The “Center for Strategic and International Studies” recently presented a report that once again highlights how China uses its dominance in the production and processing of numerous critical raw materials to gain advantages over the West, and particularly the USA. This time, the experts also focused on gallium.
China is using this critical mineral, which, according to the CSIS, is used in thousands (!) of parts falling under the purview of the U.S. Department of Defense, as a weapon in the trade war by imposing a gallium export ban late last year.
And according to the CSIS report, Chinese control over gallium production poses a significantly higher risk to U.S. national security than previously known. As the experts explain, at least one Chinese supplier is included in 85% of defense supply chains, which represents a dangerous dependence on an increasingly assertive competitor.
The Importance of Gallium for Modern Defense Systems Can Hardly be Overstated
And according to the CSIS, the importance of gallium for modern defense systems can hardly be overstated, as it enables semiconductors that perform better than silicon-based chips under extreme conditions. And that is precisely what makes them indispensable for next-generation military electronics.
The export ban on gallium, imposed in December, revealed the vulnerability of some of the most advanced weapon systems, the report continues. This is because they target, among other things, radar systems of the Navy, the Marine Corps, the U.S. Army, as well as a new radar system in the F-35 Lightning II.
The CSIS also estimates that the actual consumption of gallium in the U.S. is up to 200 tons per year. This would be ten times the official figures, which amount to 20 tons. This leads, the experts continue, to American defense companies currently strenuously searching for alternatives. Finally, the report also states that radar systems, in which gallium plays a crucial role, are an indispensable part of a national missile defense system.
China’s Control over Gallium Extends beyond Raw Materials
The CSIS also emphasizes that Beijing controls more than just the raw material gallium. For example, the Chinese chemical company Sunresin produces around 90% of the extraction resins needed for gallium recovery, while authorities have also extended export controls to the extraction technologies themselves.
Given the country’s comprehensive control over the gallium supply, China is able to manipulate the price of gallium and bring it to a desired level. Among other things, they could flood the market if competitors emerge, it was further stated.
In light of all this, the CSIS provides the U.S. Department of Defense with various recommendations for action. The experts advise, for one, that the Pentagon establish a gallium reserve of 50 tons within five years, even though the mineral can only be stored for one year. Authorities should also provide appropriate funds for the extraction of gallium in existing facilities and team up with allies to pool their purchasing power.
However, the report’s authors warn that market forces alone cannot solve the gallium challenge. The unique properties of gallium production make it essential for authorities to intervene sustainably, it said.
U.S. Government Must Intervene Sustainably in the Gallium Market – who Benefits?
A similar situation to gallium also exists with so-called rare earths. Here too, China dominates the market, especially in processing, and the USA is determined to become independent of Beijing. This is precisely why the Pentagon recently invested in the only rare earth producer in the USA, MP Materials (WKN A2QHVL), guaranteeing a minimum price that is approximately twice as high as market prices in China at that time.
A company that we at Goldinvest.de have been observing for some time, and which has already begun to benefit from these developments, is the Canadian Ucore Rare Metals (WKN A2QJQ4 / TSXV UCU), which is currently – with multi-million dollar support from the U.S. Department of Defense – building a rare earth ore processing plant in Louisiana. However, Ucore is not only about Rare Earths but about “Rare Metals” in general, and to our knowledge, there is also the possibility of processing materials like gallium one day.
The Canadian raw materials company Cerro de Pasco Resources (WKN A2N7XK / TSXV CDPR), in turn, focuses on the development and reprocessing of old tailings/waste rock in the El Metalurgista concession area near Cerro de Pasco in Peru. In an initial drilling program, consistently high silver grades were proven, which were consistently above expectations.
However, Cerro de Pasco Resources has also repeatedly proven – sometimes extremely – high gallium values, which even increased in the southern part of the previously investigated deposit and, above all, were consistently encountered. CEO Guy Goulet’s company has not yet presented a resource and is planning another drilling program first, but the available information indicates that large quantities of gallium could be present in the Quiulacocha tailings project!
And the Canadian silver exploration company Silver47 Exploration (WKN A2P4EE / TSXV AGA) could also get involved in the gallium topic. The company, still led by CEO Gary Thompson, which is close to merging with Summa Silver, has already proven a resource of approximately 169 million ounces of silver equivalent at its Red Mountain project in Alaska (USA), but has not yet considered critical minerals such as antimony and gallium. And this, even though encouraging gallium values have been proven several times in previous drilling programs!
We will definitely stay on top of this extremely exciting raw material topic!
