The United States is facing increasing pressure to develop domestic capabilities for producing critical minerals essential for weapons systems, a move driven by geopolitical instability and the rapid depletion of military stockpiles. The reliance on China for processing these vital elements, particularly rare earth magnets, presents a significant vulnerability in the U.S. defense industrial base.
Phoenix Tailings, a company operating in Exeter, New Hampshire, is working to extract critical elements from mining waste and recycled materials. With a $500 million loan from the Pentagon, the company aims to expand its separation and metallization capacity, a crucial stage in the supply chain where China holds a dominant position. This effort is seen as vital to breaking that chokehold and ensuring a more secure supply for U.S. defense needs.
Critical Minerals in Defense Systems
The urgency of this initiative has been amplified by the ongoing war in the Middle East, which has rapidly drawn down munitions stocks. Critical minerals are key components in widely used U.S. weapons systems, including Tomahawk cruise missiles, THAAD interceptors, and F-35 fighter jets. The White House is pushing military contractors to accelerate weapons production while simultaneously imposing stricter rules that ban sourcing critical-mineral components from China.
Anthony Balladon, chief commercial officer at Phoenix Tailings, acknowledged the challenge, stating, "It will be a tall order and a challenge to replenish these stocks and scale up in the time frame needed to meet defense demand and regulations." The company plans to build a "Freedom facility" to extract and produce metals like neodymium, praseodymium, terbium, dysprosium, samarium, and yttrium, which are also crucial for aerospace and automotive industries.
Even though the U.S. is increasing its efforts to rebuild a domestic supply chain for critical minerals, many new mines are years away from operation. Extracting these elements from existing mine waste offers a near-term solution to meet growing demand. Phoenix Tailings uses tailings, or waste from traditional mining, along with recycled magnets and disk drives as raw materials. The company's current capacity for producing the final metal is limited, but it aims to scale up significantly over the next few years.
Allies and Alternative Sources
Beyond domestic efforts, U.S. allies are also working to diversify rare earth sources. Arnold Magnetic Technologies, a U.S. magnet maker, previously relied on China for samarium used in precision-guided missiles. However, they have found an alternative source from abandoned mine waste in La Rochelle, France. Solvay, a Belgian company, restarted processing rare earths at this site in 2025 after previously ceasing operations. This ramp-up is attributed to growing demand for magnets, increased focus on supply chain security, and customer demand for diversified sources.
While sourcing from Solvay incurs higher costs compared to China, it has not been a prohibitive factor for companies like Arnold Magnetic Technologies, as the samarium-cobalt magnets represent a small fraction of a weapon system's overall cost. This situation has created opportunistic growth for such U.S. companies.
Pentagon Deadlines and Executive Orders
The need to reduce reliance on China is further underscored by a Pentagon deadline of January 1, 2027, for the U.S. to become independent of Chinese-sourced tungsten. China currently controls approximately 80% of the global mine supply for tungsten and an even larger share of downstream processing. Experts caution that U.S. production ramp-up will take years, necessitating reliance on existing inventories, expanded recycling, and limited non-China sources in the interim.
The strategic implications of this dependency are significant. The Center for Strategic and International Studies has warned that dwindling U.S. military stockpiles could force allies to take greater risks to conserve air defenses, potentially endangering American troops. It also raises concerns about diminished firepower in a potential future conflict with China, with estimates suggesting it could take at least three years to replenish critical missile interceptor stockpiles.
In July, former President Donald Trump issued an executive order that imposed stricter controls on defense contractors sourcing critical materials from China. This order also curtailed the Pentagon’s waiver authority for cases citing "non-availability" of domestic sources and criticized defense contractors for not prioritizing domestic production. Lockheed Martin stated they continuously assess the global rare earth supply chain to ensure access to critical materials, while other major defense contractors did not respond to requests for comment. Balladon expressed confidence that with the right support, U.S. companies and partners can meet these challenges.