The David Knight Show - China's Rare Earth Stranglehold: A Wake-Up Call for America

Episode Date: April 23, 2025

     China’s iron grip on over 90% of the world’s rare earth mineral processing threatens to cripple U.S. technology, healthcare, and defense industries overnight as China’s ready to turn off the tap in a high-stakes trade war in response to Trump’s tariffs.     Join Josh Ballard, CEO of USA Rare Earth (USARE.com, NASDAQ:USRE), as he exposes the strategic maneuvering that gave China its monopoly, and unveils a bold plan to rebuild America’s supply chain from the ground up      How long will it take, and what happens in the interim?If you would like to support the show and our family please consider subscribing monthly here: SubscribeStar https://www.subscribestar.com/the-david-knight-show Or you can send a donation throughMail: David Knight POB 994 Kodak, TN 37764Zelle: @[e-mail] App at: $davidknightshowBTC to: bc1qkuec29hkuye4xse9unh7nptvu3y9qmv24vanh7Money should have intrinsic value AND transactional privacy: Go to DavidKnight.gold for great deals on physical gold/silverFor 10% off Gerald Celente's prescient Trends Journal, go to TrendsJournal.com and enter the code KNIGHTFor 10% off supplements and books, go to RNCstore.com and enter the code KNIGHTBecome a supporter of this podcast: https://www.spreaker.com/podcast/the-david-knight-show--2653468/support.

Joining me now is Josh Ballard. He's CEO of USA Rare Earth. They're traded on NASDAQ. They have a website as well on NASDAQ. They're as simple as USAR on the web. You can find them at USARE.com, if I got that correct. If I didn't, Josh, you can correct me. And I want to talk to him because he's been on the forefront of this rare earth issue,

and that is really kind of at the forefront of what is going on in this trade dispute with China. We hold all the cards when it comes to tariffs and who's going to buy what from who, but there are other ways that they can strike back. And one of the things that they have done is to use their position of dominance in rare earth minerals to essentially shut down supply of critical things. So thank you so much for joining us, Josh. We've got a lot of questions about rare earth minerals. Thank you for joining us.

Yeah, thank you for having me. I appreciate it. First of all, tell us a little bit about what rare earth minerals are. Why do we call them rare? Rare earth minerals for the most part actually aren't rare. They are pretty abundant, but what's difficult about them is you don't have a vein of them in the ground. So when you go get coal, you have a vein of coal, you can dig it straight out. Rare earths are dispersed throughout the rock. So there's a lot of science that goes into pulling it out of the rock so that you can then separate out the minerals and the ores that can be used in the metals and the magnets and so forth. So there's a lot of science that goes into pulling it out of the rock so that you can then separate out the minerals and ores

That can be used in the metals and the magnets and so forth. So it's hard Some are super rare some are not so rare China by the way focused on the super rare ones You know to your point that they could really control But they're they're critical to modern technology and they're critical to You know really how we live today in surprising ways. Yeah, especially because we see a lot of these, you know, it's gotten to the point we have these super magnets that are very small. Of course, we use them on all kinds of things.

You can have it with an airbud speaker or all that, but just so many different things. And the fact that you can make very, very small, very strong magnets, I think that's a large part of that. And of course, with everything going electric, magnets are absolutely essential to convert electricity into some kind of movement or some kind of transducer, whether it's moving a speaker or whether it's moving a car, you know, the motor or something like that. So it's really key to the kind of devices that we have. It's really key to a lot of consumer electronics, key to military things especially. How did China, tell me, you probably know more, I thought it was somewhere around 70% of the minerals or they've got control of, but of the refinement they've got like nearly 90%. Those are the figures I've seen. Is that correct or correct me if I'm wrong?

That's correct. Yeah, that's correct. Now then you have to separate into what rare is. or correct me if I'm wrong. Yeah, that's correct. Now then you have to separate into what rare earths. So, we'll take one step back. The context of this is in the early 90s, there was a vice premier in China who said, Middle East has oil, China has rare earths. This has been their focus for over 30 years.

And they've been very deliberate about it and built up a pretty strong supply chain. To your point, today it used to be over 90% mining as well. It's now about 70% mining. We have about 15% of it here in the US of certain light rare earths that are a little bit more abundant. But over 90% of the processing have some difference in China. Not only 90% of the processing, which is just to get the ore,

but they also have over 90% of the metal making. And they also have over 90% of the processing, which is just to get the ore, but they also have over 90% of the metal making. And they also have over 90% of the magnet making for all those magnets you were just describing. So they really control a lot of the supply chain. And then when you focus it into specific minerals, this export list, for example, that just occurred about two weeks ago that went into play, those minerals they control for the most part, not every one, but for the most part over 98% in the critical ones, gadolinium, dysposium, terbium, those are over 98% for sure. Yeah, I think they're all those.

These are names that I never, I don't know, I got an electrical engineering degree, I'd never heard of these things before. Yeah, and they're so critical to our lives. Gadolinium, by the way, is the mineral that we use when you get an MRI scan. It's the mineral that creates the contrast around our organs.

So this is gonna affect millions of MRI scans around the country. It becomes personal, this isn't just political. There's other minerals in that list that are used to fight cancer. And then there's minerals like dysprosium and terbium that are used, they could handle a lot of heat, so they're used in rocket systems So they're used in a rocket systems

They're used they're used in in high performance magnets that you'd use in a not only an EV but in high performance Machinery and defense or in drones, you know So these are really important minerals and important magnets and technologies for our society today Now they've been very strategic one of the things that I've heard and you talked about Like that they're not so much rare as they are difficult to get. I guess we could have, if we could marvel at unobtainium, if we wanted to get one of those things there. But that's not a real one, but that's straight out of Marvel comics.

But it is kind of like that. It's really hard to get this stuff. And one of the things that I've heard that China has done is, you know, using very crude and dirty methods of extraction, using slave labor and a lot of other places that's helped them to get a monopoly on this as well as just the geographical location of this stuff. So from that standpoint, where do we stand in the United States? Because we also have voluntarily in the West, we have given China a huge advantage on energy costs. You know, we have – they can, again, do as cheap and dirty a coal as they wish.

We're not allowed to even have clean coal plants and that type of thing in many places in the West. Everybody's shutting down their manufacturing facilities. So we have a real issue with this. And so how do we get out of this situation, even if we've got 15% of them? How is that going to affect our country if our costs of manufacturing are higher because our energy costs are higher? If we are going to have a clean and responsible way to get to handle these things rather than just doing it and who cares what happens approach that

the Chinese have had in other countries. Yeah and I think that's a great question and you know as Americans as humans we want to do this as responsible as possible as we bring them back to the US. We can there's ways to do it much cleaner so for, in rare earth mining, of course you're mining, you're taking things out of the ground. You can't avoid that for sure. But what you can do is you can reduce dust levels. You can use a lot of acids and reagents within this process to get the minerals out of the rock and to separate them. You can recycle those reagents. There's ways you can recycle the water that you're

using within the plant. So there's things that we can do to be much more responsible about it than certainly there are in China. And then in China, not only are they responsible, but then of course the government's also subsidizing and just accelerating. And what we can do here in the U.S. is one, we can be more responsible, but then we have to create a moat, though. We have to protect the industry that we're trying to build here now, because we do need it domestically. You can argue in favor or not of the current tariff regime. What I can tell you is when it comes to rare earths, rare earth magnets, not only rare earths,

but also the other critical minerals that have been in the news a lot lately, we do need to create a moat. We need to build this industry back here in the U.S. It's too important to our day-to-day lives is too important to our defense and to rely on one single choke point like China It's just a mistake. Well, you know, love or hate China that moment there is a mistake That we need to fix and creating this moat whether it's through support through the government whether it's through a tariff regime Whether it's through making it less onerous to build a mine for example permitting and so forth But while making sure we're still responsible humans, you know, we still need to be responsible

But we don't need to kill a business to be responsible, right? Which is what we've been doing in the mining world for all these decades Oh, yeah. Yeah, I guess my question is as I look at it is how do we get from where we are right now? to a position of You know where we have some now to a position of, you know, where we have some self sufficiency in this? And you know, that would apply to pretty much everything, but in the rare earth situation, we, you know, we look at this abrupt change that is here and, you know,

being shut down right away by China. How do we get through this transition? What is the interim situation look like? You say we've got 15% supply here. How much pain is that going to cause in the U.S. during a transition period? Because there's going to be a period of time that you've got to get your mining up and working, you've got to get manufacturing up and working. That's not going to happen overnight. So what happens in the interim? Are we going to see sky high prices in the interim?

And it's for answer that's 15 percent of overall rare earths but fortunately we have 15 percent of the easiest. The ones in these export percent, this export list, we have zero. Wow. So this is a challenge for us and it's going to affect us in the very short term. I mean there's some stockpiles right? We have, I wouldn't call it a stockpile, there's some inventories of these minerals and these metals here in the u.s. Are there some in friendly countries for instance like Australia? Whatever that I think aren't there some there are important ones or yeah, they don't have this export list necessarily There's some coming out of Brazil, but they get sent to get processed in China Oh, and you know all the processing goes through China. So we're gonna have this period. I don't know what we're gonna do. I mean, maybe we're gonna work out ways

to do it through intermediaries. Maybe we'll come to some kind of agreement so we can start to get some of these minerals back for a while. The short term's tough, because there's no short term answers. And if you break apart this supply chain, and this is what we're working on as a company,

is this entire supply chain, trying to do it domestically. If you start, I'm gonna start with metals and magnets. Those, what I've been talking to the government about is, it's time for a Marshall Plan. Like we need to look at this as something that has to happen quick. We need to invest in it. We need to bring private investment.

This has to be a private public partnership. We need to make this happen as quickly as possible. And on the metals and magnet side, we can surge that and over the next year or two make a big difference, right? Not solve the entire problem that we have, but we can make a big dent in it for sure over the next couple of years. Certainly we have a plan that we could uplift this within a couple of years. We could build our whole magnet facility, which will make hundreds of millions of these magnets. We could build metal making here in the US. This can happen. We can be the first domestically,

you know, the full domestic source of this here in the US. But on the deposit side, on the mining side, on the processing side, you can build a mine. You know, that might not take so long to break up rock and grind it, but the processing of that rock to get out the minerals, there's a science behind that that we've lost. We've been working on it for years.

A couple of our peers have been working on it the last few years. We've made progress, but there's still work to do, and that doesn't happen overnight. Even if you have a great deposit, like our deposit in West Texas is an incredible deposit with all these rare earths on this export list. That's what we're heavy in. We're heavy in the heavies is what I call it. These are all these rare earths on this export list. That's what we're heavy in. We're heavy in the heavies is what I call, these are called heavy rare earths, 50, 70% heavy rare earths.

But we still have to work through the science of that. Then we have to build the processing techniques we're gonna use. We are building it. We have to build that first demo plant and then build a mine. None of that happens overnight, right? But we can surge it.

We can get support from the government. We can shorten that cycle. It's not decades. I think it's over the next few years we can build it. That's going to take a little bit of time. So we got this period we got to figure out for sure. So what you're saying is even though we have some in Texas that we know of, the minerals there, the whole processing, refinement, manufacturing process, that's been, we don't have that. We don't have that knowledge and we've got to discover that, right? As well as build the factories, is that correct? That's right. That's correct. And the, every

deposit is different as well, right? There's different mix of minerals, there's different impurities, there's different science you have to use to approach it. So it's a, you know, it's a puzzle. It's, you got uncracked at every deposit. So it's just not an overnight thing, but we have to rebuild this in the US. There's absolutely no doubt we've got to figure out a way to do it. Really caught us flat-footed, didn't they? I mean, they thought strategically about this, and we've just been kind of taking the path of least resistance for quite some time.

And now all of a sudden, because of trade dispute, it looks like it's going to be shut down, and it's going to take years for us to get this thing together. So, your company is working on the entire supply chain then, right? From getting it out of the ground to processing and refining it and then manufacturing it into a finished product, maybe even into magnets, is that correct? That's right. In fact, yeah, we're looking at taking it out of the ground in West Texas, processing

in West Texas, and then metal making and magnet making here. I'm in Oklahoma today, out here in Oklahoma. We're in the process of building a large 300,000 square foot facility, magnet making facility, and future metal making facility here in Oklahoma. It's going to be the first largest facility really to serve the entire magnet market here in the US. It's gonna make hundreds of millions of magnets and we're commissioning our first line beginning of next year and we're already making magnets. We have a big a big lab industrial lab that we're working through to start working with customers that we commissioned last month. So we're moving pretty quickly and the question

is now how quickly can we move? It's all about capital and execution and we need to get the capital in government, private, all together, to push this fast. We can build as fast as we can get capital on to build it. But we'll be a significant asset here in the US, here in the short term, for sure. Yeah, because I think back to World War II, we got caught flat-footed in a lot of critical things like rubber, stuff like that, and we lost the supply of those types of things that came up with synthetic rubbers and stuff like that. Is there any possibility that these things can be replaced, just like they replace natural

rubber with synthetic rubber? Is there any, are you looking at alternatives to rare earth that might be substitutes that could get there? Or is it- It's hard. You know, what's special about rare earths are, if it's a metal alloy, is the properties that they have. They have special properties that can withstand heat, that have superconductivity.

We take a critical metal like gallium, which was also banned a few months ago, also. We're very rich in gallium in our deposit.ium is is used in the Patriot missile system for example this is why China targeted it it's also using semiconductors because of its conductivity and stability withstand heat it helps miniaturize semiconductors and speed them up so yeah we can still make semi yeah I'm familiar with gallium that's been using semiconductors for quite some time yeah yeah and we just never bothered to have a supply of it that's pretty amazing. Yeah and it's plain on a plain's day that we should have done this so this is not a

surprise to the industry at all by the way. But when it comes to rare earth magnets the key is in some areas you can replace them but the key is they're so powerful and so small the power and how small they are, you know, it's like 10 times smaller. So when you think about a drone and the magnet it needs in a drone, like there's limitations because you can't put something too big, it makes it too heavy. If you think about a speaker, same problem, right? Now you can make a less, a speaker you can just make it, we didn't always use these magnets, you can just make it a less powerful speaker you know a permanent magnet these rarest magnets in the speaker super small they create 50% more base and they're like a

third the sire tenth the size or something like it's there's a difference in power with these if you think about Tesla you put it in beast mode and you put on the accelerator and it feels like you're in a roller coaster that's these these magnets these permanent raref magnets turn that on and turn that drive and boom, you're off, right? Yeah. And you can't do that, the weight and the size are going to be too big. And so there's limitations in terms of how far we can take it. That's why these are important. I think we just need to figure it out here domestically. Yeah, it is amazing. I mean, we're in, I guess, you could say we're in a tight spot now with this stuff. Let me just ask you, this is kind of a wild question. You know, I'm always looking at

this Greenland stuff and everybody's like, there's a lot of stuff out there. But I also hear that it's extremely hard to get the stuff out of the frozen ground or anything. I mean, that's not going to factor into anything, is it? Or is that a factor, do you think? No. I think it's great marketing. But the reality is Ukraine, Greenland, they do have a lot. Greenland has a lot, right? Ukraine doesn't have any rare earths much and what they do have is in Russian controlled territory. But in this country, they're decades away. So what we need to do is work on what we have right here. We have it here. I mean, we have, when you break apart the light rare earths, which are

Sirium and Lanthanum are used a lot of technologies and ceramics and these LCD screens We're looking at now all sorts of places you use these these Lanthanum is also used in batteries very important We have a ton of that stuff and we make a lot of it here. We just don't process it here Neodymium, Praseodymium are the key minerals that go in ore that goes into these magnets. We make some here. We have other deposits that we can develop that we know of. And then we have a heavy deposit like ours that we know we can develop. Yeah, it's going to take two or three years or four years. We can do it a lot faster than the decades away that will happen in a Greenland or Ukraine

or choose your other country. There's lots of known deposits. Not many of them are close. Yeah. We have a few here. Let's go for it. Well, it's good to hear you verify that. There's lots of known deposits, not many of them are close. Yeah, yeah. We have a few here, let's go for it. Well, it's good to hear you verify that. That's what I reported too. I just had a lot of sources that said,

you know, there's not that much in Ukraine, and what's there is not in the territory that's being controlled by the Ukrainian government. And so, yeah, there seems to be a real disconnect with reality in many cases as we look at this stuff. But the reality is that it's going to be a difficult position. And they've really got a strategic advantage in this. And they're willing to use that as leverage.

And we have given them, not only have we walked away from these things like gallium, for example, that is something that we have been used for decades in semiconductors. And yet we didn't bother to secure a supply of it. And it's amazing that we let ourselves get into this kind of a situation and it's gonna be very difficult, especially just going cold turkey.

And that's really what's happening now. It's gonna be cold turkey to do this and to create an entire supply chain. Again your company is USARE.com, it's where people can find you, it's USA Rare Earth. And so it's USARE, as in RareEarth.com and on NASDAQ you are there at USAR. Is there anything else that you would like to tell us about this as we look at this monumental task in front of us? Yeah, I'd just like to tell everybody we're working hard to solve this. We want a domestic supply chain.

We want to be the first to have a fully domestic supply chain. We're very serious about it and we're going to execute on it. It's an exciting time for us for sure. It's been very interesting but we're going to deliver on it for it's it's an exciting time for us for sure. It's been very interesting But we're gonna deliver on for the American people and and for our shareholders. So that's great We're gonna make it happen Well, as I say, you know The Chinese curse is that may you live in interesting times and I guess the Chinese are cursing us by giving us some real

Interesting times to try to adapt to things on the spur of the moment Without any preparation or forethought. It seems to be where we are right now. But thank you. I hope you're successful. I hope you get this through very quickly. Thank you so much for joining us again. USARE as in USA Rare Earth, USARE.com and on NASDAQ at USAR.

Thank you so much, Josh. I appreciate it. Thank you for having me, Dan. Appreciate it. You have a great one. Best of luck to you. Thank you.