USA Rare Earth shares jumped 20% on Monday after the company reached a preliminary agreement with the US Department of Commerce. The deal gives the government an equity stake in exchange for loans and funding to build a rare earth mine in Texas and a magnet plant in Oklahoma. This move aims to help the US cut reliance on foreign supplies of these key materials.
Background
Rare earth elements are metals used in everything from electric vehicle motors to defense weapons and computer chips. The US has long depended on China for most of these supplies, which creates risks for national security and industry. Over the past year, the government has stepped up efforts to build homegrown sources. This includes direct investments in mining companies to speed up projects.
USA Rare Earth, based in Oklahoma, has been working on two main projects. One is a mine at the Round Top deposit in Hudspeth County, West Texas. The site holds a mix of rare earths and other critical minerals. The other is an advanced manufacturing facility in Stillwater, Oklahoma, focused on making powerful magnets. These magnets, known as neodymium iron boron or NdFeB types, are vital for high-tech products.
The company has seen its stock soar this year. Year-to-date gains stand at 108% before Monday's rise. This reflects growing investor interest in US efforts to onshore production. Similar deals with other firms like MP Materials, Critical Metals, and Lithium Americas have also lifted their shares.
Key Details
The agreement is a non-binding letter of intent signed on January 26, 2026. It comes through the Commerce Department's CHIPS Program, which funds projects under the CHIPS and Science Act. In return for support, USA Rare Earth will issue about 16.1 million common shares and warrants for another 17.6 million shares to the department. This could give the government an 8% to 16% stake, depending on final terms.
Funding Breakdown
The government plans to provide up to $277 million in direct funding. It also offers a $1.3 billion senior secured loan. Together, these total around $1.6 billion in public support. The money will back $3.3 billion in total capital investments for the Texas and Oklahoma projects.
At the Round Top mine, production is set to start in 2028. It will extract 40,000 metric tons per day of feedstock. This includes 12 rare earth and critical minerals, such as yttrium, gallium, dysprosium, terbium, holmium, lutetium, erbium, thulium, ytterbium, gadolinium, hafnium, and zirconium. The site will process 8,000 metric tons per year of mixed materials from third parties.
In Stillwater, the Oklahoma plant will ramp up to 10,000 tons per year of NdFeB magnets. This more than doubles earlier plans. It will also handle on-site conversion of rare earth oxides to metals and alloys at the same scale. USA Rare Earth will be the first US firm to handle the full chain: mining, extraction, metal production, and magnet manufacturing.
On the same day, the company announced $1.5 billion in private funding. This came from a group of financial and strategic investors through a PIPE deal, or private investment in public equity.
The Department of Energy is also involved. Its National Energy Technology Laboratory signed a separate letter of intent. This focuses on heavy rare earth separation tech at USA Rare Earth's Wheat Ridge lab and the Round Top site, using digital twin technology.
"USA Rare Earth's heavy critical minerals project is essential to restoring U.S. critical mineral independence," said Commerce Secretary Howard Lutnick.
"With this unprecedented show of public and private support for our Company, we are positioned 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," stated Barbara Humpton, CEO of USA Rare Earth.
The deals are not final. They need more review, agreement details, standard closing steps, and approvals.
What This Means
This deal fits into a larger push by the Trump administration to secure US supply chains. Demand for rare earths has spiked with the growth in AI, electric vehicles, and defense tech. China controls over 80% of global processing, so building US capacity reduces vulnerabilities.
For semiconductors, these minerals enable key processes like chemical vapor deposition and compound semiconductors. They are used in dopants, high-k materials, and more. The Oklahoma magnets will supply EV motors, wind turbines, and military gear.
Other mining stocks rose on the news, showing market confidence in this strategy. The approach of government equity stakes has fueled a hot sector for investors. If completed, USA Rare Earth's projects could produce enough to meet a big chunk of US needs by 2030.
Private funding adds to the momentum. The $1.5 billion PIPE shows strong backing from investors who see long-term value. Energy Department collaboration could improve tech for harder-to-process heavy rare earths.
Success here might encourage more such partnerships. It could shift the balance away from foreign dominance. For USA Rare Earth, the cash infusion speeds up timelines and de-risks big builds. Shares extended gains from Friday, signaling trader optimism.
The full impact depends on finalizing the deals. Production ramps will take years, but this marks a key step toward self-reliance in materials that power modern life.
