HONG KONG – One of the world’s newest processors of rare earth minerals outside China is buying mining rights in Greenland to reduce dependence on Russian crude and stabilize prices, in the latest move by Western companies to diversify supply chains in the wake of Russia’s invasion of Ukraine.

Rare earth metals are essential to the manufacture of a wide range of modern products, including electric car engines, offshore wind turbines, and smart bombs. Demand has risen as automakers shift more of their production to electric vehicles.

Dozens of small companies mostly mine rare earth ore around the world and do some pretreatment to remove dirt. But only two commercial-scale plants outside of China are doing the challenging task of chemically separating semi-processed ore into a material usable for magnets in electric car engines and other applications.

Toronto-based Neo Performance Materials buys semi-processed ore from Russia, the United States and Australia and conducts chemical processes at plants in Estonia and China. Another company, Lynas, mines rare earth metal ore in Australia and conducts chemical operations in Malaysia.

Neo said on Monday it had acquired the rights to mine rare earths in Greenland from Hudson Resources, a small mining company based in Vancouver, British Columbia. The acquisition is the first step in rare earth mining by Neo, whose Magnequench division is a descendant of a former General Motors subsidiary that pioneered many of the modern magnetic applications of rare earth metals in the 1980s.

General Motors saw little potential in electric vehicles and was phased out in 1996.

Konstantin Karianopoulos, CEO of Neo, said his company plans to start mining and processing ore in Greenland within two to three years, with full production in about five years. The semi-processed crude will be shipped to the Neo chemical separation plant in Estonia, a former Soviet republic on the Baltic Sea in Eastern Europe.

Neo’s goal is to free itself from the need to buy crude at world prices. These prices fluctuate more widely than most commodities, rising up to tenfold during periods of geopolitical tension before collapsing once the tensions subside.

“I want the flexibility to feed 100 percent of my own production, or 50 percent of my own production and buy in the market,” Mr. Karayannopoulos said in a phone interview. He added that having a reliable in-house source of raw materials would make it possible to sell rare earth elements at fixed prices on long-term contracts with automakers, making the deployment of electric vehicles easier and more financially predictable.

Neo is also preparing to start building a plant in Estonia this winter that will turn processed rare earth elements into magnets for electric car motors. With European automakers rapidly shifting toward electric cars, the European Union is providing financial assistance to create a supply chain from mines to magnets within Europe for rare earths.

Although Greenland is a geographical part of North America, it is an autonomous region of Denmark, which is a member of the European Union.

The plant in Estonia currently buys three-fifths of the rare earth ore from Russia and the rest from Utah. The West has imposed many sanctions and other restrictions on companies and exports from Russia, but not yet on rare earth minerals.

Neo is not the first company to attempt to extract rare earth elements in Greenland. A consortium including a Chinese state-owned company attempted to open a mine in the southern tip of Greenland several years ago, in rare earth deposits that also contain a significant amount of uranium. this project Banned by local opponents and organizers Concerned about the risk of radioactive contamination of the environment.

Don Haines, a Canadian geologist who advised Hudson Resources in Greenland and will now be a consultant to Neo, said the Sarfartoq deposit obtained by Neo contains 97 percent less radioactive material per ton of sediment at the southern tip of Greenland.

Sarfartoq’s radiation levels are “lower than you might find sitting on ocean-side granite boulders in Maine,” he said.

The Sarfartoq deposits, on the west coast of Greenland, are also much smaller than those at the southern tip of Greenland. But Mr Karayannopoulos said the Sarfartoq deposits still had enough rare earth elements to meet Neo’s full global processing needs for at least 30 years, and possibly a century if further drilling at the edge of the deposits confirms the presence of more rare earth ore.

Mr Haines said ocean currents along Greenland’s west coast keep it ice-free during the winter, making it easy to ship semi-processed ore to Estonia.

Rare earths, a group of 17 elements near the bottom of the periodic table, are not radioactive, but radioactive pollutants such as uranium and thorium occur naturally in rare earth deposits. Controversies over how to dispose of these pollutants have led to the closure of rare earth separation plants over the past 40 years in Japan, Australia, France and the United States.

This has made China one of the largest rare earth miners and separators in the world. Russia is the fourth largest mine of rare earth minerals.

The United States and Australia are almost tied for a second in mining. Almost all US crude is mined in California and goes to China for processing, although little is produced in Florida and processed in Utah. President Biden and California Governor Gavin Newsom Announced plans in February To support the restart of chemical separation in California.

Rare earth metals have become a very prominent industry since then China halted exports To Japan for two months in late 2010 during a territorial dispute.

Rare earths are essential but are mostly used in trace amounts, so the actual value to the industry is small. Industry analysts have estimated the global sales value of rare earth ore at $2 billion, and fully processed magnetic powders and other rare earth materials at $8 billion.

Neo said it will make an initial payment of just $250,000 to Hudson for the mining rights, followed by $3.25 million once the deal is approved by the Greenland government. Mr Karayannopoulos said he had discussed the plan with officials in Greenland before the deal was struck, and was optimistic it would not be blocked like the separate China-backed project.

Neo is creating a new subsidiary to make the purchase, and has agreed that Hudson will have the right to 5 percent of the proceeds from the subsidiary’s initial public offering or sale within five years.

US automakers are beginning to make the same demands as European automakers to supply a rare-earth magnet mine near their assembly plants. GM Announcing plans in December To purchase magnets for electric motors from a plant to be built in Texas that uses rare earths from California.

Mr. Karayannopoulos predicted that the US auto market would develop in the same direction as Europe.

“Once we prove it in Europe, I want to do the same in North America,” he said.