Odd Lots

This Is How The US Can Become a Player in Rare Earth Metals

February 5, 2026

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  • The US can compete with China's rare earth dominance not by outspending them in traditional mining, but by leveraging innovation to leapfrog existing chokeholds through material engineering and biotech solutions. 
  • Waste streams, including e-waste and coal ash, represent a significant, domestically sourced resource that can be mined using advanced technologies like programmed proteins, effectively turning liabilities into America's next mine. 
  • Solving the 'valley of death' for these critical mineral innovation companies requires government-backed financial instruments, specifically early-stage equity investment (like that provided by the CIA's venture arm, In-Q-Tel's Compass Fund), rather than just loan-based instruments. 

Segments

China’s Rare Earth Ecosystem
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(00:06:07)
  • Key Takeaway: China achieved rare earth dominance by strategically investing in and creating an entire ecosystem encompassing domestic extraction, processing, and securing demand from high-growth sectors like new energy and defense.
  • Summary: China’s dominance is not due to natural endowment but decades of strategic investment, including state companies that do not need to be immediately profitable. They created an ecosystem covering extraction, processing, and product demand, including magnets for wind turbines and EVs. China also secured a lockhold on the critical technology for processing these materials.
Leapfrogging Strategy via Innovation
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(00:09:36)
  • Key Takeaway: The US strategy must focus on innovation to leapfrog China’s chokehold, as directly competing on scale and cost in traditional mining and processing is infeasible in the required timeframe.
  • Summary: The report focuses on how innovation can bypass the China chokehold, playing to US strength in R&D. Exciting companies are scaling up technologies developed from decades of research, offering a path to parity faster and cleaner than traditional methods. This approach seeks to solve national and economic security through technological breakthroughs.
Biotech and Material Engineering Examples
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(00:13:25)
  • Key Takeaway: Breakthrough technologies include developing rare earth-free magnets and using programmed proteins to cleanly and selectively extract rare earths from waste materials.
  • Summary: One innovation is a material design approach resulting in rare earth-free magnets, with Niron Magnetics scaling up production in Minnesota. Another is biotech innovation using programmed proteins to target and extract specific rare earths from waste or tailings quickly and cleanly. This positions waste as a valuable domestic resource, America’s next mine.
Solving the Off-Take Agreement Problem
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(00:18:18)
  • Key Takeaway: Overcoming the ‘valley of death’ for new critical mineral technologies requires collective off-take agreements, often facilitated by government support, as seen with Vulcan’s consortium funding.
  • Summary: New US companies need guaranteed demand to de-risk investment against cheaper Chinese competition during early scaling phases. This is achieved through collective off-take agreements between companies and end-users, such as auto OEMs or defense contractors. Vulcan serves as a model, securing funding from every branch of the military for its domestic recycling and magnet manufacturing cycle.
Policy Levers for Innovation Acceleration
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(00:25:54)
  • Key Takeaway: Effective policy requires a coordinated critical minerals innovation strategy that addresses data tracking for waste, financial tools to bridge the equity funding gap, and consortia formation for off-take agreements.
  • Summary: Fragmented approaches risk losing innovation that could change the chessboard with China; policy must track waste, potentially restricting exports of valuable e-waste. A specific equity valley of death exists for difficult tech companies that traditional venture capital avoids, necessitating government-backed VC entities like In-Q-Tel’s Compass Fund. Government must act as a ‘poll’ to coordinate consortia and early design input.
Historical Analogy: Synthetic Rubber WWII
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(00:30:11)
  • Key Takeaway: The rapid, successful industrial policy response to the WWII natural rubber supply cutoff via synthetic rubber scaling provides a relevant blueprint for the current rare earth challenge.
  • Summary: When Japan cut off 90% of US natural rubber supply before WWII, the US executed a rapid, Manhattan Project-style scale-up of synthetic rubber technology. This effort was crucial for supplying military needs like tanks and trucks. The analogy suggests a two-pronged approach: rapid technological scaling alongside public mobilization for recycling existing resources.
Trade-offs and Cleaner Mining
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(00:41:23)
  • Key Takeaway: Encouraging a domestic rare earth industry involves environmental trade-offs, but innovation in biotech, like using microbes for extraction, allows for cleaner, faster, and cost-competitive mining and refining.
  • Summary: Mining and refining are inherently dirty businesses, presenting trade-offs similar to the environmental concerns surrounding fracking. However, biotech solutions, such as Rio Tinto utilizing proprietary microbes to extract copper from old mines, demonstrate that value can be unlocked in a cleaner, faster, and cost-competitive manner. This innovation-led approach offers a more sustainable path forward.