US Backs USA Rare Earth, Strengthens Domestic Supply Chain

The US government is set to acquire a 10% stake in USA Rare Earth (USAR) as part of a US$1.6 billion investment to support the development of a fully domestic mine-to-magnet supply chain. The move targets the Round Top mine in Texas, rich in heavy rare earths like dysprosium, critical for electric vehicles, wind turbines, and defense technologies, with production expected to start in late 2028.

Under the deal, Washington would receive 16.1 million shares and warrants for an additional 17.6 million shares, each priced at US$17.10, about 25% below USAR’s closing price of US$22.71, reported Mining.com. 

In addition, the US government is expected to provide US$1.3 billion in debt financing through a Commerce Department facility created under the CHIPS and Science Act. A separate US$1 billion private investment is also reportedly planned. USA Rare Earth will host a morning conference call with investors to discuss the details.

This investment is part of a broader push by the United States to secure its domestic critical minerals supply. Previous initiatives under the Trump administration included agreements with Canada-based Lithium Americas and Trilogy Metals, as well as a deal with MP Materials, the nation’s only rare earth producer.

Round Top Mine and the Mine-to-Magnet Supply Chain

USA Rare Earth is developing the Round Top mine in Sierra Blanca, Texas, which is rich in heavy rare earth elements (REEs) such as dysprosium, essential for permanent magnets. A 2019 technical report estimates that over 20 years, the open-pit mine could yield 2,213t of rare earths, including more than 1,900t of heavy REEs. In 2025, the project produced its first batch of dysprosium oxide at 99.1% purity.

The Round Top project is a key part of a US-based mine-to-magnet value chain, which also includes a magnet manufacturing plant in Stillwater, Oklahoma, with a 5,000t annual capacity, and a processing and separation lab in Wheat Ridge, Colorado. Both facilities are expected to enter commercial operations soon.

Legislative Support: SECURE Minerals Act

The investment aligns with last week’s unveiling of the SECURE Minerals Act, a US$2.5 billion initiative introduced by Senators Jeanne Shaheen (D-NH) and Todd Young (R-IN), and Representatives Rob Wittman (R-VA) and John Moolenaar (R-MI). The legislation aims to strengthen domestic supply chains, reduce US dependence on foreign sources, and address economic and national security concerns.

The SECURE Act proposes the creation of a Strategic Resilience Reserve (SRR), an independent government corporation overseen by a seven-member board appointed by the President and confirmed by the Senate. The reserve is intended to stabilize markets, create jobs in aerospace, automotive, and technology sectors, and provide a buffer against global supply disruptions.

Senator Shaheen emphasized the strategic importance of the initiative, noting China’s dominance in critical minerals and the need for domestic resilience. The act prioritizes domestic projects, recycling, and alternative mineral sources, while allowing partner governments to contribute funding with approval. It specifically targets minerals where US import reliance is near total, aiming to secure supply chains and support domestic production.

China’s Dominance in Critical Minerals and Strategic Risks

Critical minerals are central to energy technologies, high-tech industries, defense, and advanced manufacturing. However, global supply chains are heavily dependent on China, creating strategic vulnerabilities. The International Energy Agency’s Global Critical Minerals Outlook 2025 shows that China dominates the refining of 19 out of 20 key strategic minerals, with an average market share of 70%, a concentration that has grown in recent years. This reliance on a single supplier exposes industries to geopolitical tensions, trade disruptions, and technical failures.

China’s control is particularly pronounced in rare earth elements, which are critical for permanent magnets used in electric vehicles, wind turbines, industrial motors, defense systems, and data centers. In 2024, China accounted for about 60% of global rare earth mining output and 91% of refining capacity. Its share of permanent magnet production has increased from 50% two decades ago to 94% today. This concentration makes global supply chains in energy, automotive, defense, and advanced technology highly susceptible to disruption.

Export controls have further intensified these risks. In April 2025, China imposed restrictions on seven heavy rare earths and related products, leading to shortages for US and European manufacturers and driving European prices up to six times domestic Chinese levels. By October, these controls expanded to include foreign-made products containing Chinese-sourced rare earths, additional elements such as holmium, erbium, and ytterbium, and essential processing equipment. These measures threaten production across sectors reliant on rare earths, including defense, aerospace, semiconductors, industrial motors, and AI data centers.

China also dominates lithium-ion battery supply chains. It controls over 80–95% of midstream and downstream production, including cathode precursors, anode materials, LFP cathodes, and battery cells. IEA stressed that new export restrictions could increase costs for electric vehicles and energy storage systems while creating vulnerabilities for strategic sectors such as defense, aerospace, AI, and medical devices.

Efforts to reduce dependency on China face structural challenges. Mining, refining, and magnet production projects outside China remain limited, and lead times for new projects often exceed eight years. Midstream battery material production outside China is insufficient to offset reliance on Chinese sources.

Some initiatives aim to diversify global supply chains. For example, France and Japan are collaborating to produce rare earth oxides in Lacq, France, linking different parts of the supply chain. Additional mining and refining projects are underway in the United States, Australia, Brazil, Tanzania, and India, and several permanent magnet manufacturing plants are starting operations in the United States, Estonia, Korea, Vietnam, and Germany. 

More recently, the United States and Brazil formed a strategic partnership focused on rare earths. Following renewed diplomatic engagement between Presidents Trump and Lula da Silva in late 2025, the initiative seeks to leverage Brazil’s 21Mt of rare earth reserves to strengthen technological and defense capabilities in the Western Hemisphere. Preliminary meetings have involved officials, industry representatives, and financial institutions, though Brazil’s sector faces challenges, including limited investment and incomplete geological surveys covering only about 30% of its territory. Despite these efforts, the pace of development remains slow relative to demand, and permanent magnet capacity outside China is still notably lower than for mining and refining.