Howdy, folks.
China still runs the rare earth business, from the rock in the ground to the finished magnet. A handful of Western companies are trying to change that, and USA Rare Earth (USAR) is one of the two names that always comes up. MP Materials (MP) is the other.
Which is why I sat in on USAR's second quarter call yesterday after the close.
The print was ugly.
Revenue came in at $5.82 million against expectations near $8 million. Shares dropped about nine percent after hours, then made back part of it today.
Every dollar of that revenue came from Less Common Metals, the metal and alloy shop USAR owns in the United Kingdom. Cost of product revenue ran $7.4 million against $5.82 million in sales. They sold the stuff for less than it cost to make.
Blame the supply chain. Raw material costs are brutal right now, worst of all in the heavy rare earths. USAR has pushed its prices up, though the increases landed too late to save this quarter.
The real fix is supposed to come from two deals. Serra Verde Group owns a mine and processing plant in Goiás, Brazil, and Carester is a French outfit that specializes in rare earth processing, separation and recycling technology.
Between them, USAR ends up owning the material it currently has to go out and buy. Neither deal fixes anything overnight.
The Loss You Saw Is Not the Loss They Took
Most folks are going to misread this quarter.
The headline number looks almost gentle: a net loss of $10.3 million, or five cents a share. Don't stop there. That figure includes a non-cash gain of roughly $22.4 million tied to the fair value of warrant and earnout liabilities.
Strip that accounting entry out and the adjusted loss runs $33.5 million, or 15 cents a share. That's the number Wall Street was measuring against its 13 cent estimate. Operating expenses hit roughly $45 million and capital spending hit $66 million in the quarter alone.
So the burn is real. USAR finished June with about $1.53 billion in cash, and operations ate $56.9 million of it during the quarter, $75.3 million over the first six months. At most companies this early, that pace would worry me.
USAR has a federal backstop.
Back in June it signed agreements with the Department of Commerce that open access to up to $277 million in direct federal funding and up to $1.3 billion in senior secured loan capacity under the CHIPS Act. USAR has to hit specific milestones and then apply to get reimbursed. Nobody wired them a lump sum.
CFO Rob Steele said the first request goes in within a few months.
Then came the number that caught my eye: 100.
USAR is in active commercial talks with more than 100 potential magnet customers, and more than 20 of those have moved into qualification. Signed MOUs and letters of intent cover 2,500 metric tons of annual magnet demand across aerospace, defense, industrial automation, motors and automotive. A few have already turned into production purchase orders.
Management says the first commercial magnet sale lands before the end of this year. For a company that has never sold a magnet, that's the catalyst.
August 28 Is the Only Date That Matters Right Now
Before any of that happens, though, there's a vote.
USAR is buying Serra Verde for roughly $2.8 billion. Steele told analysts the shareholder vote on August 28 is the last hurdle standing, with no regulatory approvals outstanding and closing expected shortly after. Call it 17 days.
Serra Verde is the only scaled producer outside Asia of all four magnetic rare earth elements. The deal carries a 15 year, 100 percent offtake agreement with price floors. USAR gets contracted material for everything it's building downstream.
That vote also decides who runs the place. Serra Verde CEO Thras Moraitis takes over as chief executive on October 1, replacing the retiring Barbara Humpton. The handoff depends on the deal closing, so if August 28 goes sideways, the board inherits a leadership problem on top of a supply problem.
Round Top is the slower story. USAR closed its purchase of Texas Mineral Resources this month and now holds 100 percent of the Texas deposit's economics. Three rigs have drilled more than 10,000 feet, early assays confirm heavy rare earth distribution above 70 percent, and commercial operations are still targeted for late 2028.
Washington Keeps Rewriting This Thesis for Them
Washington keeps showing up for this industry.
Last Friday, President Trump announced roughly $3 billion in federal support for critical minerals and battery projects at a State Department roundtable. Most of it came as conditional loans and export financing rather than appropriated cash, and none of it went to USAR.
The dollar figure matters less than the pattern behind it. Washington now treats mining, processing and permanent magnets as defense infrastructure. It used to treat them as a commodity business.
USAR's executive chairman was in the room for that roundtable. If that posture holds through the next budget cycle, the federal money underneath this company keeps compounding.
The market is already moving that direction on its own. Humpton put it better than any analyst I've read: availability, not price, governs the rare earth industry now. Western dysprosium oxide has climbed more than 90 percent this year to nearly $2,000 per kilogram, more than nine times what the same material costs inside China.
That gap is the whole investment case. It's also the only reason a company booking $5.8 million in quarterly revenue carries a market value near $4.7 billion.
Three Dates on My Calendar
The financials yesterday were bad. The strategy underneath them held up fine. What the valuation assumes is a level of execution nobody outside China has pulled off yet.
So I've stopped watching quarters on this one. I'm watching three dates: August 28 for the Serra Verde vote, year end for the first magnet sale, and year end again for the Round Top feasibility study.
Clear all three and the story holds while the numbers catch up in 2027. Miss one and this is a $4.7 billion company selling six million dollars of metal a quarter, and the market will price it exactly that way.
