The Phalaborwa Rare Earths Project, developed by London-listed Rainbow Rare Earths, is backed by the U.S. International Development Finance Corporation through its investment in TechMet, a critical minerals-focused firm. The DFC commitment predates the current administration — it was made under President Biden in 2023 — but the Trump administration has chosen to continue it, a decision that tells you more about how Washington views rare earth supply chain risk than it does about the state of U.S.-South Africa relations.
The project is not a conventional mine. Phalaborwa sits on 35 million tonnes of phosphogypsum, a waste byproduct of historic phosphate mining, held in two large surface stacks. Rainbow has developed a proprietary process to extract rare earth elements directly from this material, bypassing the energy-intensive steps that make traditional hard rock rare earth mining expensive.
Because the feedstock has already been chemically processed, the operation skips hard rock mining, crushing, grinding, and chemical cracking entirely. Rainbow's interim economic study, published in December 2024, put the project's post-tax NPV at $611 million on a capital expenditure of $326 million, with an estimated EBITDA margin of around 70%. Average operating costs sit at approximately $40.83 per kilogram, positioning Phalaborwa as one of the higher-margin rare earth projects in development outside of China, according to data compiled by industry consultants Argus.
The project is expected to produce neodymium, praseodymium, dysprosium, and terbium — the four magnet rare earth elements critical for electric vehicle motors, wind turbines, defense systems, and an expanding range of industrial and defense applications. First production is targeted for 2028.
China currently dominates rare earth production and processing, supplying the vast majority of global output. U.S. policy under both the Biden and Trump administrations has treated reducing that dependence as a strategic priority, and the Phalaborwa investment fits squarely within that framework.
The DFC has framed its involvement as part of a broader push to unlock Africa's mineral potential while advancing U.S. strategic interests. That framing is doing real work here. It explains why a project in a country the administration has publicly clashed with over land reform policy and other issues is still receiving active support.
Rainbow separately raised approximately $14.6 million in early April 2026 through a share subscription backed by two U.S.-based family offices and Traxys Group, one of the largest rare earth traders in the West and a primary partner in the U.S. government's Project Vault critical minerals procurement initiative. Construction is expected to begin by end of 2027, subject to permitting and financing.
For procurement and supply chain leaders tracking critical mineral sourcing, Phalaborwa is worth watching for a specific reason. It represents a model — extracting rare earths from industrial waste rather than primary mining — that could be replicated at other phosphogypsum sites globally if the economics hold at commercial scale. Rainbow is already applying the same approach at a second project in Uberaba, Brazil.
Whether Phalaborwa delivers on its economics at full scale remains to be seen. But the fact that the U.S. government is maintaining its investment position despite an active diplomatic rift with South Africa makes clear where rare earth supply chain security sits in the current policy hierarchy.
