USA Rare Earth surges on $1.6B gov’t funding LOI

[Ben Graham]

USA Rare Earth (Nasdaq: USAR) confirmed on Monday its entry into a non-binding letter of intent with the Department of Commerce for a $1.6 billion funding package. Shares surged to a three-month high.

The proposed investment comprises $277 million in federal funding and $1.3 billion in senior secured loan, to be issued under the Commerce Department’s CHIPS program aimed to revitalize the US semiconductors industry.

The LOI reflects the strategic importance of USAR’s mine-to-magnet platform and its role in closing the rare earth element and critical mineral supply gap for essential industries that underpin US national security, the Oklahoma-based company stated in a news release.

The Financial Times first reported on the deal, which would see the US government become a 10% shareholder in USAR with the acquisition of 16.1 million shares and approximately 17.6 million warrants, both priced at a discount price of $17.17 a share.

Separately, the rare earth miner said it has signed a securities purchase agreement for a $1.5 billion PIPE transaction (9.8 million shares at $21.50 per share) with Inflection Point and other fundamental and strategic investors. This brings the potential capital raising to the company to $3.1 billion.

USAR surged as much as 16% to $32.07 following the announcement, its highest since October. Year to date, the stock price and market capitalization have nearly doubled, with the latter closing in on $4 billion.

‘Transformative’ step

“This landmark collaboration with the US government represents a transformative step in USAR’s mission to secure and grow a resilient, independent domestic rare earth value chain,” said Barbara Humpton, USAR’s CEO said in Monday’s release.

The company is currently developing a rare earth mine in Sierra Blanca, Texas, that is slated to begin production in late 2028. The deposit, known as Round Top, is specifically rich in “heavy” rare earths elements (HREEs) such as dysprosium, which are essential ingredients to make permanent magnets found in high-tech applications such as electric vehicles, wind turbines and defence systems.

The Round Top project is expected to backstop a US-based mine-to-magnet value chain that also includes a magnet manufacturing plant in Stillwater, Oklahoma, which has an annual production capacity of 5,000 tonnes and is set to enter commercial operations this year, as well as a processing and separation laboratory in Wheat Ridge, Colorado.

Accelerated plans

According to the company, the billion-dollar capital injection is expected to accelerate and de-risk its growth objectives across these businesses. By 2030, it expects to extract 40,000 metric tons per day of rare earth and critical mineral feedstock from Round Top and process a combined 8,000 metric tons per annum (tpa) of materials (mixed rare earth carbonates and HREEs) from both the deposit and third parties.

In addition, USAR aims to reshore10,000 tpa of HREE metal- and alloy-making and strip-casting capacity, capabilities that do not currently exist in the US, through its recently acquired subsidiary Less Common Metals. It also plans to more than double its neodymium-iron-boron (NdFeB) magnet-making capacity to 10,000 tpa.

“USA Rare Earth’s heavy critical minerals project is essential to restoring US critical mineral independence,” Secretary of Commerce Howard Lutnick commented. “This investment ensures our supply chains are resilient and no longer reliant on foreign nations.”

DOE partnership

Further to the LOI with the Commerce Department, USAR will also collaborate with the US Department of Energy’s National Energy Technology Laboratory to advance HREE separation technologies at the company’s Wheat Ridge lab in Colorado and its Round Top deposit.

Under the Trump administration, the DOE has prioritized innovation in process modeling, the use of digital twins, and the deployment of testbeds for material-processing R&D. Through this partnership, the DOE will contribute to the development of digital twins to advance rare earth element separation technologies, with the ultimate goal of establishing the country’s first fully domestic mine-to-magnet supply chain, USAR said.

“Thanks to President Trump’s leadership, the Department of Energy is ending America’s reliance on foreign nations for the critical materials essential to our economy and national security,” US Energy Secretary Chris Wright stated.

“The DOE is partnering with USAR to rebuild the critical minerals supply chain. By expanding domestic mining, processing, and manufacturing capabilities, we are creating good-paying American jobs and safeguarding our national security.”