Spend 5 billion to help tackle weak spots? The US is reportedly considering setting up a fund to support investment in critical minerals.

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The U.S. government is reportedly planning to establish a $5 billion mining investment fund. If the news is true, this would be an important attempt by the U.S. government to directly participate in large-scale mining transactions, and the latest sign of U.S. efforts to address its vulnerability of foreign dependence on critical mineral supplies.

On Tuesday, the 16th, Eastern U.S. time, media learned that the U.S. International Development Finance Corporation (DFC) is negotiating with New York investment firm Orion Resource Partners to jointly establish the above fund. Negotiations are ongoing, key details remain under discussion, and whether an agreement will ultimately be reached is uncertain.

If the fund is finalized, it will provide a new way for the U.S. government to participate in large-scale mining deals. The Trump administration has already made ensuring the supply of critical minerals, including materials such as copper, cobalt, and rare earths, a priority.

This move highlights broad U.S. concerns about the security of the mining supply chain. In the short term, the U.S. fears that other countries will hold dominant positions in the processing of a variety of minerals, from copper to antimony.

DFC seeks private cooperation to solve financing challenges

DFC was established at the end of Trump’s first term. Since its inception, it has approved multiple mining investments through credit, equity investment, and technical assistance. Previously, the agency provided a $150 million loan to Syrah Resources Ltd. in support of its graphite mining operations in Mozambique; the company has signed a battery materials supply agreement with Tesla.

Under Biden’s term, DFC has also committed over $550 million to upgrade the railway infrastructure of the Lobito Corridor, which transports minerals from Central Africa’s Copperbelt to Atlantic ports in Angola.

Based on DFC’s official website data, if DFC eventually commits the full $2.5 billion as reported by the media, the DFC-Orion partnership fund would become the agency’s largest project ever.

According to media reports, the proposed structure is for DFC and Orion to each provide equal funding, gradually growing to about $5 billion in total. This structure is similar to the joint venture Orion launched with Abu Dhabi sovereign wealth fund ADQ in January, planning $1.2 billion in metal and mining investments over four years.

Orion manages about $8 billion in assets, with business spanning private equity, private credit, venture capital, and commodity trading.

Orion urges government capital to intervene in critical minerals markets

Orion CEO Oskar Lewnowski previously told the media that governments need to play a more active role in the market for critical minerals, and urged them to emulate China in establishing strategic reserves to serve as a buffer against supply shocks.

Last month, the U.S. Department of Defense launched its first cobalt reserve tender since the end of the Cold War. Two months prior, it was reported that the Pentagon had made a milestone investment in the largest U.S. rare earth producer, MP Materials, and signed a supply agreement with a floor price to protect the company’s profits if market prices fall.

According to Xinhua, MP Materials announced on July 10 that the Pentagon agreed to purchase $400 million in convertible preferred shares, making it the company’s largest shareholder. After conversion, the Pentagon would hold a 15% stake. The Pentagon may continue to buy common shares in the future and inject billions in long-term investment.

The report said MP Materials, founded in 2017, is the only U.S. producer with a complete rare earth industry chain, and the only company in North America able to mine and process rare earths on a large scale.

Also in July, it was reported that Orion, together with Virtus Minerals, run by U.S. military and intelligence veterans, jointly bid for copper-cobalt miner Chemaf Resources Ltd.

Congo is the world’s largest cobalt producer and second largest copper supplier, with production of both metals surging in recent years driven by investments from Chinese mining companies.

Trump administration accelerates strategic mineral initiatives

DFC is expected to play a more important role in U.S. foreign and economic policy in a potential Trump second term. The White House aims to double or triple its investment capacity through a reauthorization procedure expected next month. The agency is also expected to be granted more flexibility to invest in rich countries and take on higher-risk projects, to attract more private sector supporters.

According to Xinhua, on March 20, Trump said he had signed an executive order aimed at boosting U.S. domestic production of critical minerals and rare earths. The order authorizes use of the Defense Production Act to provide funds, loans, and other investment support to enhance domestic critical mineral capacity. It also directs federal agencies to list mines that can quickly be approved in the U.S., and identify federal land—including land under the Department of Defense—for mineral processing.

In January this year, Trump nominated Ben Black, son of Apollo Global Management’s co-founder Leon Black, to lead the DFC, but the Senate has yet to confirm the appointment.

At a confirmation hearing three months ago, the nominee Black told lawmakers that U.S. federal agencies “should absolutely not crowd out private capital” and must have more engagement with New York financial firms.

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