The United States is increasingly backing African critical-mineral projects to reduce dependence on China, but a closer examination of recent investments reveals fundamental gaps in Washington's rare-earth strategy. On July 22, 2026, the Australian mining company Harena announced a Project Development Funding Agreement with the U.S. International Development Finance Corporation (DFC) for up to $4.84 million to develop Ampasindava, a rare-earth deposit on Madagascar's northwest coast.
While American capital backing non-Chinese mineral sources appears strategically sound, the deal exposes critical oversights in how Washington is approaching rare-earth supply-chain security. The core problem lies in a widespread misunderstanding of where China's competitive advantage actually resides. Although China controls roughly 60 percent of global rare-earth mining, it controls more than 91 percent of global refining and nearly 94 percent of permanent-magnet production.
China's dominance is fundamentally a refining and processing problem, not a mining one. The industrial capacity to turn ore into usable components—separation, refining, alloy production, and magnet manufacturing—is what truly matters for the defense, energy, automotive, and advanced-technology industries. If African material must still pass through Chinese-controlled processing facilities, Washington has merely diversified extraction without changing who controls the supply chain.
Ampasindava contains high concentrations of neodymium, praseodymium, dysprosium, and terbium, the elements essential for building permanent magnets used in precision-guided munitions and fighter jets. Once complete, the mine is expected to produce about 4,000 metric tons of rare-earth oxides annually, including roughly 1,700 tons of higher-value magnet rare earths. Harena is targeting production in mid-2028 and shopping offtake agreements around Europe and the United States.
However, the project as designed covers mining only. There are no provisions for on-site separation, refining, or magnet-making. Madagascar's ore would strengthen the upstream end of the Western supply chain while leaving the specialized, high-value downstream steps untouched, according to sources cited in the original reporting.
This pattern extends across U.S. investment in African rare earths. Beyond Ampasindava, American backing has gone mainly to projects in Malawi and South Africa, with mineral-processing frameworks secured in Kenya and Tanzania. The current approach prioritizes funding extraction in countries not aligned with Beijing, but without corresponding investment in downstream processing capability.
America faces a second major constraint beyond processing capacity: workforce availability. American firms possess the technological capability to build a Western rare-earth supply chain, but they confront a shrinking mining pipeline, almost no domestic separation expertise, and no existing magnet-manufacturing workforce. Capital can be raised faster than metallurgists and process engineers can be trained.
This skills gap represents a genuine bottleneck that financial investment alone cannot solve quickly. African governments, meanwhile, are increasingly pushing foreign companies to conduct processing locally, both for economic development and to move beyond purely extractive arrangements that carry post-colonial baggage. Zimbabwe, Tanzania, and Ghana have already banned raw lithium exports rather than continue shipping unprocessed ore abroad.
France has already moved in this direction, committing to shift some mining-related processing back to Gabon by 2029. As competition for critical minerals accelerates, African nations will realize they hold substantial policy leverage. DFC investment strategies should get ahead of this dynamic by proactively including local processing or capacity-building components rather than waiting for renegotiation.
Logistics represents a third, often overlooked problem. Through the Belt and Road Initiative, China controls much of the logistics infrastructure connecting mines to ports across Africa. Even if mining, processing, and magnet production all eventually occurred in American or partner-nation facilities, the supply chain could still run through Chinese-controlled roads, rail, and ports.
Extraction and processing are visible chokepoints; logistics is the constraint that can quietly undo progress on the other two. China has already long dominated investment in Africa's copper, cobalt, and lithium sectors and is well positioned to extend that dominance into rare earths. It already controls the downstream end of the rare-earth element supply chain; adding ownership stakes in African REE projects would let it close the loop from mine to finished component.
In the first half of 2025 alone, Chinese state-owned banks issued $24.9 billion in Belt and Road-linked mining loans, with mining's share of BRI engagement trending upward. The stakes of inaction carry significant implications. Estimates show that a full Chinese export restriction on rare-earth metals could cost $6.5 trillion outside China, severing supply chains behind precision-guided missiles and other advanced defense platforms the United States has relied on for decades.
By 2035, existing and announced rare-earth projects are projected to supply less than half of global mining demand outside China, a quarter of refining demand, and less than a fifth of magnet-production demand. Closing that gap is estimated to require roughly $60 billion in investment over the next decade. History provides a cautionary lesson.
In 2010, China restricted its rare-earth exports, causing prices to spike. Western companies rushed to take advantage, including reopening Mountain Pass, an old mine in California. Then China lifted restrictions, prices collapsed, and by 2015 Molycorp, the company that reopened Mountain Pass, was bankrupt.
Its stock fell from $79 per share to 35 cents. China didn't need to invade anyone or break laws; it simply let the market work because it could set prices low enough to make new competitors unprofitable. The Pentagon's recent response to this dynamic involved a deal with MP Materials, the company now owning Mountain Pass.
In 2025, the Department of Defense agreed to guarantee that MP Materials would receive at least $110 for every kilogram of key rare-earth material it sells, regardless of market price. If the market price falls below that level, the government covers the difference. The government also promised to buy all magnets from MP's new factory for ten years.
In practical terms, Washington removed the incentive for China to simply crash prices and wait for the American company to fail again. A genuine integrated strategy would require that DFC financing be tied to comprehensive supply-chain development rather than treated as an isolated achievement. Mine finance should be paired with guaranteed non-Chinese processing and logistics, along with direct investment in Western separation and magnet manufacturing.
Long-term offtake agreements and price protections can provide producers the certainty needed to survive market manipulation. African partners should receive meaningful local processing and economic benefits rather than serving solely as raw-material sources. Congress has already provided DFC with substantial room to act.
Its December 2025 reauthorization raised the lending and investment ceiling from $60 billion to $205 billion and created a critical-minerals exception allowing investment in Five Eyes countries. This matters because much missing separation, refining, and magnet capacity must be built in allied countries with advanced economies. With the funding and authorization available, DFC now faces a choice rather than a legal obstacle.
In the second great-power competition over rare earths, the winners will not be countries that own the most mines. They will be those that pair extraction with effective governance, resilient infrastructure, and integrated processing capacity. China's 91 percent share of global refined rare-earth output and 94 percent share of magnet production make clear that mining investment alone will not deliver the supply-chain resilience the United States seeks.
The United States should measure critical-mineral security by how much of the resulting supply chain can operate independently of China, not by how many foreign mines it has financed. Africa can be a genuine pillar of American rare-earth diversification, but only if Washington connects extraction to processing, purchasing, price protection, manufacturing, and local value creation. Absent that integration, the United States risks changing where rare earths come out of the ground without changing who controls them before they reach American industry.
Source: realcleardefense.com