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AI model aims to promote deals by offering more certainty

on

future pricing

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Pentagon will continue to fund the AI program through at

least

2029

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More than 30 companies have joined non-profit Critical

Minerals

Forum

By Ernest Scheyder

May 1 (Reuters) - A U.S. government-created artificial

intelligence program that aims to predict the supply and price

of critical minerals has been transferred to the control of a

non-profit organization that is helping miners and manufacturers

strike supply deals.

Launched in late 2023 by the U.S. Department of Defense, the

Open Price Exploration for National Security AI metals

program is an attempt to counter China's sweeping control of the

critical minerals sector, as Reuters reported last year

Now, more than 30 mining companies, manufacturers and

investors - including auto giant Volkswagen - have

joined the Critical Minerals Forum non-profit and will be its

first users, according to Rob Strayer, a former U.S. diplomat

and the organization's president.

"Everyone in the critical minerals sector is looking for

more price transparency," said Seth Goldstein, a lithium

industry analyst with Morningstar. "Any tool like the CMF that

could help would be welcome."

Other members include copper miner South32 ( SHTLF ), rare

earths producer MP Materials ( MP ) and defense contractor RTX

. The CMF held its first meeting with members in

November. The privatization and CMF's membership have not

previously been reported.

Armed with the AI model, the CMF aims to help manufacturers

curb their reliance on China by signing more metal supply deals

with Western mines, according to more than two dozen industry

consultants, purchasing agents, analysts, regulators and

investors who told Reuters the program reflects one of the

boldest efforts to date to transform the ways certain metals are

bought and sold.

The goal is for the AI model to calculate what a metal should

cost when labor, processing and other costs are factored in -

and Chinese market manipulation is factored out - and thus give

buyer and seller confidence in a deal's economics.

Some deals with the CMF are beginning to take shape. Nevada

officials this week said they would work with the CMF and its AI

model to help attract copper smelting to the state. The U.S. has

only two copper smelters and as such imports nearly half of its

demand for the red metal.

The program has already faced skepticism over whether it can

achieve the goal of transforming the long-established ways

metals are bought and sold.

Yet it is aimed less at heavily traded metals - such as

aluminum - and toward lightly traded metals or metals that see

heavy overproduction from some in an attempt to sway market

pricing.

For example, the CMF model could help manufacturers forecast

available nickel supplies in 2028 if the U.S. were to impose a

100% tariff on that metal from Indonesia, the top global

producer.

That data that could help a manufacturer determine whether

to invest in a U.S. nickel mine or agree to buy its future

production, a step that would help obtain financing for a mine's

construction.

In such a scenario, the nickel buyer would use the AI model's

data to negotiate a long-term deal for guaranteed supply,

regardless of whether Chinese miners boost production and drive

down market prices, as they have done in recent years.

The CMF's aim with the AI model does assume that a buyer

would be comfortable paying more than the market price for a

metal if supply were guaranteed.

CHINA SQUEEZE

The CMF's entrance into the complex metals markets comes as

Beijing restricts critical minerals exports, the very kind of

market interference that the CMF officials said underscores the

need to build more U.S. mines and processing facilities to power

the energy transition.

Prices on the London Metal Exchange and other futures exchanges

for nickel, cobalt and some other battery metals have been

dominated in recent years by overproduction from Chinese miners

operating at a loss in Indonesia and Congo to boost market

share.

Many niche-but-essential battery minerals on which Beijing has

imposed export controls are not traded or lightly traded,

including rare earths - a group of 17 metals used to make

magnets that turn power into motion - as well as germanium and

gallium.

In response to a request for comment about the CMF, the

Chinese embassy in Washington, D.C., said that China manages its

exports of rare earths in accordance with rules from the World

Trade Organization.

"China will continue to work with other countries to jointly

undertake the responsibility of global rare earths supply," said

embassy spokesperson Liu Pengyu.

Volkswagen and some other CMF members said they see the CMF as

helping boost visibility into what can be an opaque critical

minerals supply chain. MP Materials ( MP ) and RTX did not respond to

requests for comment.

U.S. President Donald Trump has already ordered his

administration to work with private developers to boost U.S.

crucial minerals production, a step that could be aided by the

data CMF aims to provide markets, program officials said. The

president has also launched a study into potential tariffs on

all U.S. minerals imports.

Drawing on its government connections, the CMF aims to

connect mining projects with potential investors and

manufacturers needing more-secure metals supply, said Strayer.

Massachusetts-based rare earths processing startup Phoenix

Tailings hopes the CMF can help create U.S.-based prices for

minerals tied to actual production costs, said CEO Nick Myers.

Phoenix aims to use data from the CMF as negotiating

leverage with potential customers, including manufacturers that

are themselves CMF members, Myers said. "In a sector that is

opaque, it is one of the tools to get more information," Myers

said.

Not all market observers are convinced that the CMF's AI

model is revolutionary.

"I've tried to politely say I think this is worthless," said

Ian Lange, who teaches mining economics at the Colorado School

of Mines. Lange contrasted the goals of the Pentagon's AI model

with the much-larger and more-complex global oil market.

"Can we predict the price of oil better now than five years

ago? The answer is no. Machine learning doesn't help," Lange

said.

'ENCOURAGE MORE VISIBILITY'

The Pentagon's AI model is being trained using more than 70

mining-related data sets and aims to guide investment decisions

out for at least 15 years based on how unexpected market shocks

- export restrictions, for example - could affect the production

or price of a metal.

FactSet, Benchmark Mineral Intelligence and other

pricing providers are supplying data, as is the U.S. Commerce

Department, officials said.

It is access to analysis of that data - some of which is not

public - that the CMF says it believes sets the Pentagon's AI

program apart from ChatGPT or other AI programs.

And that data is the CMF's biggest cost, part of the reason

why the Pentagon's Defense Advanced Research Projects Agency

(DARPA) will fund it for the next few years while the CMF

determines whether to charge all members or create a tiered

structure with basic members getting free access and others

paying for more granular data, officials said.

S&P Global ( SPGI ), AI developer Charles River Analytics,

and software firm Exiger with price reporting agency partner

Metal Miner have developed the model, according to the

Pentagon.

S&P Global ( SPGI ) declined to comment. Charles River Analytics did

not respond to a request for comment. Exiger said it believes

its data can help forecast a material's cost and availability

and boost supply chain visibility.

The CMF has been organized as a nonprofit trade association

with a board of directors comprised of its members. Its staffing

is small - fewer than 10 employees - and its annual budget is

not disclosed.

DARPA does not have a representative on the CMF board, but

is funding the program through at least 2029 and plans to

transfer the AI model's intellectual property to the CMF by the

beginning of 2027, officials said.

There are no plans to make the CMF a for-profit entity,

although there may be charges in the future for access to more

detailed data sets, officials said.

The CMF is launching a campaign to attract more members -

especially from the semiconductor, aviation and defense

industries - and offering free membership for the next 14 months

while the Pentagon funds data collection, Strayer said.

Foreign governments are also studying whether to join the

CMF and use its data, including copper-rich Zambia and

cobalt-rich Democratic Republic of Congo, CMF officials said,

adding they aim to make the program international in scope to

boost metals market transparency.

The Zambian and DRC embassies in Washington, D.C., did not

respond to requests for comment.

As Western miners begin to demand green premiums for their

metals, those new agreements increasingly require the very

market intelligence the CMF model aims to provide.

"Any mechanism that can give you better modeling of markets

is obviously enormously valuable," said Brian Menell, CEO of

TechMet, a mining investor and CMF member.

The AI model introduces another variable for the LME to contend

with, especially as the exchange is struggling as rivals in

Chicago and Shanghai try to take market share for some niche

battery metals.

The LME declined to comment.