The U.S. backs a South Africa project to extract rare earths despite a diplomatic clash

A front-end loader transports phosphogypsum in Phalaborwa, South Africa, Monday, Sept. 8, 2025. (AP Photo/Themba Hadebe)

PHALABORWA, South Africa — Two enormous sandlike dunes at an old chemical processing plant in South Africa are at the centre of an exploratory U.S.-backed project to extract highly sought-after rare earth elements from industrial mining waste.

The Phalaborwa Rare Earths Project has U.S. support through a US$50 million equity investment by the government’s International Development Finance Corporation and is part of accelerated U.S. efforts to reduce reliance on economic rival China for the minerals crucial for making electronic devices, robotics, defence systems, electric vehicles and other high-tech products.

Countries have identified dozens of minerals, including copper, cobalt, lithium and nickel, as critical because they are essential for new technologies. The 17 rare earth elements are a subset of them.

U.S. President Donald Trump has made expanding U.S. access to critical minerals, including rare earth elements, a central policy to counter China. The Trump administration said this year it will deploy nearly $12 billion to create its own strategic reserve.

Project continues despite a diplomatic rift

The DFC was created during the first Trump administration and committed its investment in the Phalaborwa project in 2023 under former U.S. president Joe Biden.

The current Trump administration has moved forward with the project despite a major diplomatic rift with South Africa, which began when Trump returned to office and issued an executive order last February to halt all financial assistance to the country.

But the administration has shown that certain economic concerns come first. The DFC has promoted its involvement in the Phalaborwa project as part of a push to unlock Africa’s mineral potential “while advancing U.S. strategic interests.”

The Phalaborwa project is being developed by Rainbow Rare Earths. The DFC’s investment is through partner TechMet, a company that says it is focused on securing critical mineral supplies for the West. South Africa’s government does not have a direct stake in the project.

Rainbow Rare Earths CEO George Bennett told The Associated Press they hope to supply predominantly the U.S., saying its interest in the project was largely related to defense systems.

The company says it aims to supply the rare earth elements neodymium, praseodymium, dysprosium, terbium and others from its South African project. They are used in high-performance magnets in wind turbines, electric vehicles, defence and emerging applications, including robotics.

The Phalaborwa project aims to start extracting rare earths from the two huge dunes in 2028. The dunes are 35 million tons of phosphogypsum, a byproduct of mining waste and the processing of phosphate rock for acid and fertilizer production.

The project is expected to operate for 16 years, Rainbow Rare Earths said. The $50 million injection from the DFC will be used only once Rainbow Rare Earths starts construction of its processing factory in Phalaborwa, anticipated in early 2027.

Rare earths are relatively common but usually occur at low concentrations and are difficult to separate, making their mining costly.

Neha Mukherjee, research manager at Benchmark Mineral Intelligence, said that while the Phalaborwa project was unique, with its experimental above-ground mineral extraction process, its potential remains unknown.

“It looks like a fairly low-cost asset in terms of operational cost,” she said. “Even the capital requirement is not very high ... which is a good sign.”

Mukherjee added that the project is important because “we do not have enough projects to meet the entire demand outside of China.”

U.S. is ‘trying to catch up’

Rainbow Rare Earths says mineral extraction from the dunes will use up to 90 per cent renewable energy and be significantly less expensive than typical rare earth mining.

Bennett said Phalaborwa would be a low-cost producer comparable to Chinese producers.

“(Former owners) crushed it, they milled it, they put energy into it, put heat into it, all that to make the phosphogypsum, which is what’s needed to make rare earths,” said Rainbow Rare Earths project director Alberto Bruttomesso, referring to the processes the waste previously underwent. “Heating is the most expensive part of the process. It’s what costs the most money.”

The Trump administration also has invested in critical mineral mining in the U.S. and has pursued deals to secure access to these minerals abroad, including in Ukraine. Greenland’s rare earths are part of the reason Trump has wanted to acquire the Arctic island.

The Phalaborwa project is one of several mineral projects in Africa with DFC investment.

Patience Mususa, a mining specialist at the Nordic Africa Institute in Sweden, said the U.S. was “trying to catch up in terms of investment in mining” on the African continent, where China is the dominant player in mining.

In February, the U.S. Trade and Development Agency signed a formal agreement to provide $1.8 million for a feasibility study at the Monte Muambe rare earths project in Mozambique.

In Africa, the Trump administration is also continuing U.S. financial support for the Lobito Corridor, a Biden administration initiative to build an 800-mile (1,290-kilometer) railway linking mineral-rich regions of Congo and Zambia to Africa’s Atlantic coast.

Michelle Gumede, The Associated Press