From trade wars to ore wars

Wake up babe, the newest government investment in a rare earth miner just dropped.

The Trump administration is backing USA Rare Earth with a $1.3 billion loan from the Department of Commerce, plus $277 million in direct federal funding. In exchange, the US government will receive 16.1 million common shares and 17.6 million warrants, giving the government up to a 16% ownership stake if those warrants are converted. Shares jumped 7.99% on the news.

The funding will support construction of a magnet manufacturing plant in Oklahoma and development of the Round Top rare-earth deposit in Texas.

We’ve dug this hole before

Rare earth elements are critical inputs for everything from AI hardware to defense equipment. They aren’t actually rare, they’re just painful to extract and refine, thanks to high costs and messy environmental trade-offs that deter private investment.

China controls most of the world’s rare-earth processing, while US output remains limited, an imbalance Washington has been trying to correct since last year when China floated export curbs during trade negotiations.

Today’s deal with USA Rare Earth looks familiar: Last July, the US Department of Defense made a $400 million equity investment in fellow miner MP Materials, becoming its largest shareholder.

More deals ahead appear likely, as Trump administration officials today pointed to additional investments aimed at expanding US production of rare earths and other critical minerals. US demand for rare-earth magnets already runs around 50,000 tons a year and is still growing, Canaccord analyst George Gianarikas wrote in a report.

The dig continues

Investors looking to buy into USA Rare Earth alongside the White House should be aware of how previous deals have worked out.

The OG, MP Materials, has maintained its momentum: The stock is up roughly 230% over the past year and has added 25.57% YTD, though it slipped 8.8% today. That said, MP has capitalized on its boost from the government, inking a $500 million supply and recycling agreement with Apple. Also, the company plans to begin commissioning its heavy rare-earth separation facility in mid-2026.

But the government made similar investments in Lithium Americas and Trilogy Metals last year, and neither of them have had the success that MP Materials enjoyed. Lithium Americas surged 23% the day the deal was announced, but has fallen 15% since then. Trilogy Metals gained 212% the day the government made its investment, but is flat since.

Just because Uncle Sam has taken a stake in a company doesn’t mean investors automatically should as well.—SY