The US Department of Defense (DoD) is actively expanding its efforts to secure a stable supply of critical minerals for defense equipment, moving beyond direct loans to companies by introducing a new program to loan money to private investment funds. This initiative, part of the National Security Fund Finance (NSFF) program operated by the Office of Strategic Capital, aims to attract private capital to address shortages and vulnerabilities in critical mineral supply chains. While the Pentagon touts this as a way to close production gaps with countries like China, analysts like Julia Gledhill of the Stimson Center warn of high risks, suggesting that private investors are primarily motivated by financial gain rather than fulfilling production promises, raising concerns about potential profiteering and lack of transparency for taxpayers.
In addition to the new fund-based lending, the DoD has committed over $2 billion in direct deals to secure batteries and critical minerals. This includes conditional loan commitments totaling $1.95 billion to Sila Technologies for battery cells, Niron Magnetics for rare earth magnets, and Australia-based Sunrise Energy Metals. Furthermore, the DoD's Industrial Base Analysis and Sustainment program made an $85.5 million equity investment in Strategic Bauxite USA, which will combine this with $64.5 million in private funds to acquire a bauxite mine in Guyana. Bauxite is essential for heat-resistant materials in defense equipment and other industrial uses. The Pentagon has also invested $25 million in ReElement Technologies to expand rare-earth minerals refining capacity in Marion, Indiana. These investments are part of a broader push to boost weapons production and replenish depleted munitions stockpiles, with total conditional loan agreements reaching approximately $4.9 billion as of August 8, 2026.
Despite these efforts, the path to securing critical minerals is not without challenges. The Defense Logistics Agency recently canceled a tender to purchase approximately 16,000 tons of battery-grade lithium carbonate, valued at up to $300 million, without providing a reason. This cancellation highlights ongoing difficulties in bolstering critical mineral supplies. Separately, Lockheed Martin is actively seeking domestic sources for scandium and germanium, two critical minerals used in military equipment like F-35 fighter jets and infrared sensors. Lockheed is in talks with NioCorp Developments for scandium from its Nebraska mine and with Teck Resources and 5N Plus for germanium, aiming to reduce reliance on Chinese suppliers. These discussions underscore the hurdles of establishing domestic supply chains, as Chinese suppliers have historically offered lower prices and US mining and processing capacity remains limited.
