US government pours $62.8M into African rare earth projects that private investors won’t touch

The US International Development Finance Corporation has committed $62.8 million to rare earth mining projects across four African countries, stepping in where private capital has refused to go. The bulk of that money, roughly $50 million, is headed to a single project in South Africa that plans to extract critical minerals from old mine waste.

Why nobody else is writing these checks

The DFC’s funding spans projects in Malawi, Angola, Madagascar, and South Africa. The centerpiece is the Phalaborwa project in South Africa, which takes an unusual approach to mining by reprocessing gypsum waste from a legacy mine to pull out rare earth oxides like neodymium, praseodymium, dysprosium, and terbium.

Those four elements are the workhorses of the clean energy transition. Neodymium and praseodymium go into the permanent magnets that make EV motors and wind turbines spin. Dysprosium and terbium make those magnets work at high temperatures without losing their magnetic properties.

DFC executives were blunt about the market reality in statements to Reuters on August 19. Private capital simply isn’t showing up for African rare earth ventures right now.

“We do not see private capital coming in. We’re trying to help projects reach a more de-risked stage and become attractive for private-sector investment.”

There’s also a simple supply-demand mismatch working against these projects. More rare earth ventures have been announced globally than there is current demand for materials like NdPr, which means even optimistic investors see a crowded pipeline chasing limited buyers.

The de-risking playbook

The Phalaborwa project has some history with US government-adjacent capital. DFC equity in the project flows through TechMet, a critical minerals investment firm, with the relationship dating back to 2023. The project’s waste-reprocessing model is somewhat less risky than greenfield mining because it doesn’t require discovering new deposits or building entirely new infrastructure from scratch. The raw material, gypsum waste from decades of phosphate mining, is already sitting in piles waiting to be processed.

On August 7, DFC also announced project development funding for the Harena Rare Earths ionic clay project in Madagascar, marking the agency’s first mining investment in that country. Ionic clay deposits are geologically distinct from hard rock rare earth mines. They’re cheaper to process and produce a higher proportion of heavy rare earths like dysprosium, which command premium prices.

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