In late January, the week before Commerce Secretary Howard Lutnick announced a $1.6 billion government commitment to fund a US magnet maker, bankers at his former financial services company, now run by his sons, were busy earning fees raising $1.5 billion more for the company from private investors.
The parallel deals have been questioned by Democratic lawmakers alleging possible conflicts of interest involving Lutnick and his sons. But a more basic set of questions has dogged the project: Can USA Rare Earth Inc., the company getting these public and private funds, actually produce the critical minerals and magnets the government needs to break China’s chokehold on global supplies?
When the company went public in March 2025, it had a market value of just $464 million, putting it on a par with any small mining venture in the early development stage — firms that aren’t typically prime candidates for billion-dollar cash infusions. Its rare earths mine at Round Top Mountain, about 85 miles southeast of El Paso, Texas, had yet to produce anything. Investors, geologists and Pentagon officials had been examining the ore there since the 1970s with unpromising results.
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“It’s laughably bad,” said Jon Hykawy, president of Stormcrow Capital Ltd., who has researched and invested in critical minerals companies for almost two decades but has no position in USA Rare Earth. “Round Top is basically a lot of dirt. We don’t mine dirt, we mine ore in the mining industry.”
The company’s factory for making permanent magnets used in missile-guidance systems, automobiles and data centers remains a work in progress. While the Stillwater, Oklahoma, plant started production in March, USA Rare Earth has said it won’t be able to reach commercial scale until the fourth quarter of this year. The company announced in June that it was planning a second facility, in South Carolina, but production there won’t begin until 2028.
“We need to fix our critical minerals,” Lutnick told 200 people at a conference in Washington in February, a few days after the USA Rare Earth deal was announced. “We need to do it ourselves. We need to mine. We need to process. And we need to refine.”
The deal, contingent on USA Rare Earth meeting technical and financial milestones, gives the Commerce Department a 10% stake in the company in exchange for a $277 million investment and a $1.3 billion loan. None of the milestones had been reached as of the end of June, according to public filings, and no money from the loan issued. But a spokesperson for the company confirmed that the government has received the shares and warrants spelled out in the agreement. He said Round Top is scheduled to begin commercial production in 2028 and that its recoverable heavy rare earth elements, the ones used in manufacturing the company’s permanent magnets, 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 spokesman said.
The investment in USA Rare Earth is one of several that President Donald Trump’s administration has touted as part of a new policy to free the US from its dependence on China, which announced export controls last year. Those controls, which were paused until November, have become a central issue in US-China trade negotiations, and an extension is expected to be on the agenda at Trump’s meeting with Chinese President Xi Jinping in Washington this week.
Meanwhile, the Trump administration has taken unprecedented steps to address a number of national security issues. It has acquired equity stakes in critical minerals producers MP Materials Corp. and Trilogy Metals Inc.; entered into revenue-sharing agreements with private companies including Nvidia Corp. and Advanced Micro Devices Inc. for their chip sales to China; and used golden shares to block the actions of US-based companies owned by foreign corporations deemed threatening to national security.
It’s all part of a broad economic and corporate statecraft strategy untested in US markets outside moments of national crisis. In the best case, it will bolster US security and neuter China’s biggest economic weapon. At worst, it could leave taxpayers on the hook for billions of dollars in investments that never pan out. Interviews with more than two dozen investors, geologists, academics, analysts, government officials and lobbyists revealed concerns that ill-advised deals could yield Trump his “Solyndra moment” — referring to the Obama administration’s $500 million loan to a solar panel company that went bankrupt within two years.
Barbara Humpton, who became USA Rare Earth’s chief executive officer last October, acknowledged in an interview that word about the company in Washington at the time she took over wasn’t very positive.
“One of the things we heard back through the network is we’ve already talked to them and there’s no there there,” Humpton said, referring to the government agencies involved in critical minerals policy. Humpton, a former Siemens AG executive, said the company’s previous leadership had pitched itself as a rare earths solution, but the feedback was unenthusiastic.
“Folks had gone to look under the covers and had said, ‘Hey, you have a magnet line you haven’t stood up yet,’” Humpton said. “‘You have a Round Top that you don’t yet know how to process.’”
Round Top Mountain, at the western tip of Texas not far from the Mexican border, is said to have the largest deposit of rare earth minerals in the US. Despite their name, rare earths such as neodymium, dysprosium and terbium that are used in the production of magnets, are abundant across the globe. But they’re difficult to find in large concentrations that can be processed cost-effectively.
The Center for Strategic & International Studies, a nonprofit research organization that has advised the Trump administration, mining companies and investors, said in a February 2026 note that USA Rare Earth would need to mine 100 to 150 times more rock to get the same amount of ore as a project in Western Australia that has one of the world’s highest-grade rare earth deposits. CSIS called the “exceptionally low ore grade” at Round Top the project’s most significant economic risk.
The Pentagon has known about the deposit for decades but determined in the 1990s that it didn’t contain economically recoverable grades of rare earths, according to two former officials familiar with the agency’s efforts around procurement and who requested anonymity because they weren’t authorized to talk about the findings. The Defense Department reconsidered the deposit more recently, as concerns arose about China’s tightening grip on the sector, only to reach the same conclusion, the people said. The Pentagon didn’t respond to requests for comment.
The Round Top site has a history of overpromising. Texas Rare Earth Resources, a mining exploration firm that had a lease from the state for a 900-acre area at Round Top, prepared presentations and other investor materials in the early 2010s stating that the value of the deposit exceeded $100 billion. In 2012, with a new CEO on board, the company contacted the US Securities and Exchange Commission to say those claims may have been a potential violation of securities laws.
Texas Rare Earth Resources changed its name to Texas Mineral Resources Corp. and entered into a joint venture in 2019 with USA Rare Earth, a new company registered in Australia, co-founded by Pini Althaus and Mordechai Gutnick.
Gutnick is the son of Australian mining entrepreneur Joseph “Diamond Joe” Gutnick. An Orthodox rabbi who once owned an Aussie rules football team, the elder Gutnick had promoted gold and diamond mines in Australia, at one point claiming he foresaw a discovery of a deposit worth “billions of dollars.” Australian regulators found that he made questionable promises about his mining ventures and banned him in 2024 from managing companies for four years. He said in a LinkedIn message that his family is “deeply committed to mining” and that a company he founded became the second-largest gold producer in Australia. He didn’t respond to questions about the ban, except to say that “mining exploration has its ups and downs.”
“Round Top’s abundance of heavy rare earths, lithium and strategic byproducts like gallium made it a unique opportunity,” Althaus, who has worked on mining projects in Argentina, Australia and Canada, said in an interview. “A lot of people looked at Round Top and misunderstood the project. We looked at it differently.”
In 2019, the year the joint venture was formed, the companies issued a preliminary economic assessment of Round Top. They said they pitched a pilot plant to the Pentagon. They didn’t get a grant. Althaus said other companies, better positioned in Washington, were more successful.
Douglas Silver, a geologist and former mining executive who has reviewed assessments of the deposit, has a different take. “Every project has something bad about it,” he said. “Normally that can be fixed by throwing more money at it. When you find a fatal flaw, you determine if it’s a dealbreaker for your investing. In the case of Round Top, there were multiple fatal flaws.”
In April 2020, with the Round Top project stalled, Althaus, then USA Rare Earth’s CEO, pivoted to magnet making. He purchased equipment from Tokyo-based Hitachi Ltd. and got officials in Stillwater to provide a $7 million grant and tax incentives for a factory.
But the company had trouble getting the equipment to work. Althaus said that after years of being idle, the furnaces and other parts needed to be replaced. Althaus left the company in 2023. He is now executive chairman of Cove Kaz Capital Group, a US-based firm that has secured preliminary approval for at least $900 million in financing through the Export-Import Bank of the US to purchase a majority stake in Kazakhstan’s largest undeveloped supply of tungsten. Lutnick, as commerce secretary, has facilitated negotiations between Cove Kaz Capital and Kazakhstan’s sovereign wealth fund. Trump’s oldest sons, Donald Jr. and Eric, have invested in companies backing the tungsten mining project, securities filings show.
Mordechai Gutnick left the board of USA Rare Earth in June. A company in which he is an investor still owns a 7% stake, worth more than $350 million, according to a government filing.
USA Rare Earth cycled through three CEOs before hiring Humpton last year. She quickly swung into action, making connections in both the public and private sectors. Humpton said a colleague who had helped establish the White House’s Energy Dominance Council made introductions. Ken Moelis, chairman and co-founder of investment bank Moelis & Co., which had been advising the company, was asked to represent it with the Commerce Department. Lutnick told senators at a budget hearing in April that Moelis introduced him to USA Rare Earth executives. Moelis declined to comment.
Humpton said the company prepared a flowsheet with details about Round Top and presented it to the Commerce Department’s US Investment Accelerator program last fall, at the time it was pitching the project. By January, USA Rare Earth had secured the letter of intent for $1.6 billion in government funding.
Before the deal was announced in January, bankers at Cantor Fitzgerald, where Lutnick had been CEO, had canvassed Wall Street to raise money for USA Rare Earth. They used a financing vehicle known as a Private Investment in Public Equity, or PIPE, a way for companies to quickly raise cash. The goal was $500 million, according to two people familiar with the fundraising who asked for anonymity because they weren’t authorized to discuss the effort. Moelis & Co. was a co-placement agent.
Cantor received $4 billion in total offers, according to the people, and capped the PIPE at $1.5 billion, or about 40% of the company’s market value at the time. That’s an unusually high percentage for a PIPE, the people said. Bankers who arrange such investments try to balance the need to attract big investors against diluting existing shareholders. Fees for raising the money were $50 million, according to a public filing. The filing didn’t say how the fees were split.
Several Democratic senators have raised alarms about Cantor’s involvement. Massachusetts Senator Elizabeth Warren and three other lawmakers sent a letter in July to Cantor Fitzgerald Chairman Brandon Lutnick, the commerce secretary’s son, saying the terms of the USA Rare Earth deal “raise serious questions about Secretary Lutnick’s exposure to federal conflicts of interest and bribery laws.”
Maryland Senator Chris Van Hollen was the lead author of another letter, sent to the commerce secretary in June, pressing him about his involvement in the USA Rare Earth deal. That letter called out his former company’s involvement as an agent for the private placement and said the Commerce Department’s involvement should be closely scrutinized.
A spokesperson for Cantor said the firm has a longstanding relationship with USA Rare Earth that predates Lutnick’s appointment and helped with its public listing in early 2025. “Cantor had no role in USA Rare Earth’s negotiations or financing arrangements with the US government, including any matters involving Secretary Lutnick, who is fully divested from the firm,” the spokesperson said.
Kristen Eichamer, a spokeswoman for the Commerce Department, said that neither Lutnick nor anyone else at the agency has “interacted with or had any discussions whatsoever with Cantor Fitzgerald regarding the rare earth minerals industry.” The spokesperson didn’t respond to questions about the letters from Congress.
Last year, before the Commerce deal, USA Rare Earth acquired a British metal and alloy manufacturer, Less Common Metals Ltd. Since the infusion of PIPE funds, it has undertaken a flurry of other transactions. It took a 12.5% stake in Carester SAS in April to obtain the French company’s rare earth processing expertise. And it bought the remainder of Round Top shares it didn’t own for $73 million.
Also in April, it said it would purchase Serra Verde Group, a Brazilian rare earth mining company, in a $2.8 billion stock and cash deal. By the time the deal was announced, the Brazilian company had lined up significant US support, including a $565 million loan from the US International Development Finance Corp. to expand its Pela Ema mine. It also got a $500 million pledge from the Department of Defense to buy its minerals — a commitment that was boosted to $750 million in August. USA Rare Earth’s deal to buy Serra Verde closed in August.
With the acquisitions, the company touted as an American solution to the rare earths crisis had become a multinational corporation reliant on ore from Brazil and processing from the UK and France. Its market value has ballooned to more than $6 billion. But while it has begun fulfilling some customer orders for its magnets, it is still working toward larger-scale deliveries. Humpton said in the interview that she’s hoping the government will buy blocks of magnets from USA Rare Earth before they’re cut to the specifications of individual companies and hold them in storage.
USA Rare Earth said the moves were intended to shore up its supply chain while it waits for Round Top to begin production. “I don’t think of this as a pivot,” Humpton said in April about buying a Brazilian mine. “I think of this as the vision all along: The company started with domestic assets, and we’re absolutely committed to domestic production. Turns out, there are deposits all around the world. So, yes, looking at global deposits in order to complement what we can produce domestically is perfect.”
But the Brazilian mine, which began operations two years ago, only generated $2.5 million of revenue in 2025, according to a government filing after the acquisition was announced, and was operating at a loss.
Investors who visited the mine and reviewed assessment reports before it was acquired by USA Rare Earth said its ore is hard to process. The investors, who asked not to be identified discussing private information, said Serra Verde hasn’t figured out how to separate clay from the rare earth rock at its processing plant. Over the last few years, the investors said, it had to test and retest the metal screens through which water rushes to separate the rare earths. In some cases the grid size of the screens was too large and wouldn’t separate the minerals; in others the screens weren’t strong enough and would rip apart. The investors said they declined to invest.
A spokesperson for USA Rare Earth wouldn’t comment on what he called “unverified operational details” for a transaction that hadn’t closed.
China has an entire ecosystem for solving such processing problems. Magnet-making companies there can continue spitting out products while they wait for new efficiencies. USA Rare Earth doesn’t have the same cushion and instead must answer to profit-minded shareholders — and, increasingly, US government officials who may grow impatient if there aren’t tangible results.
In July, the company announced that Humpton will be stepping down in October. Her replacement? Thras Moraitis, the current CEO of Serra Verde. In a press release describing the changes, USA Rare Earth didn’t mention anything about a domestic supply chain. Instead, it talked about the company’s “vision to build a global mine-to-magnet value chain.”
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