US agency wants to buy scandium oxide from Rio Tinto for defence stockpile

LONDON, Sept 22 (Reuters) - The U.S. Defense Logistics Agency is seeking to buy scandium oxide worth up to $40 million over the next five years from a unit of mining giant Rio Tinto to secure supplies of the critical material for addition to the national stockpile.

Scandium is one of the rare earth elements, whose importance to the Western defence and technology sectors has been in the spotlight since China, the main producer, imposed export controls.

"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 published last week.

It intends to buy 6.4 metric tons of scandium oxide within five years.

In the first year it will be seeking almost 2 tons, equivalent to about 5% of last year's global production of scandium oxide, which, according to U.S. Geological Survey, totalled 40 tons with existing capacity of 80 tons.

To increase domestic supply of scandium, the U.S. awarded up to $10 million to Elk Creek Resources, a unit of NioCorp Developments NB.O, in August.

However, for now the U.S. government has to seek the product, used in many defence systems, from outside the country.

"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 document said.

Rio Tinto RIO.L, RIO.AX said it would not comment on commercial matters, but added that it was "actively collaborating with the U.S. government to identify opportunities and leverage available support to increase domestic production and strengthen supply chains for the American market."

In 2020, Rio Tinto's scientists became the first to develop a process which allows the extraction of high-purity scandium oxide from waste streams of titanium dioxide production, without the need for any additional mining.

"Rio Tinto is uniquely positioned to help secure materials critical to America's future," the group said in an emailed reply to a Reuters' request for comment.

Rio Tinto's facility in Quebec, Canada produced the first batch of scandium oxide three years ago and currently has the annual production capacity of 3 metric tons.