US government invests $1.6bn for stake in rare earths firm

Rare earths are used to make smartphones

The Trump administration will invest $1.6bn (£1.2bn) in a US critical minerals firm, marking officials' latest push to reduce China's dominance over the rare earths sector.

The agreement with USA Rare Earth, which will give the government a stake in the firm, emerged days after US President Donald Trump claimed to have secured the "framework" of a deal over Greenland - which he said includes access to rare earth minerals.

It follows similar investments by the US government in minerals companies since Trump returned to the White House a year ago.

Officials want to boost US production of minerals essential to everything from smartphones to defence technologies.

USA Rare Earth, which controls deposits of so-called "heavy" rare earths that are often used for defence technologies, said the investment will fund mining, processing, metal-making and magnet manufacturing.

Commerce Secretary Howard Lutnick, said: "This investment ensures our supply chains are resilient and no longer reliant on foreign nations."

The non-binding pledge to invest in the Oklahoma-based firm includes a $1.3bn loan from the Commerce Department as well as $277m in federal funding.

The company also said on Monday it raised a separate $1.5bn from private investors led by Inflection Point, which is chaired Michael Blitzer who is also chair of USA Rare Earth.

Shares in the company rose by more than 15% following the announcement.

Rare earths have emerged as a key bargaining chip in trade negotiations between Washington and Beijing in recent months.

US companies rely heavily on the materials, leaving them vulnerable as China took steps to restrict supplies in response to US tariffs and other tensions.

In curbing exports, China, which processes around 90% of the world's rare earths, has sought to pressure the US for better trade terms.

The US government has been investing in critical mineral firms over the past year.

It reached a $1.4bn deal with Vulcan Elements, a rare earth magnet start-up, to build domestic supplies. It also invested in MP Materials, which owns the US's only operational rare earths mine.

China has a near-monopoly on processing rare earths.

While the US and other countries are investing heavily to develop alternative supply lines, they are some way from achieving that goal.

The Trump administration has also looked to other countries as part of its push to reduce reliance on China for supply of the critical minerals.

In October, the US and Australia signed a deal intended to boost supplies of rare earths and other critical minerals.