The US Department of War’s Office of Strategic Capital has made a significant move to bolster domestic rare earth processing capabilities. By committing a US$500 million conditional loan to Phoenix Tailingsthe Office is anchoring a US$1 billion public-private initiative to construct the Freedom Facilitya state-of-the-art rare earth separation and metallization plant.
This ambitious project is set to address a critical midstream bottleneck in the supply chain for permanent magnetsdefense systemsand advanced manufacturing. The Freedom Facility, targeted to begin operations in 2028will process a variety of feedstocks, including chemical concentrates, recycled materials, and secondary sources, all using domestically controlled technology.
The Strategic Importance of Domestic Rare Earth Processing
The US Department of War’s investment in Phoenix Tailings is not just about building a new facility; it’s about securing the nation’s future. David A. LorchDirector of the Office of Strategic Capital, emphasized the strategic importance of this initiative, stating that supporting domestic processing for critical minerals and rare earths is a key focus for the Office.
The Freedom Facility is designed to handle multiple feedstock varieties, ensuring that the US has a reliable and secure supply of rare earth metals. This is particularly important given the increasing prioritization of reshoring critical metal capabilities to shield the domestic industrial base from trade disruptions. As Nicholas MyersCEO and co-Founder of Phoenix Tailings, put it, this mission is bigger than any one company. It is about strengthening American industry, securing critical supply chains, and ensuring our nation has the resources it needs to thrive.
G7 Pledge Targets Supply Chokeholds
At the recent G7 summit in Francethe US and its allies issued a joint declaration pledging to ensure that no single external nation can supply more than 60 percent of rare earth and permanent magnet imports by 2030. The leaders of the US, UK, Canada, France, Germany, Japan, and Italy stated their ambition to lower that threshold to 50 percent as soon as possible.
This pledge comes in response to China’s dominant position in the rare earth market, where it currently commands nearly 70 percent of global rare earth production and 95 percent of permanent magnet manufacturing. The US, Japan, and the EU together import more than half of the world’s rare earth magnets, primarily relying on Chinese suppliers. The G7 summit also marked the establishment of a non-binding G7 Critical Minerals Resilience and Production Alliance to track stockpiles and coordinate supply-crisis data with the International Energy Agency (IEA).
The Broader Context of Rare Earth Processing
The Pentagon’s investment in Phoenix Tailings is part of a broader federal push to rebuild domestic rare earth capacity. In March, the Defense Logistics Agency awarded a contract to advance metallothermal production of samarium and gadolinium, two rare earth metals used in advanced weapons systems. Additionally, a separate conditional loan to rare earth refiner ReElement Technologies remains under review, with Pentagon officials raising questions about the company’s ability to scale.
The urgency to find domestic alternatives has been intensified by China’s export controls on certain rare earths and magnets, imposed in in response to US chip export restrictions. The Defense Federal Acquisition Regulation Supplement (DFARS) deadline of January, which bans Chinese-origin rare earth magnets from covered defense systems, is adding further timeline pressure. Despite these efforts, gaps remain, and processing capacity is necessary but not yet sufficient. Alloy production, sintering, and heavy rare earth refining are areas that still need to be addressed.
