US government to take 10% stake in USA Rare Earth
USA Rare Earth (USAR) said on Monday that it has entered into a non-binding letter of intent (LOI) with the US Commerce Department in conjunction with the Department of Energy (DOE) that will include approximately $300 million in federal funding and a $1.3 billion loan.
The Commerce Department will also take 16.1 million shares of common stock and 17.6 million stock warrants, giving the US government a 10% stake in the company.
Shares of USAR soared almost 40% in premarket trading on Monday, before closing up nearly 8%.
USAR also announced an equity offering of $1.5 billion “anchored by Inflection Point with participation from large mutual fund complexes,” priced at $21.50 a share.
The company said that the deal with the US government "reflects the strategic importance of USAR's mine-to-magnet platform and its role in closing the rare earth element and critical mineral supply gap for essential industries that underpin U.S. national security, including semiconductors, other critical technologies, and advanced manufacturing."
The Trump administration has been aggressively trying to break the near-monopoly that China has on rare earth mining by ramping up domestic manufacturing. China is currently responsible for about 90% of global production of the critical minerals.
This imbalance came to the forefront when Beijing cut off rare earth exports earlier this year as retaliation for President Trump’s tariffs.
Back in July, the Defense Department entered into a 10-year public-private relationship with MP Materials (MP) as part of multibillion dollar package that will allow MP Materials to construct its second domestic magnet manufacturing facility – called the 10X Facility – at a soon-to-be-named location that will serve both defense and commercial customers.
The Defense Department also agreed to purchase $400 million of a newly-created series of the MP Material’s preferred stock, which is convertible into shares of the company’s common stock.
This investment made the military agency the largest shareholder of MP materials.
National security at forefront of investments
As part of its agreement with the US government, USAR said that it expects to be extracting 40,000 tons of ore per day and making 10,000 tons of rare earth magnets per year by 2030.
"This landmark collaboration with the US Government represents a transformative step in USAR's mission to secure and grow a resilient, independent domestic rare earth value chain," USA Rare Earth CEO Barbara Humpton said in a statement.
"We are grateful to President Trump, Secretary Lutnick, and Secretary Wright for their support and recognition of the strategic importance of rare earth materials and permanent magnets."
She added that the deal positions it to "accelerate the build-out of important domestic capabilities that are essential to U.S. national security, global economic competitiveness, and critical technologies of the future."
Rare earths are the key building block of modern tech, powering everything from electric vehicles and semiconductors to robotics and missile guidance systems.
When top administration officials, including Trump trade advisor Peter Navarro and National Security Council supply chain chief David Copley, met with executives from US-based rare earth firms and major tech companies in July, they hinted that the deal the government had made with MP Materials was “not a one-off” and there were ongoing negotiations with other rare earth companies.
"USA Rare Earth's heavy critical minerals project is essential to restoring U.S. critical mineral independence," Secretary of Commerce Howard Lutnick said in a statement. "This investment ensures our supply chains are resilient and no longer reliant on foreign nations."