(Bloomberg) —
The Commerce Department and Pentagon in November pledged financing and potential equity stakes in a domestic producer of rare-earth magnets that are at the center of a trade war with China, the world’s dominant supplier.
Commerce signed a non-binding, preliminary letter of intent to provide $50 million from the 2022 CHIPS Act to Vulcan Elements to purchase equipment needed to produce so-called permanent magnets used in fighter jets, wind turbines, and a range of other critical goods, according to a statement from the department.
Vulcan Elements separately said it’s receiving a $620 million direct loan from the Pentagon’s Office of Strategic Capital and $550 million in private capital to build a 10,000-metric-ton magnet facility in the US. Its partner, rare earth firm ReElement Technologies Corp., gets an $80 million direct loan from the Pentagon office to expand its recycling and processing capabilities, with that amount matched by private capital.
“It’s a dream come true,” Vulcan Elements Chief Executive John Maslin said in an interview. “This is all about ramping up the existing production that we have and getting to a scale that is meaningful to the country.”
The announcements are the latest in a string of actions taken by the federal government to invest directly in the supply chain of permanent magnet production, an industry dominated by China. It’s also further indication of the Trump administration’s dedication to create a rare-earth and magnet market that operates outside of China’s influence — a risky bet but one that could wean the US and its allies off dependence on the world’s second-largest economy.
To be sure, it’s unclear how all of the parts of the arrangement will play out as the CHIPS Act funds are part of a non-binding agreement.
The Pentagon confirmed the details of the arrangement in a statement to Bloomberg, adding that funding for the conditional loans came from the One Big Beautiful Bill Act signed in July, which provides $100 billion in lending authority for critical minerals production and related industries and projects.
“These agreements will support the production of advanced rare earth element separation, metallization, and magnet manufacturing capabilities in the U.S.,” the statement said.
ReElement separates and refines rare earths from mined concentrate and waste or recycled materials, producing oxides that are used to make metal for magnets. In an interview in September, Shane Tragethon, the company’s vice president for international strategy, said it’s the only operation in the US that separates heavy rare earths — the type targeted by China’s export controls — on a daily basis.
Earlier this year, Commerce Secretary Howard Lutnick converted CHIPS act funds to equity in struggling US chipmaker Intel Corp. The potential for a similar stake in Vulcan, which supplies magnets in the US for defense and commercial products, shows the muscle Lutnick is willing to flex to make a mark on the semiconductor industry while attempting to shore up a return for the US government.
“Our investment in Vulcan Elements will accelerate US production of rare-earth magnets for American manufacturers,” Lutnick said in a statement provided by North Carolina-based Vulcan Elements. “We are laser-focused on bringing critical mineral and rare earth manufacturing back home.”
The partnership includes the Pentagon receiving warrants in both Vulcan Elements and ReElement, though the value of those warrants hasn’t been identified. The warrants grant it the right to eventually buy shares in the closely held companies.
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