USA Rare Earth (USAR) just landed a massive vote of confidence from the U.S. government, and it couldn't have come at a better time.
- The Oklahoma-based critical minerals startup announced a transformative $1.6 billion deal with the Commerce Department that includes both federal loans and equity stakes.
- Combined with a heavily oversubscribed $1.5 billion private funding round, the company now has access to roughly $3.1 billion in capital to accelerate its mine-to-magnet operations.
The timing aligns with President Donald Trump's announcement of Project Vault, a first-of-its-kind strategic minerals reserve designed to ensure American businesses never face critical supply shortages again.
Breaking Free From China’s Grip
The deal is part of a broader push to rebuild America's critical minerals industry. China currently controls nearly 60% of global rare earth mining and over 90% of magnet manufacturing, which has created a chokepoint and threatened U.S. national and economic security.
CEO Barbara Humpton didn't mince words about the stakes involved: "We absolutely need a secure domestic supply chain for these items, and USA Rare Earth is moving at pace to make this vision a reality," Humpton told analysts on a recent conference call.
The proposed government package breaks down into two parts:
- $277 million in direct federal incentives and a $1.3 billion senior secured loan.
- In exchange, the Commerce Department will receive 16.1 million shares of common stock and 17.6 million warrants, giving taxpayers a roughly 8% to 16% stake, depending on the exercise of warrants.
How the Funding Works
Here's what makes this deal different from traditional government grants: the money doesn't arrive upfront. Instead, disbursements are contingent on USA Rare Earth achieving operational milestones between 2026 and 2028.
Humpton explained the government's rationale for this structure in an interview with CNBC. "The intent of our colleagues at the Department of Commerce was to make sure that taxpayers, the public sector would always be following the investments of the private sector," she said. "The American taxpayer is never overcommitted on this plan."
CFO Rob Steele added that most funding will flow during the current administration, assuming the company hits its targets. This milestone-based approach ensures taxpayer funds continue only if USA Rare Earth delivers on its commitments.
The Complete Rare Earth Value Chain
USA Rare Earth isn't just building one piece of the puzzle. The company is assembling what it calls a complete mine-to-magnet platform, hitting multiple high-value segments along the way.
The strategy begins with Round Top, a rare-earth deposit in Sierra Blanca, Texas, that contains 15 of 17 rare-earth elements. This deposit is particularly rich in heavy rare earths like dysprosium and terbium, which are virtually unavailable from domestic sources today. It also contains gallium, hafnium, and zirconium, all critical to semiconductor manufacturing. While it was originally scheduled for 2030, USA Rare Earth has accelerated Round Top's timeline. Commercial production is now targeting late 2028, based on positive results from solvent-extraction piloting.
"We know that the chemistry works, and now we are building up our demonstration facility," Humpton told CNBC. "Through the early part of this year, you'll be able to see the results as we bring samples from the mountain and actually process them."
Next is metal-making through Less Common Metals, which USA Rare Earth acquired in November. LCM is currently the only proven producer of both light and heavy rare earth metals outside China. The company announced plans for a new facility in Lacq, France, with 3,750 metric tons of annual capacity, supported by the French government.
Finally, there's magnet manufacturing. USA Rare Earth's Stillwater, Oklahoma, facility is on track to begin commissioning this quarter. It plans to reach 10,000 metric tons of annual magnet-making capacity by June 2030.
The Economics Look Compelling
Steele walked analysts through an aggressive growth trajectory that shows the company reaching profitability faster than many expected.
- USA Rare Earth targets gross profit breakeven in 2027, EBITDA breakeven in 2028, and cash flow breakeven in 2029.
- By 2030, the company projects $2.6 billion in revenue, $1.2 billion in EBITDA, and $900 million in free cash flow.
- Those numbers assume oxide pricing around $125 per kilogram for neodymium-praseodymium, already above the $110 price floor that MP Materials (MP) secured in its Pentagon deal.
- Notably, USA Rare Earth's agreement doesn't include price floors or offtake agreements.
"The minerals that we have are frankly in dramatic undersupply outside of China and are absolutely required for things like semiconductors, aerospace and defense," Steele explained when asked about the lack of price protection.
He pointed to specific examples. Dysprosium trades at $900 per kilogram, terbium at $3,500 per kilogram, and hafnium at $1,500 per kilogram. Global dysprosium supply from sources outside China measured in the tens of tons last year, against market demand of roughly 2,000 metric tons annually.
Challenges Remain, but Momentum Is Building
USA Rare Earth still needs to raise about $600 million in additional capital beyond the government and private funding announced Monday. Steele said the miner expects to secure that from strategic investors or institutional sources, given the project's strong returns.
The company also cautioned investors in SEC filings about execution risks. Round Top has attracted investor speculation for decades but never reached commercial production. USA Rare Earth warned it may face delays or might not successfully extract minerals commercially.
But Humpton sounded confident during the analyst call, citing the company's progression from simulation to bench testing to piloting. The selection of engineering partners Fluor and WSP should also accelerate construction timelines.
What Analysts Are Saying About USAR Stock
Out of the six analysts tracking USAR stock, five recommend “Strong Buy,” and one recommends “Hold.” The average USAR stock price target is $37, above the current price of $23.53.
For investors watching the rare earths space, USA Rare Earth's massive funding announcement signals the U.S. government is serious about rebuilding domestic critical minerals capacity.
Whether USA Rare Earth can execute its ambitious timeline will determine whether it becomes the second major leg of America's rare earth supply chain, alongside MP Materials.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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