Canadian Neo Performance Materials (NPM) is set to upgrade its existing rare-earth mineral processing in Estonia, as it strengthens the country’s role as a rare alternative in a space largely dominated by China. 

Silmet, its local subsidiary, announced on November 9 that it will construct a €100m magnet factory and a research and development centre in Narva, Estonia. The company will invest €81.25m, with the Estonian government funding the remaining €18.75m.

“This vertically integrated rare-earth manufacturing capacity will help Europe move closer to achieving its greenhouse gas reduction and climate resiliency goals,” Constantine Karayannopoulos, CEO of Neo Performance Materials said in the statement. 

As the world transitions to a clean-energy economy, global demand for rare earths and other critical minerals, such as lithium, is set to increase by a factor of five to seven, according to US White House estimates. 

Western countries are currently not in a position to cater to this growing demand without heavily relying on China. 

According to figures from the International Energy Agency, China dominates more than 71% of the global extraction and 87% of the global processing capacity of rare earths. Rare-earth magnets in particular are predominantly produced in China. According to research company Wood Mackenzie, around 95% of high-strength rare-earth permanent magnets are manufactured in China. 

There are only two commercial-scale rare-earth processing facilities outside China: one is the Silmet-operated facility in Estonia; the other is in Malaysia and is operated by Australian Lynas Rare Earths. 

“Complementing our existing operations at NPM Silmet, we are now developing the first rare-earth permanent magnet plant of its kind, that will become an important part of the supply chains of electric vehicles (EVs) and wind turbines in the EU and North America,” said Mr Karayannopoulos.

NPM expects the new magnet plant to be operational by 2025 and able to produce 2000 of magnets per year in the first phase. Further down the line, it believes production can be ramped up to 5000 tonnes annually. 

“This rare-earth factory is one of Europe’s efforts to try and localise some parts of the supply chain.” Abhishek Murali, analyst at Rystad Energy, tells fDi. 

“Magnet processing is one of the least considered aspects of the EV and wind turbine supply chain, but nonetheless is an important one. If [magnet processing is] established elsewhere, this can end the reliance of one part of the supply chain from China.” 

However, the source of rare-earth carbonate which will be processed in Estonia is uncertain. Ross Embleton, research analyst at Wood Mackenzie, expects that securing sufficient supply will be one of the biggest challenges for the company. 

NPM currently sources its rare-earth feedstock from a mine in the US state of Utah, operated by US-based Energy Fuels. It also expects several other potential sources of rare-earth materials to come online from prospective mines in Greenland and Australia.