US Bets $500 Million on Rare Earths with Tiny New Hampshire Refinery
A small facility aims to break China's stranglehold on critical mineral processing by scaling from 200kg to 120 tonnes.
1A critical supply chain gap
The US defense industry heavily relies on rare earth elements for systems like Tomahawk missiles and F-35 jets. China controls over 90% of global processing. A $500M Pentagon investment targets boosting Phoenix Tailings' capacity from 200kg to 120 tonnes annually. This move aims to strengthen the weakest link in America's defense supply chain for permanent magnets used in advanced weaponry.
2Creating value from waste
Phoenix Tailings uses mining waste and recycled magnets as raw materials. Their electrolysis process extracts strategic elements like neodymium and dysprosium. These are crucial for high-performance magnets. The company's planned 'Freedom Facility' aims to reduce Western Hemisphere's dependence on China. Phase one is set to launch in 2025 with Pentagon backing.
3Defense industry's urgent need
Middle East conflicts are depleting US munition stocks. While a THAAD missile system costs $150M, it requires just $20-30K worth of rare earths to function. The Pentagon has banned Chinese-sourced critical minerals. Phoenix Tailings' COO Anthony Balladon acknowledges meeting defense demand presents significant challenges given current capacity constraints.
4The scaling challenge
Phoenix currently produces just 440lbs (200kg) annually, targeting 5 tonnes within three months. Full 120-ton capacity won't be achieved until 2027-28. Scaling involves technical hurdles like electrolyzer expansion and new plant construction. The company secured a $500M Pentagon loan to build a new facility within 18 months that will dramatically increase separation and metallization capabilities.
5European alternative sources
US magnet maker Arnold Magnetic Technologies, long dependent on Chinese samarium, now sources from mining waste in France's La Rochelle. Belgian chemical firm Solvay reopened a rare earth separation plant it closed in the 2000s. After restarting neodymium production in 2025, the company began separating heavy rare earths like samarium this year amid growing Western demand.
6Cost takes backseat to security
Arnold's CEO Matt Blake notes Solvay's higher costs compared to China aren't prohibitive since samarium-cobalt magnets constitute a tiny fraction of weapon system expenses. CCO Aaron Williams says surging demand creates growth opportunities. Both European and US customers increasingly prioritize diversified, traceable supply chains over lowest-cost sourcing.
7Geopolitical tensions escalate
China weaponized its near-monopoly in 2025 by restricting rare earth exports, marking a turning point in US-China trade relations. With the Pentagon importing 90% of critical minerals, supply chain vulnerabilities became a national security concern. Companies like Phoenix Tailings are racing to scale domestic processing capabilities and reduce this strategic dependence.
8Long-term strategic importance
Rare earth elements are vital for technologies ranging from renewable energy to advanced defense systems. While new US mines will take years to develop, companies extracting these materials from existing waste streams offer near-term solutions. Developing domestic processing capacity is critical for maintaining US technological competitiveness and national security in an era of great power competition.
Original article: Fortune | FORTUNE — ABD'nin 500 milyon dolarlık nadir toprak elementleri hamlesi