• USA Rare Earth (NasdaqGM:USAR) has secured a $1.3b U.S. federal loan, a $277m direct federal equity investment, and a $1.5b private placement.
• The funding package makes the U.S. government one of USAR's largest shareholders and supports a domestic mine to magnet supply chain.
• The transaction introduces milestone based funding and no price supports, setting different terms compared with some peers in critical minerals.

For investors watching critical minerals, USA Rare Earth now sits at the center of U.S. efforts to build its own rare earth mining and magnet production capacity. The stock (NasdaqGM:USAR) trades at $22.42 and has seen a 69.8% return over the past year and 58.4% return year to date, with an 88.4% gain over the past month and a 9.5% decline over the past week. This combination of strong recent gains and short term pullback highlights how the market is reacting to the funding news and associated risks.

The government equity stake, combined with milestone requirements and the absence of price supports, shapes both upside potential and execution risk around USAR's projects. As the company deploys this capital, key factors to watch include how it meets project milestones, manages cost and schedule, and positions its mine to magnet supply chain within the broader U.S. critical minerals push.

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The funding package reshapes USA Rare Earth’s capital structure, shifting the main concern from “can it be financed” to “can it execute” on a multi step build out. With up to $1.6b in phased government loans and equity plus a $1.5b PIPE, the company now sits alongside peers like MP Materials and Lynas in terms of government backed rare earth supply ambitions, but with different economics because there are no price floors on its output.

USA Rare Earth narrative, what this deal means for the story

This announcement pushes the USA Rare Earth narrative further toward a national security and infrastructure story, rather than a pure speculative miner. The presence of large mutual fund complexes and other institutional investors in the PIPE also signals that a broader group of investors is now engaged with the mine to magnet plan, which could increase scrutiny on timelines, dilution and capital discipline.

Risks and rewards now on investors’ radar

• ⚠️ Total potential dilution around 75% from government equity and the PIPE is a clear overhang for existing shareholders.
• ⚠️ The non binding nature of the government LOI, milestone based funding and lack of price guarantees add uncertainty around both funding visibility and future profitability.
• ⚠️ USA Rare Earth remains pre revenue with negative shareholder equity, so execution and timing risk to planned 2027 to 2029 breakeven targets is high.
• 🎁 If the company hits its production and profitability milestones, the combination of government backing and full mine to magnet capacity could support a more resilient domestic position compared with peers like MP Materials and Lynas.

What to watch next

From here, the market is likely to focus on the closing of the PIPE, signing of definitive government agreements, and progress at the Stillwater magnet plant and Round Top project, along with any updates to timelines. If you want to see how other investors are thinking about the trade off between dilution, execution risk and government support, check community narratives on USA Rare Earth’s dedicated page.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.