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The US defence department has signed a $120mn deal with Australia’s Lynas Rare Earths to build the country’s first onshore commercial-scale rare earths separation facility, as part of a US government push to end China’s dominance of critical mineral supply chains.

Rare earth elements are vital in low carbon technologies such as electric vehicles and wind turbines, as well as military equipment and consumer electronics. China is responsible for almost 90 per cent of global refining of rare earths, according to the International Energy Agency.

Under the deal with Lynas, China would be bypassed entirely. Lynas, the world’s largest rare earths producer outside China, will export rare earth carbonate refined in Australia to the US, where it would be further processed for commercial use.

The facility, which expands a pilot scheme started in 2020, will be the first commercial scale rare earths plant inside US borders. It will meet some of the goals set out in a strategic review on building supply chains and local manufacturing industries in semiconductors, batteries, critical minerals and pharmaceuticals published last June by President Joe Biden’s administration.

The defence department, which led the work on critical minerals for the review, warned that China’s dominance of the industry carried geopolitical, supply chain and environmental, social and governance risks.

“The concentration of global supply chains for strategic and critical materials in China creates risk of disruption and of politicised trade practices, including the use of forced labour,” the department said at the time.

The $120mn will cover the full cost of the construction of the plant, which is likely to be built in Texas and be operational by 2025, Lynas said. It added that the use of ore mined and refined in Australia would answer some of the department’s environmental, social and governance concerns.