The Tiny Magnet Maker That Attracted $1.6 Billion From Lutnick

(Bloomberg) -- 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.

"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."