By Eric Onstad
LONDON, Nov 17 (Reuters) - Canada's Neo PerformanceMaterials announced plans on Wednesday to expand itsrare earths operations in Estonia to produce super-strongmagnets for electric vehicles (EVs), counting on European Unionfunding to make it viable.
The EU wants to develop domestic output of rare earthmagnets - key for both EVs and wind turbines - to help meettargets for cutting carbon emissions and for reducing relianceon China. China now supplies 95% of the EU's permanent magnets, whichare also important for the defence sector and high-tech productssuch as robots.
Estonia gave its backing for the plans by Neo, which alreadyhas a rare earth separation plant in Sillam??e, to develop aEuropean hub there to produce rare earth alloys and magnets.
Automakers and their suppliers, which are ramping up EVoutput in coming years, have already said they will buy magnetsfrom the proposed factory, Chief Executive ConstantineKarayannopoulos told Reuters.
"The marching orders given by the automotive industry isthat by 2025 they need to have a supply of magnets for theirdrivetrains coming from Europe," he said in an interview.
The first stage would aim to produce about 1,000 tonnes ayear of permanent magnets, with commercial output launching by2024, while a second stage would boost output to 5,000 tonnes ormore.
The initial cost would be $40 million-$50 million in capitaland operating costs and Neo is looking for 15 million-20 millioneuros ($17 million-$23 million) in EU funding, Karayannopoulossaid. "It would make the difference between making the fundingdecision for ourselves versus not."
Neo is applying for EU funding through the bloc's JustTransition Fund, which helps members that will be negatively hitby the green transition. Baltic state Estonia is one of thelargest per capita greenhouse gas emitters in the EU because ofoil shale it uses for power generation.
Estonian Minister for Entrepreneurship Andres Sutt welcomedNeo's plans, saying in a statement they would create new jobsand cut life-cycle emissions.
($1 = 0.8838 euros)
(Reporting by Eric Onstad; Editing by Edmund Blair)