The Commerce Department and the Pentagon on Monday pledged funding and possible equity stakes in a domestic producer of rare earth magnets, They are at the center of a trade war with China, the world’s dominant supplier.
The Department of Commerce signed a preliminary non-binding letter of intent to provide US$50 million from the Chps Act of 2022 to Vulcan Elements for the purchase of equipment needed to produce so-called permanent magnets used in fighter jets, wind turbines and a variety of other critical goods, according to a statement from the department.
Vulcan Elements separately announced it will receive a $620 million direct loan from the Pentagon’s Office of Strategic Capital. and US$550 million in private capital to build a 10,000-metric ton magnet plant in the United States. Its partner, rare earths company ReElement Technologies Corp., will receive a direct loan of $80 million from the same Pentagon office to expand its recycling and processing capabilities, an amount that will be complemented by private capital.
“It’s a dream come true,” said John Maslin, CEO of Vulcan Elements, in an interview. ““It is about increasing existing production and achieving a significant scale for the country.”
These announcements are the latest in a series of moves by the federal government to invest directly in the supply chain of permanent magnet production, an industry dominated by China. They also constitute another example of the Trump administration’s commitment to creating a market for rare earths and magnets that operates outside of Chinese influence.; a risky bet, but one that could reduce the dependence of the United States and its allies on the second largest economy in the world.
Of course, It is unclear how all parts of the deal will play out, as the Chips Act funds are part of a non-binding agreement.
The Pentagon confirmed details of the deal in a statement to Bloomberg, adding that funding for the conditional loans came from the “One Big Beautiful Bill” Act signed in July. providing $100 billion in loan authorization for critical mineral production and related projects and industries.
“These agreements will support the production of advanced rare earth element separation, metallization and magnet manufacturing capabilities in the US,” the statement said.
ReElement separates and refines rare earths from mining concentrates, waste or recycled materials, producing oxides that are used to make metals for magnets. In an interview in September, Shane Tragethon, the company’s vice president of international strategy, stated that it is the only company in the United States which daily separates heavy rare earths, the type of rare earths that are the target of China’s export controls.
Earlier this year, Commerce Secretary Howard Lutnick converted Chip Act funds into shares of struggling U.S. semiconductor company Intel Corp. The possibility of a similar stake in Vulcan, which supplies magnets in the US for defense and commercial products, demonstrates the influence that Lutnick is willing to work to make his mark in the semiconductor industry, while also trying to make profits for the US government.
“Our investment in Vulcan Elements will accelerate US production of rare earth magnets for US manufacturers,” Lutnick said in a statement released by North Carolina-based Vulcan Elements. “Our primary goal is to repatriate the manufacturing of critical minerals and rare earths.”
The alliance includes the Pentagon’s receipt of warrants in Vulcan Elements and ReElement, although the value of those warrants has not been disclosed. These warrants give you the right to purchase shares of these private companies in the future.
Shares of American Resources Corp., whose portfolio includes ReElement, soared as much as 28% after the announcement, before moderating gains. In New York, shares closed up 3.9%.
