The Trump administration plans to divert funds from the CHIPS Act to support critical mineral projects

According to the Zhitong Finance APP, two informed sources revealed that the Trump administration is considering reallocating at least $2 billion from the CHIPS and Science Act to finance critical mineral projects and expand the influence of U.S. Secretary of Commerce Gina Raimondo in this area. Following the announcement, the U.S. stock market's rare earth sector saw a short-term surge on Thursday, with American Resources (AREC.US) rising over 9.8%, Energy Fuels (UUUU.US) up over 10%, USA Rare Earth (USAR.US) increasing over 7%, and Perpetua Resources (PPTA.US) gaining over 4.8%.

This initiative will reallocate funds already appropriated by Congress for semiconductor research and factory construction, rather than proposing new spending requests, aiming to reduce U.S. dependence on critical minerals widely used in the electronics and defense industries from other countries.

Informed sources indicated that this move will also help consolidate and unify the U.S. strategy for financing critical minerals. Previously, the Pentagon's investment in rare earth company MP Materials (MP.US) raised questions about the U.S. mineral strategy, and the White House hopes to promote interdepartmental coordination by strengthening Raimondo's role.

Neither the White House nor the Pentagon responded to requests for comment, and MP Materials also declined to comment.

The total amount of the CHIPS Act is $52.7 billion, signed by President Biden in 2022, aimed at strengthening domestic semiconductor production and reducing reliance on Asia. However, since taking office in January, Trump has repeatedly criticized the act as a "massive giveaway" to businesses and has pushed for renegotiation of related subsidies.

Informed sources stated that using part of the funds for mining-related projects aligns with the spirit of the CHIPS Act, as semiconductor manufacturing requires a large amount of critical minerals such as germanium and gallium.

"The government is trying to provide funding support for the critical minerals industry through creative means," one source revealed, but the related plans are still under discussion and may be adjusted in the future.

Industry insiders pointed out that mining companies, processing plants, and recycling enterprises could all benefit from this. Currently, most of the critical minerals identified by the U.S. government are not processed domestically.

For example, Kent Masters, CEO of Albemarle Corporation (ALB.US), the world's largest lithium producer, stated last month that the company's plans to build a lithium refining plant in the U.S. have been hindered by a lack of government support, saying, "Without government cooperation, these plans are difficult to advance."

It is still unclear whether the funds will be injected into mining companies in the form of grants or equity investments, but Raimondo aims to "get the $2 billion on the ground as soon as possible" and is looking for more funding sources.

Last week, the U.S. Department of Energy proposed $1 billion in funding to support certain critical mineral projects, with these funds coming from the Bipartisan Infrastructure Law. Meanwhile, the White House is also considering using funds related to the CHIPS Act for equity investments in chip manufacturers like Intel (INTC.US) in exchange for cash grants.

Since taking office, Trump has expedited critical mineral development through executive orders, including deep-sea mining and domestic mineral projects. On Tuesday, he met with the CEOs of Rio Tinto (RIO.US) and BHP (BHP.US) at the White House to show support for U.S. mining Informed sources say that the White House plans to grant Lutnick greater power, allowing him to play a leading role in the allocation of critical mineral funds, replacing the current fragmented management by the Pentagon and other agencies.

Previously, the Pentagon's multi-billion dollar collaboration with MP Materials, including equity investments, loans, and procurement agreements, caused market chaos due to a lack of coordination. There was speculation about whether Washington would set price floors for all mining companies, prompting the government to clarify that it would not allow MP to monopolize the rare earth market.

Lutnick previously led the American investment bank Cantor Fitzgerald, which is a significant shareholder of Critical Metals Corp (CRML.US). Foreign media reported in June this year that the company is seeking loan support from the Export-Import Bank of the United States.

Analysts point out that this move by the Trump administration is aimed at ensuring the security of the semiconductor supply chain and reshaping America's voice in the global critical minerals sector. With the concentration of funding flows and regulatory power, a significant shift in U.S. mineral strategy may occur in the future