ReElement Technologies, a rare earths start-up, has stopped pursuing a conditional loan of $80m from the US Department of Defense, according to two administration officials, reported Reuters.
The decision follows the company’s inability to meet federal due diligence criteria for the loan, which formed part of a broader $700m critical minerals funding initiative announced by the Office of Strategic Capital last November.
The officials did not provide details on the specific issues encountered during the due diligence process.
The loan was intended to help ReElement process rare earths and other critical minerals with its own technology.
A separate $620m loan from the same funding initiative was allocated to Vulcan Elements, a start-up magnet manufacturer backed by the 1789 private equity fund, where Donald Trump Jr. is a partner.
According to the officials, ReElement is now exploring other forms of federal assistance, potentially including a loan with different terms.
The company’s decision to withdraw from the government loan comes as it seeks to position itself as a competitor to Chinese rare earths dominance.
ReElement CEO Mark Jensen told the news agency in June: "Putting debt on your balance sheet adds cost to your balance sheet."
He said the company would instead focus on private investment to lower costs and "compete head-to-head against China".
In a later statement, Jensen added: "The structure has been changed based on mutual desire and we are working through the process," but did not clarify whether another government loan was being pursued.
Vulcan Elements’ Pentagon loan remains in place, according to the administration officials.
Plans announced last year would see ReElement supply Vulcan with the rare earths needed to produce up to 10,000t per year of magnets for the Pentagon.
The US Department of Defense and the White House declined to comment specifically on the loan.
The funding process has also come under scrutiny from Democratic lawmakers, who have questioned possible political influence and the review procedures for the loans.
ReElement has not disclosed cost estimates for a planned commercial facility in Marion, Indiana.
Earlier this year, ReElement received a $200m investment from Transition Equity Partners, and Japan’s Mitsubishi Materials agreed to acquire an undisclosed stake in the company.
Both companies declined requests for comment.
