USAR Earnings Recap
Beat 2 of last 5 quarters
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USA Rare Earth's progress underscores the accelerating Western buildout of a non-China rare earth supply chain, a critical input for AI infrastructure (motors, servos, semiconductors, robotics). The company's integrated mine-to-magnet platform, backed by $1.5B in cash and up to $1.6B in Department of Commerce funding, positions it to anchor the non-China tier. The surge in Western heavy rare earth prices and customer urgency signal a structural shift that could benefit the entire Western critical minerals ecosystem.
Q2 FY2026 revenue was approximately $6 million, all from LCM metal and alloy sales, with gross margins pressured by higher raw material costs due to industry-wide supply constraints. Operating expenses were ~$45 million, including elevated M&A and legal costs, and the adjusted net loss was $33.5 million ($0.15/share). The company signed definitive agreements with the Department of Commerce, announced the acquisition of Serra Verde and an investment in Carester, and broke ground on a second U.S. magnet and metals facility in Blacksburg, South Carolina. Operationally, the hydrometallurgical facility in Wheat Ridge was commissioned, first commercial dysprosium and NdPr oxide samples were produced from recycled magnet swarf, and the TMRC acquisition closed. Stillwater is scaling toward 600 metric tons run-rate capacity by year-end, with 140 employees and over 100 active commercial dialogues.
Management reiterated its long-term schedule: Round Top targeting commercial operations in late 2028 and 10,000 tons of both metal/alloy and magnet capacity in the U.S. by 2029. The company expects to close the Serra Verde acquisition shortly after the August 28 shareholder vote, with no remaining regulatory hurdles. Management highlighted a two-tier market emerging (China vs non-China) with Western heavy rare earth prices surging, and expects positive pricing momentum as it establishes non-China pricing. They expect first magnet sales by year-end 2026 and plan to apply for the first Department of Commerce reimbursement distribution in the coming months. The company did not provide formal financial guidance but signaled improving gross margins at LCM as utilization rises and as feedstock from Serra Verde and Carester becomes available.
“For decades, price governed this industry because availability was assumed, availability or lack thereof is what governs the rare earth industry now.”
on Market paradigm shift
“We have already gone out with higher prices on our products, and we expect that, that will be seen in the upcoming quarters.”
on Pricing momentum
“So swarf generally speaking will represent 20% to 30% of our finished magnets.”
on Recycling feedstock
Barbara, congratulations and Thras as well. Barbara has done a great job. Rob, maybe my first question is something you just said on the PPOs. I think did you say run 2,500 metric tons already. And if so, is the plan to continue to even build upon that? And I'd love to hear, are these long-term arrangements, like what type of orders are we talking in years perhaps?
That is 2,500 tons of annual demand, and we are looking to expand that well beyond. The additional customers in the pipeline and near-term qualification will build demand further. Supply agreements will range from single purchase orders to annual agreements, and over time we will selectively enter into offtake agreements based on economics.
Barbara I just want to say it's been a pleasure working with you. Maybe to focus on Serra Verde, an acquisition expected to close pretty soon. Can you just sort of outline for us the remaining regulatory approvals or closing conditions that are out there, particularly in Brazil? And maybe a second part to that, Serra Verde is expected to deliver about $600 million in annualized EBITDA by the end of '27. What are the key operational bottlenecks as you understand them before you've closed it that maybe present risk or opportunity by the end of the year?
The Serra Verde transaction is in the process of being closed, the shareholder vote, which is the last remaining hurdle is on August 28, and we'll be closing the transaction shortly after that, there are no more regulatory hurdles. In terms of where Serra Verde is headed, we've talked about the business scaling to 6,400 metric tons of Trio by end capacity by the end of 2027. As we close the transaction at the end of the month, we'll be providing more insights.
I was curious on the hydromet facility that you guys are ramping up here. You've had a couple of positive updates lately on those early efforts. But just wondering how we should expect kind of communication of various milestones on those different flow sheets over the coming months and quarters?
We're going to be coming out with relevant milestone updates as we progress throughout the year, and there'll be several more along the way that will be relevant. We still are on track to complete our DFS by year-end and publish our S-K 1300 going into early next year. We will be announcing milestones as we hit them.