• U.S. DFC invests $4.6M in Malawi’s Songwe Hill rare earth project
• Funds support engineering studies; repayment tied to project success
• Move aligns with U.S. push to reduce rare earth reliance on China

The U.S. International Development Finance Corporation (DFC) has signed an agreement to inject $4.6 million into the Songwe Hill rare earth project in Malawi. The announcement was made Monday, Sept. 29, by the project’s Canadian owner, Mkango Resources (MKAR), which had already secured support from the European Union for the same asset months earlier.

The financing secured by Mkango is structured so that it is only repayable if its subsidiary, Mkango Rare Earths Limited, which manages Songwe Hill, succeeds in raising the necessary funds to begin construction or operation of a mine within ten years. In the meantime, the DFC funds will be used primarily for front-end engineering and design (FEED) studies.

"The DFC recognises the game-changing development potential of the Project and this initial Project Development Funding provides a path for MKAR to secure the longer-term development funding needed to develop Songwe Hill and position the Mkango group as one of the few key players in the global rare earth supply chain," said Alexander Lemon, President and Founding Director of the company.

U.S. Strategy to Counter China

While the precise terms of the DFC's equity support were not detailed, the investment is part of the agency's broader strategy in Africa. Through grants, loans, and memorandums of understanding, the DFC has been systematically increasing its presence alongside companies active in minerals deemed critical by the United States.

Whether it is graphite in Uganda and Mozambique or rare earths in Malawi, Washington aims to secure access to deposits that can reduce its dependence on China, the world's leading supplier of these products.

According to a 2022 feasibility study, Songwe Hill is projected to produce 8,425 tons of rare earth carbonate annually over an 18-year mine life. The European Union is also closely monitoring the project, evidenced by the inclusion of Mkango’s planned rare earth separation plant in Poland on the European list of Strategic Critical Minerals Projects. That plant is expected to process rare earths from Songwe Hill.

Influence Gap

Despite the backing, analysts argue that European and American initiatives remain insufficient to counter China’s dominance in critical minerals, even in Africa. The European Council points out that European companies have a low presence in the African mining sector, partly due to inadequate support from Brussels, which limits their ability to mobilize financing commensurate with the stakes.

The International Energy Agency projects that Africa will attract $50 billion in investment for critical mineral production between 2024 and 2040. Where announced American and European aid is typically limited to a few million dollars, Chinese groups, backed by their government, spend billions annually on project acquisition to steer future production toward China.

Pending a shift in strategy from Brussels and Washington, the agreement signed with Mkango grants the DFC the right to "directly provide and/or arrange for financing or investment for the Project on commercial terms substantially comparable to or better than the terms of other financing options available."

Emiliano Tossou