Over the past year, the United States has taken measures to secure rare-earth elements and reduce its dependence on China. Earlier this year, the U.S. government provided USA Rare Earth (USAR -2.99%) with funding to boost its domestic "mine-to-magnet" production. The government is providing funding to bolster supply chains and ensure domestic mining and processing capabilities for these important magnets.
Given the importance of rare earths for national security, could investing in USA Rare Earth make you a millionaire?
NASDAQ: USAR
Key Data Points
USA Rare Earth secured billions to build its manufacturing and mining capabilities
In January, USA Rare Earth secured access to $3.1 billion in much-needed capital. This includes $1.5 billion in private-sector investment and another $1.6 billion from the U.S. government, including $1.3 billion in senior secured loans; in return, the U.S. government will get a 10% equity stake in the miner's stock. This money will help the company expand its manufacturing facility in Stillwater, Oklahoma and develop its Round Top project.
The company will manufacture sintered neodymium iron boron magnets, which are essential in electric vehicle (EV) motors, wind turbines, and defense systems such as missiles and fighter jets, at its Stillwater facility. While it has produced a small batch of sintered permanent magnets, it has yet to demonstrate that it can produce them at scale. The company hopes to open its facility in the first quarter, but as of this writing, it remains in the commissioning phase.
In March, USA Rare Earth entered into an agreement to acquire Texas Minerals Resource Corporation for roughly $73 million in stock. The acquisition gives the company 100% control over the Round Top Project in Texas, which is described as the richest heavy rare-earth, gallium, and beryllium deposit in the United States. It hopes to begin production here by 2028.
Image source: Getty Images.
It faces competition from another up-and-coming miner stock
Prospective investors will want to keep an eye on MP Materials, a competitor to USA Rare Earth. MP Materials operates the Mountain Pass mine, which is currently the only rare-earth element mine in North America, is already producing at scale, and has established contracts with giants like General Motors and Apple.
The company is producing record levels of NdPr oxide and rare-earth concentrate as commercial-scale production has begun at its Independence facility in Fort Worth, Texas. In the long term, MP plans to develop a "10X" facility, set to open around 2028, to significantly ramp up production.
Is USA Rare Earth for you?
For investors in USA Rare Earth, owning the stock is a bet on its future and ability to execute. The company still needs to begin production at its Stillwater facility, so keep an eye out for the activity around this in the coming months. In the long term, the company will need to develop the Round Top project, which is at least two years away from operations.
An investment has the potential to be a millionaire-maker if USA Rare Earth can pull it off and fulfill its role as an important domestic supplier of these crucial magnets. However, the mining stock is in its infancy, and it faces execution risk along the way, so if you do decide to invest, keep the position modest and don't invest more than you are willing to lose.
