Offshore processing of critical metals comes with steep costs to national security & to our environment

Metals are a key material that the enable the manufacturing of buildings, airplanes, cars and electronics. Rare earths in particular are a high-demand and limited-supply commodity that are 99% produced in China — presenting western democracies and multinational corporations with a significant supply chain vulnerability. Rare earths are needed to produced key components such as magnets that are needed to make electric vehicles, MRI machines and jet-craft engines. The US has a strategic interest in building capacity for domestic production.

Electrified transportation relies heavily on rare earth metals

Existing technology can't meet demand
Supply shortage Demand is increasing as renewable technologies and advanced systems gain adoption. Inefficient & hazardous production Current mining technologies produce massive amounts of waste, limiting domestic deployment. Supply chain risk With supply limited to China, The US & other Western countries are at risk of not having the materials needed to achieve electrification targets.

Full tailings-to-metal platform 

Phoenix Tailings has unlocked the ability to extract and purify rare earths, iron and gold found in mining tailings found all over the world, including the United States, enabling a truly decentralized and CO2 free manufacturing platform. Tailings are waste streams, basically red mud, found at the foot of mining operations all over the world. Phoenix Tailings is the first and only company in the world that can extract and purify the various metals found in tailing waste.

China has been able to capture the rare earth market for several reasons, including but not limited to 1) extremely low cost of human capital and 2) non-existent environmental and safety regulations. The main byproducts of manufacturing rare earths using conventional processes are hydrofluoric acid and carbon dioxide. Hydrofluoric acid (HF) in particular is an extremely toxic substance that is notorious for causing human suffering and death among factory workers. By using Phoenix’s processes, a CO2-free, HF-free, and US-based manufacturing process can be implemented.

Proprietary, zero-waste technology

Phoenix Tailings has created a fully vertically integrated manufacturing platform that takes in mud waste (tailings) and produces >99% pure metal bars. The technology platform has two components 1) extraction and 2) refining. Extraction is the process of separating the metals in the mud and turning them into metal oxide concentrates. Refining is the process of taking metal oxide concentrates and turning them into >99% metal bars. In some cases, extraction provides more value in the supply chain and sometimes refining does. In some cases, having both provides the best solution to the market.

The technologies that underpin the phoenix manufacturing process encompassing a number of step wise improvements over the state of the art with several key innovations that have resulted in over 20 patents and 30 trade secrets.

Key parts of their IP include:

• Chemical leaching for improved concentration formation during extraction and purification of mud tailings
• The removal of cerium oxide during refining using a novel selective halogenation process
• The removal of HF during their molten salt electrolysis to enable lower operating costs, temperature, and the ability to scrub CO2 during refining.
• Scale-up designs that will ultimately enable Phoenix to extract and refine kilotons of metal per year. 

$5–10M ARR potential by end of 2023

The company is now the largest producer of neodymium and dysprosium, two highly important rare earths, outside of China. Currently Phoenix can produce 100kg/ month at their pilot facility in Somerville Massachusetts. They expect to scale up production to 30 metric tons per year by the end of 2023. Neodymium currently sells for $150,000/ton and dysprosium currently sells for $330,000/ton, giving Phoenix the ability to scale revenues to $5–10M/year by the end of the year. In addition, Phoenix has already signed a $15M MOU with a customer looking to purchase Phoenix’s rare earths.

On the government side, the team has built an impressive array of connections within the federal government and DOD. The company has an active pipeline of >$80M worth of federal grants that could be awarded within 1-2 years.

Refining —1st Stage Refining Pilot Complete

Phoenix Tailings has demonstrated repeatable production of rare earth metals domestically without carbon emissions, solving a critical supply chain gap. The company is now in the process of scaling up its technologies to hit commercial volumes.

Extraction — Pilot site secured

Phoenix Tailings has completed the needed R&D, feasibility assessments and infrastructure analyses needed to start a large scale pilot production for extraction onsite at a tailings deposit. The next step is to build a pilot unit on-site.

* Geochemistry and Geophysics of Iron Oxide-Apatite Deposits and Associated Waste Piles with Implications for Potential Rare Earth Element Resources from Ore and Historical Mine Waste in the Eastern Adirondack Highlands, New York, USA”. USGS, 2019.

$150M+ in refining contracts under negotiation

Phoenix has generated an impressive sales pipeline. The company is currently negotiating two rare earth refining contracts worth over $150M/year, and expect the deals to close by Q3 2023. In addition, they are growing a sales pipeline worth close to $1B — which includes both Wall Street metal traders as well as direct OEM supply agreements with electric vehicle manufacturers.

Refining contracts pipeline

The value chain for rare earths is segmented between companies who can extract them from the ground and those who can refine them. All refining is currently done by China, but extraction is geographically diverse. There are several companies that specialize in extraction of rare earths including USA Rare Earths and MP Materials (NYSE:MP). Both USA Rare Earths and MP materials can create rare earths concentrates but they are reliant on sending these concentrates to China to refine the concentrates into pure metal bars.

Both USA Rare Earths and MP Materials have vested interest in bringing refining stateside, and have both engaged with Phoenix. USA Rare Earths is currently negotiating a $120M/year supply agreement with Phoenix. Phoenix believes it can turn a 30-40% margin on a partnership with USA Rare Earths to refine and metalize their concentrates. Once Phoenix onboards their own extraction process the captive margins may be able to increase to over 90%. Long term stability of these margins will depend ultimately on the Chinese government and whether they will lower their sales price once Phoenix becomes a global player in the coming years.

Hub & spoke model

Phoenix Tailings is currently commercially producing Rare Earth metals: Neodymium and Dysprosium Iron Alloy in Massachusetts from purchased oxides and concentrates.

Neodymium and dysprosium currently sell for $150,000 per ton and for $330,000 per ton, respectively, and are the initial focus for Phoenix Tailings. In addition to supplying finished metal bars, Phoenix may be able to partner with and ultimately acquire contract manufacturers who supply finished magnets, which would enable Phoenix to become a fully vertically integrated magnet manufacturer and supply OEMs finished goods. In fact, Phoenix has already signed a $15M letter of intent with one such contract magnet manufacturer. The $15M MOU is to supply the magnet manufacturer with metal bars but in addition, they have also agreed to generate a white-labeled, Phoenix-branded magnet.

Refining: Scaling Up
Over the next 5 years, Phoenix Tailings plans to build three refining facilities processing rare earth concentrate into final metals. With the growth in each stage, the company will be able to further expand revenue and gross margins.

Extraction: Case Studies
Unlike traditional mining companies, Phoenix Tailings avoids the time intensive process of conventional exploration & permitting, allowing the company to deploy rapidly on numerous sites, unlocking tremendous value with venture level returns.

Financial Model: 3 Sites Operational by 2028
Full growth plan reaches EBITDA positive by Q4 2025, strong EBITDA margins of 40% or ~$700M/year at stabilization.

$3 Trillion+ market opportunity

There are three market verticals that Phoenix is targeting. The beachhead market for Phoenix is the $7B rare earths market that will grow to $15B by 2030. The medium to long term market is iron, which a $350B market, and ultimately the gold market which is worth $3 trillion. There are several macroeconomic tail winds that will enable Phoenix to win market share rapidly.

Medium to long term market: Iron 

Iron is almost 100x the size of the Rare Earths market at nearly $320B per year. In 2019 close to 2.3B of iron ore was produced. Major iron ore producers include Rio Tinto ($55B), Vale ($54B) and Anglo American ($35B). These companies operate mines and sell iron to several customers, primarily those in steel production, including TATA Steel, Nippon Steel and Arcelor Mittal. Steel is a critical metal used to make bridges and buildings that underpin modern society. Steel production is also one of the largest emitters of CO2 (7% of total emissions), resulting in 3.7 Giga Tons per year. Phoenix’s unique iron concentrate would eliminate the need for steel producers to use high amounts of CO2 to make steel resulting is 65% lower CO2 emissions.

There are several highly valued startups attempting to produce CO2-free steel. One such company, Boston Metal, has raised $190M from top tier VCs. In theory Phoenix would disrupt startups like Boston Metal because any steel producer could simply purchase Phoenix’s iron concentrate to produce a low CO2 version of their steel. The key question for Phoenix is whether the techno economics can scale and phoenix can capture a healthy margin and be cost competitive. Iron currently sells for $125/ton, which is substantially less than neodymium or dysprosium. The key innovation for Phoenix in iron production lies in its ability to extract high volumes of iron from tailings mud at low cost.  

Long term: Gold

Gold is a $3 trillion dollar market opportunity due to its extremely high price ($65M/ton), which far exceeds the price of rare earths. There are potentially two market opportunities within the gold market for Phoenix. Like rare earths, Phoenix may be able to buy gold concentrates from miners and sell the refined gold bars at a profit. This work is currently underway to see if Phoenix can be cost competitive. In addition, Phoenix may be able to secure the rights to tailings ponds of gold mines as well as non-gold mines where there are trace amounts of gold in the tailings such as those in Cobalt mines.

Technoeconomics as a strategic driver

Phoenix Tailings will be able to earn market share by leveraging their ability to sell their metal at or below the existing spot price of the metal being traded on the open market. Commodities like metal are traded on futures contracts, and having a reliable and consistent sales price and manufacturing output may enable Phoenix to be awarded with 8- and 9-figure contracts within a few short years as they continue to scale up their first production systems. In some cases, the volatile movements of metals contracts provide significant uncertainty and vulnerability to large OEM purchasers.

Ability to gain a global monopoly of tailing ponds

Phoenix has been making significant progress locking up agreements with mining owners as well as with relationships within the US government. Phoenix has been granted an exclusive rights to a tailing pond in upstate New York, with an estimated $2B worth of metals for zero upfront capital, only needing to give up 0.5% of future net sales. Because tailings ponds are essentially considered waste streams, mining operators must pay to remediate the ponds and manage their disposal. This gives Phoenix an unprecedented opportunity to lock up the world’s supply of tailings for very-little-to-zero upfront costs. Phoenix is in active discussions with over 2 dozen of tailings all over the world over representing trillions of dollars in untapped metal assets.

There is an opportunity for Phoenix to secure 100x more sites like the one in upstate New York and corner the global market of tailings assets. Even if another company could develop a competing technology to Phoenix, having control of the land rights will prevent new entrants from physically accessing the tailings. While all tailings won’t be free of upfront capital like the site in upstate New York, even modest investments likely enable phoenix to capture of the entire worlds tailings reserves, giving phoenix an unprecedented competitive advantage and a fully vertically integrated supply chain, especially for rare earths in the case of also purchasing the magnet contract manufacturers.

Key national security interests

A key driver for the adoption of Phoenix’s rare earths will be the ability for multibillion dollar OEMs and the United States defense industry to reduce its reliance on a foreign adversary. China has publicly stated that their goal is to control the global supply of rare earths and sees its ability to control the market a strategic geopolitical advantage. Phoenix is currently in discussions with several US defense agencies and is currently targeting several large DOD and DOE funding programs that would enable the phoenix to build large scale production sites.  In addition, In-Q-Tel is an investor in Phoenix through their investment in Phoenix’s series A. In-Q-Tel is the VC arm of the central intelligence agency (CIA).

24-Month Operational Plan

Over the next 24 months, the company will build a full refining pilot that showcases Phoenix Tailings’ Processing Technology generating positive gross margins. It will also design the full commercial plant which harvests rare earths from tailings and other sources.

$10M pre-Series B led by Sumitomo

Republic Deal Room has secured an allocation for Deal Room investors to invest in an SPV into a $10M pre-series B SAFE round at a $100M valuation cap and 20% discount. $7M has already been raised and closed of this round.

Sumitomo, a Japanese trading company with $50B in annual revenues, has led the round as a strategic investor. Sumitomo is one of the largest steel traders in the world, which makes them an ideal strategic investor. In addition, active discussions between Phoenix and Sumitomo are in place that would enable Sumitomo to finance the CAPEX of the future manufacturing plants backed against existing and future POs.

The $10M raise will give Phoenix over 12 months of runway, as well as provide the capital to build out their initial production units ($2M) that will be able to generate greater than 30 metric tons per year of neodymium and dysprosium which would be worth $5-10M/year. A key inflection point of the business will be met once larger scale production is underway. At this point, large customers, such as those in negotiation for the $150M in contracts will feel confident to place standing POs. Those POs will provide the backdrop for Phoenix to raise >$50M series B as well as move discussions forward with CAPEX financiers such as Sumitomo to build out Phoenix’s first commercial systems that could make >1,000 metric tons of rare earths per year.  

Phoenix Tailings is led by a strong founding team with a diverse set of skills and experience. Nick Myers, the CEO, brings with him a family history in the mining business, providing him with a deep understanding of the industry's challenges and opportunities.

Myers is joined by co-founders Michelle Chao and Thomas Villalon, both scientists from MIT. Their technical expertise and innovation have been instrumental in developing Phoenix's proprietary manufacturing platform and patent portfolio. 

Phoenix's entire team consists of 18 experts, including many PhD scientists and technical specialists with a strong shared vision for transforming the mining industry.