Latest / The Manufacturing Podcast with Fexingo: Factories, Supply Chains, and Industrial Business / How a Canadian Factory Is Turning Mining Waste into Rare Earth Magnets
Transcript
- Lucas: So, Luna, we talk a lot on this show about circular manufacturing — taking waste streams and turning them into something valuable. But there's one category of materials that's notoriously hard to recycle, and that's rare earth elements. Luna: Right, the stuff that goes into EV motors, wind turbines, basically any high-performance magnet. And right now, China dominates the processing. Lucas: Exactly. China controls about 90 percent of the refining capacity for rare earth oxides. So when I heard about a factory in Saskatchewan that's planning to produce finished rare earth magnets from mining waste, I had to dig in. Luna: From mining waste — meaning they're not digging new mines, they're processing tailings? Lucas: That's the idea. The company is called Vital Energy, and they're retrofitting an old potash facility near Saskatoon. Their feedstock is low-grade rare earth concentrate that would normally be discarded at existing mines — stuff that's maybe 2 to 5 percent rare earth oxides by weight. Luna: So they're taking what's essentially waste rock and pulling out neodymium and dysprosium — the key elements for permanent magnets. Lucas: Right. They've developed a proprietary hydrometallurgical process that uses selective leaching and solvent extraction. The plant is designed to produce 500 metric tons of finished magnets per year by 2028. To give you a sense of scale, that's enough for roughly half a million EV motors. Luna: Half a million — that's not trivial. But the global EV market is what, tens of millions of vehicles a year? So it's a start. Lucas: It's a start, and it's strategically important. The Canadian government kicked in $50 million through the Critical Minerals Infrastructure Fund. The total capital cost is estimated around $200 million. But the real question is whether they can compete on cost with Chinese producers. Luna: What's the cost gap looking like? Lucas: Chinese magnet producers benefit from scale and decades of process optimization. They can produce sintered neodymium magnets for roughly $50 to $60 per kilogram. Vital Energy's target is $70 to $80 per kilogram initially, with a path down to $60 as they scale. Luna: So a modest premium, but then you factor in supply chain security and the fact that Western automakers are trying to source outside China. That premium might be acceptable. Lucas: That's exactly the pitch. And it's not just automakers — wind turbine manufacturers like Vestas and GE Renewable Energy are also desperate for non-Chinese magnets. The US alone has set a target of 30 gigawatts of offshore wind by 2030, and each megawatt of direct-drive turbine needs about 600 kilograms of rare earth magnets. Luna: So a 10-megawatt turbine would need six metric tons of magnets. That's a lot of neodymium. Lucas: It is. And that's why we're seeing a flurry of activity. There's a similar project in Nebraska — Noveon Magnetics — that's using recycled magnets from old hard drives and speakers. And in the UK, a company called Less Common Metals is expanding its magnet production. But the Saskatchewan plant is the first to use mining tailings as feedstock at scale. Luna: So the process itself — is it environmentally cleaner than conventional rare earth processing? Because that's historically been a dirty business. Lucas: Good question. Conventional rare earth processing uses large amounts of sulfuric acid and produces radioactive thorium waste. Vital Energy claims their process produces no liquid effluent — they recycle the solvents and reagents. And since they're using already-mined material, they avoid the landscape disturbance of a new mine. But obviously, we'll need independent verification once the plant is operational. Luna: They break ground yet? Lucas: They started construction in May 2025, and they expect mechanical completion by late 2026. So we're looking at commissioning in early 2027, with ramp-up through 2028. Luna: It's interesting — you don't normally think of Saskatchewan as a manufacturing hub. But they have cheap electricity from hydro and natural gas, and they have the mining infrastructure already. Lucas: And proximity to the Port of Churchill on Hudson Bay gives them an export route to Europe. So geographically, it actually makes a lot of sense. Luna: I want to ask about the technical challenge. Separating rare earth elements is notoriously difficult because they're chemically very similar. How are they achieving high purity? Lucas: That's the core of their proprietary process. They use a multi-stage solvent extraction system with a series of mixer-settlers — basically, they dissolve the ore in a solvent, then pass it through organic solvents that selectively bind to different rare earths. They claim >99.5 percent purity for neodymium and dysprosium. That's competitive with Chinese product. Luna: So if you're an automaker sourcing these magnets, you're not sacrificing performance for geopolitics? Lucas: That's the claim. And they're working with one major automotive OEM on qualification. I can't say which, but it's a name listeners would recognize. The qualification process involves testing the magnets in electric drive units for thermal stability and coercivity — that's the magnet's resistance to demagnetization. Luna: Speaking of performance and sourcing — there's a broader point here about how manufacturing is shifting from 'just in time' to 'just in case'. The pandemic showed everyone how fragile single-source supply chains are. Lucas: Right, and rare earths are a textbook case. In 2011, when China restricted exports of rare earths to Japan over a territorial dispute, prices of some elements spiked 10x. So having domestic capacity is not just about economics — it's about strategic resilience. Luna: The Canadian government has been putting money into critical minerals. I think they committed over $4 billion in the last few years across different projects. Lucas: Yeah, and the US Inflation Reduction Act has provisions for supporting domestic magnet production through the 45X tax credit. So there's policy alignment on both sides of the border. Luna: Before we move on — this kind of deep-dive conversation is exactly why we do this show. We try to bring you specific, actionable case studies from the front lines of manufacturing. And if you find these conversations valuable, we'd love your support. It keeps the show ad-free and helps us invest in more on-the-ground reporting. You can buy us a coffee at buy me a coffee dot com slash fexingo. Lucas: Yeah, that's a big help. Even a small contribution goes toward travel costs for visiting factories like this one. We're hoping to be in Saskatchewan when the plant opens. Luna: Alright, back to the technical details. One thing I'm curious about: the magnet-making process itself. Once you have the rare earth metal, you still have to turn it into a sintered magnet, which is a complex powder metallurgy process. Lucas: Right. Vital Energy is building the full value chain on site — from oxide to metal to finished magnet. The metal production uses a molten salt electrolysis process, similar to how aluminum is made. Then the metal is ground into a fine powder, pressed in a magnetic field to align the crystals, sintered at over 1,000 degrees Celsius, heat-treated, and machined. They're even doing the coating — typically nickel copper nickel or epoxy. Luna: So it's a pretty capital-intensive facility. Smelting, sintering, machining — that's a lot of equipment. Lucas: It is. And one challenge is the supply of rare earth oxides themselves. Vital Energy plans to source from existing mines in Canada and the US. There's a mine at Mountain Pass in California, which is the only operating rare earth mine in the US, and there's the Nechalacho project in the Northwest Territories. But both produce a mixed concentrate that still needs to be separated. Luna: So the bottleneck shifts from mining to processing. And this plant is both a separator and a magnet maker. Lucas: Exactly. And that vertical integration is key to the economics. If you sell rare earth oxide, you get maybe $10 per kilogram. If you sell a finished magnet, you get $50 to $60. So you capture five to six times the value. Luna: What's the workforce like? Are they finding skilled people in Saskatoon? Lucas: That's one of the softer challenges. Saskatchewan has a strong mining workforce, but magnet manufacturing is different metallurgy. They've partnered with the University of Saskatchewan on training programs, and they're targeting 150 full-time jobs once the plant is at full capacity. Luna: So 150 direct jobs, plus construction jobs. And the multipliers for the local economy. Lucas: Right. And the construction phase is expected to employ about 400 workers. So it's a meaningful investment for a province of 1.2 million people. Luna: Let's zoom out a bit. If this plant works, does it prove that the West can rebuild rare earth magnet manufacturing? Lucas: I think it's a proof point. But scaling to meet total demand — which is growing at 8 to 10 percent annually — will require several more plants of this size. The US Department of Energy estimates that domestic magnet production needs to reach 20,000 metric tons per year by 2035 to meet EV and wind targets. Right now, it's essentially zero. So 500 tons is a start, but we need forty times that. Luna: That's a massive gap. But you have to start somewhere. Lucas: Absolutely. And there are other projects in the works — a plant in Oklahoma by USA Rare Earth, and another in Texas by Noveon. So the ecosystem is building. The question is whether the policy support will be sustained and whether automakers will commit to long-term offtake agreements. Luna: That's the chicken and egg problem. Automakers want to see proven supply before they commit, but investors want to see offtake before they fund plants. Lucas: Right. And that's where government grants and loan guarantees can bridge the gap. Vital Energy's $50 million grant — plus an additional $20 million from the Saskatchewan government — helped de-risk the project. And they've reportedly signed a memorandum of understanding with a European automaker for a five-year offtake agreement. Luna: So there is some commercial traction. Not just government money. Lucas: That's the key detail. Government money gets you to construction, but long-term viability requires real customers. And if they can hit their cost targets, there's a real market here. Luna: Alright, final thought: any single number that sums up the significance of this project? Lucas: I'd say 500 metric tons. It's not huge, but it represents the first time in over two decades that a Western factory will produce sintered rare earth magnets from domestic feedstock. If they succeed, it opens the door for the next 5,000 tons. Luna: Good note to end on. That's all for this episode of The Manufacturing Podcast. Lucas? Lucas: Thanks for listening. We'll be back next week with another story from the factory floor.