The Next Fort Knox? Why the Army is Going All-In On Rare Earths

A New Strategic Reserve in the Desert

Nearly ninety years after the U.S. Army secured the nation's gold reserves at Fort Knox, a parallel strategic imperative is unfolding. This time, the focus is not on bullion but on the essential building blocks of modern military hardware: rare earth elements. Washington has selected REalloys (: ALOY) to spearhead a groundbreaking project: the construction and operation of a facility dedicated to processing dysprosium and terbium. These specific rare earths are crucial for the high-performance magnets that power sophisticated defense systems, including advanced weaponry, radar, sonar, and electric propulsion for military vehicles.

The historical parallel to Fort Knox underscores a profound national security concern. Just as gold was once secured due to external threats, the current vulnerability lies in the global supply chain for critical minerals. The question looms large: how much of the defense industrial base can America afford to outsource? Dr. Jeff Waksman, Principal Deputy Assistant Secretary of the Army for Installations, Energy and Environment, articulated the urgency, stating, "The ability to process critical minerals on U.S. soil is a national-defense priority required for munitions, missiles, sensors, batteries, and the platforms our Soldiers depend on." He further emphasized the Army's unique position, "Leveraging our legal authorities and land, the U.S. Army is able to help nurture a critical minerals industrial base which equips and sustains America’s Soldiers without putting any taxpayer dollars at risk."

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An Unprecedented Military-Industrial Partnership

The scale of foreign control over rare earth processing is staggering. As of 2024, China commanded approximately 91% of the global separation and refining capacity for magnet rare earths and was responsible for roughly 94% of the world's rare-earth permanent magnet production, according to data from the International Energy Agency. This dominance creates a significant chokepoint for the U.S. defense sector, which has relied for decades on components incorporating these magnets.

The selection of the Tooele Army Depot in Utah marks a significant departure from previous military-industry collaborations. It is the first time the Army will host a commercial mineral processing operation on one of its installations. Under this novel arrangement, the Army provides the land at the 43,000-acre facility, while REalloys injects the necessary capital, constructs the processing plant, and manages its day-to-day operations. This structure offers REalloys a distinct advantage by eliminating the need to secure an industrial site from scratch, directly aligning its development with a stated national defense priority.

The choice of dysprosium and terbium is strategic. These elements are vital for maintaining the efficacy of powerful magnets under extreme thermal conditions. Such magnets are indispensable for precision guidance systems, advanced defense electronics, electric motors, and sophisticated sonar and radar arrays – all systems where performance degradation under duress is unacceptable. China's entrenched position in this segment of the supply chain presents a vulnerability that the U.S. defense industry cannot readily mitigate.

China's Export Controls and the Drive for Domestic Capacity

Beijing's assertive control over the rare earths market was starkly demonstrated in April 2025. The imposition of export controls on seven heavy rare earths, along with associated metals and compounds, sent shockwaves through global manufacturing sectors. U.S. and European manufacturers faced immediate challenges in sourcing magnets, leading to production cuts and temporary factory shutdowns, as reported by the IEA. The incident highlighted a critical flaw in the supply chain: mining more ore is insufficient if the subsequent separation, refining, and magnet material conversion processes remain concentrated elsewhere.

The Tooele initiative directly targets this processing bottleneck. REalloys has existing operations in Euclid, Ohio, where it produces rare-earth metals and magnet materials for various U.S. government agencies and industrial clients. This domestic capability is complemented by a strategic partnership in Canada. REalloys has secured a substantial agreement with the Saskatchewan Research Council (SRC), guaranteeing access to 80% of its upgraded production capacity. This investment, approximately $21 million, is expected to significantly boost the output of dysprosium oxide and terbium oxide, alongside neodymium-praseodymium metal. REalloys anticipates receiving initial high-purity dysprosium and terbium oxides from SRC for testing as early as the fourth quarter of this year, with SRC handling the separation and refining in Canada. The Tooele plant will then process these oxides into metals, which will subsequently be alloyed at REalloys' Ohio facility.

Accelerating Towards a 2027 Deadline

The Army's conditional award for the Tooele project, announced on June 25, was swiftly followed by REalloys closing a $100 million financing round the next day. While the proceeds are earmarked for general corporate purposes, they provide crucial capital to support operations across Ohio, Saskatchewan, and potentially Utah, pending finalization of the lease agreement.

This strategic push aligns with a critical Pentagon deadline: January 1, 2027. A new Department of Defense Federal Acquisition Regulation Supplement (DFARS) rule will take effect, imposing stringent requirements on neodymium-iron-boron magnets used in covered defense contracts. The rule prohibits the use of rare earth materials if they were mined, refined, separated, or produced in China or other designated nations, with very few exceptions. Defense contractors will be compelled to meticulously trace the origin of every magnet component back to its raw material source and through every stage of processing.

REalloys and SRC are working to meet this timeline. SRC is slated to deliver its first qualification materials in late 2026, just ahead of the DFARS rule's implementation, with commercial production targeted for early 2027. REalloys projects that the Tooele facility could break ground in 2027, aiming for initial operations by or before 2028. This domestic rare earth processing capability is becoming a key differentiator for U.S. defense suppliers.

Market Ripple Effects

The U.S. government's renewed emphasis on critical minerals is not solely benefiting rare earth processors. Investors are increasingly scrutinizing companies involved in producing other strategic metals vital for defense and the burgeoning electrification sector. Freeport-McMoRan (NYSE: FCX), a global leader in copper production, stands to gain as demand for the metal escalates due to electric vehicles, grid modernization, and the expansion of AI-driven data centers. Similarly, Southern Copper (NYSE: SCCO), with its extensive operations in Peru and Mexico, is positioned to benefit from the sustained global need for reliable copper supplies over the coming decades.

Emerging players are also attracting attention. NioCorp Developments (TSX: NB) is progressing with its Elk Creek project in Nebraska, focusing on niobium, scandium, and titanium – materials essential for aerospace, defense applications, and high-strength steel alloys. Concurrently, Idaho Strategic Resources (NYSE: IDR) is broadening its rare earth portfolio alongside its existing gold mining assets, contributing to the broader U.S. strategy for a more resilient critical minerals supply chain.

Reading Between the Lines

The Army's conditional award to REalloys at Tooele signifies a strategic pivot towards securing essential processing capabilities on home soil. This initiative transcends a simple land lease; it represents a critical step in de-risking the defense supply chain from geopolitical leverage. While the U.S. possesses mining capacity, the ability to separate, refine, and convert rare earths into usable materials domestically has been a persistent challenge. The partnership with REalloys at Tooele aims to directly address this gap, treating rare earth processing as vital national infrastructure, much like the historical safeguarding of gold at Fort Knox.