WASHINGTON (AP) -- The Trump administration and private investors are partnering with two rare earth startups in a $1.4 billion deal to scale up the nation's access to materials and technology that is crucial for producing an array of high-tech goods and military equipment.
The investment in Vulcan Elements and ReElement Technologies is the latest stake taken by the U.S. in a handful of private companies -- including another rare earths company and chipmaker Intel -- since President Donald Trump began his second term in January. The White House has made it a priority to bolster the nation's supply chain in a market dominated by China.
Vulcan Elements manufactures rare earth magnets, while ReElement processes rare earth mineral ores and recycles old batteries and other products made with rare earths.
Rare earths are used in fighter jets, guided missiles, drones and nuclear submarines as well as smartphones and wind turbines.
The influx of cash will allow Vulcan and ReElement to ramp up their annual magnet production to 10,000 tonnes annually, the companies said.
"Our investment in Vulcan Elements will accelerate U.S. production of rare earth magnets for American manufacturers," Secretary of Commerce Howard Lutnick said. "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."
The deal announced this week comes just days after Trump met with Chinese leader Xi Jinping and agreed to cut tariffs on China, which Beijing reciprocated by allowing the export of rare earth elements.
Before Xi and Trump met last week, China had imposed restrictions that would have required foreign companies to get special approval to export items that contain even small traces of rare earths elements sourced from China, even if those products were made elsewhere by foreign companies. However, it didn't eliminate restrictions that were imposed in the spring after Trump imposed his initial round of tariffs.
China accounts for nearly 70% of the world's rare earths mining and controls roughly 90% of global rare earths processing.
The deal includes a $620 million loan from the Department of Defense, $50 million of federal incentives from the Department of Commerce and $550 million in private capital.
The Defense Department will receive warrants in both Vulcan and ReElement, with Commerce getting a $50 million equity stake in Vulcan.
In July, the Defense Department agreed to invest $400 million in shares of the Las Vegas-based MP Materials, which runs the only American rare earths mine. The unusual direct investment in the company made the government the largest shareholder in MP Materials.
A week later, MP Materials announced a new $500 million agreement with tech giant Apple to produce more of the powerful magnets used in iPhones as well as other high-tech products like electric vehicles.
U.S. Steel, Lithium Americas and Trilogy Metals are among the companies the U.S. government has taken equity stakes in under Trump.
Those investments have drawn skepticism from economists, former government officials and even members of the president's own party.
While it's not unprecedented for the government to offer financial support to business and industries, historically those investments usually came during major economic crises.
