ReElement, a startup company that produces rare earths, no longer seeks $80 million in Pentagon loans. Administration sources confirm this.
Two administration officials said that the startup ReElement Technologies, which produces rare earths, has ceased to seek an $80m Pentagon loan. The move was part of a larger push by the Trump Administration to "jump-start" domestic production of vital minerals in order to compete with China's dominance.
Officials said that the move was made after the company failed to meet the due diligence requirements of the federal government for the conditional lending offer. The officials who spoke on condition of anonymity declined to elaborate, and didn't provide any documentation regarding the due diligence issues.
Two officials confirmed that the company is looking for other federal aid, such as a possible new government loan with different terms. The $80m loan was part of an overall $700m critical minerals funding package announced by the U.S. Department of Defense Office of Strategic Capital in November last year. The package included a $620-million loan to Vulcan Elements. This startup magnet maker counts the private equity fund1789 as an investor. Donald Trump Jr. also is a part of this fund. Vulcan wants to use the rare earths refined at ReElement to produce magnets for U.S. Military. Officials from the administration said that when the loan package was announced, ReElement, and Vulcan, were at the heart of U.S. efforts in reducing reliance on China. China dominates global rare-earths processing and magnet manufacturing used for electric vehicles, advanced electronic systems, and U.S. armed forces?systems.
White House Senior Advisor Peter Navarro stated that he advocated for Vulcan/ReElement as part of administration efforts to build local supply chains for materials, technologies and other items deemed essential to U.S. National Security. He added?that administration continues to support ReElement.
Navarro responded to questions regarding the loan by saying that "small startup companies like ReElement or Vulcan represent a future of supply-chain resilience and reindustrialization in the United States." Their innovative technologies will counter China's pricing strength?and boost America’s national security."
ReElement CEO Mark Jensen said in June that the company had decided to rely on its own investment and not a government loan. Jensen stated that the company would rather avoid the debt and the associated costs.
Jensen said, "Adding debt to your balance sheets adds costs to your balance sheets," during a June 16 visit to ReElement’s Noblesville, Indiana pilot facility. He said that relying on equity investments would allow the company to reduce costs and "compete head-to-head with China."
Jensen stated in a statement issued on 29 June that the company is still exploring options. Jensen stated that the company was still exploring options with the government.
Jensen refused to say whether the company still sought a government loan, or any other type of financing. He also did not answer questions regarding the due diligence requirements of the initial conditional loan.
Vulcan says its Pentagon loan is on track. The administration officials I spoke with confirmed this. ReElement did not provide a public cost estimate for renovating a building that will house its commercial facility in Marion, Indiana. Losing the Pentagon loan could raise the company's borrowing cost, since Washington lends at lower rates than private lenders. In the first half of this year, Transition Equity Partners invested 200 million dollars in ReElement and Japan's Mitsubishi Materials acquired a?unknown stake in the startup. Both companies did not respond when asked for comments.
A White House official, in response to a question from the press office regarding the ReElement loan of $80 million, did not comment but said: "The Trump Administration continues to explore various deal structures with ReElement in order to strengthen America's Supply Chains."
The Department of Defense declined to comment as well on the ReElement loan package. According to plans announced by Vulcan last year, the two companies would work together closely, with ReElement supplying the rare earths required by Vulcan in order to produce 10,000 metric tonnes of magnets per year for the Pentagon. Vulcan CEO John Maslin said last November that the company was trying to create an ecosystem in the United States.
Democratic lawmakers have been examining the $700 million package of financing. They have asked if Vulcan Elements' connections to Trump Jr. affected their decision on which companies received federal funding and sought information about whether proper review processes were followed. Could not determine whether Trump Jr. had any involvement in the financing.
Vulcan refused to comment and Trump Jr. didn't respond to any questions. (Reporting from Ernest Scheyder, Noblesville; Jarrett Renshaw, Washington; Editing by Claudia Parsons).
(source: Reuters)
