CAIRO, Aug 20 – US funding for African rare earth projects is increasing as private investors remain reluctant to finance projects across the continent, according to two senior executives at the U.S. International Development Finance Corporation (DFC).
The DFC has committed $62.8 million to rare-earth projects in Malawi, Angola, Madagascar and South Africa, although none of the projects has started production, the agency said on Wednesday.
About $50 million of the funding has gone to the Phalaborwa project in South Africa, which is backed by Dublin-based mining investor TechMet. The DFC executives said private capital has been slow to enter the sector. They said the agency is helping projects reach a stage where they carry less risk and can attract private-sector investment.
The comments highlight the difficulty of attracting private investment into African rare-earth projects, even as the minerals become increasingly important to the United States and other Western countries seeking to reduce their dependence on China.
One DFC executive said private investors remain cautious about African rare-earth projects because of their higher risks. Investors are also concerned that intervention by China in global markets could affect prices and weaken the financial outlook of projects.
Analysts have also raised concerns about the economics of many proposed rare-earth projects and the limited demand from investors.
“There are far more announced rare-earth projects than there is demand for neodymium-praseodymium (NdPr) magnets,” said Olimpia Pilch, head of strategy at advocacy group Critical Minerals Africa.
Africa currently accounts for about 20% to 25% of the DFC’s global investment portfolio, the second DFC executive said.
China dominates the global rare-earth supply chain and has tightened export controls over the past two years. Rare earths are used to produce magnets needed for electric vehicles, wind turbines and defence systems. The United States is increasingly using the DFC to support supply chains for critical minerals outside China.
