DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

In late January, one week before Commerce Secretary Howard Lutnick announced a $1.6 billion government commitment for USA Rare Earth Inc., bankers at Cantor Fitzgerald were raising another $1.5 billion from private investors. Lutnick formerly led Cantor, which is now run by his sons.

Democratic lawmakers have questioned the parallel deals, alleging potential conflicts involving Lutnick and his sons. Beyond those concerns, investors, geologists and officials are asking whether USA Rare Earth can deliver the critical minerals and permanent magnets needed to reduce American dependence on China.

When USA Rare Earth went public in March 2025, its market value was just $464 million. Its mine at Round Top Mountain, about 85 miles southeast of El Paso, Texas, had produced nothing, despite scrutiny of the ore by investors, geologists and Pentagon officials dating to the 1970s.

Jon Hykawy, president of Stormcrow Capital Ltd., has researched and invested in critical minerals companies for almost two decades and holds no position in USA Rare Earth. “It's laughably bad,” he said. “Round Top is basically a lot of dirt. We don't mine dirt, we mine ore in the mining industry.”

The company is also developing a Stillwater, Oklahoma, factory for permanent magnets used in missile guidance systems, automobiles and data centers. Production started in March, but USA Rare Earth has said the plant will not reach commercial scale until the fourth quarter of this year.

A second facility planned for South Carolina is not expected to begin production until 2028. Round Top is also scheduled to enter commercial production in 2028, according to a company spokesperson.

The government agreement depends on USA Rare Earth meeting technical and financial milestones. It gives the Commerce Department a 10% stake in exchange for a $277 million investment and a $1.3 billion loan.

Public filings showed that none of the milestones had been reached by the end of June, and no loan money had been issued. The company confirmed that the government had received the shares and warrants specified in the agreement.

A company spokesperson defended the project, saying its recoverable heavy rare earth elements are easily processed. “Round Top has been validated by US Government due diligence; by the private investors who backed us with financing; and by the industry partners, who have chosen to join us,” the spokesperson said.

Round Top is said to contain the largest rare earth mineral deposit in the US, but concentration remains a major issue. The Center for Strategic & International Studies said USA Rare Earth would need to mine 100 to 150 times more rock to obtain the same ore as a Western Australian project with one of the world’s highest grade deposits.

The Pentagon determined in the 1990s that Round Top lacked economically recoverable grades of rare earths, according to two former officials who requested anonymity. The War Department later reconsidered the deposit as concerns about China increased, but reached the same conclusion, the people said.

USA Rare Earth chief executive officer Barbara Humpton acknowledged that the company had a poor reputation in Washington when she arrived last October. She said agencies had questioned both the unproven magnet line and the company’s ability to process material from Round Top.

Humpton moved to build connections in government and finance, while investment bank Moelis & Co. represented USA Rare Earth with the Commerce Department. By January, the company had secured a letter of intent covering $1.6 billion in government funding.

Cantor bankers separately sought $500 million through a Private Investment in Public Equity transaction, according to two people familiar with the fundraising. Cantor received $4 billion in offers and capped the transaction at $1.5 billion, equal to about 40% of the company’s market value at the time.

Fees for the fundraising totaled $50 million, although a public filing did not disclose how they were divided. Cantor said its relationship with USA Rare Earth preceded Lutnick’s appointment and that it played no role in the company’s government negotiations or financing arrangements.

USA Rare Earth has used its new capital for multiple transactions, including a 12.5% stake in France’s Carester SAS and the remaining Round Top shares for $73 million. It also completed a $2.8 billion cash and stock purchase of Brazilian mining company Serra Verde Group in August.

Serra Verde had secured a $565 million US government loan and a Department of War commitment to buy its minerals, which increased from $500 million to $750 million in August. USA Rare Earth now relies partly on Brazilian ore and processing expertise from the UK and France.

The company’s market value has climbed above $6 billion. Although it has begun filling some magnet orders, it is still pursuing larger deliveries, and Humpton said she hopes the government will purchase unfinished blocks of magnets and place them in storage.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.