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The U.S. government is putting $1.6 billion behind USA Rare Earth, the company announced this week, as part of a broader push to strengthen domestic critical supply chains and reduce reliance on China (The Wall Street Journal, subscription).

What’s going on: USA Rare Earth “said Monday that the nonbinding letter of intent from the Commerce Department’s CHIPS Program would cover a proposed $1.3 billion senior secured loan, alongside $277 million in proposed federal funding.”

• Under the agreement—part of the administration’s effort to build a stronger domestic rare-earths supply chain—the company will give the Commerce Department 16.1 million shares and approximately 17.6 million warrants.
• The news follows the announcement in November that rare-earth magnets company Vulcan Elements received a $620 million Defense Department loan, along with $50 million from the Commerce Department.
• The U.S. government has also taken stakes in rare-earths miner MP Materials.

Why it’s crucial: “The flurry of investment follows China restricting its rare-earth exports in April, putting pressure on the government and U.S. businesses to meet mineral demand from defense contractors and other manufacturers.”

Well-positioned: USA Rare Earth has raised an additional $1.5 billion in private investment, it said.

• It’s also signed a letter of intent with the Energy Department’s National Energy Technology Laboratory, under which the lab will help it develop “digital twin technology to improve the company’s rare-earth elements separation processes.”