The U.S. government is making a strategic investment by acquiring a minority stake in USA Rare Earth, a rare earth miner based in Oklahoma. This investment is part of a broader initiative to reduce reliance on foreign imports of critical minerals, which are essential components in high-tech products such as smartphones, electric vehicles, and robotics.
In the current global context, China dominates the rare earth market, processing over 90% of the world’s critical minerals. This significant control gives China leverage in global trade dynamics, particularly in the ongoing trade tensions with the United States.
On Monday, USA Rare Earth announced that the U.S. Commerce Department will inject $1.6 billion into the company, aimed at advancing mining operations in Texas and establishing a magnet manufacturing facility in Oklahoma. This investment significantly increased USA Rare Earth’s market shares, which surged by over 13% prior to the market opening.
The funding agreement, part of the Commerce Department's CHIPS program, comprises $277 million in federal funding and a $1.3 billion senior secured loan. In exchange, the Commerce Department will receive 16.1 million shares of common stock and the right to purchase an additional 17.6 million shares.
During this announcement, Secretary of Commerce Howard Lutnick emphasized the critical nature of USA Rare Earth's project for restoring U.S. independence in mineral supply. He articulated that this funding is crucial for building resilient supply chains not dependent on foreign nations.
The Trump administration has intensively advocated for strengthening the critical mineral industry within the U.S., aiming to alleviate the dependency on China, which poses a national security risk. The administration’s efforts include a notable interest in acquiring Greenland, further underlining its commitment to securing critical mineral resources.
USA Rare Earth is the third U.S.-based rare earth operation to receive investment from the Trump administration in recent months. The Pentagon previously invested $400 million in MP Materials, another rare earth producer, which also received a $150 million loan in August. The government's strategy involves diversifying the rare earth supply chain and reducing reliance on foreign sources.
In November, the Trump administration announced a collaboration with rare earth startups Vulcan Elements and ReElement Technologies, amounting to a $1.4 billion partnership designed to enhance U.S. access to vital materials and technologies necessary for the production of various high-tech products and military equipment.
The administration's budget proposals include considerable funding allocations aimed at increasing the U.S. stockpile of critical minerals, demonstrating a commitment of $2 billion for the Pentagon, alongside an additional $5 billion through 2029 for investment in critical mineral supply chains. Since 2020, the Pentagon has awarded over $439 million towards establishing domestic supply chains for rare earth elements.
Recently, a bipartisan group of lawmakers proposed the creation of a new agency with a designated budget of $2.5 billion to spur the production of rare earths and other critical minerals, reflecting a unified effort to bolster the U.S. economy and secure its technological infrastructure against foreign competition.
