US DFC Commits $62.8 Million to Four African Rare Earth Projects

The US International Development Finance Corporation (DFC) has committed $62.8 million to four rare-earth projects in Africa, as Washington works to diversify critical mineral supply chains and reduce dependence on China.

The projects are located in Malawi, Angola, Madagascar and South Africa, but none has reached commercial production. The largest allocation, about $50 million, is going to the Phalaborwa rare-earth project in South Africa, backed by Dublin-based mining investor TechMet. The remaining $12.8 million is spread across projects in the other three countries, although the DFC has not disclosed the individual amounts.

US Funding Targets Early-Stage Risk

The DFC’s involvement comes as rare-earth developers continue to struggle to attract private capital. Two senior DFC executives told Reuters that private investment in Africa’s rare-earth sector remains limited, with the agency using its funding to help projects reach a stage where commercial investors may be more willing to participate. Rare-earth projects require significant upfront investment and face challenges around infrastructure, processing capacity and future commodity prices. Developers also have to contend with uncertainty over demand for specific rare-earth products.

Olimpia Pilch, head of strategy at Critical Minerals Africa, pointed to another challenge: the number of announced rare-earth projects is already much higher than current demand for neodymium-praseodymium (NdPr) magnets. NdPr is used in permanent magnets for electric vehicles, wind turbines and other applications that are driving interest in rare-earth supply.

China Remains Dominant in Rare-Earth Processing

China’s position in the rare-earth industry remains a major factor behind the US push to develop alternative supply chains. Chinese companies control a large share of global rare-earth processing, while Beijing has introduced tighter export controls in recent years. China has also provided significant financing for mining projects across Africa. Chinese state-backed lenders such as the China Development Bank and Export-Import Bank of China have supported projects involving copper, cobalt, lithium and other minerals in countries including the Democratic Republic of Congo, Zambia, Guinea and Zimbabwe.

The DFC is taking a different approach. Its funding is intended to help reduce early-stage project risks and attract private capital rather than provide all the financing required to develop a mine.

European and UK development finance institutions, including the European Investment Bank and British International Investment, are following similar approaches in supporting African critical mineral projects.

Africa Already a Major DFC Market

Africa accounts for about 20% to 25% of the DFC’s overall investment portfolio, according to one of the DFC executives who spoke to Reuters. The $62.8 million rare-earth commitment therefore forms part of a much larger US investment presence on the continent. The specific focus on rare earths reflects Washington’s interest in developing mineral supply chains outside China’s existing networks.

For the four African projects, however, DFC financing is only an early step. Each project will still need to demonstrate its resource potential, secure permits, develop processing plans and attract additional commercial financing before reaching production.

The projects in Malawi, Angola, Madagascar and South Africa will therefore provide an early test of whether development finance can help move African rare-earth projects from exploration and development towards commercially viable production.