The Trump administration continues its push to rebuild domestic supply chains for critical technologies through a US$1.4 billion public-private partnership with Vulcan Elements and ReElement Technologies –a subsidiary of American Resources Corporation (NASDAQ:AREC)- to expand US production of rare earth magnets.
The Department of Commerce’s announced that it signed a preliminary letter of intent to provide US$50 million in proposed incentives to Vulcan Elements under the CHIPS and Science Act.
The funds would support equipment purchases for the production of neodymium-iron-boron (NdFeB) magnets, a key material that powers technologies from fighter jets and nuclear submarines to AI data centers and semiconductor equipment.
In return, the Department of Commerce will receive US$50 million in equity in the company.
The incentives are part of a larger US$1.4 billion package that includes US$700 million in conditional loan commitments from the Department of Defense’s Office of Strategic Capital (OSC) to Vulcan Elements and ReElement Technologies.
The rest will come from private capital and direct loans to finance the construction and expansion of facilities capable of producing up to 10,000 metric tons of NdFeB magnets annually.
“Our investment in Vulcan Elements will accelerate US production of rare earth magnets for American manufacturers. We are laser-focused on bringing critical mineral and rare earth manufacturing back home, ensuring America’s supply chain is strong, secure and perfectly reliable,” Secretary of Commerce Howard Lutnick said in Vulcan’s recent press release.
Bill Frauenhofer, the CHIPS Program director, added that the company’s strong industry ties will help further sever the US’ dependence from foreign imports.
China currently dominates the global rare earth sector by supplying more than 80 percent of the world’s processed rare-earth materials. US manufacturers and defense contractors have been under pressure since Beijing imposed export restrictions on critical minerals late last year and tightened them again this year, requiring buyers to secure approval from Chinese authorities to ensure end uses were nonmilitary.
Though China has recently relaxed some of those curbs after trade talks with President Xi Jinping, the US is accelerating plans to insulate its supply chains from future disruptions.
Together, both companies are seeking to establish a fully integrated US magnet supply chain. ReElement will focus on processing end-of-life magnets, electronic waste, and mined concentrates into high-purity rare-earth oxides, while Vulcan will convert those oxides into metals and manufacture finished magnets.
To support this goal, Vulcan will also build and operate a 10,000-ton magnet facility in the US financed by a US$620 million direct loan from the OSC, US$550 million in private capital, and the US$50 million in Commerce incentives.
Meanwhile, ReElement’s recycling and processing expansion will be backed by an US$80 million direct loan from the OSC and further aided by private investment. The Defense Department will also receive warrants in both companies, giving it the right to purchase shares at a predetermined price.
The investment marks another instance of the administration taking equity stakes in private technology and materials companies. In recent months, the government has acquired ownership positions in MP Materials (NYSE:MP), Intel (NASDAQ:INTC), and semiconductor giants NVIDIA (NASDAQ:NVDA) and AMD (NASDAQ:AMD).
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
