USA Rare Earth wins up to $19.3M in DOE backing

USA Rare Earth (Nasdaq: USAR) has been selected by the United States Department of Energy (DOE) to receive up to $19.3 million (C$26.6 million) in federal funding for a pilot-scale rare earth separations project aimed at strengthening domestic supply chains for critical minerals.

The funding, subject to final negotiations, comes through the DOE’s Critical Materials Innovation, Efficiency and Alternatives program. It would support development of processing capacity for rare earth elements used in energy, defence and advanced manufacturing. 

The total project value is estimated at about $50.5 million, including $31.2 million in non-DOE funding. Final scope, budget and timing remain under negotiation with the department.

“We are honoured to be selected by the Department of Energy under its critical materials innovation program,” CEO Barbara Humpton said in a statement. “This selection is an important validation of our team’s cutting-edge work to build a resilient rare earth value chain.”

Shares in the company jumped 8.2% to $24.42 apiece Thursday afternoon, valuing USA Rare Earth at about $5.4 billion.

Expansion drive

The award marks another step in USA Rare Earth’s aggressive expansion campaign as it seeks to challenge China’s dominance in critical minerals processing and establish itself as a leading Western supplier of rare earths and permanent magnets. The company has assembled assets across the U.S., UK, France and Brazil spanning mining, metals, alloys and magnet manufacturing.

USA Rare Earth has pursued a string of acquisitions and investments since it went public through a reverse takeover last year. After last year acquiring U.K.-based Less Common Metals, gaining rare earth metals and alloy production capacity, it agreed last month to buy 12.5% stake in France’s Carester SAS to access rare earth processing expertise.

The firm also received $1.6 billion in proposed funding from the US Department of Commerce in January, contingent on hitting milestones tied to the buildout of core projects.

Acquisition under review

Last month, USA Rare Earth announced a $2.8 billion deal to acquire Brazil’s Serra Verde, owner of the Pela Ema rare earth mine in Goiás state. The transaction included a 15-year U.S. offtake agreement tied to production of neodymium, praseodymium, dysprosium and terbium, metals used in high-performance magnets.

Brazil’s antitrust watchdog has opened an investigation into the proposed Serra Verde buy, which would give USA Rare Earth control of Brazil’s only producing rare earth mine. The operation, which entered commercial production two years ago, is one of the few outside China capable of large-scale heavy rare earth production. Serra Verde has said the mine could account for half of non-Chinese heavy rare earth output by next year.

The DOE selection underscores Washington’s broader push to secure domestic supplies of strategic minerals as geopolitical tensions and export controls expose Western dependence on China’s dominance in rare earth mining, processing and magnet manufacturing. 

USA Rare Earth is betting on vertically integrated operations stretching from mining to magnet production will help position it as a cornerstone supplier to aerospace, defence, semiconductors, energy and data centre industries.