The Commerce Department and Pentagon on Monday pledged financing and potential equity stakes in a domestic producer of rare-earth magnets that are at the centre of a trade war with China, the world’s dominant supplier.
Commerce signed a non-binding, preliminary letter of intent to provide US$50 million (RM209.88 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 US$620 million direct loan from the Pentagon’s Office of Strategic Capital and US$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 US$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 officer 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 US$100 billion in lending authority for critical minerals production and related industries and projects.
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.
Shares of American Resources Corp, whose holdings include ReElement, surged as much as 28% following the announcement before trimming gains. The stock closed 3.9% higher in New York on Monday.
Source: Theedgemalaysia
