WASHINGTON — The Pentagon’s Office of Strategic Capital (OSC) has entered into two conditional loan agreements totaling $1.2 billion to strengthen the domestic rare earth elements sector, according to recent Department of Defense announcements.
The department announced a $725 million conditional loan granted to Denver-based Energy Fuels, a uranium production specialist. The funding is intended to facilitate the construction of a new U.S.-based facility dedicated to rare earth separation and metallization.
According to the announcement, the increased production capacity will provide critical support for permanent magnet facilities across the U.S. industrial base and enhance supply chains for various specialized defense and industrial applications. The agreement includes standard prerequisites for the final financial closing, requiring the company to satisfy all financial, legal, and technical due diligence.
Energy Fuels indicated that the funds will be utilized to enhance existing processing capabilities at its White Mesa Mill in Utah and to develop a new rare earth metals and alloy facility at an undisclosed location. The loan carries a 20-year repayment term.
Additionally, the Defense Department signed a $500 million conditional loan with Phoenix Tailings for the development of the “Freedom Facility.” This project is designed to support the mine-to-magnet supply chain, with the company aiming to begin processing both light and heavy rare earth minerals by 2028.
These initiatives reflect the second Trump administration’s strategic effort to secure the materials essential for manufacturing advanced weaponry, ranging from precision munitions to fighter jets.
Speaking at a Center for a New American Security event on Tuesday, Michael Cadenazzi, Assistant Secretary of Defense for Industrial Base Policy, emphasized the necessity of these investments. “You can dream all day long about scaling [weapons production but] if you don’t have germanium, gallium, and rare earths, it is a pipe dream,” Cadenazzi stated, noting a renewed commitment from the White House to operate at scale compared to previous efforts in mineral procurement.
Despite these advancements, some of the administration’s funding strategies have faced legislative scrutiny. In February, several Senate Democrats raised concerns regarding the legality and competitive nature of the Pentagon’s equity deal with MP Materials.
In July 2025, the administration established a 10-year public-private partnership in which the DoD agreed to purchase $400 million of newly created series stock. In exchange, MP Materials pledged to accelerate the development of a comprehensive, end-to-end magnet supply chain to reduce reliance on foreign suppliers.
Sen. Jack Reed, the top Democrat on the Senate Armed Services Committee, questioned the strategic rationale and legal foundation of such transactions during a February hearing, specifically referencing potential conflicts with the Antideficiency Act.
