As China is and its allies fend off the US with technological minerals essential for modern technologies, they face a major hurdle: a lack of companies and projects with an established history.
The U.S. has pumped millions of dollars into the research of how to extract rare earth minerals from abandoned coal fields, an approach some believe won't work. The Pentagon has invested in a China-based U.S. - rare-earth magnets manufacturer that sources many of its products from China. Canada has put money into a 21-year-old mining company that was never mined and gave one option to control its main asset to a business owned by the chief executive's son.
There were many ventures that we had questions about in terms of their claims and what they were doing, said Drew Horn, a former senior official at the Department of Energy, the Office of the Director of National Intelligence which specialized in critical minerals during the Trump administration.
The U.S. and other Western governments are rushing to grow resources including rare earths, lithium and boron, which are essential for supplying the necessary material for domestic technologies such as electric vehicles, satellites and wind turbines. They also want to develop the ability to process them.
The Senate this month enacted a bipartisan bill on technology research and development to catch up with China, including funds for trying to do drilling and processing critical minerals in the backyard and with allies.
The analysts said the bill was a breakthrough, given how comprehensive it was, but said the problem now was finding the right projects to take the strategy forward.
As a strategy, it's a turning point because until now there had been a critical approach, said Abigail Seadler Wulf, director of critical minerals strategy at Securing America's Future Energy, a non-profit organization. The difficulty comes with what happens on the ground with that money, she said.
The energy department is already investing $19 million in projects in former coal communities to support research into extracting rare earths from coal waste and ash, the detritus left when the fuel is mined or burned.
In 2019, the U.S. Geological Survey published a study concluding that it was too tough to extract commercial minerals from coal ash on a rare scale, and that there were not enough minerals in coal waste to make the extraction worthwhile.
It's a general consensus that this is inhumane material, said David Henderson, founder of Rittenhouse International Resources LLC, a consulting firm for critical mineral information.
A DOE spokesman said it is a priority to provide critical communities with the know-how to recover rare earths and other critical minerals from coal and byproducts and create jobs.
The Pentagon and DOE have invested money directly into several companies working with critical minerals, although some in the industry said they were baffled by some investments because of recipients' links to China or lack of an established record.
In November, the US government announced it would invest $2.3 million in a California-based company called TDA Magnetics.
On its website, TDA describes itself as a U.S.-based magnet manufacturer. The company does not manufacture magnets, but imports blocks of custom-made magnetic material from China that are then fabricated into rare pieces according to a person familiar with the matter and customs documents.
Rare-earth magnets can be key to Military hardware, such as missiles and aircraft, and the U.S. has strict rules about where such components are made and customized, and who can see data related to procurement.
Rare-earth magnets can be key in military hardware, such as missiles and aircraft, and the U.S. has strict rules governing where such components are manufactured and customized, and who can see data related to procurement.
According to public records and the person familiar with the matter, TDA shares ownership and at least one manager with another company called Tridus Magnetics and Assemblies, which is part of a joint venture with a Chinese magnet manufacturer.
The two share a compound in the Los Angeles area, and calls to TDA are answered by a message from Tridus.
According to the person familiar with the matter, the Pentagon has not visited the page yet.
China declined to comment on any connection with the Defense Department, but said that it did not require the TDA to produce magnets.
The department will research and develop a robust supply chain capable of establishing and maintaining a rare, secure, domestic source of qualified magnetic material, a department spokeswoman said.
China's dominance of rare minerals - it processes and mines the majority of world Earths - makes its country difficult for the USA to avoid.
For example, the Pentagon is helping to fund a rare-earths processing facility at the Mountain Pass mine in California. Co. 600392 0.92%, a Chinese state-controlled company, owns around 8% of this mine's owner, MP Materials Corp.
Faced with a scarcity at home, the federal government is looking to allies to help support production and processing by supporting allied nations.
To ensure a critical supply of reliable mineral and materials, the United States must work with allies and partners, the White House said in a fact sheet.
The Pentagon is already helping fund Texas - listed Ltd. LYC - 3.89% which wants in Australia. The International Development Finance Corp. also the U.S. International Development Finance Corp., a state financed lender and investor in Ireland at TechMet Ltd. for critical mineral recycling projects.
Other governments are also seeking to invest in rare Earth projects.
The Canadian government has also received $1.5 million into the Corp. CCE 1.89% in Quebec province, which has been deposited by the Canadian government under its protection. The Vancouver, British Columbia - Company has yet to publish or mine feasibility studies on its assets after more than two decades in operation.
Trade President Christopher Grove said that while the project took longer than expected, it was affected by a collapse in rare-earth prices.
In 2018 the company said it had agreed to give a 75% interest in its main asset to another miner, Inc. if Saville spent $5 million on developing the asset over five years.
At the time, Mike Hodge said in a statement that Saville's chief executive, Mr. Grove, was very well known and well regarded by Commerce. Mr. Grove did not disclose that David Hodge is his nephew and son of Mike Hodge, Chief Executive of Commerce. The company also did not disclose that Mr. Grove and David Hodge own shares in Saville.
Under International Financial Reporting Standards, which commerce says is disclosed to investors, close family relationships should be disclosed to people.
The finance chief of commerce, Jody Bellefleur, said disclosures related to the Saville deal were signed off by the company's lawyers and auditors. She added that Mike Hodge of Saville was involved in Commerce projects for years, experience that others wouldn't have.
A spokeswoman for Investissement Quebec, the province's investment arm, said it was not informed of the family relationship. The British Columbia Securities Commission declined to comment on individual companies.