The US government is providing further financial backing to secure supplies of rare earth elements (REEs) considered critical to national defence and economic security, as it seeks to reduce its reliance on China.
On Monday, the Department of War (DoW), through its Economic Defense Unit (EDU), announced plans to inject US$750 million ($1.05 billion) into a program supporting an offtake agreement for mixed rare earth carbonate (MREC) produced at Serra Verde’s Pela Ema Project in Brazil.
Located in the central Brazilian state of Goiás, Pela Ema is the first large-scale producer outside Asia of all four critical magnet rare earths — dysprosium (Dy), terbium (Tb), neodymium (Nd), and praseodymium (Pr).
The mine entered commercial production in early 2024, becoming the first of its kind in Brazil. It is targeting annual production of 6,400 tonnes of rare earth oxides by the end of 2027 over a 25-year mine life.
Given the project’s potential scale, the DoW says the initiative will help address US dependence on China, which dominates global rare earth mining and processing.
“By partnering with Serra Verde, we are taking a decisive step to break our adversaries’ near-monopoly on rare earth elements,” Assistant Secretary of War for Industrial Base Policy Mike Cadenazzi says.
“This collaborative effort ensures that our defense industrial base has the guaranteed, long-term access to the critical materials needed to manufacture next-generation weapons systems and maintain our technological edge.”
Broader funding package
The DoW’s US$750 million commitment is part of a broader US$1.55 billion investment structure mobilised by the EDU.
The package also includes a US$300 million purchase commitment from the Defense Logistics Agency (DLA) and US$500 million from a major US bank.
The funding is expected to provide capitalisation support for USA Rare Earth (NASDAQ:USAR) as it moves towards completing its proposed acquisition of Serra Verde, announced earlier this year.
The latest backing follows a financing agreement between Serra Verde and the US International Development Finance Corporation (DFC) for a US$565 million loan to optimise and expand the Pela Ema operation.
According to the DoW, these investments are working in parallel with Department of Commerce efforts to establish a non-Chinese mine-to-magnet rare earth supply chain.
“This historic US$1.55 billion investment is a major step towards securing one of the most vital supply chains for our warfighters and our economy,” EDU Director George K. Kollitides II says.
“By ensuring reliable access to these critical rare earth elements, we are protecting the production of everything from fighter jets and nuclear submarines to the energy infrastructure and commercial technology that power our modern world.”
The funding adds to a growing series of US government investments aimed at securing alternative sources of rare earths and building domestic and allied supply chains outside China’s dominant market.
Write to Jackson Chen at Mining.com.au
Image: Serra Verde Group
