US steps in to fund African rare earths shunned by private money, sources say

DAKAR - The US International Development Finance Corporation (DFC) is backing a pipeline of African rare-earth projects as private investors remain reluctant to finance the sector, two senior DFC executives told Reuters.

The DFC has committed US$62.8 million (S$80 million) to rare-earth projects in Malawi, Angola, Madagascar and South Africa, though none has so far reached production, the agency said on Aug 19.

Most of that funding – about US$50 million – was for the Phalaborwa project in South Africa backed by Dublin-based mining investor TechMet.

“We do not see private capital coming in,” one of the executives said, requesting anonymity because they were not authorised to discuss the matter publicly.

“We’re trying to help projects reach a more de-risked stage and become attractive for private-sector investment.”

In a rare public acknowledgement, the two DFC executives said that private investors remain largely unwilling to fund African rare-earth projects, despite their strategic importance in reducing US dependence on top producer China, which dominates the global supply chain and has over the past couple of years tightened export controls.

Rare earths are essential for magnets used in electric vehicles, wind turbines and defence systems.

The US is increasingly using the DFC to help develop Western-aligned supply chains for critical minerals.

One of the DFC executives said private investors remain wary of African rare-earth projects because of their higher risk profile and concerns that Chinese market intervention can undermine pricing and project economics.

Analysts also say many proposed rare earth projects face uncertain economics and limited investor appetite.

“There are far more announced rare-earth projects than there is demand for neodymium-praseodymium (NdPr) magnets,” said Olimpia Pilch, head of strategy at advocacy group Critical Minerals Africa.

Africa accounts for roughly 20 per cent to 25 per cent of DFC’s global investment portfolio, the second DFC executive said. REUTERS