USA Rare Earth secures up to $1.6B CHIPS funding for US expansion

USA Rare Earth announced definitive agreements with the US Department of Commerce that provide access to up to $1.6 billion in funding under the CHIPS Act to support the development of a domestic rare earth supply chain.

The agreements formalize an earlier announcement that the Trump administration would support a $1.6 billion debt-and-equity funding package for the company.

Despite the funding milestone, shares of USAR declined nearly 5.3% in morning trading.

The company said the funding framework will help accelerate development of its rare earth mining, processing, metal-making, and magnet manufacturing operations across the United States as Washington seeks to reduce dependence on China for critical minerals and rare earth materials.

Funding package expands support for growth plans

Under the agreements, USA Rare Earth will gain access to up to $277 million in federal funding and as much as $1.3 billion in senior secured loan capacity through the Commerce Department's CHIPS program.

Disbursements will be tied to the achievement of project milestones, according to the company.

The funding adds to a $1.5 billion private capital raise completed in January.

Combined with previous fundraising efforts, USA Rare Earth said it now has approximately $3.5 billion in committed capital to support its expansion plans.

As part of the agreement with the Commerce Department, the company will issue 16.1 million common shares and 17.6 million warrants to the department.

The agreements come months after Chief Executive Officer Barbara Humpton told Reuters that the transaction was expected to close in April.

Round Top project central to expansion strategy

A significant portion of the funding will support the development of the company's Round Top heavy rare earth and critical minerals project in Texas.

USA Rare Earth is targeting initial production from the project in 2028 as part of its broader effort to establish a fully integrated domestic supply chain.

The company said the agreements will also support processing and separation operations for materials produced at Round Top, including heavy rare earth element oxides, concentrates, and other critical minerals.

In addition, funding will be used to expand domestic metal-making, alloy production, and strip-casting capabilities.

The company plans to reshore 10,000 tons per year of heavy rare earth metal-making and alloy capacity as it builds out its mine-to-magnet strategy.

US aims to reduce dependence on China

The announcement comes as the United States continues efforts to strengthen domestic production of critical minerals and reduce reliance on China, which currently dominates global rare earth processing and magnet manufacturing.

USA Rare Earth earlier announced plans to invest $1.2 billion in a new magnet manufacturing and refined metals facility in South Carolina.

The project is expected to expand domestic production capacity and create hundreds of jobs.

The Commerce Department funding will also support the scaling of neodymium-iron-boron (NdFeB) magnet manufacturing operations in Oklahoma and South Carolina to a combined capacity of 10,000 tons per year.

USA Rare Earth said its objective remains the creation of an integrated US rare earth supply chain spanning mining, processing, metal production, and magnet manufacturing.