USA Rare Earth shares rally as Commerce Department takes equity stake

Key Points

• The Commerce Department will provide USA Rare Earth with a $1.3 billion loan and $277 million in federal funding.
• USA Rare Earth will issue Commerce 16.1 million shares of common stock and 17.6 million in warrants.
• The Trump administration has taken stakes in several miners as it builds a Western rare earth supply chain to reduce dependence on China.

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USA Rare Earth shares rallied Monday after the critical minerals startup announced that the Department of Commerce will take an equity stake.

Commerce has issued a letter of intent that would provide USA Rare Earth with a $1.3 billion loan and $277 million in federal funding.

USA Rare Earth will issue Commerce 16.1 million shares of common stock and 17.6 million in warrants. The U.S. government will have an 8% to 16% stake in the company depending on whether the warrants are exercised, according to a filing with the Securities and Exchange Commission.

USA Rare Earth will also raise $1.5 billion from private investors. The proposed deal with Commerce is subject to the finalization of certain conditions.

CEO Barbara Humpton said the deal with the U.S. government will turn USA Rare Earth into an industry leader. Its stock soared 29% at its high Monday before closing with a gain of about 8% at $26.72 per share.

"This is a watershed moment in our work to secure and grow a resilient and independent rare earth value chain based in this country," Humpton told analysts on a call Monday.

"We have long said that meeting the urgent call to reassure the rare earth and critical minerals industry will require a multiplayer solution, and this establishes our company as one of the leaders," she said.

USA Rare Earth is the latest in a series of mining companies that the Trump administration has taken equity stakes in as it builds a Western rare earth and critical minerals supply chain to reduce dependence on China.

Rare earths are a subset of critical minerals that are crucial inputs in strategic industries like defense, robotics, electric vehicles and semiconductor manufacturing.

Magnet plant and mine

The capital infusion from the Trump administration will help USA Rare Earth advance its plan to build a magnet manufacturing plant in Stillwater, Oklahoma, and a mine at a rare earth deposit in Sierra Blanca, Texas, called Round Top.

Commerce will disburse the funding from 2026 through 2028 based on milestones as USA Rare Earth implements its business plan, Chief Financial Officer Rob Steele told analysts on the call.

USA Rare Earth is on track to commission its magnet manufacturing plant in the first quarter of 2026, Steele said. It aims to start commercial mining operations at Round Top in late 2028, he said.

The company needs about about $4.1 billion to execute its plan, Steele said. It will have about $3.5 billion between its current cash and the government financing as well as private funding announced Monday, he said. This leaves $600 million in additional capital that USA Rare Earth needs to raise.

"We believe we can raise the remaining capital from attractive sources, and you should assume that's equity capital but that can come from strategic investments as well as institutional investors," Steele said.

Funding conditions

But USA Rare Earth has to satisfy several conditions before the agreement with Commerce is finalized. This includes raising at least $500 million from sources other than the federal government, which it will satisfy with the private funding announced Monday.

It also has to secure two memorandums of understanding with semiconductor end or midstream users, obtain feedstock supply agreements through 2027, and define a power plan for its magnet facility among other conditions, according to its SEC filing.

The planned investment in USA Rare Earth comes after the Defense Department struck a landmark deal last summer with rare earth miner MP Materials that included an equity stake, price floor and offtake agreement. The Trump administration also took stakes in Lithium Americas and Trilogy Metals last year.

The agreement with USA Rare Earth does not include price floors or offtake agreements.

The U.S. has been dependent on rare earth imports from China, which dominates the global supply chain. Beijing tried to cut off rare earth exports last year during trade disputes with the Trump administration.

"USA Rare Earth's heavy critical minerals project is essential to restoring U.S. critical mineral independence," Commerce Secretary Howard Lutnick said in a statement. "This investment ensures our supply chains are resilient and no longer reliant on foreign nations."