U.S. Commerce to Take Equity in USA Rare Earth, Backing $1.6B Financing Plan

Washington has stepped into the rare earths market with a conditional financing package for USA Rare Earth that mixes government lending and direct funding alongside private capital. The Commerce Department’s letter of intent outlines a $1.3 billion loan plus $277 million in federal funding, to be paired with a contemporaneous $1.5 billion private raise; together these tranches are designed to underwrite construction of a magnet factory in Oklahoma and development of the Round Top deposit in Texas. In exchange for the federal support, USA Rare Earth will issue common shares and warrants that give the United States an equity position that ranges from the low single digits up to roughly the mid-teens of outstanding ownership if warrants are exercised. Company management says the funds will be disbursed against milestones through 2026–2028 and that the magnet facility is slated for operational commissioning in the first quarter of 2026, while commercial mining is targeted for the back half of 2028. Executing the plan requires roughly $4.1 billion in total capital; the announced government and private commitments leave about $600 million still to be sourced. Among the explicit preconditions to closing are at least $500 million of non-federal capital, secured supply agreements through 2027, memorandums of understanding with semiconductor or midstream users, and a finalized power plan for the magnet plant. Unlike some prior government deals in the sector, this arrangement does not include contractual price floors or firm offtake guarantees, leaving market exposure for product sales. The market responded immediately: the stock booked a sharp intraday advance before settling with a solid gain, reflecting investor enthusiasm but also pricing in remaining execution risk. Strategically, the transaction is a move to shorten dependence on foreign supplies—especially Chinese sources—by supporting domestic capacity for magnets and rare-earth feedstock that feed defense, electric vehicles and semiconductor supply chains. But the work ahead is operationally demanding and capital-intensive; meeting milestones, securing additional investors, and locking long-term offtake will determine whether the investment catalyzes a resilient U.S. value chain or simply delays the industry’s familiar development risks. If the deal closes as outlined, it represents a notable example of active industrial policy where federal capital is used to de-risk strategic supply investment and attract private partners. The broader precedent of government equity participation in mining and processing could reshape how critical mineral projects are financed in the U.S., but it also invites scrutiny over taxpayer exposure and the terms under which government takes stakes in nascent industrial ventures.