Metal Tech News - December 13, 2023
For most Americans, the U.S. Department of Homeland Security conjures up images of an intelligence agency borne from the 9/11 attacks on the World Trade Center and Pentagon that employs TSA airport screenings, border checkpoints, and internet monitoring to protect Americans from terrorist threats, both foreign and domestic.
And these airport, border, and cybersecurity measures are at the crux of DHS's mission. So, why were top Homeland Security officials roaming the halls of the American Exploration & Mining Association annual meeting in Reno, Nevada, earlier this month?
The short answer is that critical mineral security has become synonymous with homeland security.
"The threat environment has warped, it has changed, it has evolved," Tim Moughon, director of the field intelligence directorate at the U.S. Department of Homeland Security, informed mining sector representatives during a Dec. 8 presentation at the AEMA conference.
Instead of hijacking planes to inflict terror, adversaries are increasingly targeting economic sectors as a way to weaken the United States.
"Economic competitiveness is a national security issue. Our ability to maintain our way of life, our ability to maintain our position in the world, our ability to fund our physical security – all of these things are dependent on a strong and robust economy," Moughon told attendees of a presentation in Reno. "The mining sector is critically important in this respect. Not only for the GDP output that the mining sector contributes, but even more importantly because of the key role it plays in providing those critical minerals, critical resources, for the defense industrial base, for the tech sector, and areas like that."
Department of Homeland Security believes it is absolutely vital that Washington decision-makers understand the threats to America's mining industry, which is why it is increasingly sharing and seeking information from the sector.
"When you talk about threats to the mining sector, when you talk about threats to critical industries like this, the federal government doesn't have all the answers," Moughon said. "It is really important that this be a two-way conversation if we are to have an accurate appreciation of the threat environment."
The stealing of proprietary and sensitive research and development data is one of the primary foreign threats to American mining identified by DHS operatives.
"To remain competitive, it is absolutely critical that the United States maintain an edge in the research and development processes for the mining industry," Moughon said. "We have seen a number of different threats from nation-state actors that are intended to undermine our ability to maintain our research and development expertise in this sector and in other critical sectors."
The DHS field intelligence director said countries like China are using insiders to identify sensitive information and exploit that data to provide adversary nations with a competitive advantage. This industrial espionage is not typically carried out by government agents planted to steal sensitive information. Instead, foreign governments often use patriotism and other means to convince or coerce students, researchers, and businesses to acquire and transfer proprietary data.
The Chinese government is the most prolific sponsor of these programs – and the U.S. is a primary target.
The most famous of China's corporate espionage programs was the Thousand Talents Plan, which incentivized its members to steal foreign technologies needed to advance China's national, military, and economic goals.
While Thousand Talents does not exist in its original form, DHS says China continues to operate similar programs around the world.
Another way China and others gain intellectual properties from the West is through investments in mining and other companies.
"We have seen cases where foreign adversaries have used investment tools to purchase companies or to purchase technologies that are sensitive and to use this tool to exploit that back to their home countries," Moughon said.
It does not take a large investment or interest in the company to pose a risk. Even buying less than 10% of a company's stock can connect a foreign adversary to sensitive information through board seats and other connections to a company and its assets.
"An investment that is strategically targeted to a very sensitive technology can be incredibly damaging to the competitiveness of the United States, even if the aggregate dollar amount is not terribly large," the field intelligence director said.
Whichever way the data is gained, China leaders are particularly interested in information that will bolster its information technology, biotechnology, advanced manufacturing, and energy sectors.
"Many of those have heavy overlap with the mining sector," Moughon said.
The economic and competitive disadvantages from the transfer of trade secrets and technologies to China are compounded by cheap labor, lower regulatory standards, and state backing of many businesses in the communist country.
Foreign governments often leverage stolen data and technologies, along with the lower ESG standards and costs typical of non-western nations, to monopolize the production of critical minerals.
Over the past five decades, China has monopolized the mining and processing of a majority of the minerals that are now deemed critical to the U.S.'s economic well-being and national security.
The communist nation has not only leveraged its own mineral wealth to establish monopolies but has picked up assets around the globe.
One of the best-known methods used by China to gain control of mineral assets outside of its border is through the Belts and Road Initiative, a strategy to develop infrastructure in developing nations. In exchange for its investment, China often gains ownership of mining projects.
"It is a great example of the Chinese government's efforts to go out and buy up critical minerals, critical resources. China has become the largest bidirectional lender in Africa in recent years," said Moughon.
The US-China Economic and Security Review Commission estimates that 15 African nations owe China a combined $140.6 billion under what some are calling the Chinese debt trap.
"China is also very involved with many of these enterprises – essentially, state-owned monopolies that can invest in the space, but invest in the space at a discount."
According to DHS data, 61 out of the 77 Chinese companies doing business are state-owned enterprises.
The control over so many mining assets both within and without its borders, coupled with state-owned mining companies that are not necessarily in business to turn a profit, strengthens China's monopolization of the global critical minerals sector.
China then bolsters its own economy and national security by upgrading these critical minerals into higher-value products used in electric vehicles, high-tech electronics, military hardware, and an enormous array of consumer goods.
"The government of China has a critical position now in the critical minerals space, they dominate the market for processing critical minerals, from ore to refined products," said Moughon. "They use these products in both intermediate goods and then in finished goods."
China has demonstrated its ability and willingness to leverage its critical minerals monopoly as a geopolitical tool.
"With this monopoly power comes tremendous ability to target adversaries and to use this economic position to shape the behavior of other governments," said Moughon.
One example of this was China's severe restriction of rare earth exports following a 2010 dispute with Japan in the South China Sea. At that time, the communist nation was the world's sole producer of these technology elements.
This cutting off of global supply resulted in a massive increase in the prices for the various rare earth elements, sparking a global rush to discover and develop deposits outside of China. At the height of this frenzy, China flooded the markets and drove many of the burgeoning rare earths companies out of business, which provided the communist government to acquire distressed rare earth assets at a discount.
This year, China is using a similar strategy as part of a technology trade war with the West.
In July, the communist government announced that it is emplacing state-controlled restrictions on gallium and germanium, a pair of tech metals critical to computer chips and other technologies.
At the time, many market and geopolitical analysts speculated that China's export restrictions of these two critical semiconductor metals were a counter to restrictions by the U.S. and other Western countries on the exports of chipmaking technologies and equipment to China.
The Chinese government then followed up on the restrictions of this pair of tech metals with an October announcement that it would also be curbing graphite exports, which went into effect on Dec. 1.
The U.S. is heavily dependent on China, which produces more than 60% of the world's mined graphite and nearly 90% of the advanced anode material, for this key ingredient in the lithium batteries powering EVs and storing renewable energy.
"So, these aren't hypotheticals," said Moughon. "We see adversaries use monopolistic power very intentionally to advance their own national interests."
The DHS field intelligence director made it clear that Homeland Security understands that an overreliance on unreliable foreign sources for goods, including minerals, is a national security threat during emergency events like pandemics, national disasters, war, or critical supply shortages.
"The ability for the United States to continue to maintain its position, to continue to lead the world in terms of our values, is dependent on this ability to maintain a robust economy and maintain our access in this space," Moughon told the mining representatives in attendance.
"If you want to partner with us, we would be delighted to do that and have a conversation to figure out how we can further the conversation so that both policymakers at the federal level and you within the sector are all armed with the right information to make the best decisions to advance our homeland security," the DHS field intelligence director concluded.