The Tiny Magnet Maker That Attracted $1.6 Billion From Lutnick

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1:22You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Rare Earths and Critical Minerals. Gotta go there. We gotta go there. It brings us to the company USA Rare Earth. It's run by Barbara Humpton, someone whom we've spoken to quite a bit. That was back when she was CEO of Siemens USA. When USA Rare Earth went public back in March of 2025, now she's CEO of this company, okay? It had a market value of just$464 million. dollars now it's got a market cap just shy of 5.8 billion dollars difference thanks in part to the 1.6 billion it's gotten from commerce department secretary howard lutnik usa rare earth and its unproven assets are the subject of a bloomberg news investigation by joe doe he's bloomberg news senior reporter for corporate and economic statecraft he joins us here in the bloomberg interactive brokers studio congratulations on this story it's a great piece yeah i encourage everybody to check it out uh before we get into some of the numbers here yeah the assets that that usa rare earth has uh what are they okay and what is available now for them to actually mine okay uh they have a mine deposit in round top which is outside of el paso texas 75 miles or so they have a magnet manufacturing plant in Stillwater, Oklahoma that's still getting up to scale.

2:43They now also have a metallization company in the United Kingdom and a processing technology that they've bought into in France. And then they now have a Brazilian rare earth mine, which we get into the story that they're still trying to figure that out. So that is effectively all the assets they have, which by the way, in 2019, when I first started covering this company, They had a stake, a percentage stake in the mine in Texas, and that's all they were. So, yay, problem solved. U.S. has all the critical minerals or rare materials that it needs, right? Yeah. I mean, listen, this is like, how do you end up doing a story about a company called USA Earth that most people have never heard of?

3:28Well, you find out that they get a$1.6 billion commitment from the Commerce Department led by howard lutnik and then you find out that they raised a 1.5 billion dollar pipe concurrently with the promise commitment from the united states federal government and the co-placement agents on that pipe were canter fitzgerald and molus and there were about 50 million dollars in fees that were earned from that now we don't know how those fees were explaining the canter fitzgerald connection please for people who might not be familiar canter fitzgerald is the former um financial firm that Howard Lutnick ran for a very long time.

4:09And for those who were, you know, paying attention to, unfortunately, the 25 year anniversary of 9-11, the Commerce Secretary Lutnick did talk about the fact that he lost most of his firm during 9-11 and devastating, devastating moment. So there's real history here for Cantor Fitzgerald. He left Cantor Fitzgerald when he became the Commerce Secretary and his sons took over leading the company. Now, listen, our story is not going into saying that necessarily something wrong happened here, but they were the placement agent on this. The company, Barbara Humpton herself told us, was struggling to get attention in Washington before she came in on October 1st of 2025.

4:57Those are her own words in the interview. And now we're sitting here nine months after the Commerce Department announced that it was going to give a commitment to USA Rear Earth. And we finally did a deep dive, connecting all the dots of what this company is now versus what it was. All the money that has been swirling around from the private markets, but also from the public money that's been given to it. And we felt like there was a whole lot here that readers, Bloomberg followers could really benefit from hearing. I just want to say a spokesperson for Cantor said the firm has a longstanding relationship with the USA Rare Earth that predates Ludnick's appointment and helped with its public listing in early 2025.

5:39Quote, Cantor had no role in USA Rare Earth's negotiations or financing arrangements with the U.S. government, including any matters involving Secretary Ludnick, who is fully divested from the firm. the spokesperson said and then a spokesperson for the commerce department said that neither ludnic nor anyone else at the agency has interacted with or had any discussions whatsoever with canterbury jailed regarding the rare earth minerals industry well then i guess i don't know if this is a this makes sense but then one would ask well how did that relationship happen then how did that placement happen is it just random like how does it's a question listen listen we looked at this story at let's talk about the fundamentals of the company We, all of us, have spent 18 months talking about questionable connections between the Trump administration and money going out the door and who's benefiting from it.

6:32One of the things that I have been trying to do is look at the actual companies getting the money and ask the question, simple question, who's doing the due diligence around this company? And when you dig into the company, what do they have to offer? we looked at usa rare earth and we said this is a company that has a mine in texas that we have people on the record who have looked at this deposit for years who said it is a mound of dirt we had people who have looked at the serra verde mine in brazil and they said and we have this in our story according to people familiar who have who have seen the mine who understand the mine the trouble they are having is processing the rare earths that are being pulled out of the ground okay this is the the dfc one of the agencies in the united states government has given major backing to sarah verde the dow has also been giving major backing to sarah verde usa rare earth came in and bought sarah verde we have been told according to people familiar they cannot separate the clay from the rock the screen you have to send a ton of water through this deposit it to separate the rare earth rock from the clay.

7:44The screens are, the grids are too large in the screens or they're ripping through the screens. People are not, people have told us that these problems on processing at Cerro Verde are enough of a problem for them to stay away from investing in it. When you start talking to people in the market who have looked at all these different assets that USA Rare Earth have, they have major questions around them. Now I should be clear, If there's enough money to make them work in enough time, maybe they can make them work. But I think what's really interesting and probably smart and to look into is that ultimately it's money from the U.S.

8:22government. It's taxpayer money, right? It's taxpayer dollars. That ultimately goes to this. Right. Now, not a dime has gone out the door from the Commerce Department on the USA where Earth deal. Why? They have certain milestones they have to reach in order to get that money from the Commerce Department. So far, they have not reached those milestones as of the latest public filings that they have out there. But, you know, you start having the question of you raised a billion and a half dollars from the private markets on the promise to those to those investors that that the United States government would be backing this.

8:57And I'm not saying they will or they won't. I'm just saying, if they never end up getting a dime from the government because they can't reach the milestones of the original promise they had to the government, then what? You just raised a billion and a half dollar pipe back on January that you ended up using to make all these other investments and purchases. And then you never came through on the other stuff and the government dollars never came in the first place. Investors who made the investment based on the assumption that that government money was coming, which was a big endorsement. It's why we started all talking about the company in a big way.

9:33That's exactly right. And, you know, this is the questions when you talk to investors, right, who are looking at all these companies that the government's giving money to, not just USA Rare Earth. They are constantly saying, where's the diligence? You know, does this technology work? Does this deposit have what it has? You know, will this be a solution? What is the revenue here? I mean, we look through the public filings. I mean, you know, Sarah Verde, if it is a great deposit, what we found was they made$2.5 million in revenue in 2025 and are operating at a loss. I talked to a number of investors who go to us in the mining space.

10:10That's not what we technically call a great deposit or a great mining project. Maybe eventually it works, but like right out of the gates, that's not a good sign. How is this, I don't want to call it a deal, but this situation distinct from like a trilogy metals or an MP materials or, or even like an Intel where the U S buys a stake. Like I, you cover economic statecraft. I can't remember a time in my lifetime where there's been more involvement in private companies, maybe the bailout and, you know, post-financial crisis. But yeah, but that was an extent in a moment. Right. We're well more than 12 months into this endeavor now.

10:50How is this distinct from the other sort of deals that we've seen in the world of economic statecraft? Well, to be fair, like I think the USA Rare Earth story is one of a number, right? I mean, we, Kate O 'Keefe, one of our senior reporters down in Washington, she and I did a story back in May that maybe you remember, where we reported that the DOD had raised multiple red flags around a company called ReElement Technologies. And they had questions around the technology and the ability of this technology to separate rare earths out of the ground. You know, we've been doing these stories, right?

11:26We're diving in and pointing out that there are people around these things saying, we have raised red flags, we have questions about them. And I would say that this is not, so USA Rare Earth is unique in that it's USA Rare Earth. And they've, they said they were a mine to magnet domestic solution and now own a Brazil mine and a United Kingdom, uh, metallization company and, uh, have a stake in a French processing technology. So it's like, that's technically like, that's fine. There's a lot of people who say the solution to the rarest problem is, is being global is bringing in people. But your promise initially is that you're a domestic mine to magnet supplies chain solution to the commerce department.

12:08So, you know, it's just, there's a lot going on here. What do we hear? We just got about 30 seconds. So we apologize. What do we get from the government or the Pentagon or from the Commerce Department? Yeah. I mean, Tim already read what the Commerce Department said. What you would hear anybody inside the government say, and this is fair, is we are putting money towards projects that we think can work and give us a solution to the rare earth problem. not all of them will work out but the one or few that do means it's worth all the money and all the time and you know what that could end up being true although there's more in your story about the pentagon knowing about that they've looked at this deposit and have passed on it many times in the past yes um incredible deep dive as always all the work that you do um so thank you so much

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