U.S. Invests $1.6 Billion in USA Rare Earth to Counter China

The U.S. Department of Commerce announced a $1.6 billion investment in USA Rare Earth to establish a domestic "mine-to-magnet" supply chain and reduce national security reliance on China. The deal, executed via a non-binding letter of intent under the CHIPS and Science Act of 2022, consists of $277 million in federal funding and a $1.3 billion senior secured loan. In exchange, the government will acquire an equity stake, receiving 16.1 million common shares and warrants for 17.6 million additional shares priced at $17.17 each, representing an ownership stake of approximately 10% to 16%.

USA Rare Earth will use the capital to develop a rare earth mine at the Round Top deposit in Sierra Blanca, Texas, and a neodymium magnet manufacturing facility in Stillwater, Oklahoma. Commercial production at the Texas mine is expected by 2028, while the Oklahoma facility is targeted for completion in the first half of 2026. To complement federal backing, the company raised between $1 billion and $1.5 billion through private financing, including a PIPE transaction led by Cantor Fitzgerald and anchored by Inflection Point Capital.

Following the January 26 announcement, USA Rare Earth shares surged over 20% in premarket trading. The investment is part of a broader Trump administration strategy to onshore critical minerals essential for semiconductors, defense systems, and electric vehicles. The company also acquired Less Common Metals to expand its capabilities. Despite the funding, analysts have noted that the company remains speculative and pre-revenue, with negative cash flow projections extending through 2028.