USA Rare Earth surges 18% on $3.1B US government funding package
CHIPS Act-backed investment creates first domestic rare earth supply chain, reducing China dependency
USA Rare Earth shares surged 18% in Monday trading after the company announced a landmark $3.1 billion capital package backed by the U.S. government, marking the most significant federal investment in domestic rare earth production in decades.
The Stillwater, Oklahoma-based miner closed at $29.12, adding $4.35 to its share price on volume that exceeded 548% of its daily average. The rally pushed the stock near its 52-week high of $43.98 reached earlier this year, though it remains well below that peak after a volatile trading period that saw shares dip as low as $5.56.
At the heart of the transaction is a non-binding letter of intent with the Department of Commerce's CHIPS Program for $1.6 billion in federal funding, consisting of $277 million in direct support and a $1.3 billion senior secured loan. The package is bolstered by a $1.5 billion private investment through a common stock PIPE (Private Investment in Public Equity) transaction, anchored by Inflection Point with participation from major mutual fund complexes, according to the company's announcement.
The U.S. government will acquire an 8-16% equity stake in the company, including 16.1 million shares and 17.6 million warrants priced at $17.17 per share. This strategic partnership aims to establish America's first fully integrated mine-to-magnet supply chain, addressing critical national security vulnerabilities.
The funding will accelerate development of USA Rare Earth's Round Top heavy rare earth project in Texas and a magnet manufacturing facility in Oklahoma. These operations are designed to produce 10,000 tons per annum of heavy rare earth element metal and alloy-making capacity, alongside 10,000 tons per annum of neodymium-iron-boron (NdFeB) magnets—more than double the company's previous capacity plans.
Rare earth elements are essential components in electric vehicles, wind turbines, defense systems, and consumer electronics. China currently dominates global production, controlling approximately 60% of rare earth mining and nearly 90% of processing capacity. The U.S. has not had significant domestic rare earth production since the Mountain Pass mine in California scaled back operations more than a decade ago.
The strategic importance of this investment extends beyond commercial considerations. The Department of Commerce has identified 35 critical minerals essential to national security and economic prosperity, of which rare earth elements comprise 17. USA Rare Earth's operations would secure domestic access to 12 of the government's top 30 most essential critical minerals and rare earth elements, reducing dependence on foreign sources for materials vital to semiconductor chip manufacturing, renewable energy infrastructure, and advanced weapons systems.
"This transaction enables the largest domestic heavy rare earth, critical mineral, metal, and magnet production to support U.S. semiconductor, defense, energy, and other major industries by 2030," the company stated in its announcement. "The collaboration aims to establish the country's first fully domestic mine-to-magnet supply chain."
The investment comes amid intensifying U.S.-China competition over critical mineral supply chains. The Biden administration has made supply chain resilience a central pillar of its industrial policy, with the CHIPS and Science Act authorizing $52 billion to strengthen domestic semiconductor production and related supply chains. The rare earth funding represents the first major application of CHIPS Act resources to the critical minerals sector.
Analysts have taken note of the transformational potential of the government backing. USA Rare Earth currently has five "buy" ratings from covering analysts with an average price target of $27.20, according to market data. The consensus rating reflects the company's position as a pure-play rare earth developer with strategic assets but also recognizes the execution risks inherent in bringing complex mining and processing operations online.
The company remains in the development stage with trailing twelve-month revenue of zero and an earnings per share loss of $2.23, typical for mining companies advancing projects toward production. However, the $3.1 billion capital injection provides substantial runway to reach commercial operations without the dilutive financing that typically plagues development-stage miners.
Investor enthusiasm was evident in the trading activity, with 64.4 million shares changing hands—far exceeding the company's average daily volume. Institutional investors currently hold approximately 30% of outstanding shares, while insiders own 13.3%. The PIPE transaction is expected to significantly increase institutional ownership upon completion.
Critical challenges remain. The company must successfully navigate complex environmental permitting processes, secure additional off-take agreements for its planned production, and execute construction of both mining and manufacturing facilities on an accelerated timeline. The rare earth market has historically been volatile, with prices subject to rapid swings based on Chinese export policies and global demand trends for electric vehicles and renewable energy technologies.
Nevertheless, the federal backing provides a significant validation of USA Rare Earth's strategic assets and the broader push to reshore critical mineral production. As tensions with China persist over technology and trade, rare earth independence has emerged as a bipartisan priority in Washington, with policymakers increasingly viewing control over these materials as essential to maintaining U.S. technological leadership and military preparedness.
The next key catalysts to watch include finalization of the binding agreements with the Department of Commerce, completion of the PIPE financing, and progress on permitting for the Texas and Oklahoma facilities. Investors will also be monitoring potential off-take agreements with major U.S. manufacturers seeking to secure domestic rare earth supplies.