The U.S government is expanding its role as an equity investor in the rare earth and critical minerals sector by taking direct stakes in domestic and allied companies.
The reason is simple: since the start of his term, President Donald Trump has shown a strong interest in strengthening domestic supply chains and reducing the country’s reliance on China.
Over the past month, through a series of strategic investments and policy decisions, various US departments, including the Department of Energy (DoE) and the Department of Defense (DoD), have underscored that national security and industrial policies are converging in the mining and rare earth sectors.
Among the companies positioned to benefit from these policy shifts is USA Rare Earth (USAR), whose stock rose 11.6% today, marking a new high for the rare earth magnet supplier.
USA Rare Earth
The U.S. government hasn’t yet taken an equity stake in U.S. Rare Earth, but that may change.
CEO Barbara Humpton said in an interview with CNBC that the firm is in “close communication with the administration,” emphasising that the rare earth ecosystem “will not be a zero-sum game” and will require multiple players to meet future demands.
The company’s stock has increased by 110% in the past month and is up 153% year-to-date.
Who is USA Rare Earth?
USA Rare Earth is a magnet supplier based in Oklahoma that manufactures sintered neodymium magnets and other rare earth metals. These magnets are critical to the defense and energy sectors, and are also used in electric vehicles, wind turbines and consumer electronics.
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The company recently took a step toward supply chain integration with its planned acquisition of Less Common Metals (LCM), a UK-based producer of rare earth metals and alloys.
USAR will pay $100 million in cash and issue 6.47 million shares of common stock, with the expectation of closing the deal by the end of 2025, pending regulatory approval in the UK.
“The combination of USAR-LCM will establish rare earth metal making in the United States for the first time in decades,” said Michael Blitzer, Chairman of USAR.
He added that the deal positions the firm as a leader.
USAR will be uniquely positioned in the ex-China rare earth magnet supply chain with both a large magnet facility in Oklahoma and mining rights to the Round Top Deposit of heavy rate earths in Texas”, and “positions the combined company to be a leader in the global rare earth industry, the only one with a true mine-to-magnet offering.
Roth Capital believes that the deal supports USAR’s goal to begin domestic rare earth magnet production by 2026 and reiterated its Buy rating and $20 price target on the stock, according to TheFly.
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Through its sintered neo magnet manufacturing facility in Stillwater, Oklahoma, which is set to go commercial in 2026, the company plans to enter the AI semiconductor race.
According to the company’s official statement, this facility will “serve a variety of fast-growing industries, such as defense, robotics, electric vehicles, wind power, appliances, cordless tools and even computing and semiconductors.”
Other Government Stakes
According to a report from The International Energy Agency, China controls about 60-70% of global rare earth mining and roughly 90% of mining capacity.
Rare earth elements are critical to renewable energy systems, national defense and advanced manufacturing. China’s past export restrictions appear to have prompted the US administration to develop domestic and allied alternatives through public investments, which, in turn, have catalyzed private investments.
Trilogy Metals
On October 6, the U.S. Department of War announced a $35.6 million investment for a 10% equity stake in Trilogy Metals (TMQ), a Canadian mineral exploration and development company, currently developing mineral resources in Alaska’s Ambler Mining District.
This investment coincides with President Donald Trump’s approval of the Ambler Road Project, designed to connect the mining district with Alaska’s existing road network.
Following the announcement, Cantor Fitzgerald upgraded Trilogy Metals from Speculative to Buy and raised its price target to $10 from $3, as reported at TheFly.
It’s stock was up 240% today.
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MP Materials
In July, the Department of Defense acquired a 15% stake in MP Materials (MP) , a Nevada-based rare earth producer that supplies domestic magnet and defense industries.
This billion-dollar company has seen a 378% increase in its stock price year-to-date.
Lithium Americas
After the US government acquired a 5% equity stake in Lithium Americas (LAC) , which operates the Thacker Pass lithium project in Nevada, the company’s stock surged, yielding a 43% gain this month.
These investments represent a significant shift from the U.S. government’s previous approach to supporting these industries, which was primarily through tax credits, loans, and grants.
However, today, the approach has shifted to direct ownership, deemed essential for national security.
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