The U.S. Army wants first dibs on American-produced heavy rare earths, and REalloys (NASDAQ: ALOY) has just signed a landmark nonbinding term sheet that could put it at the top of the military's supply chain list.
And the terms are extraordinary. The term sheet proposes a potential 75-year operating lease on approximately 200 acres at Tooele Army Depot in Utah, where REalloys would build and operate a facility processing dysprosium and terbium, two metals China has spent decades monopolizing.
In return, one of the things that the Army wants is the right of first offer on production, giving it an opportunity to secure the materials for American weapons manufacturers before they are offered to other buyers, although it is not obligated to purchase any.
This is the latest development in a relationship that began taking shape in June, when the Army selected REalloys for exclusive negotiations.
Now, the two sides have signed a term sheet spelling out the proposed commercial terms: an initial 50-year lease, a possible 25-year extension, government ownership of the land and a privately financed industrial operation that could help supply the military for generations. The term sheet is non-binding, and the final lease still requires financing and regulatory approvals.
Consider what the Army is proposing here.
Rather than waiting for a domestic rare earth industry to develop on its own, it is making military land available to a private producer and negotiating priority access to the output. The company would carry the cost of construction and operations, while the Army would gain a source of American-processed heavy rare earths, particularly dysprosium and terbium, which at or near the top of Washington’s metals wishlist.
Dysprosium and terbium are used in the high-performance magnets that keep working when temperatures climb inside fighter aircraft, missile systems, and advanced electric motors. Radar, sonar and precision-guided munitions also depend on specialized magnetic materials. The problem is that China controls almost all global processing of dysprosium and terbium, leaving American defense manufacturers exposed to Chinese export licensing decisions.
That dependence became painfully obvious when Beijing introduced export restrictions on seven categories of medium and heavy rare earths in April 2025. Manufacturers suddenly faced delays, licensing requirements, and uncertainty over materials that had previously moved through established supply chains.
For the Pentagon, the stakes are unusually high.
Retired four-star General Jack Keane, who serves on REalloys' board, put the military consequences plainly in the company's announcement:. "For too long, the United States has depended on adversaries and others for the materials inside its most advanced defense technology and China has made clear it is prepared to use that dependence as leverage. Dysprosium and terbium sit at the center of that vulnerability. Our ability to deter conflict, and to prevail if deterrence fails, depends on producing munitions and weapons systems at scale, and that requires supply chains we control. This term sheet is an important step toward bringing heavy rare earth processing onto a U.S. defense installation. "
The Army's own Dr. Jeff Waksman was equally direct, describing rare earth processing as a national security vulnerability and pointing to China's near-total control of dysprosium and terbium.
The Pentagon has also imposed a deadline. Beginning January 1, 2027, expanded federal sourcing restrictions will apply to covered rare earth magnets and their supply chains. Defense contractors will need compliant sources of materials, processing, and manufacturing.
That creates an opening for companies capable of producing qualified rare earth metals outside China.
REalloys Has Been Assembling the Pieces
REalloys has spent the past two years doing precisely that, securing feedstock, processing capacity, metallization technology, and financing across North America.
The company is already developing rare earth materials in Euclid, Ohio, and has partnered with Canada's Saskatchewan Research Council to expand non-Chinese rare earth processing.
Under that arrangement, REalloys secured rights to approximately 80% of SRC's expanded output, with the upgraded facility targeting annual production capacity of roughly 525 tonnes of NdPr metal, 30 tonnes of dysprosium oxide and 15 tonnes of terbium oxide
Those numbers are important because the rare earth business has a serious problem between the mine and the finished magnet.
Mining rare earths is one thing. Separating them, converting the oxides into metals and producing the alloys used in advanced magnets requires specialized equipment and technical expertise. China dominates those industrial processes, which is why simply opening new Western mines won't eliminate dependence on Chinese suppliers.
REalloys is developing what it says will become the largest heavy rare earth metallization facility outside China, with commissioning currently targeted for the first quarter of 2028.
The company has also secured a 15-year offtake agreement covering 15% of Phase 1 production from Critical Metals' Tanbreez project in Greenland, adding another potential source of rare earth feedstock outside China.
Other non-binding agreements involving Montana, Wyoming, and international partners expand the company's access to raw materials, while its strategic LOI with JS Link aims to connect rare earth alloy production with permanent magnet manufacturing.
There's also a direct Pentagon relationship beyond Tooele.
In March, the Defense Logistics Agency awarded REalloys a contract to develop modular metallization technology for samarium and gadolinium, two additional metals used in specialized defense applications.
And the company has raised significant money to pursue its plans. REalloys completed an approximately $100 million institutional private placement in June and reported $122.4 million in cash at the end of that month.
Its Saskatchewan expansion and heavy rare earth metallization projects are funded through their planned commissioning stages, according to the company. Tooele remains a separate proposed development requiring its own financing and approvals.
Inside the Army's Unusual Rare Earth Deal
The Army's approach at Tooele deserves attention because it could change how Washington develops domestic sources of critical materials.
Under the proposed arrangement, the government keeps the land. REalloys pays fair-market rent, finances construction, and runs the processing operation. Once production begins, the Army receives a contractual opportunity to buy the materials it needs.
The military would also receive participation rent once commercial operations begin, with the exact methodology to be negotiated in the definitive lease.
That means the Army could help establish domestic production on its own property while leaving construction and operating costs with the private sector.
And this is no ordinary short-term industrial lease.
The proposed initial term is 50 years, with a possible 25-year extension. That's a potential three-quarters of a century for a facility dedicated to materials that American defense manufacturers currently struggle to source outside China.
The proposed right of first offer is equally important. It would give the Army an opportunity to secure production from the facility, although it would not require the military to purchase any material.
The implications extend across America's largest defense contractors, whose most sophisticated weapons programs rely on specialized materials that cannot always be sourced domestically. Lockheed Martin (NYSE: LMT) is a particularly important example. Its F-35 Lightning II fighter jets rely on rare earth permanent magnets, and the company recently unveiled a framework agreement with the Pentagon covering 850 U.S. aircraft over the next decade. Securing American-made magnet materials is becoming increasingly important as the military prepares to sustain production of these advanced aircraft for years to come.
The same supply-chain concerns extend to missile defense. RTX Corporation (NYSE: RTX), through its Raytheon business, produces Patriot air defense systems, advanced interceptors and military radars. In October, Raytheon was selected to modernize U.S. Space Force early-warning radar systems. For manufacturers operating at this level of technological complexity, dependence on foreign-controlled critical-material supply chains creates risks that Washington is increasingly determined to reduce.
Northrop Grumman (NYSE: NOC) faces similar strategic considerations as the manufacturer of the B-21 Raider stealth bomber, one of the Pentagon's most advanced aircraft programs. The company's portfolio also spans missile defense, space systems and advanced military electronics. With the Pentagon seeking to expand domestic production of rare earth permanent magnets, companies developing next-generation defense platforms have a direct interest in the availability of reliable, qualified American suppliers.
The issue also reaches beneath the ocean. General Dynamics (NYSE: GD), through its Electric Boat division, builds Virginia-class attack submarines and Columbia-class ballistic missile submarines for the U.S. Navy. The Pentagon has specifically identified both submarine classes among the military platforms that depend on rare earth permanent magnets. That makes the effort to establish secure domestic supplies relevant not only to combat aircraft and missiles, but also to the vessels underpinning America's naval deterrence.
There is still work to do. REalloys and the Army must negotiate a definitive lease, complete environmental reviews, agree on rent, secure financing and satisfy other regulatory and government requirements.
But the new term sheet provides something considerably more concrete than the June selection announcement: the proposed operating terms of a long-term industrial relationship with the U.S. Army.
For REalloys (NASDAQ: ALOY) the potential prize is a processing operation on military land, a strategically important customer with priority access to production and a business focused on two of the hardest rare earth materials to source outside China.
China spent decades cornering the market for the metals America needs to build its most advanced weapons. Now the U.S. Army is offering REalloys something few mining or metals companies could dream of: a potential 75-year home on military soil, with the Pentagon first in line for what comes out of it. The lease isn't final, and the Army hasn't committed to buying anything. But the fact that Washington is negotiating terms like these tells you just how far it's willing to go to get its hands on dysprosium and terbium.
By. Tom Kool
Related Stories
