The Pentagon will offer a conditional $500 million loan to a U.S. company at the forefront of rare earth element processing, the latest step in the Defense Department’s push to shore up the key domestic supply chains crucial to modern electronics, advanced weapons and military technology, defense officials said Tuesday.
In a statement, the Pentagon said the $500 million loan to Phoenix Tailings — combined with another $500 million in private capital investments — will fund the expansion of critical metal production at the company’s existing facilities in Massachusetts and New Hampshire. It will also fund the construction of a new rare earth separation and metalization facility in the U.S., officials said.
“Supporting domestic processing for critical minerals and rare-earths is a key focus for [the Pentagon], and the rare-earth midstream processing capabilities that Phoenix Tailings represents are key shortage areas that need to be rapidly addressed,” said David A. Lorch, director of the Pentagon’s Office of Strategic Capital, in a press release.
Rare earth metals are 17 minerals used in the production of most high-end electronics and applications. The metals themselves are not rare, but the process of finding, separating and purifying them is expensive and complex.
China has a near-monopoly on rare earth processing and refining due to decades of investment in infrastructure and research. Beijing controls more than 90% of the world’s rare earth processing infrastructure, giving it almost total control over the pricing of materials essential for producing cellphones, fighter jets, radar systems, next-generation missiles and many other foundational components crucial to the U.S. military and the broader 21st-century American economy.
Phoenix Tailings is one of the companies looking to change that by basing rare earth processing facilities in the U.S. The company exploits the leftover waste materials from mining operations, or tailings, and finds and processes rare earth minerals found inside.
SEE ALSO: LISTEN: Phoenix Tailings CEO explains why China dominates U.S. in rare earth elements
The direct government loan to Phoenix Tailings is the latest signal from the Trump administration that it will invest aggressively in some of the private companies at the center of U.S. military-industrial supply chains.
Nick Myers, the CEO and co-founder of Phoenix Tailings, appeared on The Washington Times’ “Threat Status” podcast last year and said that while the U.S. is still at the forefront of defense technology, China’s dominance of the rare earth game is a threat.
“There’s really not too much of a debate around the end products that we produce. They’re awesome. What China did strategically at a governmental level is look down the value chain,” Mr. Myers said. “They invested in the metalization. They buy materials, the raw material, from mines at a high price, they process it in China and then sell the metals at a discount. That’s how they’ve ended up being able to control the whole world.”
Mr. Myers said that China’s dominance in the rare earth processing field could lead to an economic or military disaster for the U.S.
“The tank, the battleship, nuclear energy, wind energy, gas energy, all of it relies on rare earth metals. And without it, our society is crippled not from a military standpoint, only from an actual everyday operation standpoint,” Mr. Myers said. “They are playing on a different level right now. China is engaging in economic warfare. They understand that warfare is not all kinetic, and they’re leveraging their economic power.”
• Vaughn Cockayne contributed to this report.
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