A new U.S. mineral stockpile is about to start doling out up to $1 billion in loans to domestic manufacturers to help secure needed materials for high-tech products and buffer them from trade spats with China.

In an interview with POLITICO last week, Brett Lambert, tapped to oversee VaultCo by the chair of the U.S. Export-Import Bank, detailed how Project Vault will work. A former Pentagon official during the Obama administration, Lambert said the $1 billion is the first tranche of spending in an overall $12 billion project.

The Trump administration is injecting large amounts of cash to help jumpstart domestic mining and processing to ease Beijing’s grip on those markets.

Project Vault is different. The idea is the government helps U.S. companies secure and store minerals and materials that are costly, hard to come by, and vulnerable to a geopolitical rollercoaster — particularly the whims of Chinese trade policies.

While much of the Trump administration's focus has been on trying to curb Chinese dominance over minerals, Lambert acknowledged VaultCo will sometimes buy minerals mined or processed in China after exhausting domestic and allied sources.

“We expect to see more and more U.S. and allied material coming online, where we can use those as a source,” he said. “The hope is in 10 years you won't need a program like this.”VaultCo, a public-private partnership, received a $10 billion loan from the Export-Import Bank and $1.67 billion in private funds. And commodity traders Mercuria and Glencore, which is also a global miner, recently committed $500 million each to the vault.

The program is designed to help out original equipment manufacturers, or OEMs, the technical term for automakers and other companies that produce equipment. Lambert envisions a lean operation that’s mostly virtual and outsources its work.

Companies will be able to ask VaultCo for a specific amount of minerals at a specific price point, he said. VaultCo would then ask the Ex-Im Bank for a loan to cover the cost of buying that material on behalf of the manufacturer. The company then owns and can withdraw that material over a period of 10 years. After a decade, companies would pay VaultCo fees tied to the cost of the loan and interest, and take ownership of their remaining materials held by VaultCo. How is VaultCo coming together? We have launched, but we haven't learned to fly yet. Are you a federal employee? No, this job doesn't come with any affiliations with the government. How did you get involved in Project Vault?

When I was in government as the [Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy] back in the first Obama administration, critical minerals became a big topic and affected our programs quite dramatically. Since then, I've been in the private industry and following what is, in essence, a market failure.

One of the banks that's participating in the program reached out to me. I had worked with them when I was at Northrop Grumman. I spoke with John Jovanovic at Ex-Im and decided that it was something I thought I could help with, given my background in industry and government and in the manufacturing side.

We expect to name them in, probably the next week or two weeks. We're doing some background checks, and I'm making sure they're comfortable and won't have any conflicts of interest. There will be five or six members total. What companies are participating?

Because it is a competitive market, we don't want to reveal who's asking for what material or who's providing that material. We want to keep that confidential for the sake of both the markets and the companies who are participating.

We will never reveal who the OEMs are or the suppliers that are supplying them, but the companies themselves can release information. How will the program work?

The OEMs actually instruct us what they need and in what quantities and at what price point, and then we go out to the market and try to find that material. And if we can find the material at that price point, then we'll sign a loan.

At that point, Vault will take possession of the material, and they will draw down from that material over a period of time to kind of smooth out their inventory, so they don't get these large shocks in price or or just not having the assets available to them.

I think a lot of OEMs, understandably, want to try out the program and see if it really works for them. How do you dole out minerals in emergencies?

Even though Vault has title to the materials, the materials are actually owned by the OEM. There wouldn't ever be a case of us deciding who got what because they actually own it from the beginning.

We're very different from [the National Defense Stockpile, which estimates how much companies need in hard times]. I refer to it as a stock buffer because the companies actually own the product, and we say you can take up 33% a year.

If there were a huge shock to the system, and a company was not going to be able to continue manufacturing a certain product, we would make exceptions for basically a hardship withdrawal. They could withdraw more than that in the case of a crisis or a national crisis or a particular mineral crisis, which we've experienced in the past. What benefits does VaultCo offer the private sector?

They may not have the ability to source the materials that we'll be able to source. We do have a lot of suppliers coming to us. Second, we hope to aggregate demand and lower prices because we'll have a larger pool of demand to draw from.

Third, there’s a financial benefit of not having to pay the money up front, and using the government's financial vehicle as a way to work this in almost an off-balance-sheet way, so they don't have to carry it as inventory on their balance sheet. How does this make us more competitive with China?

In and of itself, it doesn’t. It’s one of many tools. But it protects some of the OEMs against the shocks that may occur because of the market failure or because of a whim of a particular provider. How are you sourcing materials and will some come from China?

People will come to us with the request, and the first place we will look is a list of domestic suppliers, and hopefully we'll find suppliers in the domestic environment. Next we would go to allies and friends, not just NATO and Asian allies, but their friends around the world where there is material.

And if all of that fails, we would go out to “Rest of World,” just like it’s done now. Over time, that will get easier, but it takes time for some of these projects to reach maturity and actually start producing the process material. Who will oversee Project Vault?

Oversight will be from the board with the Ex-Im’s observer rights. It sounds odd that we're not naming the companies, but we plan to be as transparent as possible about what the finances look like. We'll release all of the internal finances. We need to work closely with Congress so that they have a level of comfort that their money is being spent appropriately.