USA Rare Earth (NASDAQ: USAR) has signed a non-binding Letter of Intent with the US Department of Commerce and entered into a collaboration with the US Department of Energy, marking a major step forward in its plan to build a fully domestic rare earth supply chain.
The agreement highlights the company’s growing role in addressing US supply vulnerabilities tied to national security, advanced manufacturing, and semiconductor production.
What the Government Commitment Looks Like
Under the Letter of Intent, the Department of Commerce’s CHIPS Program has outlined up to US$1.6 billion in potential support. This includes:
• US$277 million in proposed federal funding
• US$1.3 billion in a proposed senior secured loan
Separately, USA Rare Earth also raised US$1.5 billion in private capital through a PIPE financing, led by Inflection Point with participation from large institutional investors.
While the agreement is still subject to final approvals and due diligence, the scale of the proposed funding signals strong government backing.
Why This Matters Strategically
The US currently depends heavily on foreign sources for rare earth elements, particularly heavy rare earths that are critical for:
• Semiconductors
• Defense systems
• Aerospace
• Clean energy technologies
USA Rare Earth’s mine-to-magnet strategy is designed to close this gap by keeping every step of production inside the US, from mining through to finished magnets.
What USA Rare Earth Plans to Build by 2030
If fully funded, the company plans to:
• Begin commercial mining at its Round Top project in Texas by 2028
• Extract 40,000 tonnes per day of rare earth and critical mineral feedstock
• Process 8,000 tonnes per year of heavy rare earth oxides and concentrates
• Reshore 10,000 tonnes per year of heavy rare earth metal and alloy production
• Expand NdFeB magnet manufacturing capacity to 10,000 tonnes per year
• Recycle magnet production waste to improve efficiency and reduce costs
Many of these capabilities currently do not exist at scale in the US.
Department of Energy Collaboration
Alongside the Commerce Department agreement, the Department of Energy will work with USA Rare Earth on advanced separation technologies using digital twin modelling.
The goal is to improve efficiency, reduce costs, and speed up development of rare earth processing methods, helping create the first fully domestic rare earth supply chain from mine to magnet.
Management and Policy Support
Company leadership described the collaboration as a turning point for US industrial independence, emphasizing its importance for national security and economic competitiveness.
Government officials echoed that view, highlighting the need to reduce reliance on foreign nations for materials essential to chips, defense systems, and energy infrastructure.
Investor Takeaway
This announcement significantly strengthens USA Rare Earth’s long-term investment case.
Key investor implications include:
• Clear alignment with US industrial and national security policy
• Access to large-scale, low-cost government-backed financing
• Reduced execution risk through public-private partnerships
• Exposure to high-demand markets like semiconductors and defense
• First-mover advantage in a fully domestic rare earth supply chain
While the funding is not yet finalized, the size and scope of the proposed support suggest USA Rare Earth is becoming a cornerstone player in America’s critical minerals strategy.
