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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: In the jungles of northern me and Maar, close to

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Speaker 2: the border with China, a town called Pungwah sits in

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Speaker 2: a small valley. It's surrounded by forested peaks that are

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Speaker 2: sometimes dusted with snow. But against this scenic backdrop, a

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Speaker 2: sprawling industrial operation is transforming the hilltops.

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Speaker 1: So you have these hills, these very dramatic hill slopes,

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Speaker 1: with these pools kind of midway up the hill. So

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Speaker 1: there's like kind of a lattice work of pipes that's

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Speaker 1: laid over boreholes. So yeah, it is sort of industrial

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Speaker 1: and dystopian, but also set in a very remarkable, very

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Speaker 1: beautiful part of the world.

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Speaker 2: Timothy McLaughlin is a journalist and a freelance contributor for

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Speaker 2: Bloomberg based in Singapore. He says Punghwa and the surrounding

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Speaker 2: region of Kachin State have come into the spotlight lately

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Speaker 2: because a ground there is rich with precious metals rare

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Speaker 2: earths that are in high demand right now.

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Speaker 1: Meanmar is hugely significant in the rare earth's industry. It

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Speaker 1: is the third largest producer of rare earths globally, behind

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Speaker 1: the US of China.

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Speaker 2: These rare earth elements are worth billions of dollars. They're

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Speaker 2: key components in your iPhone, your electric vehicles, and even

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Speaker 2: missiles used by the US military. And Me and Mar

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Speaker 2: isn't just any producer of rare earth. It's a crucial

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Speaker 2: supplier to China, accounting for more than half of the

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Speaker 2: country's total imports last year. But the region around Pungwa

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Speaker 2: has been disrupted by a long running conflict between me

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Speaker 2: and Maar's military junta and a rebel group, the Kachin

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Speaker 2: Independence Army or KIA.

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Speaker 1: The current Hunter took power in twenty twenty one, and

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Speaker 1: it has been a very tumultuous, bloody period for the

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Speaker 1: country for the past couple of years. It's important to

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Speaker 1: understand that Memr already had a large number of armed

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Speaker 1: groups who were fighting the central military primarily for greater

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Speaker 1: autonomy for their ethnic groups, and so the past four

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Speaker 1: years has seen a massive surge in fighting. You know,

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Speaker 1: the military has been able to hang on to most

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Speaker 1: of the middle of the country, but their control over

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Speaker 1: the periphery of the country and the borderlands has suffered

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Speaker 1: quite a bit.

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Speaker 2: Hungwah is part of that embattled region. The Kia took

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Speaker 2: control of the area late last year and that's created

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Speaker 2: a headache for China.

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Speaker 1: So they take over to these mines by the Kia

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Speaker 1: a huge complicating factor for Beijing and came at a

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Speaker 1: really inopportune time because whereas became this big global trade

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Speaker 1: issue kind of rate as the KA took over these mines,

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Speaker 1: and so Beijing and Chinese companies are now buying rare

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Speaker 1: earths from them, so funding them. But then they are

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Speaker 1: also supporting the memr military of the junta, so they

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Speaker 1: are on both sides of this fight.

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Speaker 2: This is the Big Take Asia from Bloomberg News. I'm wanh.

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Speaker 2: Every week we take you inside some of the world's

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Speaker 2: biggest and most powerful economies and the markets, tycoons and

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Speaker 2: businesses that drive this ever shifting region. Today on the show,

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Speaker 2: how a rebel army in me and Mar became a

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Speaker 2: major player in the rare earth's industry and what its

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Speaker 2: new dominance means for China next door and for global

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Speaker 2: supply chains. Despite the name, rare earths are really not

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Speaker 2: that rare. They can be found all over the world,

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Speaker 2: but they're almost never found on their own in nature.

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Speaker 2: The minerals are mixed in with other elements in the

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Speaker 2: ground and often at low concentrations, and that makes mining

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Speaker 2: them a complex process. In me and Mar, rare earths

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Speaker 2: are usually extracted from the soil on hillsides.

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Speaker 1: So you have these very dramatic hill slopes with these

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Speaker 1: collection pools that are sort of at the bottom midway

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Speaker 1: up the hill. The collection pools they're lined with tarps,

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Speaker 1: so the water tends to have this kind of turquoise

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Speaker 1: color to it.

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Speaker 2: And to get these rare earth elements into these vast

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Speaker 2: collection pools, a process called n C two leaching comes in.

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Speaker 1: It's sort of like an IV drip for a hillside.

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Speaker 1: You're dripping this leaching agent into the hillside. So there's

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Speaker 1: like kind of a lattice work of pipes that's laid

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Speaker 1: over boreholes and then there's little taps and so this

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Speaker 1: is just going down into the ground and then later

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Speaker 1: towards the bottom of the hill washed out and what

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Speaker 1: comes out at the bottom is this mixture of rare

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Speaker 1: earth water leaching agent that's collected in large pools sort

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Speaker 1: of like concrete industrial swimming pools, and the rare earth

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Speaker 1: sludge settles at the bottom. The water is drained off,

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Speaker 1: and that sludge is then baked in these big furnaces

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Speaker 1: that look like massive pizza ovens, and the resulting product

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Speaker 1: is are rare docksides.

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Speaker 2: When demand for these metals began to take off in

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Speaker 2: the mid two thousands, China was by far the biggest

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Speaker 2: miner of rare earths. It accounted for nearly all of

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Speaker 2: the world's mind rare earth supply and was also the

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Speaker 2: biggest refiner. But around twenty ten, China began shutting down

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Speaker 2: many of its small scale mines.

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Speaker 1: China started to see the environmental impact it was having.

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Speaker 1: Pumping millions of liters of this fluid into the ground

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Speaker 1: had enormous ecological impact, especially of watersheds and river weys.

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Speaker 2: The wastewater that's full of chemicals and toxins is typically

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Speaker 2: directed right back into the nearest river. It can contaminate

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Speaker 2: the soil and the waterways downstream and cause landslides. A

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Speaker 2: lot of the mines that China shut down were located

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Speaker 2: in the country's southwest, along the frontier with Miunmar, and

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Speaker 2: as the industry shut down in China, the mine opera

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Speaker 2: looked just across the border. To get back to business.

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Speaker 1: You can see that on the ground level when you

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Speaker 1: know Chinese miners arriving, but eventually you can start to

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Speaker 1: see it from space because the mines start to get dug,

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Speaker 1: the pools start to fill up. You can also see

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Speaker 1: the road network getting built, and the road network kind

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Speaker 1: of goes not that far. It goes from China into

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Speaker 1: these mines and then and then the trucks kind of

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Speaker 1: go back out.

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Speaker 2: A geospatial analysis found that in just about seven years,

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Speaker 2: hundreds of new mining sites have sprung up in the

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Speaker 2: area where Pungwa is located. China became the biggest buyer

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Speaker 2: of me and Mars rare earth. It imported more than

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Speaker 2: eight hundred million dollars by twenty twenty one. That's eight

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Speaker 2: hundred times what it bought just a decade ago.

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Speaker 1: They have large deposits of two specific elements which are

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Speaker 1: turbum and dysprosia, and they are important to making rare

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Speaker 1: earth magnets, and these magnets are now found in a

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Speaker 1: lot of electric vehicles, five trains, wind turbines, guided missile systems,

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Speaker 1: and these two elements are added to magnets to enhance

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Speaker 1: their capabilities to make them able to work at higher

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Speaker 1: temperatures without losing the magnetism that they have. And so

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Speaker 1: right now these magnets are a huge point of contention

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Speaker 1: between the US and China. While these magnets are coming

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Speaker 1: from China because that's where they are made, the elements

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Speaker 1: that are going into them are coming from Vanmar in

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Speaker 1: many cases.

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Speaker 2: And what kind of impact then, are we seeing of

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Speaker 2: this mining boom on the environment and on local communities.

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Speaker 1: You're seeing people and other groups realize that there is

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Speaker 1: a huge amount of money, huge amount of demand. We're

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Speaker 1: going to see these minds expand probably outside of Kitchen

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Speaker 1: State to places that are controlled by other groups who

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Speaker 1: think that they have similar geology and they can also

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Speaker 1: kind of cash in on this rare gold rush at

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Speaker 1: the moment, but I think the environmental impact is probably

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Speaker 1: the most pronounced right now. All you're seeing the rivers

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Speaker 1: and streams that are very important to the way of

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Speaker 1: life for small villages and cities and towns at this

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Speaker 1: part of the world getting totally ruined. And it is

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Speaker 1: also becoming a cross border issue because these watersheds run

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Speaker 1: through Southeast Asia and so some of this stuff is

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Speaker 1: now flowing into Thailand, and so you see the Thai

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Speaker 1: government tie civil society becoming concerned about this. There's also

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Speaker 1: concerns about the structure of the mines, the safety you

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Speaker 1: could imagine, pumping millions of gallons of liquid into the

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Speaker 1: side of a hill makes it inherently unstable. Often people

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Speaker 1: are getting trapped in tunnels or killed by landslides. So yes,

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Speaker 1: overall environmentally and labor regulations wise, very much sort of

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Speaker 1: the Wild West at the moment.

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Speaker 2: And while mining companies have been tearing up the ground

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Speaker 2: in search of rare earth minerals, the region around the

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Speaker 2: mines is being torn by a bloody conflict between the

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Speaker 2: government and rebel groups. After the break, the crucial supply

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Speaker 2: of rare earths in the hands of a rebel army

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Speaker 2: the risks for China and the world. For years, the

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Speaker 2: town of Pungwa in northern me and Maar was under

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Speaker 2: the control of a warlord allied with the country's military junta.

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Speaker 2: The rare earth's minds in the region were operated by

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Speaker 2: Chinese companies, and the shipments of the precious metals ran

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Speaker 2: like clockwork. Reporter Tim McLaughlin says the Chinese government generally

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Speaker 2: sees me and Mar's military regime as a stabilizing force

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Speaker 2: along its border.

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Speaker 1: Beijing's greatest fears that the country would splinter apart and

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Speaker 1: there would be some sort of Syria type situation right

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Speaker 1: on a huge border that they have, And so they

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Speaker 1: sat on the fence for a while, and then when

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Speaker 1: they saw the MEMR military started to struggle last year

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Speaker 1: and maybe losing some key strategic outposts, they really kind

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Speaker 1: of came off the fence and threw their port behind

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Speaker 1: the ME and R military. Not because I think there's

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Speaker 1: any deep love there. I think it's because they really

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Speaker 1: fear the country just crumbling, and they think much like

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Speaker 1: the BOMR military does, that they are kind of the

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Speaker 1: glue holding this all together.

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Speaker 2: But that changed late last year when the KA, the

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Speaker 2: armed ethnic group battling the military junta, advanced on Pungwa.

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Speaker 1: The Kitschin Independence Army is fighting a larger, decades long

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Speaker 1: struggle against the VMMR military for greater autonomy for the

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Speaker 1: Kitchen ethnic people. Late last year, the KIA started fighting

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Speaker 1: their way towards this point, looking to capture not just Pangwa,

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Speaker 1: but capture all of Kitchen Special Region one and kind

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Speaker 1: of take it as their own.

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Speaker 2: The KIA took control of Pungwa along with hundreds of

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Speaker 2: valuable rare earth minds overnight. That made the rebel army

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Speaker 2: one of the largest players in the rare earth industry.

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Speaker 2: But Tim says this change of control in Pangwa has

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Speaker 2: put China in a difficult position. It's bordered with me

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Speaker 2: and mar Is Long, so it needs to secure the

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Speaker 2: cooperation of the military junta, but it also needs the

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Speaker 2: rare earths that are now controlled by the rebels.

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Speaker 1: The KA is complicated because they are fighting the VNMR

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Speaker 1: junta and so Beijing and Chinese companies are now buying

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Speaker 1: rare earths from them, so funding them. But then they

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Speaker 1: are also supporting the menmar military of the junta, so

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Speaker 1: they are on both sides of this fight, and they

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Speaker 1: have voiced their displeasure to the Kia. They've also closed

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Speaker 1: the border on occasion to try to sort of force

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Speaker 1: their hand. So we did see the mining shut down

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Speaker 1: and saw the border close for a long time. It

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Speaker 1: is since reopened because we could see the exports going

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Speaker 1: out of VMMR into China now, so you know, an

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Speaker 1: agreement of some sort between these companies between the Kia

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Speaker 1: between China has been reached. For now, but like many

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Speaker 1: things in Nmar, at the moment, how long it will last,

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Speaker 1: how steady it is, is in open question.

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Speaker 2: By purchasing the rare earth's mind in Me and Mar,

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Speaker 2: China is effectively funding the Kia, perhaps a military Hunta's

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Speaker 2: greatest and most long standing enemy. This puts China in

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Speaker 2: a pickle, and that's why it's now looking for other

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Speaker 2: suppliers of these in demand elements.

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Speaker 1: You'll see much more coming from Laos. You'll see mining

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Speaker 1: startup in parts of Meanmar where Beijing has better relations

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Speaker 1: with the armed groups that have closer relations to Beijing,

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Speaker 1: and so the big official Chinese companies could go in

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Speaker 1: and operate. You're not relying on this kind of ragtag

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Speaker 1: middleman to kind of do this stuff.

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Speaker 2: As China tries to find other places beyond Me and

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Speaker 2: Mar for rare earths, the US is also scrambling to

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Speaker 2: find its own alternative to China. Last month, a rare

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Speaker 2: earth mine opened in Wyoming, the first in the US

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Speaker 2: in more than seventy years. At the same time, the

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Speaker 2: US is also tentatively eyeing Me and Mar.

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Speaker 1: For rare earths. There's been some interest from State Department

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Speaker 1: and other groups. About kind of sussing out and getting

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Speaker 1: a feel for the current situation and what it's like

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Speaker 1: on the ground. Right now, the US has very limited

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Speaker 1: engagement with Meanmar, meanmr is massively unstable at the moment.

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Speaker 1: You know, you have the hunta fighting armed ethnic groups,

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Speaker 1: you have them fighting smaller pro democracy groups that popped

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Speaker 1: up down for the coup. The Hunt is starting plans

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Speaker 1: for an election, which I think could be very destabilizing.

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Speaker 1: And then of course you see the military running a

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Speaker 1: really horrific campaign against its own citizens.

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Speaker 2: And Tim says there are more than just political and

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Speaker 2: humanitarian considerations for the US to factor.

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Speaker 1: There's just really, really really huge logistical issues. I mean,

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Speaker 1: it would take moving tons of rare earth material from

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Speaker 1: a sort of undeveloped, far remote corner of the kind,

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Speaker 1: and then you'd have to move it across the country

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Speaker 1: that's covered with hundreds of warring ethnic groups and armed

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Speaker 1: groups to a point of exit. Then the question is, well,

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Speaker 1: where do you bring it to refine it? And the

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Speaker 1: answer to that question is you bring it to China,

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Speaker 1: because China is the only place that has the capability

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Speaker 1: to refine this stuff. So now we're back where we started,

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Speaker 1: right and that is assuming that Beijing would allow this.

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Speaker 1: Why would China allow any US firms or companies or

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Speaker 1: linked people come into their own backyard and take what

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Speaker 1: they have obviously deemed a national security asset from them.

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Speaker 1: So there's a myriad of issues. There's obviously been the

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Speaker 1: sort of moral issues of the country and dealing with

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Speaker 1: various militaries, but just the logistics and geopolitics of it

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Speaker 1: alone make it sound almost inconceivable.

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Speaker 2: And now you've got this rebel army added to the

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Speaker 2: geopolitical mix. It's such a wild card.

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Speaker 1: Yeah, I mean, I don't think there's another situation that

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Speaker 1: ever reached the geopolitical tension that we're seeing now between

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Speaker 1: the US and China with rarersts in the middle. And

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Speaker 1: so you have these big superpowers and these big tech

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Speaker 1: companies and huge investments, and then when you drill down

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Speaker 1: one of the key players here is this group that

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Speaker 1: really was born out of a anti colonial struggle against

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Speaker 1: the MR government. And then I think the other thing

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Speaker 1: kind of wildcard here is technology in the advancements. Maybe

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Speaker 1: rare earth magnets will be innovative out of existence. Do

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Speaker 1: you already see some companies touting that they're running their

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Speaker 1: ev motors with batteries that don't have rare earths in them.

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Speaker 1: Maybe we're not talking about of them in the same way,

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Speaker 1: whether it's in ten years or fifteen or twenty years.

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Speaker 1: So there's also this other kind of unknown as the

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Speaker 1: kind of where this whole industry goes.

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Speaker 2: This is The Big Take Asia from Bloomberg News. I'm

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