Pentagon Takes Up to 19.9% of Elmet in Tungsten Push

The US Department of War on Monday, September 14, committed US$450 million to tungsten manufacturer The Elmet Group (NASDAQ:ELMT) through redeemable preferred equity and warrants for up to 19.9 percent of its common stock, and expanded grant funding for rare-earth developer Ucore Rare Metals.

The US Department of War has put US$450 million behind a single tungsten manufacturer and widened grant support for a rare-earth processor, deepening a pattern in which Washington no longer simply buys critical minerals but buys into the companies that make them.

The twin commitments were announced on Monday, September 14. The larger of the two goes to The Elmet Group (NASDAQ: ELMT), a Maine-based maker of tungsten components, and is being structured through the department's newly formed Economic Defense Unit. Rather than a contract or a loan, the unit will take redeemable preferred equity plus warrants exercisable for up to 19.9 percent of Elmet's common stock. Alongside it, rare-earth developer Ucore Rare Metals (TSXV:UCU,OTCQX:UURAF) saw its existing grant funding expanded.

What the US$450 million actually buys

The money is earmarked rather than open-ended. Elmet will deploy more than US$165 million across three existing plants — Lewiston, Maine; Coldwater, Michigan; and Euclid, Ohio — which turn out tungsten components for a list of programs that reads like a summary of American deterrence: Patriot, Javelin, AEGIS, Trident II and THAAD missiles, F-35 fighter jets, and Virginia- and Columbia-class submarines.

A further US$150 million is assigned to a majority-owned joint venture with Blue Moon Metals and Australia's EQ Resources, whose purpose is to restart ammonium paratungstate conversion at the Springer mine in Nevada. Ammonium paratungstate, or APT, is the intermediate chemical that sits between tungsten concentrate and the metal powders used in machining tools and penetrators. It is the choke point in the tungsten chain: a country can mine concentrate and still be dependent if it cannot convert. Restarting domestic APT conversion is the part of this package that changes the industrial map rather than simply expanding capacity that already exists.

Cash arrives in stages. The agreement provides an initial US$200 million drawdown at closing — roughly 44 percent of the headline figure on an illustrative basis — with the remainder following as the programs advance. In exchange, the Pentagon gets one independent board seat and one non-voting observer seat, a governance footprint that is modest in headcount but meaningful in practice for a company whose customer and largest new investor are now the same institution. Details of both commitments were reported by INN Rare Earth.

Why equity, not a purchase order

Grants and offtake contracts have been the standard tools of Western critical-minerals policy, and both have a known weakness: they underwrite a project without giving the state any claim on the upside or any seat at the table when a foreign buyer comes calling. Preferred equity with warrants does both. If Elmet's tungsten franchise becomes more valuable because the government helped build it, the government participates. If control of the asset is ever in play, a near-20 percent warrant position and a board seat are facts a would-be acquirer has to deal with.

For shareholders the trade-off is the mirror image. The capital is cheap relative to what a mid-cap industrial could raise privately for a metallurgical conversion restart, and it comes attached to demand visibility that is difficult to price — the programs listed run for decades. Against that sits dilution: warrants for up to 19.9 percent of common stock is a substantial claim on future equity, and redeemable preferred sits ahead of common holders in the capital structure. Public-market investors tend to discount that arithmetic immediately and reassess the industrial logic later.

How the market took it

The reaction on Tuesday was not a celebration. Elmet shares last traded at 19.57, down 8.98 percent on the day from a previous close of 21.50, having swung across a session range of 18.42 to 22.60 — a spread that tells you the market spent the day arguing with itself about whether state capital on these terms is an endorsement or an overhang. Figures are as of the last trade at 20:00 GMT on September 15; the market is closed.

Ucore's OTCQX line (UURAF) finished at 1.80, down 2.70 percent from 1.85, in a much tighter 1.79 to 1.86 band. An expanded grant is a smaller event than a near-20 percent warrant position, and the price action reflects that proportionality.

Both moves came on a soft tape. The S&P 500 proxy SPY closed at $757.39, off 0.46 percent; the Nasdaq 100 proxy QQQ finished at $704.54, down 0.65 percent; and the Dow 30 proxy DIA ended at $521.23, lower by 0.62 percent. Elmet's decline was therefore an order of magnitude larger than the broad market's, which points to the terms of the deal rather than to risk-off flows.

The dilution question shareholders now own

Three things determine whether Monday's announcement reads well in two years. The first is execution at Springer: APT conversion restarts are metallurgical projects, not construction projects, and schedules in that category slip for reasons that have nothing to do with funding. The second is the warrant strike and the conditions under which the Economic Defense Unit can exercise — the difference between a 19.9 percent ceiling and a 19.9 percent reality is worth more to common holders than the headline number suggests. The third is whether the three-plant, US$165 million-plus capital program translates into higher-margin throughput or simply replaces aging equipment.

For Ucore, the calculus is different in kind. Grant money reduces the equity the company has to sell to reach production but does not confer the strategic protection an equity stake implies. Rare-earth separation remains the harder problem in the Western supply chain, and a topped-up grant is best read as continuity of support rather than a step change.

What to watch next

Closing mechanics come first: the US$200 million initial drawdown, the identity of the independent director, and the formal terms of the preferred and the warrants when they appear in filings. Then the joint venture structure with Blue Moon Metals and EQ Resources, where the split of the majority-owned vehicle and the offtake arrangements for Springer's APT output will determine how much of the value accrues to Elmet versus its partners.

More broadly, the Economic Defense Unit's first outings establish a template. If the Pentagon is prepared to take preferred equity and near-20 percent warrant positions in processors, every listed company in tungsten, rare earths, graphite and gallium now has a plausible funding route — and every one of their shareholders has to price the dilution that comes with it.

Key facts

• Elmet (NASDAQ: ELMT) last close: 19.57, -8.98% (as of 20:00 GMT, Sep 15, 2026)
• Pentagon commitment to Elmet: US$450 million; US$200 million drawn at closing
• Equity position: Redeemable preferred plus warrants for up to 19.9% of common stock
• Ucore (OTCQX: UURAF) last close: 1.80, -2.70% (as of 20:00 GMT, Sep 15, 2026)

Frequently asked questions

What did the Department of War commit to The Elmet Group?

The department committed US$450 million to Elmet through its newly formed Economic Defense Unit, taking redeemable preferred equity and warrants exercisable for up to 19.9 percent of Elmet's common stock. An initial US$200 million is drawn at closing, and the Pentagon receives one independent board seat plus one non-voting observer seat.

Where will Elmet spend the money?

More than US$165 million goes across three existing plants in Lewiston, Maine; Coldwater, Michigan; and Euclid, Ohio, which make tungsten components for defense programs. A further US$150 million funds a majority-owned joint venture with Blue Moon Metals and Australia's EQ Resources to restart ammonium paratungstate conversion at the Springer mine in Nevada.

Why does ammonium paratungstate matter?

Ammonium paratungstate, or APT, is the chemical intermediate between tungsten concentrate and the metal powders used in tooling and defense components. A country that mines concentrate but cannot convert it remains dependent on foreign processors, so restarting domestic APT conversion addresses the genuine choke point in the tungsten supply chain.

How did Elmet shares react?

Elmet last traded at 19.57, down 8.98 percent from a previous close of 21.50, with a session range of 18.42 to 22.60 as of 20:00 GMT on September 15. The decline was far larger than the broad market's, where the S&P 500 proxy fell 0.46 percent, suggesting the deal terms drove the move.

What did Ucore Rare Metals receive?

Ucore Rare Metals, listed as TSXV:UCU and OTCQX:UURAF, received an expansion of existing grant funding rather than an equity investment. Its OTCQX line closed at 1.80, down 2.70 percent from 1.85, in a narrow range of 1.79 to 1.86 — a smaller reaction consistent with the smaller structural change.

Which defense programs depend on Elmet's tungsten parts?

Elmet's three US plants supply tungsten components used in Patriot, Javelin, AEGIS, Trident II and THAAD missile systems, F-35 fighter jets, and Virginia- and Columbia-class submarines. That program list gives the company unusually long demand visibility, which is part of the rationale for state capital entering its capital structure.

Sources

• Pentagon Funds Elmet, Ucore in Critical Minerals Push — INN Rare Earth

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