USA Rare Earth’s stock climbed higher on Monday, Jan 26, after the official confirmation of government investment in the mine-to-magnet producer.
The US is steadily building its rare-earth supply to rival China, which currently controls the majority of global rare-earth processing and magnet manufacturing. Rare earths are a strategic priority due to their role in national security, spanning defense systems, semiconductors, electric vehicles, and consumer electronics.
Last October, USAR’s CEO, Barbara Humpton, said the company was in close communication with the White House, suggesting a possible deal in the future. On Monday, Jan 26, it cemented its position in Washington’s strategy to rebuild a domestic rare-earth supply chain; rare earths are crucial for national security and are an industrial priority.
Following the announcement, USAR stock soared 7.9% on Monday and continued its upward trend after hours before pulling back 3% on Tuesday, Jan 27. Even with the pull-back, this formerly under-the-radar stock has gained more than 90% this past month and is up 117% year-to-date.
USA Rare Earth KL
Big government backing meets market optimism
USA Rare Earth entered into a non-binding Letter of Intent with the U.S. Department of Commerce and a collaboration with the Department of Energy (DoE). The agreement is part of the CHIPS (Creating Helpful Incentives to Produce Semiconductors) Program that could unlock up to $1.6 billion in funding for USAR. This includes $277 million in proposed federal support and $1.3 billion senior secured loan under the CHIPS Act.
This funding is set to accelerate the build-out of the company’s mine-to-magnet supply chain, covering mining, processing, metal-making, and magnet manufacturing, to bridge the supply gap critical to industries that support US national security and advanced manufacturing.
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In parallel, USAR also secured a $1.5 billion Private Investment in Public Equity (PIPE) anchored by Inflection Point and other institutional investors, bringing the total prospective capital to about $3.1 billion.
The funding from the Commerce Department, however, will be tied to milestones and approvals and would include issuance of common stock and warrants to the governments, aligning public-sector support with investor objectives.
USAR will issue 16.1 million shares of common stock and around 17.6 million warrants to the Department of Commerce. Overall, the U.S. government will wind up with a 10% equity stake in the company.
The US administration’s push to lessen reliance on China for rare earths, which are used in strong magnets, EVs, laptops, smartphones, surgical equipment, drones, fighter jets, and more, has pushed domestic manufacturers like MP Materials (MP) and USA Rare Earth to the forefront.
USA Rare Earth is currently developing a top-tier heavy rare-earth deposit in Texas, with commercial production expected to begin in 2028. Simultaneously, it is scaling the permanent manufacturing at its Oklahoma facility, set to begin commercial output in 2026.
Analysts are bullish on USAR
Wall Street appears bullish about the agreement. Benchmark analyst Subash Chandra raised the firm’s price target on USAR to $45 from $15, keeping a Buy rating, citing that the rare-earth producer secured 85% of the $4.1 billion in capital it needs for full integration through this announcement.
Benchmark was also “surprised by the scale of the transaction” and raised its price target on USAR’s increased magnet-making capacity from 5,000 metric tonnes to 10,000 metric tonnes, as reported by TheFly.
Canaccord also raised its price target following the US Department of Commerce’s letter of intent to $33 from $23, while maintaining a Buy rating. The firm noted that, while this agreement lacks the price floors, profitability guarantees, and off-take agreement of the deal with MP Materials, Canaccord believes that such supports are not essential to USAR’s business model, according to TheFly.
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