Rare-earth magnet startups seal $1.4 billion deal with Trump administration
The deal with Vulcan Elements and ReElement Technologies is a strong sign the Pentagon is intent on building a supply chain to reduce China’s control.
Two startups aiming to produce an American supply of rare-earth magnets have sealed a $1.4 billion deal with the U.S. government. It is the latest sign that the Trump administration is moving to build out a domestic rare-earths supply chain and thwart China’s sector dominance—and willing to pay large sums for it.
Led by Vulcan Elements, the deal involves a $620 million loan from the Defense Department’s Office of Strategic Capital to build and operate a U.S. magnet facility capable of producing 10,000 metric tons of magnets each year, the company said Monday. The Commerce Department is chipping in $50 million and private investors are putting in another $550 million.
Rare-earth magnets are essential for the construction of motors needed in AI data centers, electric vehicles and consumer electronics as well as missiles, drones, satellites, ships, jet fighters and other defense systems. China has long dominated the supply chain, from mining to processing.
Also involved in the deal is ReElement Technologies, a company that works to purify and recycle rare-earth materials, which will help in the recycling of old magnets to boost domestic production. ReElement secured $160 million from the Office of Strategic Capital and private investors.
In return for the funding, the Raleigh, N.C.-based Vulcan said the Commerce Department will receive $50 million of its equity. The Defense Department will receive warrants in both Vulcan and ReElement; warrants offer the ability to buy stock at a preset price.
It is a fresh move by the administration to take equity in private companies building technology that President Trump has given priority to.. In July, MP Materials, the U.S.’s largest rare-earths miner, announced the Defense Department had taken a 15% stake. In August, the administration acquired a 10% stake in Intel. That followed a deal with AI chip makers Nvidia and Advanced Micro Devices to take a 15% cut of their sales to China.
The deal marks a major boost for the newly formed Vulcan Elements, led by former Navy officer John Maslin, which in March unveiled its first commercial manufacturing facility. It announced a $65 million venture-capital raise this summer. The startup’s magnet production has received huge demand since China first implemented export curbs on rare earths and critical minerals essential to U.S. manufacturing and defense—and which are difficult or impossible to source elsewhere.
ReElements’s involvement in the deal shows the important role that rare-earth magnet recycling, rather than just mining, is going to play in supplying new factories in the U.S.
U.S. manufacturers and defense contractors have been scrambling for alternatives and the shortage has amplified the vulnerabilities of dependence on China for these critical materials since Beijing put strict export restrictions on them late last year. American companies subsequently had to seek permission from Beijing and prove their products weren’t used in defense.
In recent days, China rolled back some of the curbs on rare-earth exports. After trade talks with Chinese leader Xi Jinping last week, Trump said that the hostilities over rare earths “has been settled."
Write to Heather Somerville at heather.somerville@wsj.com
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