USA Rare Earth: As Losses Rise, Operational Progress Matters More

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USA Rare Earth (NASDAQ: USAR) is a small company working to solve a big problem: the United States' reliance on China for rare earth elements (REEs). Currently, mining company MP Materials (NYSE: MP) is the only U.S. firm producing and processing REEs at scale. It is also the only U.S. company making permanent magnets, the vital products made using REEs.

Excitement around REE companies has helped USA Rare Earth’s shares rise approximately 150% over the past 52-weeks. Still, the basic materials stock is among the most volatile in the market, now down well more than 50% from highs.

The company recently reported earnings. Its adjusted loss per share increased from 15 cents to 19 cents, leading the firm to miss estimates significantly. However, for this early-stage company, revenue and earnings do not tell the full story.

At this point, USAR’s primary goal is to become a fully integrated mine-to-magnet producer in the United States. By examining the progress the firm has made on this front, investors can get a sense of what to expect going forward.

Why Building up REE Magnets Is a Strategic Priority for the U.S. Government

The United States government has recognized that REEs, and ultimately permanent magnets, are critical to economic and national security. This comes as technologies from consumer electronics, electric vehicles, clean energy infrastructure, and defense systems rely on permanent magnets.

However, China dominates this industry and isn’t afraid to use its influence to control prices and as a geopolitical tool. Overall, China controls around 60% of worldwide REE mines, 90% of processing, and 94% of permanent magnet production.

This is why the US Department of Defense invested $400 million in MP Materials. It also guaranteed MP a $110/kg price floor on Neodymium-Praseodymium (NdPr) oxide. Producers refine REEs to create NdPr oxide, which they can then use to make magnets. In September of 2025, this price floor was 86% higher than the market price MP received, showing the government’s extensive support for its operations. With this background, let’s dive into how USAR’s strategy is progressing thus far.

USAR’s Site Development and Funding Gain Steam

USAR noted several developments in its earnings report that show the firm is moving toward its goal. The company’s Round Top deposit in Texas is its most valuable asset, containing a significant amount of REEs. Notably, the firm is now targeting the commissioning and commercial production at Round Top in late 2028, two years ahead of its previous schedule.

The firm acquired Less Common Metals (LCM) in November 2025, which will support important manufacturing steps for eventual magnet production. The acquisition also allowed USAR to generate revenue after seeing no sales in 2024, as LCM had existing customer relationships.

However, sales were still small at $1.64 million. Because the acquisition took place in late November 2025, these sales likely accounted for only a month of revenue. Thus, sales in 2026 should be much larger. Still, LCM's role in supporting USAR’s long-term mine-to-magnet ambitions is more important than the revenue it brings in near-term.

USAR has also commissioned its Stillwater magnet production site in Oklahoma. USAR believes this will enable it to begin fulfilling customer orders for permanent magnets in Q2 2026.

Funding is another area of strength. The company generated gross proceeds of $1.5 billion from a private stock offering. It also expects to sign an agreement with the Department of Commerce in April to gain access to an additional $1.6 billion in funding. However, it is important to note that most of the Department of Commerce funding would come through a loan.

Combined with its $360 million in cash and equivalents and proposed support from the French government, this could give the firm total funding of nearly $3.5 billion. In this case, USAR would be within earshot of the estimated $4.1 billion needed to build out its mine-to-magnet platform.

USAR: High Upside Potential With Substantial Risks

USAR is targeting $2.6 billion in revenue in 2030 and $900 million in free cash flow. With a market capitalization currently near $3.3 billion, if the company is successful in its plan, its valuation today looks cheap. However, its plan does face significant risks.

The Department of Commerce funding is not guaranteed. If the deal falls through, it would leave a huge gap in USAR’s funding needs. It is also possible that the actual funding the company needs to finance its projects exceeds current estimates. Additionally, construction or mining setbacks could cause significant delays in large-scale revenue generation.

Still, the importance of diversifying the REE supply chain remains an ace up USAR’s sleeve. Additionally, its Round Top Deposit is particularly rich in heavy REEs. Highly advanced technologies require heavy REEs, and their prices are much greater than the light REEs MP specializes in.

Overall, USAR is a high-risk, high-reward stock, and one that investors should have significant conviction in before considering.

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