USA Rare Earth (NASDAQ:USAR) shares surged more than 20% pre-market after the company disclosed that it has entered into a preliminary agreement with the US government for a large strategic investment.
The Stillwater, Oklahoma–based company said it has signed a non-binding letter of intent with the US Department of Commerce under the CHIPS Act, outlining a proposed funding package totaling about $1.6 billion. The package includes roughly $277 million in direct federal funding and a proposed $1.3 billion senior secured loan.
In exchange, the US government would receive approximately a 10% equity stake in USA Rare Earth through newly issued shares and warrants. Government ownership could rise into the mid-teens on a percentage basis if all warrants are exercised, according to people familiar with the structure.
The proposed transaction is part of the federal government’s broader effort to strengthen domestic supply chains for rare earth elements and permanent magnets, which are widely used in defense systems, semiconductors, energy technologies and advanced manufacturing.
“This landmark collaboration with the US government represents a transformative step in USAR’s mission to secure and grow a resilient, independent domestic rare earth value chain,” USA Rare Earth CEO Barbara Humpton said.
“With this unprecedented show of public and private support for our company, we are positioned to accelerate the build-out of important domestic capabilities that are essential to US national security, global economic competitiveness, and critical technologies of the future.”
Secretary of Commerce Howard Lutnick described USA Rare Earth’s heavy critical minerals project as “essential to restoring US critical mineral independence.” “This investment ensures our supply chains are resilient and no longer reliant on foreign nations,” Lutnick said.