Many years ago, the West delegated the mineral processing of REE to China. It released the pendulum from one pole and divided the world into two: the ones who know how to use the tools, the Chinese, and those who don't, us, the West. The masters of rare earth metals processing became criminally wealthy and bought shares in the Western mining companies. Meanwhile, the investment tycoons of the USA sneaked the biggest reserves. They bought or took over the existing mines and vertically integrated the full mine-to-magnet chain.

Now the pendulum is swinging back. China tries to snatch it back by imposing export controls and confiscating the scientists' passports. However, the pendulum is at full swing to where it was released. There is only one difference. When the West released it, the path of the pendulum was empty. It swung freely to China. Today, everyone is standing on the arc: Stanford dropouts, MIT white-coat lab dwellers, rapacious IP blowers, shark-suited M&A execs, sanction busters, and an army of mining companies.

Who will survive the wrecking ball? The one who can prove capital provenance and knowledge. The pendulum swings pole to pole, on its way, it racks or lifts.

International Coordination A Friendshoring Mechanism

The Minerals Security Partnership (MSP) is a club of allied nations chaired by the USA, 13 other nations, and the EU, 15 members in all.They describe their mission as the acceleration of public and private investment in the critical mineral supply chain.

They have had some achievements, quite extraordinary for a multi-nation, multi-continent bureaucratic coalition. Between 2022 and 2025 they backed a handful of projects. Loans, guarantees, and memoranda, one of them carrying a full 100% off-take agreement.

100% Off-take Mechanism

Every ton mined by these nations is a ton China can neither mine nor process. An example of 100% off-take is Queensland Pacific Metals' Townsville hub: its entire nickel-and-cobalt output, for the life of the project, is reserved for General Motors, LG, and POSCO. Full off-take is one of the 5 mechanisms to keep China out.

These nations built a provenance gate, a coordinated pool of money, 100% off-takes force divestment, a minimum price floor for decades, refusal to renew contracts, and friend-shoring.

You cannot find any of the above mechanisms inside any policy memorandum. The intent in politics is one thing, and the outcome is another. However, sometimes a rebranding is a signal. The MSP was the Biden era, climate and ESG in mind, but today we call it defense and national security. The mechanisms haven't changed.

These nations all together hold up to only 6% of all the reserves of REE, to remain independent of China and even starve it, you need to align the nations with the bigger reserves.

2010 - Lockout Mechanism

Months before China choked off Japan's rare earths, Denham Capital became the first investor in the Serra Verde mine. Sixteen years later, USA Rare Earth (USAR) announced the acquisition, and the U.S. government signed a fifteen-year offtake for 100% of Serra Verde's four magnetic rare earths: neodymium, praseodymium, dysprosium, and terbium.

It gets more interesting. Washington guaranteed a minimum price under each one, making them numb to China's price dumping. Serra Verde is the only large-scale producer of all four outside Asia.

It's already clear that competing with USA Rare Earth won't be easy. They have access to the raw material, and off-take contracts running for more than a decade with a floor price.

The minimum price does protect them in two ways. First, the USAR will be resistant to China's price dumping. Second, it makes the financial modelling extremely predictable and easy.

The 100% off-take makes them independent of demand. Advances in metallurgy and magnet manufacturing can reduce the amount of REE in each magnet, and it's already happening: Grain Boundary Diffusion (GBD) has significantly reduced the amount of HREE inside each magnet.

And the raw material is ionic clay, which requires less energy to process than hard rock. It allows them to generate a margin on each kilogram of finished magnet that is inaccessible to competitors.

Some months have passed since China cut the supply of REE to Japan. China, now locked out of Brazil's largest Ionic clay deposit, needs to double down.

Force Divestiture

In the closing weeks of 2023, a Chinese rare-earth giant became the largest shareholder in a Western miner. Shenghe Resources bought its way to the top of Vital Metals' share register and signed agreements to earn into Vital's rare-earth projects in Tanzania.

The following June, Vital's Canadian arm sold its stockpile of mined rare-earth ore, the "North T" pile from the Nechalacho project.  The buyer was the Saskatchewan Research Council, a company owned by the provincial government. It replaced an earlier deal that had been struck back in December 2023, at the very moment Shenghe was taking its stake. The records never name who that earlier buyer was, and Shenghe kept its shares so this was not China being thrown out. It was the physical material being steered into government hands and away from wherever it had been heading.

Canada had already been shutting the door on Chinese ownership outright. In October 2022, it declared that large investments by foreign state-owned companies in critical minerals would be approved "only on an exceptional basis," and days later, it ordered three Chinese investors to sell their Canadian holdings outright: Sinomine out of Power Metals, Chengze Lithium out of Lithium Chile, and Zangge out of Ultra Lithium. By May 2024, a $130-million investment by China's Zijin Mining in Solaris Resources had fallen away too, four months after it was announced.

It is the same country doing two things at once. One hand diverts the tonne of material away from China; the other denies China the asset itself. While the United States was building and buying supplies, its northern ally was making sure China could neither own nor carry the supplies that already existed. Meanwhile, the US government has backed several Canadian mining projects and companies since then.

Brothers in Arms

An Australian company called Northern Minerals. What makes it matter is a single deposit: it holds, in its own words, "one of very few deposits outside of China where dysprosium and terbium can be mined." Those two metals are the heavy rare earths that let magnets keep their strength in heat  and China controls roughly ninety percent of the world's supply of them. A stake in Northern Minerals is a stake in one of the few doors out of that dependence.

A Chinese-linked investor had been trying to widen its grip on that door. Yuxiao Fund, a Singapore-based vehicle, already held just under ten percent; in August 2022 it asked to lift that toward twenty. Australia's Treasurer refused, blocking the increase in February 2023. But the buying continued through a side door: a shell company registered in the United Arab Emirates, Indian Ocean whose sole owner and director was a Chinese citizen, Jing Tian, and which Australia treats as a legal "associate" of Yuxiao had  picked up another 2.84 percent. Counted together, the two crossed the ten-percent line that triggers a national-security review.

So Australia reached for the blunt instrument. After a formal review, in June 2024 the Treasurer issued Disposal Orders: Indian Ocean had sixty days to sell its Northern Minerals shares to someone unconnected to it.

Rather than sell to an outsider, Indian Ocean, according to the Treasurer,  moved all its roughly 168 million shares to Jing Tian herself, its own director, in late July. Then it reversed it. Then it did it again in early August. Then swapped Jing Tian out for a brand-new director altogether. The Treasurer now contends those transfers broke the divestiture order, has asked the Federal Court to say so, and wants financial penalties.

Australia, another mining giant, also closes the door to China.

Somewhere in the background of almost every rare-earth deal the West has tried to unwind, the same name keeps turning up.

Invisible Arm

Start with what China's grip looks like at full strength. In August 2023, an Australian miner called Peak Rare Earths signed a deal over its Tanzanian deposit that pointed the entire project at one Chinese company: it would buy all of the output for seven years, and on paper build the mine, arrange the financing, and take a slice of the ownership. Output, construction, capital, and control, all flowing one way. That company was Shenghe Resources.

And once you know the name, you start seeing it everywhere.

In Canada, Shenghe was the largest shareholder in Vital Metals when, in that same December 2023 window, Vital's Canadian stockpile of mined ore was steered into the hands of a provincial government body.

In the United States, Shenghe owns close to eight percent of MP Materials, the country's flagship rare-earth producer, and was for years its buyer and partner.

And in Greenland, Shenghe part-owns the company behind the Kvanefjeld deposit, Energy Transition Minerals. When Greenland banned uranium mining and killed the project, that company turned and sued the government for as much as $11.5 billion in lost future profits.

One Chinese company, threaded into allied producers on three continents. It bought into the American champion, seated on the Australian miner's board, sitting atop the Canadian share register, part-owner of the Greenland claimant. And even in failure and denial, it accesses a new asset class. When life denies you Uranium, you nuke the government.

A New Asset Class

We saw how the West tried to starve China; Greenland is where the current reverses.

At Kvanefjeld, in the far south of Greenland, sits one of the largest undeveloped rare-earth deposits on Earth. The deposit is Rich in terbium and neodymium, the magnet metals with one complication: the rare earths are bound up with uranium, and you can't dig out one without the other. The company holding it, Energy Transition Minerals (formerly Greenland Minerals), is partly owned by the same Chinese group threaded through this whole story, Shenghe. Then, in 2021, Greenland held what locals called the "mining election." The winners banned uranium mining, and the ban killed the project.

The company is suing Greenland through the private arbitration system that lets a foreign investor haul a government before a tribunal for the right to mine, or for compensation of up to $11.5 billion. That figure isn't the money already spent (a little over $100 million); it's the mine's projected lost future profits, plus interest, and it is roughly ten times Greenland's entire annual budget.

The suit is bankrolled by a litigation-finance firm, Burford Capital, which fronts the legal costs for a share of the winnings, turning a lawsuit against a state into an investable asset. And this isn't hypothetical: in the same family of cases, the salvage firm Odyssey Marine already won $37 million from Mexico over a refused seabed permit.

Breaking a Chinese-backed lock is not free. When the West or a green electorate cancels one of these projects, the blocked partner sends the state a bill for the profits it never got to earn, with an entire finance industry ready to underwrite the claim. Which means Chinese-linked money carries an escape hatch: cooperate with China, and if the West later pulls the plug, an arbitration payout is waiting. Cutting China off is a fiscal decision as much as a political one. The West has to have the stomach to pay for it.

2026

Competing against the USAR and alike is incredibly hard, unless in some exceptional cases that I outlined in detail in my reports. Besides the magnitude of their funding and operation, they have aggressive business models that expand beyond the mine in their possession. Investing in processing technologies and new startups carries immense political risk, foreign to traditional venture capital firms. I have created a template to diagnose the risk. You can download it here without email registration. Capital provenance is the gate to competitive advantage in mineral processing, not the moat itself. It’s a part of the trust layer that makes the

References

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Greenfield, P., & Weston, P. (2025, March 5). Fearing toxic waste, Greenland ended uranium mining. Now, they could be forced to restart – or pay $11bn. The Guardian. https://www.theguardian.com/environment/2025/mar/05/greenland-mining-energy-transition-minerals-environmental-laws-uranium-rare-earth-toxic-waste-investor-state-dispute-settlement-isds-aoe

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Peak Rare Earths Limited. (2023, August 9). Peak and Shenghe sign a binding offtake agreement and a non-binding strategic EPC and funding MOU for Ngualla [ASX announcement]. Australian Securities Exchange. https://wcsecure.weblink.com.au/pdf/PEK/02695634.pdf

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