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USA Rare Earth shares rallied on Monday after the critical minerals startup announced that the Department of Commerce will take an equity stake.
Commerce has issued a letter of intent that would provide USA Rare Earth with a $1.3 billion loan and $277 million in federal funding.
USA Rare Earth will issue Commerce 16.1 million shares of common stock and 17.6 million in warrants. The U.S. government will have an 8% to 16% stake in the company depending on whether the warrants are exercised, according to a filing with the Securities and Exchange Commission.
USA Rare Earth also raised $1.5 billion from private investors. The proposed deal with Commerce is subject to finalization of agreements and approvals.
CEO Barbara Humpton said the deal with the U.S. government will turn USA Rare Earth into an industry leader. Its stock soared more than 20% after the announcement Monday.
“This is a watershed moment in our work to secure and grow a resilient and independent rare earth value chain based in this country,” Humpton told analysts on a call Monday.
“We have long said that meeting the urgent call to reassure the rare earth and critical minerals industry will require a multiplayer solution, and this establishes our company as one of the leaders,” she said.
USA Rare Earth is the latest in a series of mining companies that the Trump administration has taken equity stakes in as it builds a Western rare earth and critical minerals supply chain to reduce dependence on China.
Rare earths are a subset of critical minerals that are crucial inputs in strategic industries like defense, robotics, electric vehicles and semiconductor manufacturing.
The capital infusion from the Trump administration will help USA Rare Earth advance its plan to build a magnet manufacturing plant in Stillwater, Oklahoma, and a mine at a rare earth deposit in Sierra Blanca, Texas called Round Top.
Commerce will disburse the funding from 2026 through 2028 based on milestones as USA Rare Earth implements its business plan, Chief Financial Officer Rob Steele told analysts on the call.
USA Rare Earth is on track to commission its magnet manufacturing plant in the first quarter of 2026, Steele said. It aims to start commercial mining operations at Round Top in late 2028, he said.
The company needs about about $4.1 billion to execute its plan, Steele said. It will have about $3.5 billion between its current cash and the government financing as well as private funding announced Monday, he said. This leaves $600 million in additional capital that USA Rare Earth needs to raise.
“We believe we can raise the remaining capital from attractive sources, and you should assume that’s equity capital but that can come from strategic investments as well as institutional investors,” Steele said.
The Trump administration struck a landmark deal last year with rare earth miner MP Materials that included an equity stake, price floor and offtake agreement. It also took stakes in Lithium Americas and Trilogy Metals.
The agreement with USA Rare Earth does not include price floors or offtake agreements.
The U.S. has been dependent on rare earth imports from China, which dominates the global supply chain. Beijing tried to cut off rare earth exports last year during trade disputes with the Trump administration.