The U.S. Defense Logistics Agency (DLA) plans to buy scandium oxide worth up to USD$40 million over the next five years from a unit of mining giant Rio Tinto Group (NYSE: RIO).
Announced Monday, the move aims to secure supplies of the critical material for addition to the national stockpile. Scandium, a rare earth element, has gained importance in Western defence and technology sectors after China, the dominant producer, imposed export controls.
The agency intends to purchase 6.4 metric tons of scandium oxide within five years. In the first year, it will seek nearly 2 tons, roughly 5 per cent of last year’s global production.
According to the U.S. Geological Survey, total production reached 40 tons in 2024, with existing capacity at 80 tons.
Consequently, the U.S. government must source scandium from outside the country for now. The metal plays a key role in many defence systems, including advanced aerospace and communications equipment.
“Scandium, until recently, was primarily sourced from China. In late 2024, China placed export controls on scandium, which constrained the supply chain and prompted this acquisition for the National Defense Stockpile,” DLA said in a document.
To increase domestic supply, the U.S. awarded up to USD$10 million to Elk Creek Resources, a unit of NioCorp Developments (NASDAQ: NIO), in August. However, current production from domestic sources remains limited.
“Rio Tinto Services Inc. has been identified as the only vendor available capable of fulfilling the government’s required product needs at the capacity required for the contract,” the agency said.
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Scandium and other REE represent big opportunities
Rio Tinto also aims to identify opportunities and leverage support to increase domestic production and strengthen supply chains for the American market. In 2020, Rio Tinto’s scientists became the first to extract high-purity scandium oxide from titanium dioxide waste streams without additional mining. This innovation positions the company to supply critical materials efficiently.
Rio Tinto’s facility in Quebec, Canada, produced its first batch of scandium oxide three years ago. The site currently has an annual production capacity of 3 metric tons. Furthermore, the company emphasized its unique capability to help secure materials critical to America’s technological and defence future. Analysts note that with global production concentrated in a few countries, sourcing scandium reliably remains a strategic priority.
Scandium is a rare earth metal valued for its lightweight strength and corrosion resistance. It is used in aerospace alloys, fuel cells, and advanced defence and communication systems.
Scandium appears on the U.S. government’s critical minerals list, alongside antimony, marking it a high-priority material. Multiple companies, including NevGold Corp (CVE: NAU) (OTCMKTS: NAUFF) (FRA: 5E50), have already demonstrated promising antimony finds and could land lucrative government contracts.
Similarly, more scandium producers may attract significant federal interest. For instance, Ramaco Resources (NASDAQ: METC), a coal mining company in Wyoming, has discovered significant deposits of rare earth elements, including scandium, at its Brook Mine.
Furthermore, increased government focus may accelerate domestic production and incentivize investment in extraction and processing technologies. Also, companies securing verified reserves or innovative extraction methods could gain a competitive advantage in this emerging strategic market.
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