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The U.S. government, under the Trump administration, is set to invest $1.6 billion in USA Rare Earth, a domestic critical minerals firm. This move signifies the administration’s continued efforts to curtail China’s dominance in the rare earths sector.
The agreement, which will grant the government an equity stake in the company, follows President Trump’s recent claim of securing the “framework” of a deal concerning Greenland, purportedly including access to rare earth minerals.
This investment aligns with similar financial commitments made by the U.S. government to minerals companies over the past year.
The administration aims to bolster domestic production of minerals deemed essential for various sectors, ranging from smartphone manufacturing to defense technologies.
USA Rare Earth, which possesses significant deposits of “heavy” rare earths often utilized in defense applications, stated that the investment will facilitate mining, processing, metal production, and magnet manufacturing operations.
Commerce Secretary Howard Lutnick commented, “This investment ensures our supply chains are resilient and no longer reliant on foreign nations.”
The non-binding pledge to invest in the Oklahoma-based firm encompasses a $1.3 billion loan from the Commerce Department, along with $277 million in federal funding.
Furthermore, the company announced on Monday that it had secured an additional $1.5 billion from private investors, led by Inflection Point, chaired by Michael Blitzer, who also serves as chair of USA Rare Earth.
Following the announcement, shares in the company experienced a surge, increasing by over 15%.
Rare earths have gained prominence as a crucial element in trade negotiations between Washington and Beijing in recent months.
U.S. companies heavily rely on these materials, making them vulnerable to potential supply restrictions imposed by China in response to U.S. tariffs and other trade-related tensions.
By curbing exports, China, which processes approximately 90% of the world’s rare earths, has sought to exert pressure on the U.S. to secure more favorable trade terms.
The U.S. government has been actively investing in critical mineral firms throughout the past year.
A $1.4 billion deal was reached with Vulcan Elements, a rare earth magnet start-up, to establish domestic supply capabilities. Investments have also been made in MP Materials, the owner of the sole operational rare earths mine in the U.S.
China maintains a near-monopoly on rare earth processing.
While the U.S. and other nations are making substantial investments to develop alternative supply chains, they are still some distance from achieving this objective.
The Trump administration has also explored collaborations with other countries as part of its strategy to reduce reliance on China for the supply of these critical minerals.
In October, the U.S. and Australia formalized an agreement aimed at augmenting the supply of rare earths and other critical minerals.
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