US bets billions of dollars on unproven groups in rare earths deals

{"text":[[{"start":9.467,"text":"The Trump administration is poised to sink $1.6bn into a mining company that aims to extract rare earths and make high-tech magnets in the US. But the lossmaking company has yet to do either commercially."}],[{"start":24.346,"text":"The deal with USA Rare Earth is one in a series the Trump administration has struck over the past year, as it strives to rapidly establish secure domestic supply chains for critical minerals, including rare earths."}],[{"start":37.6,"text":"But some industry experts have questioned whether the companies chosen by the administration are capable of delivering on their promises, while one executive noted that early-stage companies such as USA Rare Earth are not poised to “solve problems today”."}],[{"start":55.76,"text":"In some cases, the companies that have won government backing have financial ties to people close to the Trump administration, which has prompted Democrats in Congress to question the basis for the deals."}],[{"start":65.76,"text":"Rare earths are crucial to US security and economic interests, and go into the high-performance magnets used in electric cars, weapons systems and a wide range of other industries. But their production is dominated by China, which has exploited its control by restricting access to them."}],[{"start":null,"text":"

"}],[{"start":84.223,"text":"Heidi Crebo-Rediker, senior fellow at the Council on Foreign Relations and former chief economist at the state department, said of the government’s dealmaking: “It’s a matter of taking greater risks, which I think this administration is willing to do. Rather than seeing whether the government loses money on each investment, we should look at whether the money is helping grow resilience.”"}],[{"start":105.36,"text":"Others said the US mining industry was in desperate need of investment and pointed out that there were few domestic rare earth hopefuls to choose from."}],[{"start":113.84,"text":"The administration was taking a “VC-type approach, where if you invest in 10 companies and a few of them succeed, you can still really move the needle,” said Ryan Castilloux, managing director of rare earths research group Adamas Intelligence."}],[{"start":129.416,"text":"Round Top, USA Rare Earth’s deposit in Sierra Blanca, Texas, has never been commercially mined, but is expected to contain 15 of the 17 rare earth elements."}],[{"start":139.686,"text":"The company’s plan to produce the so-called “heavy” rare earths that are especially hard to source outside China was key to the administration’s interest in the company, said Joel Fetter, managing director of lobby group Clark Street Associates, who worked on the transaction."}],[{"start":156.256,"text":"But it remains unclear how much of each metal can be extracted. USA Rare Earth, founded in 2019, has not yet completed a so-called “definitive feasibility study”, a crucial milestone that looks at whether the metals in a deposit are realistically recoverable and economically viable to mine."}],[{"start":175.394,"text":"Round Top has a history dating back decades of not being developed, and industry experts said the concentration of rare earths in the deposit — metal per unit of rock — was relatively low, meaning they may be more expensive and difficult to extract."}],[{"start":190.531,"text":"“I don’t think it’s any secret that Round Top is very low ‘grade’ compared to many rare earth elements projects in development,” said David Merriman, research director at Project Blue, referring to the concentration."}],[{"start":null,"text":""}],[{"start":203.688,"text":"In February, the US Center for Strategic and International Studies characterised the grade as “exceptionally low”, which it said could challenge Round Top’s “commercial viability”."}],[{"start":214.677,"text":"Another test was the site’s “soup” of minerals, said the Center. USA Rare Earth’s 2019 preliminary economic assessment said half of the mine’s expected sales would come not from rare earths but from other metals including uranium, hafnium and lithium."}],[{"start":231.024,"text":"Merriman said producing a wide array of minerals would significantly “complicate the processing and increase the capital requirements”."}],[{"start":239.881,"text":"USA Rare Earth said the 2019 assessment no longer reflected its current development plan — though chief executive Barbara Humpton told analysts in January that hafnium would still be a “game changer” for Round Top’s economics."}],[{"start":253.301,"text":"The company was targeting commercial-scale mining in 2028 under an “accelerated” plan, as part of its vision to develop a “mine-to-magnet value chain” that was decoupled from China. It planned to use a “leaching” method to extract the metals at Round Top, which the British Geological Survey told the FT may be a solution for lower-grade deposits. Testing had suggested that meaningful amounts of heavy rare earths would be recoverable, USA Rare Earth added."}],[{"start":286.447,"text":"Humpton joined USA Rare Earth in October from Siemens, where she led US operations for the industrial group. According to Fetter, USA Rare Earth’s government deal “came together in a matter of months”, following initial discussions between Humpton and commerce secretary Howard Lutnick."}],[{"start":304.48,"text":"Lutnick’s former investment bank, Cantor Fitzgerald, which is now run by his sons, supported USA Rare Earth on its initial public offering through a Spac deal last year, and its subsequent $1.5bn fundraising announced in January. The raise satisfied a condition of the provisional government funding, which also requires USA Rare Earth to complete its feasibility study and meet other milestones."}],[{"start":333.464,"text":"USA Rare Earth’s connection to Lutnick has alarmed some Democrats, who have expressed “serious concerns” about the deal. In a letter to Lutnick in February, senators, including Elizabeth Warren, said it “could stand to enrich your immediate family and former company”. USA Rare Earth declined to comment on the letter."}],[{"start":354.238,"text":"The commerce department said Lutnick had “fully complied with the terms of his ethics agreement”. Cantor did not work on the USA Rare Earth government deal, a commerce official added."}],[{"start":null,"text":"

Recent US government minerals deals

Company	Date	Metal
MP Materials ¹	July 2025	Rare earths
Serra Verde	Aug 2025	Rare earths
Lithium Americas ³	Sep 2025	Lithium
Trilogy Metals ²	Oct 2025	Copper
Vulcan Elements & ReElement Technologies ²	Nov 2025	Rare earths
USA Rare Earth ²	Jan 2026	Rare earths
¹ Included equity, warrants and price floor; ² Included equity and warrants; ³ Included warrants

"}],[{"start":366.171,"text":"A White House spokesperson said: “Safeguarding America’s national and economic security by reshoring critical supply chains is a top priority for President Trump, and the only special interest guiding this effort is the best interest of the American people.”"}],[{"start":381.04,"text":"That required “casting a wide net” and backing a range of companies, since “the risks of America lacking a secure rare earth supply are too high for the Administration to take an overly cautious approach”."}],[{"start":395.154,"text":"Others with government backing include the rare earths hopefuls Vulcan Elements and partner ReElement Technologies, which jointly secured a $1.4bn deal last year. That came months after Donald Trump Jr’s venture capital firm, 1789 Capital, invested in Vulcan."}],[{"start":415.467,"text":"ReElement is a portfolio company of American Resources Corporation. American Resources Corporation said in its latest quarterly report in November that “there is substantial doubt about [its] ability to continue as a going concern”."}],[{"start":430.08,"text":"The filing said management believed active fundraising efforts would enable American Resources Corporation to continue operating, but added the “future cost to develop” its ReElement segment “remains uncertain”."}],[{"start":443.571,"text":"A Pentagon official said the department’s financing agreement was “directly between” the Office of Strategic Capital and ReElement rather than American Resources Corporation. “Additional due diligence will occur as part of the requirements process before any loan funds are disbursed,” they said."}],[{"start":462.387,"text":"Asked for comment about the wording in the company’s filings ahead of publication, Mark Jensen, chief executive of both American Resources Corporation and ReElement, said the FT’s “statements are factually incorrect” but declined to give specifics."}],[{"start":478.047,"text":"“American Resources probably has more cash on its balance sheet than 90 per cent of most news sites or newspapers as it’s a dying industry which I am sure you know working for one,” he said. ReElement had closed “over $220mn in financing facilities along with credit facilities” in recent years, he said."}],[{"start":498.4,"text":"American Resources Corporation reported $2.1mn in cash on its balance sheet in its most recent quarterly statement."}],[{"start":507.786,"text":"UMB Bank, a trustee of bonds issued by the West Virginia Economic Development Authority, last year sued American Resources Corporation and related companies, including ReElement, over $45mn in financing agreed in 2023. The lawsuit alleged the companies “funnelled millions in public bond proceeds out of West Virginia through a web of fraudulent transfers to benefit themselves”."}],[{"start":532.64,"text":"American Resources Corporation and the related companies deny the allegations and countersued in February, alleging breach of contract. The litigation is set to go to trial in September 2027."}],[{"start":545.898,"text":"Despite questions about Round Top’s viability, USA Rare Earth does have a key piece of the rare earths supply chain: UK-based Less Common Metals, a lossmaking manufacturer it acquired last year for $217mn."}],[{"start":562.082,"text":"Less Common Metals has expertise that few outside China possess: its factory in Cheshire turns mined rare earths into the metal used by magnet makers. The operation is small, recording just £8.5mn in turnover and more than £1mn in losses in 2024."}],[{"start":581.52,"text":"USA Rare Earth plans to expand Less Common Metals’ operations at new facilities in France and in the US in Oklahoma, where it is developing a magnet factory. (USA Rare Earth last week commissioned its first magnet production line, and plans to produce some this year and at scale by 2029.)"}],[{"start":null,"text":""}],[{"start":600.433,"text":"David Abraham, an affiliate professor at Boise State University and a former White House official, said Less Common Metals “is a vital piece of the supply chain outside China despite its size, with very respected leadership and strong industry connections”."}],[{"start":617.44,"text":"For all domestic rare earth hopefuls, a key question is whether they will be able to survive if the government money stops coming."}],[{"start":626.157,"text":"The rare earths industry outside China has long complained that companies are unable to compete with Beijing-backed rivals that can produce at lower costs and flood the market to push down prices."}],[{"start":637.437,"text":"The concerns have fuelled an interest in government-guaranteed minimum prices, or “floors”, for miners’ output. The highly sought-after mechanism was included in the government’s deal with MP Materials last year — and helped the operational miner swing to a quarterly profit in its most recent earnings. Positive adjusted earnings and net income were “primarily due to the [rare earth] price floor protection agreement”, MP said."}],[{"start":662.24,"text":"Humpton told analysts in January that “we don’t need price floors”, or for the government to guarantee the sale of USA Rare Earth’s material, because there was “so much demand outside of China for these metals and our magnets”."}],[{"start":680.08,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1774877063_7435.mp3"}