Summary
The U.S. and Australia dramatically escalated the global resource competition by signing a landmark Critical Minerals Framework worth up to $8.5 billion in joint projects. The agreement, signed by President Trump and Prime Minister Albanese, aims to create a secure, allied supply chain to counter China's dominance. As a direct result, both governments immediately committed initial funding for priority projects, including a Gallium refinery in Western Australia and an equity investment in the Arafura Rare Earths project. Meanwhile, the U.S. FEOC regulations continue to tighten, with new guidance on licensing and debt restrictions threatening to exclude domestic clean energy projects with significant Chinese financial or technological ties.
Key Points
U.S.-Australia Sign $8.5B Critical Minerals Supply Framework
On October 20, 2025, the U.S. and Australia signed a landmark Framework for Securing Supply in the Mining and Processing of Critical Minerals and Rare Earths. The deal covers an $8.5 billion pipeline of "ready-to-go" projects and includes a joint commitment to inject at least $1 billion in financing into projects in both countries over the next six months. The framework features mechanisms to protect markets from non-market policies and to accelerate permitting, confirming the nations' intent to decouple strategic supply chains from China.
Allies Announce Funding for Gallium Refinery and Rare Earths Project
As part of the new pact, immediate financial commitments were made:
Gallium: Australia announced up to $200 million in concessional equity finance for the Alcoa-Sojitz Gallium Recovery Project in Western Australia. The U.S. Department of War will also take an equity stake, supporting a refinery expected to supply up to $10\%$ of global gallium—a semiconductor and defense input.
Rare Earths: Australia announced a $100 million equity investment in the Arafura Rare Earths Nolans project, which aims to produce $5\%$ of global rare earths.
FEOC Rules Broaden to Debt and Licensing Agreements
Recent legislative changes to the U.S. Foreign Entity of Concern (FEOC) rules, now taking effect in tax years beginning after July 4, 2025, significantly tighten restrictions for projects claiming IRA tax credits. The new rules prohibit credits if a project involves "material assistance" from a Prohibited Foreign Entity (PFE). This includes licensing agreements that restrict a licensee's right to control production, and debt/equity structures where a single PFE owns $25\%$ or aggregated PFE influence (including debt) reaches $40\%$ of the entity.
South Korea Launches Task Force to Counter China’s Rare Earth Controls
The South Korean government has activated a Rare Earth Supply Chain Response Task Force and pledged a comprehensive strategy by year-end. This urgent move follows China's expansion of export controls to rare earth technologies and the new extraterritorial application of its licensing regime. South Korea, which relies on China for over $\mathbf{80\%}$ of its rare earth needs, is prioritizing R&D into recycling and alternative materials while opening a China supply chain hotline to expedite permits for its vital semiconductor and automotive industries.
Why It Matters
The Allied Capital Mobilization is Real
The $8.5 billion U.S.-Australia deal, with immediate funding announcements, is the strongest signal yet that Western allies are moving past rhetoric to execute direct, government-backed industrial policy. By jointly funding a gallium refinery and taking equity in rare earth projects, the U.S. and Australia are absorbing project-level risk to ensure the security of non-Chinese supply chains, particularly for high-end defense and semiconductor inputs.
FEOC Creates IP and Financial Minefields
The broadened FEOC/PFE definitions introduce new compliance risks that extend deep into corporate finance and technology. Companies relying on IRA incentives must now scrutinize their intellectual property (IP) licensing agreements for any Chinese-sourced technology that could give a PFE "effective control" over the production process. This is a deliberate policy tool to force the technological decoupling of U.S. clean energy and defense manufacturing.
South Korea is the Next Frontline
South Korea's urgent task force highlights the reality of the crisis for advanced Asian allies. With heavy reliance on Chinese rare earths for its tech sector, South Korea is now directly exposed to China's geopolitical leverage. The rapid response signals a strategic need for South Korean manufacturers to partner quickly with Australian and U.S. miners to diversify its industrial base.
Watchlist Companies
Company / Entity | Context | Homepage / Link |
Arafura Rare Earths (ARU) | Australian miner receiving $100M government equity; project is a key component of the new U.S.-Australia framework. | |
Alcoa Corp. (AA) | Partner in the new Gallium Recovery Project in Western Australia, which is receiving joint U.S./Australia funding. | |
VHM Ltd. (VHM) | Australian rare earth miner with US EXIM Bank interest; poised to benefit from accelerated allied financing. | |
Titan Mining Corp. (TI) | New York zinc miner that recently discovered byproduct germanium; germanium is a key target of the new allied focus (Gallium). | |
LG Energy Solution | South Korean battery giant; faces heightened supply chain risk from China and pressure to secure new rare earth sources. | |
South32 (S32) | Miner of Hermosa deposit in Arizona, a potential source of zinc and manganese, essential materials for the U.S. stockpile. |
Critical Minerals Spotlight
Rare Earths / Gallium — Allied Funding: Joint U.S.-Australia equity investments confirm these materials are the top priority for strategic decoupling and defense security.
FEOC/PFE — Debt/IP Control: New IRA rules target not just ownership, but the influence exercised by foreign capital and technology via debt and licensing agreements.
Stockpiles — Regionalization: The focus on Australian processing assets is the clear next phase of Western stockpiling: securing processed, value-added products, not just raw ore.
Action Points
FEOC Compliance for IP: Companies utilizing any Chinese technology or licensing agreements for IRA-eligible components must urgently review contractual language to eliminate any provision that could be deemed a PFE's "effective control."
Monitor Arafura and Alcoa Equity: Track the details of the initial funding packages for Arafura and Alcoa, as these deals will set the template (terms, pricing, offtake rights) for future U.S./Australian investment in other allied critical mineral projects.
Benchmark Korean Strategy: Observe which non-Chinese producers South Korean majors (auto, battery, semi) partner with, as this demand could create a powerful new catalyst for Australian, Canadian, and U.S. projects.
This briefing is for informational purposes only and is not legal, investment, or policy advice. Information is believed accurate at time of publication. Sources are publicly available.