Harena Rare Earths (LSE: HREE) has secured backing from the United States government for its Ampasindava rare earths project in Madagascar, highlighting Washington’s effort to challenge China’s dominance of critical minerals supply chains.

Harena said last week that the U.S. International Development Finance Corporation (DFC) committed up to $4.8 million for pilot plant work, laboratory testing and environmental programs, a move that could help advance the project through early development steps and position it for future financing.

The investment fits with Washington’s push to expand U.S. involvement in African mining sectors that have long been dominated by “opaque, predatory investments from our adversaries,” a State Department spokesperson told Reuters on Tuesday. The spokesperson added that Madagascar offers opportunities to increase U.S. and allied investment in critical minerals.

Strategic shift

Ampasindava contains neodymium, praseodymium, dysprosium and terbium, rare earth elements used to make permanent magnets for electric vehicles, wind turbines and defence systems including fighter jets and precision-guided missiles.

China dominates global rare earth mining and processing and has reinforced its grip on supply chains through export controls. That has prompted Western governments to look for alternative sources of supply, particularly for materials needed in magnets and other technologies that are difficult to substitute at scale.

Harena expects Ampasindava to produce about 4,000 tonnes of rare earth oxides a year, including 1,700 tonnes of high-value magnet rare earths NdPr and DyTb. Executive chair Ivan Murphy said the company expects to receive an exploitation permit within the next few weeks and remains on track to begin production by mid-2028.

Processing options

Harena is also evaluating processing options in the U.S. and Europe, with MP Materials (NYSE: MP), USA Rare Earths (NASDAQ: USAR) and Belgium’s Solvay among the potential refining partners.

Although the DFC commitment represents only a small portion of Ampasindava’s estimated $150 million development cost, Murphy said it could open the door to more substantial U.S. financial support as the project moves toward construction. A DFC official confirmed the agency could consider additional financing, subject to due diligence and regulatory approvals.

Ampasindava reflects a broader shift in Africa’s critical minerals sector. While Chinese companies have dominated investment in the continent’s copper, cobalt and lithium industries for years, Western governments are increasingly backing rare earth developments as part of efforts to diversify supply chains for strategically important minerals and reduce reliance on concentrated processing routes.