Pentagon Eyes Unprecedented 75-Year Deal to End China's Rare Earth Stranglehold
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Army wants first dibs on American-produced heavy rare earths, andREalloys (NASDAQ: ALOY)has just signed a landmark nonbinding term sheet that could put it at the top of the military's supply chain list.
The term sheet proposes a potential 75-year operating lease on approximately 200 acres at Tooele Army Depot in Utah, where REalloys would build and operate a facility processing dysprosium and terbium, two metalsChina has spent decades monopolizing.
In return, one of the things that the Army wants is the right of first offer on production, giving it an opportunity to secure the materials for American weapons manufacturers before they are offered to other buyers, although it is not obligated to purchase any.
This is the latest development in a relationship that began taking shape in June, when theArmy selected REalloys for exclusive negotiations.
Now, the two sides have signed a term sheet spelling out the proposed commercial terms: an initial 50-year lease, a possible 25-year extension, government ownership of the land and a privately financed industrial operation that could help supply the military for generations.
The term sheet is non-binding, and the final lease still requires financing and regulatory approvals.
Rather than waiting for a domestic rare earth industry to develop on its own, it is making military land available to a private producer and negotiating priority access to the output.
The company would carry the cost of construction and operations, while the Army would gain a source of American-processed heavy rare earths, particularly dysprosium and terbium, which at or near the top of Washington’s metals wishlist.
Dysprosium and terbium are used in the high-performance magnets that keep working when temperatures climb inside fighter aircraft, missile systems, and advanced electric motors.
Radar, sonar and precision-guided munitions also depend on specialized magnetic materials.
The problem is that China controls almost all global processing of dysprosium and terbium, leaving American defense manufacturers exposed to Chinese export licensing decisions.
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