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The U.S. Commerce Department on Monday announced plans to invest approximately $1.6 billion in USA Rare Earth, a move that could give the government a 16% stake in the company if all warrants are exercised.
The move is seen as a new step in the Trump administration’s broader strategy to reduce dependence on Chinese mineral imports by fostering a Western supply chain.
While the agreement prices the company’s shares at $17.17 each, the stock jumped over 21% to $30 in early trading following the SEC filing.
As part of the deal, the Commerce Department will provide USA Rare Earth with a $1.3 billion loan under the CHIPS and Science Act, alongside $277 million in direct federal funding. In exchange, the U.S. government will receive 16.1 million common shares and 17.6 million warrants from the company.
If fully exercised, the warrants would give the federal government an 8% to 16% ownership stake in USA Rare Earth, according to a filing with the U.S. Securities and Exchange Commission.
The federal investment will back two core infrastructure projects: the development of a mine at the Round Top rare earth deposit in Texas and the construction of a permanent magnet manufacturing facility in Stillwater, Oklahoma.
The operations are expected to help establish an end-to-end U.S. supply chain for rare earths, which are a subset of critical minerals used in sectors ranging from defense to electric vehicles and semiconductors.
Rare earth elements are essential to modern technologies, yet the U.S. has historically relied on China, which currently controls a dominant share of the global supply. During past trade tensions, Beijing signaled its ability to disrupt this supply by imposing export controls on rare earths.
China currently accounts for nearly 90% of global rare earth production, underscoring the strategic urgency behind Washington’s efforts to establish alternative sources.
The latest deal mirrors similar agreements made by the Trump administration, including prior investments in MP Materials, Lithium Americas, and Trilogy Metals.
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