South Africa’s development finance institution has committed $20 million to a domestic rare earths project aimed at helping the European Union reduce its reliance on China for critical minerals.

The state-owned Industrial Development Corp. (IDC) is backing Frontier Rare Earths Ltd.’s Zandkopsdrift project in the Northern Cape, the Luxembourg-registered company said on Thursday.

The European Union, which is seeking to strengthen its critical minerals supply chains, designated the project a strategic asset last year.

The IDC’s equity investment will fund a definitive feasibility study for Zandkopsdrift, which is expected to produce rare earth products and battery-grade manganese from 2030. Frontier did not disclose the size of IDC’s shareholding.

Global race to reduce China dependence

China currently dominates the processing and refining of rare earth elements, which are used in permanent magnets for smartphones, drones, electric vehicle motors, and wind turbines.

The EU, the United States and other economies are racing to develop alternative sources of supply.

Business Insider Africa previously reported that African mines could supply nearly 10% of global rare earth output within five years, up from virtually zero today, introducing new players into a market long dominated by China.

Frontier said it is evaluating multiple potential EU funding pathways for the project and has signed an agreement with Carester SAS, which will deploy proprietary extraction technology at the mine and process part of the future output at a separation plant under construction in France.

The IDC also holds investments across the mining and metals sector, including Kumba Iron Ore, ArcelorMittal South Africa and Merafe Resources. (Business Insider Africa)