Noveon Magnetics Inc., a San Marcos-based recycler and maker of rare earth magnets, has landed a deal to deliver 1,000 tons of magnets to Nidec Motor Corp. over the next five years.

Calling the contract “a great form of validation,” Peter Afiuny, Noveon’s co-founder and chief commercial officer, said Friday that Nidec will use the magnets in its industrial automation and defense businesses.

He wouldn’t disclose the deal’s value but said it’s been in the works for a few years. The company has said previously it expects to make 2,000 tons of magnets each year, generating about $250 million in annual revenue.

The deal comes as the U.S. and other countries hustle to compete with China, which dominates the global rare-earth metals market and produces 90% of the world’s rare-earth magnets.

“We are especially excited to support them, because we think that there’s a lot of growth within what they’re offering to the market, and it falls right in line with where we want to be as a magnet producer to sort of broader applications,” Afiuny said.

Noveon is one of only five companies outside China — and the only one in the U.S. — making sintered neodymium iron boron magnets which, according to Afiuny, are the “most powerful, permanent magnet that you can buy.”

Noveon has developed processes to make the magnets from new or recycled materials from discarded electric motors and components. The magnets are used in motors, actuators and other devices across various industries due to their strength and ability to withstand heat. Computers, electric vehicles, MRI machines, robots, wind turbines, microwaves, missiles and fighter jets are among the machines that depend on the technology.

“This agreement is a critical step in strengthening America’s industrial base and ensuring the availability of advanced rare earth magnet technology for our nation’s most strategic industries,” Noveon CEO Scott Dunn said in a statement.

Based in St. Louis, Nidec Motor is a subsidiary of the Nidec Corp., a Japanese conglomerate with 300 companies across the Americas, Asia and Europe. It’s one of the world’s largest producers of electric motors.

“This partnership further reinforces the importance of a strong U.S. manufacturing capability, and we are proud to lead the way in building a sustainable, resilient, and strategically vital domestic supply chain for our future,” said Michael Briggs, president of Nidec Motion & Energy.

Launched in 2014, Noveon has seen increasing success since it began operations at its 145,000-square-foot facility in 2020. Along the way, it’s grown from 25 employees to nearly 100, and Afuny said that could increase with the Nidec deal.

Noveon’s facility has capacity to produce 2,000 tons of magnets each year but has said it could scale to produce up to 10,000 tons annually.

As the company grows, it’s working toward 24/7 operations at San Marcos. It has added shifts, Afiuny said, but is not there yet.

The company has raised at least $150 million in funding, including $75 million in a May 2023 round led by investment firms NPG in Dallas and Aventurine Partners, which has its primary office in Houston. At the time, Forbes reported the company expected to bring in $10 million in 2023.

It’s also finalizing a contract with the Defense Department estimated to be worth $35 million and talking with other government agencies, including the Department of Energy, for additional work.

“It’s a really sort of bipartisan issue. It’s important for national security. It’s important for developing our industrial base, whether it’s an energy industrial base or a defense-related industrial base,” Afiuny said. “At the end of the day, it’s servicing a broader need that supports trends in electrification and, as a result, I think that there’s a lot of good attention at the state level” as well as across the federal government.