Trump administration to invest $1.6bn for stake in rare earths firm

The Trump administration will invest $1.6 billion (£1.2 billion) in a US critical minerals company, marking the latest move by officials to reduce China’s dominance of the rare earths sector.

The non-binding agreement with Oklahoma-based USA Rare Earth, announced Monday, will strengthen mining, processing, metal fabrication and magnet manufacturing, the company said.

The deal includes a $1.3 billion loan from the Commerce Department, which will allow it to take an equity stake in the company, and $277 million in federal funding.

Officials are seeking to boost U.S. production of minerals critical to everything from smartphones to defense technology in a bid to reduce dependence on Beijing.

USA Rare Earth, which controls deposits of so-called “heavy” rare earths often used for defense technologies, also announced Monday that it had raised a separate $1.5 billion from private investors.

Shares of the miner rose as much as 20% following the announcements.

The Commerce Department’s support for USA Rare Earth follows similar agreements with other rare earth companies since President Donald Trump’s return to the White House.

Last year, the government struck a $1.4 billion deal with Vulcan Elements, a rare earth magnet startup, to strengthen the nation’s rare earth supply chain. It also invested in US rare earth mining company MP Materials, which owns the country’s only operational rare earth mine.

The Commerce Department did not immediately respond to requests for comment.

China has a virtual monopoly on the processing of rare earths. Even though the United States and other countries are investing heavily to develop alternative supply lines to China, they are still far from achieving this goal.

Rare earths have become a key bargaining chip in trade negotiations between Washington and Beijing in recent months. U.S. companies rely heavily on these materials, making them vulnerable this year as China has taken steps to restrict supplies in response to U.S. tariffs and other tensions.

By reducing exports, China, which processes about 90% of the world’s rare earths, has sought to pressure the United States for better trade terms.

The Trump administration has also looked to other countries as part of its efforts to reduce its reliance on China for supplies of critical minerals.

In October, the United States and Australia signed an agreement to increase the supply of rare earths and other essential minerals. Trump also claimed to have secured the “framework” for a future Greenland deal, covering the island’s defense – a deal he said includes access to rare earth minerals.