Who could have guessed that “not in my backyard” (NIMBY) would ever yield to YIMBY? But it’s true; in one particular part of the green technology industry, “yes in my backyard” has become the new-new thing.
Specifically, certain links in the renewable energy supply chain are establishing production here in the U.S., the phenomenon of which is just one example of a trend I identified one year ago: I called it “Made in America… Or at Least NOT Made in China.” NMIC, for short.
Prior to the Covid-19 pandemic, America’s growing reliance on China-based production of numerous goods seemed mildly galling, but convenient.
Although we certainly didn’t like exporting manufacturing jobs overseas, we didn’t mind buying China-made goods for a fraction of what the U.S.-made equivalent would cost.
Then came Covid-19.
Suddenly, our conveniently low-priced supply of China-made goods seemed much less convenient. Costume jewelry, cat toys and action figures from China continued to flood Walmart (NYSE:WMT) shelves, but many basic and/or essential China-made products like facemasks, syringes and antibiotics were nowhere to be found.
As how, we Americans discovered that we had become overly reliant on China for various products. Because of this realization, ramping up U.S. production of key raw materials and products became “priority #1” in boardrooms across America.
The renewable energy sector is leading the movement… and could capture a “Made in America” premium in the stock market.
Both of these resource companies are vying to expand their U.S. footprint in the rare earth elements (REEs) supply chain.
The Australia-based Lynas is the largest producer of REEs outside of China, the country that inconveniently produces about three-quarters of the REEs the world uses every year.
REEs are a set of 17 metallic elements on the periodic table. They have odd names like scandium, neodymium and cerium.
Generally speaking, these elements are not actually very rare, but they do not typically appear in concentrated, economically feasible ore deposits. They are dispersed, which means that large, commercial quantities of these elements are relatively rare.
REEs are vital to the production of consumer products like solar panels, electric vehicle (EV) batteries, smartphones and computers. Without these critical raw materials, none of these products would be possible.
In addition, REEs are absolutely critical to the U.S. military. They are key components of missile guidance systems, lasers, electronic displays, radar and satellites.
That’s why the U.S. Department of Defense recently sought to develop home-grown REE production… and why Lynas gained an opportunity to shift part of its operations to the U.S.
Early last year, the company secured a deal with the DOD to build a light rare earths separation plant in Hondo, Texas. The facility, which will process rare earths sourced from Lynas’s flagship Mount Weld mine in Western Australia, will be able to produce around 5,000 metric tons of rare earths products per year.
Once it becomes operational, the facility will be the only significant processor of REEs in the U.S.
Like Lynas, Energy Fuels is vying to begin processing REEs here in the U.S.
Because Energy Fuels is the only licensed and operating uranium mill in the country, it already has the necessary permitting to deal with the radioactive waste that comes from processing some REEs.
Late in 2020, Energy Fuels struck a deal to receive natural monazite sand ore (Monazite) mined in Georgia by Chemours (NYSE:CC) and process it into rare earth carbonate (RE carbonate).
Under this arrangement, which began operating earlier this year, Energy Fuels is using its White Mesa mill in Utah to process a minimum of 2,500 tons/year of Monazite from Chemours. That processing is recovering the contained uranium and producing a marketable mixed RE carbonate.
Energy Fuels has also forged a downstream arrangement with Canada’s Neo Performance Materials (OTCMKTS:NOPMF), in which Energy Fuels is shipping RE carbonate from its White Mesa mill to Neo’s rare earth separations facility in Estonia, the only commercial producer of separated rare earth oxides in Europe.
So when you add it all up, monazite from Chemours’s Georgia mine goes to Energy Fuels’ Utah mill to produce RE carbonate. That material then travels to Estonia, where it becomes separated REEs.
This process creates what Energy Fuels calls “a new United States-to-Europe rare earth supply chain.” While somewhat complicated, this new supply chain would boast one very specific attribute: It produces REEs that are NMIC!
As Energy Fuels explains:
“[This new supply chain] is very good news for end-users of rare earth products in the U.S., Europe, Japan and elsewhere who seek alternative sources of rare earths produced in the U.S. and Europe to the highest global standards of environmental protection and sustainability…The physical delivery of this product also represents the launch of a new, environmentally responsible rare earth supply chain that allows for source validation and tracking from mining through to final end-use applications.”
Energy Fuels is actively seeking other sources of monazite in order to achieve its goal of processing 15,000 tons per year. For perspective, that level of production would yield REE volumes equal to roughly 50% of total current U.S. demand.
As these examples show, the trend toward U.S.-based production of renewable energy components and products is a rapidly developing one. As this trend gains momentum, I expect it to spawn a number of dynamic, innovative companies that could achieve major success in their respective industries.
NIMBY: The Tech Sector
As I write to you, China is imposing a mega crackdown on its tech giants, including Baidu (NASDAQ:BIDU), Alibaba Cloud, Tencent Cloud and Huawei Cloud. This heavy-handed regulatory scrutiny has hammered the shares prices of leading tech stock like Alibaba Group (NYSE:BABA), Tencent (OTCMKTS:TCEHY) and Baidu.
These stocks have suffered dramatic and devastating share price plunges over the last six months — wiping out about $1.5 trillion of market value, according to South China Morning Post.
This grim episode in China is causing me to turn my sights toward “locally grown” companies, not unlike the YIMBY green energy companies I mentioned earlier.
In fact, I have a list of three “disruptor” plays that center around the movement away from China-made goods, as well as technology. (One even gives Huawei a run for its money.)
You can get all the details here at my 2021 Tech Supercycle Summit, where my colleague and I dive into the next phase of 5G tech.
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NOTE: On the date of publication, Eric Fry did not own either directly or
indirectly any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.