Adds details, background

By Eric Onstad

LONDON, April 20 (Reuters) - USA Rare Earth USAR.O will acquire Brazilian rare earths miner Serra Verde for $2.8 billion in cash and shares, it said on Monday, another step in its strategy to create an operation comprising mining, processing and magnet making.

The U.S. company will pay $300 million in cash and 126.9 million in its own newly issued shares for the transaction, which is expected to close in the third quarter of 2026, a statement said.

Serra Verde also said on Monday it had entered into a 15-year agreement to supply 100% of its production during the mine's initial phase to a special purpose vehicle capitalised by the U.S. government and private sources.

USA Rare Earth agreed to a $1.6 billion debt-and-equity funding package with the U.S. government in January, while privately held Serra Verde agreed a financing deal worth $565 million with Washington in February.

"Serra Verde’s Pela Ema mine is a one-of-a-kind asset and the only producer outside Asia capable of supplying all four magnetic rare earths at scale," USA Rare Earth CEO Barbara Humpton said.

MINE RICH IN HEAVY RARE EARTHS

Forecast shortages of heavy rare earths dysprosium and terbium could be a stumbling block in the West's drive to create domestic supply chains of rare earths and permanent magnets.

Serra Verde's mine is rich in heavy rare earths, unlike many other Western deposits, making it particularly attractive.

The company launched commercial production in early 2024, and has not yet hit full output, which is expected to be about 6,500 metric tons of total rare earth oxides a year by 2027.

Serra Verde is owned by private equity groups Denham Capital, Energy and Minerals Group and Vision Blue, which is led by the former head of Xstrata, Mick Davis.

Shares of USA Rare Earth fell 8% in premarket activity, but at their last close they were up 68% so far this year.