The Department of Commerce’s CHIPS Program Announces a Letter of Intent with USA Rare Earth to Accelerate Its Domestic and Vertically Integrated 'Mine-to-Magnet' Strategy

WASHINGTON, D.C. - The Department of Commerce's CHIPS Program Office announced the signing of a non-binding letter of intent to provide up to $277 million in direct funding and up to $1.3 billion in a senior secured loan to USA Rare Earth (USAR) under the CHIPS and Science Act.

USAR will be the only company in the U.S. that will mine rare earth-containing critical minerals, extract rare earth oxides, convert them to rare earth metals, and strip-cast these metals as feedstock for the manufacture of neodymium iron boron (NdFeB) permanent magnets (also known as "rare earth magnets").

The proposed funding will support two projects in Texas and Oklahoma with estimated capital investments totaling $3.3 billion.

USAR's mine in Round Top, Texas will extract 40,000 metric tons per day of rare earth and critical mineral feedstock and is expected to begin commercial production in 2028. The mine will process a combined 8,000 metric tons per annum (TPA) of third-party mixed rare earth carbonate (MREC), heavy rare earth elements (HREEs), and critical mineral oxides and concentrates. 12 rare earth and critical minerals will be processed, including yttrium, gallium, dysprosium, terbium, holmium, lutetium, erbium, thulium, ytterbium, gadolinium, hafnium, and zirconium.

USAR's advanced manufacturing project in Stillwater, Oklahoma will increase its production capacity of NdFeB magnets to 10,000 TPA, more than doubling previously planned capacity, and establish on-site metallization and strip-casting capability of 10,000 TPA of rare earth metals and alloys.

"The CHIPS Program's proposed $277 million funding and $1.3 billion loan will be instrumental for the construction of a domestic integrated supply chain for critical minerals and NdFeB magnets which are essential for semiconductor chip manufacturing," said Bill Frauenhofer, Director of the CHIPS Program. "Yttrium, gallium, dysprosium and the other 9 critical and strategic minerals that will be mined in Texas, along with the Oklahoma magnet production, provides U.S. semiconductor companies a reliable domestic source and removes choke points in their manufacturing supply chain that enable chemical vapor deposition, high-k materials, compound semiconductors, dopants and other foundational applications."

In conjunction with the proposed CHIPS funding, the Commerce Department will receive approximately 16.1 million USAR shares and a warrant for another 17.6 million shares.

Also, on January 26th, USAR announced that it raised $1.5 billion of private sector equity via a Private Investment in Public Equity ("PIPE") transaction from a consortium of financial and strategic investors to support the company's projects and capital needs.

"Accelerating the onshoring of rare earth minerals, metals, and magnets is paramount to national and economic security," said the Executive Director of the U.S. Investment Accelerator, Michael Grimes. "With the Department of Commerce's funding for USA Rare Earth's vertically integrated mine-to-magnet operations, we will significantly increase the domestic supply of crucial components for semiconductors, defense, and numerous other industries strategic to the United States."

In addition to the collaboration with the Department of Commerce, the U.S. Department of Energy's National Energy Technology Laboratory has signed a Letter of Intent to collaborate with USAR to advance heavy REE separation technologies at the Company's Wheat Ridge lab and Round Top deposit, leveraging digital twin technology.

The proposed CHIPS Program's $277 million in funding and $1.3 billion senior secured loan is subject to further diligence, finalization of agreements, customary closing conditions, and approvals.