CHIPS Act-backed deal accelerates rare earth supply chain
Stillwater-based USA Rare Earth, Inc. is giving up a potential 8% to 16% ownership stake in exchange for more than $1 billion in federal funding and loans, a move aimed at accelerating domestic production of rare earth minerals critical to semiconductors, permanent magnets, defense systems, and advanced manufacturing.
The company announced it has secured $277 million in direct federal funding along with a proposed $1.3 billion senior secured loan through the U.S. Department of Commerce and the U.S. Department of Energy, under the CHIPS and Science Act of 2022. The Act was designed to reduce U.S. reliance on foreign — particularly Chinese — semiconductor and critical mineral supply chains.
USA Rare Earth (USAR) said the financing package reflects the federal government’s recognition of the company’s mine-to-magnet strategy as a cornerstone of U.S. national security and economic competitiveness.
Federal stake tied to equity and warrants
To qualify for the more than $1 billion loan, USAR will issue the Department of Commerce 16.1 million shares of common stock and approximately 17.6 million warrants, according to filings with the Securities and Exchange Commission reported by CNBC.
Depending on whether the warrants are exercised, the federal government could hold between 8% and 16% of the company.
News of the funding sent USA Rare Earth stock soaring nearly 20% in Monday trading.
USAR also disclosed it has raised $1.5 billion through a PIPE transaction (private investment in public equity), involving large institutional and mutual fund investors.
Round Top project anchors rare earth expansion
USA Rare Earth is partnered with Texas Mineral Resources Corp. on the Round Top Project, a large rare earth and critical mineral mining operation in Hudspeth County, Texas, about 85 miles southeast of El Paso.
The company said the non-binding Letter of Intent (LOI) with the federal government underscores the strategic importance of the Round Top deposit and USAR’s vertically integrated approach to mining, processing, metal-making, and magnet manufacturing.
The LOI remains subject to further diligence, final agreements, regulatory approvals, and customary closing conditions.
Production targets through 2030
According to the company, the newly secured capital is expected to accelerate and de-risk growth across its operations. By 2030, USA Rare Earth expects to:
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Extract 40,000 metric tons per day of rare earth and critical mineral feedstock from Round Top, with commercial production targeted for late 2028
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Process 8,000 metric tons per year of third-party and internally sourced rare earth oxides, including dysprosium, terbium, yttrium, gallium, and hafnium, materials essential to aerospace, defense, semiconductors, and energy production
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Reshore 10,000 metric tons per year of heavy rare earth metal and alloy-making capacity through its subsidiary Less Common Metals Ltd. (LCM) — capabilities that currently do not exist in the U.S.
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Double neodymium-iron-boron (NdFeB) magnet production to 10,000 metric tons annually
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Process 2,000 metric tons per year of swarf, a byproduct of magnet manufacturing
Oklahoma magnet facility nearing completion
USAR confirmed its Stillwater, Oklahoma magnet manufacturing facility remains on track to complete commissioning in the first quarter of 2026, a key step in establishing a fully domestic mine-to-magnet supply chain.
The company also announced recent acquisitions and partnerships through LCM, including agreements with Solvay S.A. and Arnold Magnetic Technologies, strengthening downstream magnet and alloy production.
DOE partnership advances separation technology
In addition to Commerce Department funding, the U.S. Department of Energy’s National Energy Technology Laboratory has signed an LOI with USAR to collaborate on heavy rare earth element separation technologies, using digital twin modeling at the company’s Wheat Ridge laboratory and Round Top site.
The DOE partnership aligns with federal priorities under the Trump administration to deploy process modeling, digital twins, and advanced testbeds to rebuild domestic critical mineral supply chains.
Leaders cite national security importance
“This landmark collaboration with the U.S. Government represents a transformative step in our mission,” said Barbara Humpton, CEO of USA Rare Earth. “With this unprecedented public and private support, we can accelerate domestic capabilities essential to U.S. national security.”
Commerce Secretary Howard Lutnick called the project “essential to restoring U.S. critical mineral independence,” while Energy Secretary Chris Wright said the partnership ends reliance on foreign suppliers and creates “good-paying American jobs.”
Transaction overview and financial outlook
The proposed financing includes:
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$277 million in federal funding
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$1.3 billion senior secured loan
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$1.5 billion PIPE transaction priced at $21.50 per share
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Total capital raised: $3.1 billion
The PIPE is expected to close January 28, 2026, pending customary conditions.
USAR reported preliminary year-end cash reserves exceeding $350 million, with 2025 operating losses estimated between $56 million and $62 million and capital expenditures of $37 million to $43 million.