A £145m factory near Hull which will make materials for magnets used in electric cars and wind turbines is to receive government support.
The plant, which will process rare earth materials at Saltend, will be the first in the UK and the second largest of its type outside China.
Owners Pensana said it would create 126 jobs and was expected to begin operations in 2023.
Financial aid is to come from the £850m Automotive Transformation Fund.
The announcement of support for the plant, which was granted planning permission in June, came as the government published its first Critical Minerals Strategy (CMS)
Business and Energy Secretary Kwasi Kwarteng said Britain needed to “move quickly to secure the rare earth minerals necessary to supply our future industries”.
He said the UK needed to develop and strengthen its supply chains for these minerals to avoid being vulnerable to geopolitical threats.
“Our support for Pensana’s new facility in Yorkshire shows we are already putting CMS aims into action to diversify our supply chains away from dominant market players.”
The Automotive Transformation Fund, from which government cash support for the Saltend site will come, is aimed at electrifying Britain’s automotive supply chain.
However, the amount the government would be providing to the factory has not been announced.
Pensana chairman Paul Atherley said he welcomed government support.
“Our Saltend rare earth processing hub will be the world’s first independent and sustainable rare earth separation plant, with plans to produce 5% of the global magnet metals in 2024.
“This will play a vital role in transforming the UK’s EV and offshore wind industries, as well as creating high value local jobs in the Humber region.”