The Pentagon’s hunt for heavy rare earths has led to Kuantan, Malaysia, where Lynas Rare Earths is separating materials that sit at the center of modern defense, clean energy, electronics, and advanced manufacturing. The real story is not just who owns the rocks. It is who can refine them safely, reliably, and at scale.
Lynas has signed a binding letter of intent with the U.S. government for about US$96 million in light and heavy rare earth oxide purchases over four years.
That gives Washington a new non-Chinese supply route, but it also puts fresh attention on Malaysia, where Lynas must stop producing radioactive waste by 2031 under its renewed operating license.
Why Kuantan matters
Rare earths sound mysterious, but the supply problem is painfully practical. The International Energy Agency says China accounted for 60% of global mined production of magnet rare earths in 2024, 91% of refined output, and 94% of sintered permanent magnet production.
That means a refinery in Malaysia can matter as much as a mine. Separation turns mixed rare earth material into individual oxides, the ingredients needed for magnets in EV motors, wind turbines, aerospace systems, and data centers. Without that step, the rocks are still just rocks.
The new U.S. deal
Under the Lynas agreement, the U.S. government plans to allocate about US$96 million to buy light and heavy rare earth oxides. The deal also includes a US$110 per kilogram floor price for neodymium-praseodymium oxide, a key magnet material.
This is not a final supply contract yet. Lynas said the letter of intent creates a framework to finalize one, after uncertainty over whether a heavy rare earth processing facility in Seadrift, Texas would proceed. Amanda Lacaze, the company’s CEO, said Lynas was “pleased to sign this binding letter of intent.”
The environmental catch
Here is where ecology enters the picture. The same supply chain that can support cleaner cars and more efficient turbines also depends on complex chemical processing. If badly managed, rare earth operations can leave acidic waste and radioactive tailings that threaten water, soil, and nearby ecosystems.
Malaysia renewed Lynas’ operating license for 10 years, but with strict conditions. Science Minister Chang Lih Kang said radioactive waste generated over the next five years must be treated and neutralized, and no new permanent disposal facility will be allowed.
That is not a small footnote. For people living near industrial plants, the issue is not geopolitics or defense policy. It is groundwater, dust, trucks on local roads, and trust.
Why samarium matters
Lynas said its Malaysian facility has produced its first samarium oxide, adding to separated dysprosium and terbium. The company says this makes it the only commercial producer of separated heavy rare earth oxides outside China.
Samarium oxide is used in high-performance magnets for electronics and aerospace, among other applications. Lacaze called the achievement “on spec and ahead of schedule,” a small phrase that carries a lot of weight in a market where delays can ripple into factories and defense programs.
A wider supply race
The U.S. is not betting only on Malaysia. USA Rare Earth announced a roughly US$2.8 billion deal to acquire Brazil’s Serra Verde Group, owner of the Pela Ema rare earth mine and processing plant, with the company pointing to a 15-year offtake agreement tied to magnetic rare earth production.
There is also a deadline looming. U.S. acquisition rules say that, starting January 1, 2027, contractors cannot deliver certain covered materials mined, refined, separated, melted, or produced in covered countries including China, with the rule covering the full supply chain for samarium-cobalt and neodymium-iron-boron magnets.
What to watch now
The big question is whether these projects can scale without simply moving the environmental burden from one country to another. By the IEA’s own estimates, existing and announced projects outside China would cover only about half of mining needs, a quarter of refining needs, and less than a fifth of magnet demand outside China by 2035.
At the end of the day, the Pentagon’s Malaysia deal is both a breakthrough and a warning. The world wants cleaner tech and more secure defense supply chains, but it also has to pay for careful processing and serious waste controls.
The official statement was published on LynasRareEarths.
