Critical minerals sit at the intersection of geology, geopolitics and capital allocation. They are indispensable to the transition economy, yet notoriously difficult for conventional markets to value correctly. Investors accustomed to fast-moving sectors often misunderstand the economic structure of these assets, particularly the relationship between capital raised and value created. Nowhere is this clearer than in the rare earth sector, where a project’s potential is often considerable but its ability to realise that potential depends entirely on its access to funding.

This essay sets out the core economic principles behind critical mineral investing, and uses Pensana’s recent funding announcement as a case study in how value is created not by avoiding dilution, but by deploying capital where it has the greatest multiplier effect.

Europe’s Strategic Blind Spot

Over the past few years, Western governments have spoken often about reducing dependence on China. But when you look at the actions being taken, a different picture appears.

In July, the U.S. Office of Strategic Capital received authority to deploy up to $100 billion. That single step makes the current situation clear:

Europe is not moving from dependency to independence.

It is moving from a Chinese monopoly to a US–China duopoly.

Why Europe’s Critical Mineral Projects Cannot Attract Capital

Europe and the UK continue to release critical-minerals strategies. These documents outline familiar aims: increasing domestic processing, reducing dependence on China, and building more resilient supply chains. On paper, the direction looks positive. In practice, almost no major project in this area has secured bankable financing.

The reason is simple. Strategy and policy are not the same. A strategy states what a government wants to achieve. A policy creates the conditions that make it possible. Europe and the UK have produced many strategies but have introduced very little policy that shifts risk in a way that attracts capital.

Over the past decade, two significant narratives have shaped the rare earth elements (REE) market: the revival of the Mountain Pass mine in California and the decline and eventual sale of the Ngualla project in Tanzania. While each story stands on its own, their interplay illustrates a critical trend: China has consistently out-strategised and out-manoeuvred Western capital markets. Mountain Pass may have remained operational, but at a cost that ultimately favoured China. Conversely, Ngualla, recognised as one of the world’s premier neodymium-praseodymium (NdPr) deposits, slipped from Western control at a fraction of its true value. This analysis is not merely commentary; it reflects two converging timelines with significant implications.

The global energy transition is shifting industrial power in real time, and Africa is at the heart of it. Since my presentation in January 2025, the continent’s role in the global transition economy has become even clearer. As electrification accelerates and demand for critical minerals reshapes industrial strategy, Africa has moved from the margins to the centre of new supply chains.

Meanwhile, Europe has hesitated. While the UK and EU debated strategies and policies, others acted. China, the United States, and African institutions have stepped in to seize opportunities. The outcomes of projects like Ngualla in Tanzania and Longonjo in Angola show what decisive partnerships achieve—and what delay costs. Africa is moving with clarity. The question is whether Europe will participate or continue to watch the transition economy move on without it.

The story of how China came to dominate the global rare earth magnet industry does not begin with China. It begins in the laboratories of Japan and the United States in the late 1970s and early 1980s, when researchers at Sumitomo Special Metals in Osaka and General Motors in Indiana independently invented the neodymium-iron-boron (NdFeB) magnet. These were revolutionary technologies—one sintered, one bonded—that placed the West at the centre of a supply chain that would become foundational to electronics, automotive engineering, defence systems, and later the entire electrification economy. At that moment, it was unthinkable that China, then still industrially undeveloped, would one day control nearly every stage of this value chain.

In March 2025, the new United States administration under President Trump reintroduced a series of tariffs on Chinese industrial products, including electric vehicles, batteries, and critical minerals. The measures were justified as a response to what Washington described as “market distortion and state subsidy.” Beijing’s response followed just over a week later, not through tariffs of its own but through regulation. On 4 April, the Ministry of Commerce issued Announcement No. 18, designating several heavy rare-earth elements — samarium, gadolinium, terbium, dysprosium, and lutetium — as “dual-use technologies” under China’s 2020 Export Control Law. The message was clear: if Washington intended to use trade as leverage, Beijing would use access.

MOFCOM 18 set the tone for the rest of the year. It became the first in a series of policy actions that reshaped sentiment across the rare-earth industry and revealed how differently China and the West interpret economic strategy. Beijing acts within a coherent framework; the West reacts to headlines.

It started quietly. In the middle of October 2025, MP Materials began to soften after climbing toward an extraordinary high of around a hundred dollars a share. Nothing in its published numbers justified that price, but nothing justified what came next either. As MP began to fall, it dragged an entire sector with it—Australia Lynas, UK’s Pensana, USA Rare Earths and American Resources from the United States—companies that together represent a large proportion of the West’s attempt to build an independent rare-earth supply chain separate from Chinas monopoly.

In less than three weeks the group lost roughly half its market value. It wasn’t project failure or falling demand; it was the behaviour of markets that now react faster than they think. Watching it happen, felt like observing an automated reaction that no longer knew what it was reacting to.

The title may seems sensationalist, but by some estimates, the subject component is less than a dollar and the total overall dependency may be  up to $5 trillion. This essay attempts to highlight how important it is for the rest of the world to build its own rare-earth supply chain. It is magnitudes more important than most people realise.

At the heart of almost every modern product — from cars and washing machines to robots and wind turbines — lies a handful of small, powerful permanent magnets. They’re made from rare-earth elements such as neodymium and praseodymium, and China makes almost all of them.

At the Xi–Trump summit, China agreed to postpone its new rare-earth export regulations until the end of 2026. The decision carried little cost but preserved every policy lever — quotas, licensing, and regulatory authority — while projecting moderation amid geopolitical tension. The objective was flexibility: Beijing can tighten or ease policy as conditions evolve.
Any renewal will fall under the 15th Five-Year Plan (2026–2030), which is expected to consolidate rare earths’ role as a core industrial foundation, directing more of China’s output toward advanced manufacturing and domestic consumption.
For the West, that means a permanent reduction in export-available feedstock and no alternative but to invest directly in its own upstream and midstream capacity.