USA Rare Earth Funding From Commerce LOI
USA Rare Earth funding could reshape capitalization after a Commerce CHIPS Act LOI and will put approvals, share issuance and dilution in investors' focus.
KEY TAKEAWAYS
- Commerce LOI outlines a $1.6 billion CHIPS Act package with $1.3 billion loan and $277 million equity.
- Commerce would receive 16.1 million common shares plus warrants for 17.6 million shares exercisable at $17.17 each.
- The LOI is non-binding and shifts capital toward hybrid equity and secured debt, raising dilution and execution risk.
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USA Rare Earth funding advanced when the company disclosed a non-binding letter of intent with the U.S. Department of Commerce that could accelerate domestic production of heavy rare earths and expand U.S. industrial capacity.
CHIPS Act LOI Terms and Investor Impact
USA Rare Earth (NASDAQ: USAR) revealed a non-binding letter of intent with the Department of Commerce for a $1.6 billion funding package under the CHIPS Act. The package includes a $1.3 billion senior-secured loan and $277 million in federal equity support. The LOI is preliminary and does not specify approvals, termination dates, or fees. The company scheduled an investor conference call for Jan. 26, 2026.
In exchange for the funding, Commerce would receive 16.1 million common shares and warrants for 17.6 million additional shares exercisable at $17.17 each, about a 25% discount to a recent closing price of $22.71. These financing and equity instruments will expand USA Rare Earth’s capital base and introduce potential dilution as warrants convert. This shifts the company’s near-term capitalization from pure project finance toward a hybrid of public equity and secured debt, placing execution of project milestones and approvals in investors’ view.
Project Timetable and Strategic Context
The Round Top mine in Hudspeth County, West Texas, is scheduled to begin production in 2028. The company targets extracting 40,000 metric tons of critical-mineral feedstock daily by 2030. The deposit is rich in heavy rare earths such as dysprosium. The broader development includes a magnet plant in Stillwater, Oklahoma, designed for 5,000 tonnes per year with commercial operations planned for 2026, and a processing laboratory in Wheat Ridge, Colorado. A 2019 technical report cited annual production of 2,213 tonnes of rare-earth elements, including more than 1,900 tonnes of heavy rare earths, over a 20-year horizon.
The funding package supports a domestic rare-earth supply chain and aims to reduce U.S. dependence on countries responsible for more than 90% of global processing. It involves collaboration with the Department of Energy and aligns with administration investments in MP Materials and Lithium Americas. Together, the financing and equity components position USA Rare Earth as a key participant in federal efforts to reshore heavy rare-earth processing and build domestic magnet-manufacturing capacity.
