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Vietnam’s Rare Earth Partnership Contenders: Unpacked

For a brief month or two last year, Vietnam’s rare earth reserves were a hot commodity (pun intended). This was on the back of a whirlwind visit to Hanoi by the President of the United States, Joseph Biden, during which he announced the US would support Vietnam with mapping its rare earth resources and finding investors for the industry more broadly.

China, the current world leader in rare earth mining and refining and in the midst of a tit-for-tat trade war with the US, in response, was quick to announce that the President of China would visit Vietnam too. An op-ed in the China Daily went on to say that the US-Vietnam rare earth ambitions were ‘unrealistic’ and asserting that when it came to rare earths it had the US beat.

The merits of the op-eds arguments are open to debate, suffice it to say, that all the attention from the US and China had made rare earths in Vietnam the talk of the town and this was a kick in the pants for the industry and things started to move.

In particular, it was reported at the beginning of October, that Australian mining company Blackstone Minerals and Vietnamese firm Vietnam Rare Earth–or VRE–were preparing to bid for a licence to operate the Dong Pao rare earth mine reportedly the biggest reserves in the country estimated at 11.3 million tons.

These ambitions, however, were to be short-lived with reports a little under two weeks later that the current owner of the Dong Pao mine, Lai Chau-Vimico Rare Earth–known locally as Lavreco–had recorded revenue of just VND 240 million or US$9,800 in revenue in 2022 a suspiciously small amount.

This was followed just days later by the arrest of several key mining figures for violating mining regulations, most notably among them the head of VRE. Specifically, it was alleged several companies had colluded to manipulate invoices to avoid paying taxes. In raids on several mining sites as part of the investigation police reportedly confiscated about 13,700 tons of rare earths.

Needless to say, by the end of October the Biden-induced rare earth dopamine hit had dissipated 

In fact, when Xi Jinping was in Hanoi in November, little was said on the matter but for a couple of vaguely worded lines in a joint statement that asseted that China and Vietnam would ‘actively seek the possibility of strengthening bilateral and multilateral cooperation in the field of key minerals’. By that time, however, interest from the local press had waned.

That’s not to say rare earth development has been put on ice altogether. There is still a lot of interest in developing the industry from outside of Vietnam and a number of players are still actively pursuing rare-earth development partnerships with Vietnam and Vietnamese firms–there is a lot of competition.

So, what’s up for grabs?

The US Geological Survey’s Mineral Commodity Summaries 2024 estimated Vietnam’s rare earth reserves to be in the vicinity of 22 million tons. China, which has the largest reserves, for comparison, is estimated to have double that at 44 million tons, and Brazil which comes in third place has roughly 21 million tons.

But having all of these reserves is one thing, getting them out of the ground is quite another. According to the report, Vietnam was estimated to have extracted just 1,200 tons in 2022. Following the aforementioned arrests, it also revised its outlook for 2023 down from 1,200 tons to 600 tons. 

China on the other hand was estimated to have extracted 210,000 tons in 2022 and 240,000 tons in 2023–the report notes that China’s numbers do not include undocumented production and it seems, based on the aforementioned confiscated rare earths, it may be that there is quite a bit of undocumented production in Vietnam too.

But off-book rare earth mining aside, there are a number of key players vying for a piece of the legitimate rare earth mining pie, each taking their own unique approach.

Australia

Earlier this year, Vietnam and Australia upgraded their bilateral ties to a comprehensive strategic partnership. As part of this new relationship status, Australian Prime Minister Anthony Albanese announced an annual dialogue on minerals targeted at developing Vietnam’s mining sector broadly and rare earths specifically.

Australia’s Blackstone Minerals and Australian Strategic Mining also still have a Memorandum of Understanding with the aforementioned VRE. It’s not clear what will happen to the company in light of its leader’s arrest but Blackstone said in a statement that it remains committed to making a bid for access to the Dong Pao mine.

On that note, it’s also worth mentioning that Blackstone has been working on developing a nickel mine a few clicks northwest of Hanoi for some time now and in the process appears to have built some relationships in Vietnam’s mining industry–it has participated in workshops on revisions to Law on Mining and Law on Minerals the first version of which, back in 1996, was developed in consultation with the Australian government.

Furthermore, Australia and Vietnam are both parties to the Comprehensive and Progressive Trans-Pacific Partnership. This multi-party free trade agreement is set to remove tariffs on mining-related goods and should see nations that have ratified the agreement cleave closer together in economic collaboration.

South Korea

With a longstanding investment and manufacturing relationship with Vietnam, South Korea is well-connected with key decision-makers and has a breadth of experience doing business in Vietnam.

Home to some of the world’s biggest electronics manufacturers, rare earths are incredibly important for South Korea’s economy. Manufacturing a decent portion of those electronics in Vietnam and being able to access its rare earths has clear supply chain advantages and this has led South Korea to become much more active in Vietnam’s rare earth space.

Of note, under the terms of the Vietnam-Korea Free Trade Agreement South Korean firms can own a mining firm in its entirety or up to 51 percent of a joint venture–foreign ownership caps that limit the control of foreign firms over their business operations in Vietnam are often cited as a challenge when doing business in Vietnam.

Furthermore, last year, the two countries signed a Memorandum of Understanding on a joint research initiative that is set to include establishing a research centre in Vietnam.

South Korea also launched a project earlier this year with the United States that would see scientists from both countries converge in Hanoi to look at extracting critical elements from coal ash.

United States of America

Aside from partnering with South Korea, the United States has said it intends to work with Vietnam in mapping and quantifying its rare earth minerals and assessing their value.

In terms of the capital required to build out the industry, few countries are more well-endowed than the United States. It’s also a major consumer of products produced using rare earth minerals including electronic devices and semiconductor chips.

The US has been very clear on how it intends to support the development of Vietnam’s rare earth industry. In a White House Fact Sheet released in concert with Biden’s trip to Hanoi, it specifically, cited ensuring any development meets ‘high environmental, social, and governance (ESG) standards’.

This is good for society and the environment, however, it can complicate the process. Community consultations, for example, are not always welcomed by key decision-makers in Vietnam and media censorship can make it challenging to properly assess public opinion.

ESG values are also not always congruous with the values of impacted communities.  By its own numbers–which are often skewed to show Vietnam in a favourable light–1.58 million households in Vietnam were considered poor or nearly poor in 2023. Often situated in rural areas, the importance of ESG in mine development may be lost amid the desire for the economic benefits.

This is worth bearing in mind when looking at China’s somewhat different approach.

China

Whereas the US has put ESG up front and centre, China has taken a different tact. It is instead, per a Vietnam-China joint statement released in concert with Xi’s trip to Hanoi, pushing the benefits of its support being in ‘energy and supply chain security’.

Indeed, China is well known for the lack of conditions it attaches to its investments in contrast to developed countries which often require protection for workers and the environment.

In this context, China may be able to move further faster than other key contenders.

Furthermore, the political systems of China and Vietnam are closely aligned as are the Chinese and Vietnamese ways of doing business–on the Transparency International Corruption Perceptions Index 2023, China and Vietnam scored 42 and 41, respectively. This saw Vietnam take out 83rd place and China 76th.

Moreover, China has experience in both mining and refining rare earths. It was the biggest producer of rare earths in 2023 well ahead of its nearest rival, and it also borders Vietnam making integrating Vietnam’s rare earths into its existing supply chain much easier and even cheaper.

Russia

Perhaps an outlier in the current geopolitical climate, Russia could also have a role to play in Vietnam’s rare earth sector. Earlier this year, Empress Catherine II St. Petersburg Mining University and Hanoi University of Mining and Geology signed a partnership agreement. Whereas the agreement pertains to training personnel and the pursuit of academic research in the mining sector, connections and networking hold a lot of sway in doing business in Vietnam. 

Russia also has a huge reserve of rare earths–estimated to be about 10 million tons–and has had a bit of success getting them out of the ground. It was the seventh biggest miner of rare earths in 2023, extracting some 2,900 tons. 

It’s also somewhat of a pariah in international business circles at the moment with access to a number of markets limited through sanctions. Vietnam, however, is one market that is still open to doing business with the former soviet state.

What’s next?

There is a broad range of support on offer to assist Vietnam in developing its rare earth industry but making the right choice could be tricky. Australia does look to be a front-runner, however, the events that took place in October of last year show that in Vietnam the business environment can turn on a dime.

The path forward right now looks hazy, however, it was reported last month that Lavreco wants to go it alone in mining rare earths at Dong Pao and then either take on a partner to help process the extracted minerals or export what it manages to mine to be refined. This, however, does not seem to be set in stone.

In this light, another change of course would not come as a surprise and firms interested in Vietnam’s mining industry development should therefore make sure to keep abreast of developments in the industry and they can best do so by subscribing to the-shiv.

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