The deal was seen by Australia’s ambassador in Washington, Arthur Sinodinos, as proof the US was comfortable using Australian resources and companies to plug gaps left by its move away from China.
The $10 million loan from the Tasmanian government is part of $85 million in funding required to reopen the so-called Dolphin project on King Island.
The mine operated between 1917 and 1992, when it was closed due to low tungsten prices rather than a lack of reserves.
The company is looking for a further $15 million in federal government support before raising the remainder from equity and debt markets.
The company has already secured off-take agreements for 70 per cent of its planned production from commodity trader, Nobel Group and Nordic manufacturer, Sandvic Group.
Tungsten is the second-hardest mineral known to man, behind diamonds, and is used in drill bits for the mining industry, tunnelling machines and cutting equipment critical in the manufacture of vehicles and aircraft.
The US does not have a operating tungsten mine, while Australia has only a small working deposit in Tasmania.
Prime Minister Scott Morrison mentioned critical minerals during his address to the National Press Club on Monday as part of $1.5 billion in new funding for the government’s Modern Manufacturing Strategy.
“Our priorities are clear. We’re investing, we’re encouraging others to do the same,” he said.
The executive chairman of King Island Scheelite, Johann Jacobs, said the Dolphin project would be one of the highest-grade tungsten mines in the world.
“Tungsten is a strategically significant metal and a key input to industries that are vital to national security,” he said.
“We note that several Western governments have recently identified a crisis in the supply chain for critical minerals, particularly tungsten
Hugh White, an emeritus professor of strategic studies at the Australian National University, said government funding for critical mineral projects was likely to accelerate over the next decade.
“We are basically saying we are not prepared to trust China as a supplier of tungsten and other critical minerals. What we have to understand is there may be consequences for this stance,” he said.
“The further trust erodes on both sides then the harder it will be for [Canberra and Beijing] to get back to more normal relations.”
Professor White said while Australia’s reliance on China for critical minerals had become a vulnerability, the same could be said for China’s reliance on Australia for iron ore.
Gavin Pearce, who holds the marginal federal seat of Braddon which includes King Island, welcomed the project but said any decision was “ultimately a commercial one for the proponent”.