A rare earths project in South Africa that the European Union has identified as strategic has secured a 20 million US dollar equity investment from the country’s state-owned development finance institution, as Western economies seek alternatives to China-dominated supply chains, Bloomberg reported.

The funding was provided by the Industrial Development Corp. to Frontier Rare Earths Ltd.’s Zandkopsdrift project in the Northern Cape province. Frontier, a Luxembourg-registered company, said the capital will be used to finance a definitive feasibility study ahead of planned production of rare earth products and battery-grade manganese from 2030. The size of the IDC’s shareholding was not disclosed.

China currently controls much of the global processing and refining capacity for rare earth elements, which are used in permanent magnets found in smartphones, drones, electric vehicle motors, and wind turbines. In response, the EU, the United States, and other partners have been working to diversify sources of critical minerals, including through projects in Africa.

Zandkopsdrift was designated a strategic project by the EU last year as part of those efforts. Frontier said it is assessing multiple potential European funding options linked to that status, according to Bloomberg.

The company has also signed an agreement with Carester SAS, which will apply proprietary extraction technology at the mine and process part of the future offtake at a rare earth separation facility under construction in France.

Frontier Chairman Philip Kenny said revenue from manganese produced as a byproduct is expected to lower overall costs, positioning Zandkopsdrift as the lowest-cost producer of rare earths outside China.

Rian Coetzee, the IDC’s executive for industrial planning and project development, said the investment in Frontier’s South African subsidiary aligns with the institution’s mandate to support industrialisation and the development of critical minerals in Southern Africa.

The IDC already has exposure to the mining and metals sector through investments in companies including Kumba Iron Ore Ltd., ArcelorMittal South Africa Ltd., and Merafe Resources Ltd., Bloomberg reported.