At the latest meeting of the Select Committee on the Chinese Communist Party's Critical Minerals Policy Working Group, lawmakers addressed the escalating concerns about U.S. dependence on critical minerals from China.
Led by Republican U.S. Rep. Rob Wittman of Virginia and Democratic U.S. Rep. Kathy Castor, the meeting also featured Republican U.S. Rep. Carlos Giménez, illustrating a strong bipartisan effort to tackle this strategic challenge.
Industry insiders — including Adam Johnson from Metis Endeavor, Wade Yeoman from Jervois, and Mahnaz Khan from Silverado Policy Accelerator — participated, bringing diverse insights into the critical minerals supply chain.
Castor opened the discussions with a clear statement about the committee's purpose and bipartisan nature.
"I'm not going to go on too long, but I hope you all know this is a bipartisan committee where we really are focused on bipartisan solutions that will be durable and can be implemented by agencies and bring the private sector in as our partners," Castor said.
She further emphasized the committee's proactive stance, adding, "At the end of last year, the committee issued a bipartisan economic report, a significant portion of which focused on critical minerals."
The conversation then shifted to Jervois' operations, with Wade Yeoman discussing the strategic implications of their Idaho Cobalt Operations. He underscored the operational challenges and financial burdens threatening the sustainability of their U.S. operations.
"Maintaining the mine has cost $150 million, with rising holding costs potentially leading to a 'deep shutdown,'" Yeoman revealed, indicating the financial duress that could undermine their contribution to the U.S. mineral reserves.
Giménez, focusing on the sourcing of these critical materials, inquired about the origins of Jervois' raw materials, to which Yeoman responded: "We are working with our current suppliers through joint ventures to build component plants in the U.S. However, the raw materials still primarily come from the Democratic Republic of Congo (DRC), Indonesia, China, Korea, and Japan."
Giménez, probing deeper into the supply chain, asked, "Where does the finished processed product come from? You have to process all these minerals before they are used in batteries and other applications. So where is this processing done?"
Yeoman clarified. "The battery supply chain, which I'm most familiar with, involves about eight steps from mining to concentrating to refining and on to production stages like peaking, cam, and cell production. Most of these processes are currently conducted in China and other Asian countries like Korea and Japan," Yeoman said.
Despite these detailed explanations, the discussions revealed a critical gap in the scrutiny over the transparency of Jervois' supply chain, particularly the reliance on sensitive regions like the DRC and China for raw materials. This lack of deeper probing into the supply chain processes highlights ongoing concerns about the integrity and sustainability of U.S. mineral sourcing strategies.
Financial instability and operational inconsistencies
The challenges faced by Jervois extend beyond operational hurdles. Financial instability has been a significant concern, with the company grappling with substantial losses and dwindling cash reserves.
On April 30, Jervois reported operational losses of nearly $18 million for the first quarter, according to their Quarterly Activities Report to March 31, 2024. The company disclosed a cash reserve of less than $27 million, admitting it had just 1.5 fiscal quarters, or approximately 4.5 months, of funding left.
Burdened by high operational costs, falling cobalt prices and debts totaling more than $169 million, Jervois faces the prospect of selling assets, restructuring debts, or bankruptcy. Looming debt payments due at the end of June exacerbated the situation, contributing to the company's stock price falling below 2 cents on the Australian exchange.
On March 17, 2023, Jervois declared it had achieved "sustainable production" at its Idaho mine. However, this operation was suspended just twelve days later, on March 29, 2023. This discrepancy between the company's optimistic announcements and reality raised serious doubts about its credibility and operational stability. Such contradictions highlight significant concerns about the company's ability to maintain stable and reliable mining operations.
Government funding and strategic decisions
Yet, even with this bleak financial picture, Jervois has inexplicably secured funds from the U.S. government. As recently as June 19, 2023, Jervois announced $15 million in funding from the U.S. Department of Defense, on top of a previously announced $15 million from the same agency.
This ongoing support, totaling $30 million, suggests a disconnect between Jervois' financial realities and the confidence shown by U.S. government entities. The question arises: Why would the government invest so heavily in a financially troubled company?
On Feb. 26, Jervois announced a site selection for a $300 million refinery project in either Pennsylvania or Louisiana, further underlining its pursuit of U.S. government funding. Given Louisiana's shallow water table and the significant waste streams associated with a refinery, Pennsylvania appears to be the likely choice. Conveniently, Pennsylvania is also a Presidential Election battleground state, raising suspicions about the political motivations behind this selection.
Additionally, Jervois applied to the Department of Energy's Advanced Technology Vehicle Manufacturing Loan Program (ATVM) and the Manufacturing and Energy Supply Chains (MESC) grant program on April 24, 2023, seeking additional funds to build a facility that produces cobalt sulfate for electric vehicles.
This application came shortly after a strategic announcement on April 18, 2023, indicating a shift in focus from expanding operations in Europe to establishing a significant presence in the U.S. The Export-Import Bank of the United States provided a letter of support for the Idaho project under its China and Transformational Exports Program and the Make More in America Initiative.
Both the ATVM and MESC programs, designed to boost U.S. manufacturing and lessen reliance on foreign materials, require detailed evaluation and, in some cases, matching funds. The pressing question is whether these diligence processes will be based on genuine benefits to the U.S. supply chain.
It is hard to see how Jervois could pass even common sense scrutiny, let alone a rigorous financial exam. This situation calls for greater transparency and stricter oversight in the distribution of U.S. government funds, particularly in sectors critical to national interests.
Historical parallels and governmental missteps
This situation mirrors previous governmental missteps, notably the Solyndra debacle. Solyndra, a solar panel startup, received $535 million in co-signed loans from the Barack Obama administration in 2009, only to fail and declare bankruptcy by September 2011.
This failure highlighted broader issues, including poor governmental due diligence and misunderstanding renewable energy market dynamics. Similarly, Microvast, a Chinese-backed battery manufacturer, was initially awarded $200 million by the Department of Energy, only to have the funding canceled in May 2023 after Republican lawmakers exposed its ties to the Chinese government.
These instances show a pattern of enthusiastic but misguided government investments in green technology without thorough assessments of financial stability or market viability. Are these historical patterns indicative of a persistent oversight problem in government investments?
Broader strategic views and environmental considerations
The July 10 Critical Minerals and Rare Earth Elements Working Group meeting also showcased varying views among committee members.
Giménez expressed skepticism about U.S. ability to compete with China in critical minerals, criticizing the current focus on electric vehicles, which intensifies reliance on Chinese resources. He advocated for a shift towards technologies like fuel cell technology, which might offer security and environmental benefits without reinforcing Chinese industrial supremacy.
Conclusion: A call for rigorous oversight
As the U.S. confronts these ongoing challenges, the case of Jervois Global serves as a reminder of the complexities and potential pitfalls in government funding decisions. It compels policymakers to critically evaluate the sustainability of investing in foreign entities that may require continuous financial support, ensuring that national interests are safeguarded and taxpayer funds are allocated wisely.
Will the U.S. government learn from past mistakes, or is it doomed to repeat them with Jervois?
This situation highlights potential risks for U.S. taxpayers, as the company's stability and long-term viability remain in question. The alignment of Jervois' lobbying efforts with critical funding announcements from the U.S. Department of Defense — totaling $30 million to date — raises concerns about the effectiveness and direction of U.S. investments in foreign-operated mining ventures, especially those as financially volatile as Jervois.
The pattern observed here mirrors past governmental missteps where emergency financial interventions failed to consider the broader implications of investing in unstable firms, drawing a parallel to the costly outcomes of Solyndra and Microvast.
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