US Government Invests $1.6B in USA Rare Earth to Boost Domestic Critical Minerals Sector
The U.S. Department of Commerce has revealed plans to acquire an equity stake in critical minerals startup, USA Rare Earth. This strategic move involves a substantial investment of $1.3 billion in loans and $277 million in federal funding. The initiative is part of the Trump administration’s ongoing efforts to decrease American reliance on Chinese rare earth supplies.
In return for the government’s investment, USA Rare Earth will issue 16.1 million shares of common stock and 17.6 million warrants to the Commerce Department. This arrangement will result in the federal government owning an 8% to 16% stake, contingent on whether the warrants are exercised. Following the announcement, the company’s shares experienced a surge, rallying over 20%. This marks one of the most significant federal investments in the domestic critical minerals sector.
The capital injection is set to aid USA Rare Earth in constructing a magnet manufacturing plant in Stillwater, Oklahoma. The plant is slated to commence operations in the first quarter of 2026. Additionally, the funding will support the development of a mine at the Round Top deposit in Sierra Blanca, Texas. The Commerce Department will disburse the funding from 2026 through 2028, based on the achievement of specific milestones.
“USA Rare Earth’s heavy critical minerals project is essential to restoring U.S. critical mineral independence,” stated Commerce Secretary Howard Lutnick. “This investment ensures our supply chains are resilient and no longer reliant on foreign nations.”
Rare earth minerals play a vital role in the production of defense systems, electric vehicles, semiconductors, and robotics. At present, China holds a dominant position in the global supply chain, controlling approximately 90% of rare earth magnet production. The Trump administration has previously invested in several other mining companies, including MP Materials, Lithium Americas, and Trilogy Metals, as part of its strategy to establish a Western rare earth supply chain.
Source: CNBC