terms of a clara as I mentioned before we still do have light rare earths in our deposit and we will separate them and supply those to the market but they will be you know there will be need for others in that space so I think for us it's we will separate you know all the elements that are in our deposited any meaningful level where there's a market okay now you're building this plant how big is the plant like is it how much of the heavy rare earth demand in the west will you be able to supply out of this out of this particular plant I believe it's approximately

28:4915% of China's supply we have all that information on our website but in terms of the size of the plant what what might be interesting is it's it's a it'll look like a distribution warehouse it's about 300,000 square feet and with some tax with our raw materials outside and all the processing inside and we'll be producing like for instance um disprocium on on an oxide basis 200 about 230 tons per year terbium about 39 tons per year and then uh year trim um we can produce fast fast quantities of your trim so it's you know on a world scale so it really just comes down to the individual elements and um you know you have as I mentioned before you have

29:53to size your separation to match your deposit and the end user will they all be domestically in North America or will some of this start to get exported to the jurisdiction say Europe as an example I mean I think the big focus is North America but it definitely um you know with friendly nations it's it's going to be it'll start going outside just you know North America you know you mentioned the import export bank of America they've stepped up with loans there's multiple critical metals programs and such um how important are they to funding what you're doing and the rest of the industry is doing and is the American government getting getting this right and and walking the actual walk rather than you know other governments and say one thing to

30:55another I believe government's role is absolutely critical the challenge we have and we haven't really spoken about this but the other side of it is we want to provide a supply chain that our customers could come and visit us they can see where the material comes from we're operating according to the standards that the world expects today in terms of environmental and social and government governance so to do things right takes a lot of capital investment and that can be where critical minerals projects where they typically struggle you can have a decent operating cost good technology a good plan but it takes a lot of capital to do it so I think that's one of absolutely the key areas that government can help and that is helping on various critical mineral projects so we're very happy to be working with the export import bank or XM of the United States

32:00to help fund this project it's absolutely critical okay now China and the way that they can control the the marketplace they can't be happy you get a competition from the west so like there's things that they can do such as lower the price of the rare earth so that it's not economical are you prepared for such a thing or is the government able to you know to step up and you know create a stopgap to prevent China from influencing the western plants by lower prices that's a really good question and when you look at materials like lithium you can you can see that influence over the last decade or more so it's a very important factor I think with rare earths there's really two two sides to that one is on the consumer side where this has happened

33:10several times before where supply has been you know the force that's been turned off and created havoc in supply chains but then later comes back on again and I believe that at the use rate and the value in their products the rare earths are relatively low part of the total cost that the users are starting to say enough we can't be exposed to this and we are going to make tough decisions now to make sure that we have supply chains that are independent of this control and then there's another school of thought that with the growth of technology that these materials are required by China internally and so I believe we're in a state now where we're going to have to supply and the market also is demanding as supply chain that is secure

34:12so I believe it's something we have to be aware of but I believe it's sorting itself out so if that's the case you must have a line of and users feeding down your door for your supply well your trim you can I'll use your trim as an example I know technically it's not a rare earth but it's in a lot you know it's in our deposit at a high level but it's a nice example so as I mentioned before your trims used in gas turbines that are used to power AI so you but at a very very low level but you can't purchase it right now the supply chain is has really been cut off the lead time on a gas turbine if you want to buy one is over four years so it's absolutely critical and this is you know that's one element but it's showing up again and again in different areas so I really do believe that you know the markets started to learn

35:20how what we need to do to secure ourselves and it's just key that this area that you don't have this control that you you've handed away in these elements that have a very low in use cost yet you you know such a strong supply risk and how much does the military applications bury into this versus like we we keep talking about AI and we can't talk about you know electric vehicles but a lot of these rare earth show up militarily and a lot of different applications how much of that is is causing the criticality of you know domesticating the supply chain I would say in that is in the forefront of government's mind in terms of volume though it's relatively low so I think it's it's definitely part of the equation but it's not the it's not the only thing that is driving it

36:25just the market itself is driving it anyway okay so it's it's domestic use capacity that's really driving the market although the military is worried about it is what again yeah and yeah and I'm sure that's encouraging government's participation yes now we've seen um is it really stand-in materials um government is set a floor for what the price of the the material is going to be so is that across all the rare earth stories that kind of like you need to the rare earth that they're processing I'm not as familiar with with that commercial uh deal that was made my understanding it's more specific um certainly floor pricing is a very

37:27always one tool that can be used to help companies such as ours get financing because often the question is into your question earlier is if I take a loan from the bank and then the prices drop you know what security does the bank have that we can repay on that loan so I think that's one of the key areas and I think it's absolutely critical that government does step in either through the form of loans like we're working with XM bank on or in terms of floor pricing the various tools that can be used okay so you guys are setting up shop in Louisiana one of the other companies that we've talked about just loosely you course also setting up shop in Louisiana is Louisiana going to become a rare earth processing hub uh is there a particular reason you guys chose the Louisiana is it governmental or strategic or you just happen to that's where you put you close your

38:34icing point into a map and that's where you think that it now it was it was a very strategic decision and it comes down to stock with two technical reasons so when we make our separation we have a and as I was mentioning those tonnages of products we produce a fairly low so there's a fairly low volume of concentrate coming from the mines in Chile and Brazil but to make this separation it's a chemical separation and we're using a technology called solvent extraction and you use specialty extractants that depending on the pH you're able to slowly separate these different rare earths very low energy usage but high in terms of chemical usage so we're a chloride based process and we use hydrochloric acid as I asked it and then sodium hydroxide as our base so what we needed to do because these are used in high a volume

39:40we needed to be near a chloral-coli plant on the Gulf Coast so we looked at all the different possible locations then looked at land availability how business-friendly the state was permitting aspects and we settled on a site outside Lake Charles Louisiana the beauty of the site is it's part of the Louisiana Economic Development Certified Site Program so that meant it already had the correct zoning it already had the environmental due diligence done so speed is the name of the game here and this site was essentially ready to go for a project just like ours and then we've just had tremendous support from the state of Louisiana we have we've been given some tax incentives but also just in generally in terms of the support of the state to help us make sure we do things the right

40:42way and be able to progress like our permitting as fast as possible so Louisiana's been particularly business-friendly okay now the stock that's going to go through this plant is it all from your minds in South America or are you going to be able to take other people's stock as well well we've designed our plant solely focused on our internal production capabilities as I mentioned before we think it's really important to control that supply chain there's these are natural deposits so there you have this naturally varying feedstock that you're feeding into a complicated chemical process and we believe having full control as many levers as possible means that we can optimize that production to do it as efficiently as possible and maximum quality okay so let's take a look at the company timeline so you've you've got a couple of mines in South America you've got this processing

41:46plant are the mines already operational or what's the timeline to get them operational and how does that relate to the processing plant and getting it operational well and and that's the trick right is we're building a vertically integrated supply chain where it's essentially four projects in three different countries and we have to develop develop them all in parallel and so it takes a lot of planning between between all of them so currently I'd say in Chile we've already got our permit and we're going to be in early works later this year at the end of the year early next year to be able to be in production at the end of 2028 then that will will feed into our plant in Louisiana which is also on track for the similar timeline and so it's it's really a matter of

42:51having very tight control of these different schedules understanding our risks and monitoring it as we go to make sure that we line these projects up correctly okay so Chile and the plant come on sides about the same time the other line I think he said was in Peru as in Brazil Brazil sorry so when does it come online and is that scale your plant up like does your plant need to scale up to accommodate it or will it all ready and just waiting for Brazil to come online it'll be ready and waiting we won't have to scale it we're designing for both of them at once Brazil's in the final stage of permitting so you know we're still pushing very hard to have all our projects come on at the end of 2028 but of course with you know different risks that you're exposed to and timelines you know just even lead times of equipment we're having to monitor it all

43:56very closely in balance but our big objective is to have a Clara up and running it by the end of 2028 okay so you're the chief operating officer so that makes you the head catheter in this situation yeah there's there's a lot of balancing that we have to do because we're you know as a company it's you have the capital projects you have technology development we have a pilot plant in at Virginia Tech that's working on our separation we have another pilot plant going on right now and Chile on our electrolysis plant to convert the oxides to metals so there's there's a lot of balancing on all this where we we have to take all the factors into effect and and control our schedules and and communicate very well and and just manage it yeah it seems to me all the planets and the

44:59stars of the line just nicely for you to to take advantage of the need to domestically source and supply these materials and process these materials so and you're on a good timeline to be able to make a dent in that in a short frame so I suspect between now and then there's going to be an awful lot of news and a lot of excitement around your company if people wanted to follow that what's the best way for them to do so you um the the best way is on our website or you can sign up for updates or you we are through LinkedIn we always make sure to post our announcements so you can connect with a Clara resources on LinkedIn and get those updates and they're coming thick and fast just last week we got to announce that we we received our air permit for the site in Louisiana for instance so that's the the key gating permit for us getting into construction so that

46:03just we are moving making tremendous progress and there'll be lots of announcements coming over the next month perfect um so given the status of you being a critical metals company are you finding the permitting process to be fast tracked and moving quickly as government says or is there still bottlenecks and and challenges with it um I would say Louisiana's being particularly helpful on helping us do things right the first time there's there's I wouldn't say there's any shortcuts or fast tracking but in terms of doing it right first time saves you a tremendous amount of time and Louisiana's been particularly helpful so I would say in all of it I wouldn't say things have been you know fast tracked as so to speak but tremendously supportive okay that's

47:07good to know um before I leave you is there anything else that we did maybe cover that we should about the the company and the rare earths yeah I mean I'd say there were three points that I'll leave you with about a Clara when you're thinking of a Clara first I read the deposit type so two ionic clay deposits focused on heavy rare earths the second one is our focus on processing technology which we didn't get to talk about too much but we have proprietary technology for both the extraction of the heavy rare earths as well as the separation and then also our shareholders where our Clara's 57% of our stock is controlled through hawkschilt mining and at water hawkschilt and another 10% by the cap group in Chile and so we just have tremendous stability in terms of we

48:08might be a pre-production company but we're a spin-off of a very large company that's been around for 130 years and listed on the London stock exchange so we're really well supported so I'd say those are the three key things about Clara two deposits process technology and the tremendous support we have from our shareholders wonderful I want to thank you for joining me I look forward to having you back on as you guys make progress at both the mine and the processing level and talk about that progress and what it's going to mean for the rare earth markets in the west great thank you Michael I really enjoyed that conversation me too thank you the prospector news podcast is for educational purposes only the opinions expressed are those of the participants are not to be taken as investment advice listeners need to do their own

49:09due diligence and seek advice of a licensed investment advisor