DoD backs $1 billion rare earth initiative with Phoenix Tailings

The US Defense Department's Office of Strategic Capital and Phoenix Tailings announced a roughly $1 billion strategic initiative to rebuild America's rare earth midstream processing industrial base, the companies said June 30.

"This investment addresses one of the most critical gaps in our domestic supply chain — the ability to process rare earth materials into usable forms for defense and commercial applications," the Office of Strategic Capital said in a joint statement with Phoenix Tailings.

The US depends on China for more than 80 percent of its rare earth processing, according to US Geological Survey data. The initiative targets midstream processing — the stage between mined rare earth concentrate and finished magnet-grade metals — where Chinese state-owned enterprises control an estimated 90 percent of global capacity, per industry data from Adamas Intelligence.

Rare earth permanent magnets are essential components in fighter jets, guided munitions, advanced radars, electric vehicle drive systems and robotics. There is no commercially viable substitute for dysprosium in high-performance defense magnets, while neodymium-praseodymium forms the backbone of permanent magnets across defense, automotive and AI hardware applications.

Parallel advances in domestic refining

The DoD initiative comes as US-based refiners demonstrate technical breakthroughs. Momentum Technologies, a Texas-based critical minerals refiner, recently produced 99.9 percent pure neodymium-praseodymium oxide from e-waste and magnet production scrap, and 99.5 percent pure dysprosium from magnet waste, according to company data. The company also achieved 99.5 percent pure yttrium from mined feedstock.

Momentum's MSX platform uses modular processing units that cost less to build and operate than conventional solvent-extraction methods, the company said. Planned commercial capacities range from 100 tonnes per year to 1,000 tonnes per year, targeting both primary ores and secondary waste streams.

Supply chain implications

The Phoenix Tailings initiative and Momentum's technical milestones signal a broader push to reduce US reliance on Chinese rare earth processing. China's dominance in midstream processing has been a strategic vulnerability highlighted by multiple US government reports, including a 2022 Pentagon assessment that identified rare earth processing as a critical defense supply chain risk.

The DoD's roughly $1 billion commitment through the Office of Strategic Capital — established in 2022 to mobilize private capital for critical technology supply chains — represents one of the largest single government investments in domestic rare earth processing capacity.

This article is for informational purposes only and does not constitute investment advice.