The US is set to take a minority stake in critical minerals start-up USA Rare Earth, the latest in a series of government investments that seek to reduce America's dependence on imports of the materials.
USA Rare Earth said on Monday it had signed a non-binding agreement with Washington, in which the Department of Commerce will provide $1.6 billion in funding to the critical minerals start-up to boost the production of rare-earth materials.
Under the letter of intent, the Department of Commerce said it would provide USA Rare Earth with a $1.3 billion loan and $277 million in federal funding. The company also raised $1.5 billion from private investors. The Oklahoma company said the letter of intent is subject to further diligence and approvals.
The US government will hold an 8 to 16 per cent stake in USA Rare Earth depending on whether the warrants are exercised, according to a filing with the Securities and Exchange Commission.
US President Donald Trump has argued that securing the supply chain for rare earths is a critical component of national security. Production of rare earths has been a major focus following China's export restrictions amid trade tension between Washington and Beijing.
“This investment ensures our supply chains are resilient and no longer reliant on foreign nations,” Commerce Secretary Howard Lutnick said in a statement.
Shares in USA Rare Earth have almost doubled in the past month, and were up more than 8 per cent on Monday. The deal follows a landmark investment agreement the Defence Department made with MP Materials last year.
In November MP Materials also announced it had partnered with the Defence Department to establish a strategic joint venture with the Saudi mining company Maaden to develop a rare-earth refinery in the kingdom. They said the joint venture under the US-Saudi critical mineral co-operation framework represented a major step in diversifying the global supply chain for the US and its allies.
