US backs RE magnets with $1.3B for Vulcan, ReElement

Rare earth magnet producer Vulcan Elements has struck a partnership with the U.S. government and ReElement Technologies to expand United States rare earth magnet production.

Vulcan is to receive a $620-million direct loan from the Pentagon’s Office of Strategic Capital and $550 million in private capital, as well as a $50-million equity investment from the Department of Commerce to fund a 10,000-tonnes-per-year magnet plant in the U.S., the companies said on Monday. 

ReElement, a unit of American Resources (Nasdaq: AREC), will receive an $80-million direct loan from the Pentagon also matched by private capital to scale up recycling and processing of end-of-life magnets and e-waste.

“It is unclear if the Pentagon will have any or all offtake from this operation as it does with the MP Materials (NYSE: MP) investment,” BMO Capital Markets wrote in a note on Tuesday.

Shares in American Resources gained 3.4% on Monday and a further 2.6% on Tuesday morning in New York to $4.10 apiece, valuing the company at $421 million. 

The new deal with Vulcan and ReElement echoes how the Department of Defense took a 15% stake Of MP Materials in July for $400 million and a week later Apple bought offtake (from the only operating U.S. rare earths mine) for $500 million. Washington is ratcheting up investment in rare earths to counter Chinese control of the elements used in modern defence, cell phones and other technologies. 

Trade gains

China agreed last week to reduce trade barriers on the critical elements for a year, while the U.S. cancelled 10% tariffs it linked to fentanyl production, suspended the 24% reciprocal tariffs levied on Chinese goods and permitted more technology trade. However, other Chinese restrictions on critical mineral exports remain in place.

Vulcan is finalizing a multi-state search within weeks for a location to build, commission and operate a 10,000-tonnes-per-year magnet plant, the company said in an email.

“As a former Navy officer, I am honored by the trust that the American government and American people have placed in Vulcan Elements,” CEO John Maslin said in the release. “Now more than ever, we remain focused on execution and performance, so that we can deliver a capability that the nation urgently needs.”

The Commerce Department and Pentagon on Monday pledged financing and potential equity stakes in the domestic producers of rare-earth magnets. The Department of Defense will receive warrants in both ReElement and Vulcan, which is a privately-held North Carolina-based start up. 

“Our investment in Vulcan Elements will accelerate U.S. production of rare earth magnets for American manufacturers,” Secretary of Commerce Howard Lutnick said in the statement. “We are laser-focused on bringing critical mineral and rare earth manufacturing back home, ensuring America’s supply chain is strong, secure and perfectly reliable.”

Magnet output

Vulcan manufactures sintered permanent neodymium iron boron (NdFeB) magnets in the U.S.  for critical defence and commercial applications. It entered the US rare earth magnet manufacturing race this year.

In August, Vulcan Elements and ReElement Technologies announced a commercial-scale offtake agreement for “light” and “heavy” rare earth oxides—the materials necessary to produce rare earth magnets.

NdFeB magnets are essential components in almost every advanced machine and electronic device—from AI data centers and semiconductor fabrication equipment to satellites, drones, robotics, electric motors, and virtually all military platforms.