The U.S. Department of Defense has handed Phoenix Tailings a $500 million loan to build a domestic rare-earth processing plant. The deal, announced this week, is part of a broader push to loosen China’s grip on the supply chain for materials critical to everything from fighter jets to iPhones.
Why the Pentagon wrote the check
Phoenix Tailings, a Massachusetts-based startup, will use the money to construct a facility that refines rare-earth elements — metals like neodymium and dysprosium used in permanent magnets, lasers, and guidance systems. The Pentagon’s investment comes from its Defense Production Act fund, which lets the military prop up domestic production of goods it considers essential for national security.
Right now, more than 80% of the world’s rare-earth processing happens in China. That concentration creates a vulnerability the U.S. has tried for years to fix. Past attempts, like the short-lived Mountain Pass mine in California, ran into environmental and cost hurdles. Phoenix Tailings says its technology can extract metals from mining waste — and do it without toxic solvents.
What Phoenix Tailings plans to build
The company hasn’t released a timeline or a location for the new plant. Its existing pilot facility in Woburn, Massachusetts, processes small batches of rare-earth oxides. The $500 million loan is meant to scale that operation to a commercial level.
Phoenix Tailings was founded in 2019 by a group of engineers from MIT and Harvard. It has raised about $50 million in venture capital before this loan. The Pentagon money is structured as a direct loan, not a grant, so the company will have to pay it back with interest.
The national security angle
Rare-earth elements are used in the F-35 joint strike fighter, in missile guidance systems, and in advanced radar. Without a reliable domestic source, U.S. defense contractors depend on imports that could be cut off during a conflict. The Pentagon’s interest in Phoenix Tailings signals that Washington sees the startup as a serious bet — not just a science experiment.
Still, building a rare-earth supply chain from scratch is slow. China has decades of infrastructure and experience. Phoenix Tailings will have to prove it can match that combination of cost and volume.
The company is expected to announce site selection by the end of the year. That choice — and the regulatory battles that come with it — will determine whether the Pentagon’s half-billion-dollar bet pays off.
