The Rare Earth Race in America 2025

David Mitchell

Welcome back to another edition of Global Equity Research, brought to you by Softgate Capital Research, the research arm of Softgate Capital. I'm David Mitchell, and joining me as always is Emily Carter. Today, we're shining a spotlight on a name that's started to pop up everywhere in the raw materials and EV supply chain conversations: USA Rare Earth.

Emily Carter

Hey everyone. Honestly, David, I feel like every time we do an episode on strategic resources, someone emails asking, "What's going on with U.S. rare earth supply chains?" So this one’s for you all. USA Rare Earth has made real waves since their SPAC merger in early 2025, and they play in a sector that’s, well, let's say, finally on the radar for more than just commodity nerds and national security folks.

David Mitchell

Exactly. Critical minerals, especially rare earths, are now headline news—largely because of what they mean for EVs, wind turbines, defense applications, you name it. So today, we're digging into USAR's business model, their operational journey, and what their story tells us about America's broader push to compete with China for magnetic materials.

Emily Carter

And we'll try to break this all down without getting too lost in the chemistry. I promise—no periodic table quizzes today. Let's get into it.

Emily Carter

Alright, first off, let's sketch out where USA Rare Earth fits in this whole ecosystem. The company actually started off as a private business and, in March 2025, did the whole SPAC thing—merging with Inflection Point Acquisition Corp. Their HQ is in Tampa, they’re up on the Nasdaq, but the main operational action is in Stillwater, Oklahoma, with the big project site at Round Top in Texas.

David Mitchell

And that’s important—especially the Round Top piece. Unlike a lot of the rare earth juniors who are just hoping for a mineral discovery someday, USAR's strategy hinges on vertical integration. They plan to take things from raw separation all the way up to manufacturing the actual NdFeB magnets—the kind used in EV motors, top-end electronics, and wind energy gear.

Emily Carter

You know, the magnets are where it gets super interesting—it's not just about digging up rocks. USAR is unique because Round Top gives them heavy rare earths like dysprosium and terbium, not just the more common stuff. Those heavies are critical for high-temperature magnets, which defense and automaker folks are desperate for.

David Mitchell

And, let's be honest, the entire thesis here is national security. China controls most of the rare earth supply chain—mining, refining, and, crucially, making those magnets. If the U.S. wants secure access for electric vehicles, wind power, and even military tech, we need this kind of domestic, vertically integrated player. That's where the policy context comes in—onshoring magnets isn’t just a business bet, it's a political and strategic necessity.

David Mitchell

So, let’s talk dollars and cents. The SPAC combo closed in March 2025, which meant a big influx of capital—PIPE investments, warrant exercises, all that jazz, landing them a pretty beefy cash position. Post-deal, they ended up with about four to five hundred million in cash, depending on how many warrants come in by early 2026. Definitely gives them some runway.

Emily Carter

But, I think it's worth noting—their financial statements are choppy, especially on a GAAP basis. Basically, the accounting swings all over the place because those warrants change value so much quarter to quarter. If you strip out those non-cash swings, adjusted operating losses are still a thing—they’re building out the Stillwater magnet plant in Oklahoma, so there’s a lot of up-front cost and not a dollar of revenue yet.

David Mitchell

That’s the key—2025 is all about capex and opex while they ramp. The Stillwater facility is the next big step. We’re looking at commissioning, integrating their LCM acquisition for alloy tech, running pilot batches, and—if they're on schedule—the first commercial revenues could hit in 2026. Until then, it’s about keeping a careful eye on that big cash pile and burn rate. If everything lines up, they don't need to raise again soon, but delays or extra spending could change that outlook fast.

Emily Carter

So, for listeners who always ask, "Is the runway long enough?"—the answer is: so far, so good, but the main risk is execution. No commercial revenue yet, so hitting plant milestones is non-negotiable. I’d say it’s very much a show-me story for now.

Emily Carter

When we dive into what USAR actually aims to sell, it’s mostly about those sintered NdFeB magnets. Once Stillwater is up and running at industrial scale, they plan to be a key supplier—think big auto and industrial buyers, with some early pilot orders and custom jobs in 2026.

David Mitchell

That’s their bread and butter, but there are some side bets, too. They could sell rare earth oxides or separated materials from Round Top, maybe do some toll processing for others, and—eventually—recycling could be part of the mix. The lithium byproduct from Round Top is another potential upside, but that’s a longer-term play.

Emily Carter

Margins are interesting here. They’re betting on capturing more value by going all the way from rock to finished magnet. Alloy tech from LCM could really help if they get scale, but the early years will be loss-making—no way around it. That's just the nature of building a heavy industrial base from scratch.

David Mitchell

To bring this commercialization path to life, they’ve signed some early MOUs—for example, supplying pipeline inspection tools or specialty drone motors. Real quantities are going to be small at first, but if those pilot projects succeed, it's a foot in the door for bigger deals down the road.

Emily Carter

So, this is all about planting seeds with these pilot partnerships. But like we talked about with Kempower’s early install wins last episode, it’s a grind to scale those first pilot successes into commercial revenue. Execution risk all the way down.

David Mitchell

So, how does USAR stack up against the established players? Their peer group includes names like MP Materials, Lynas, Neo Performance Materials—Western companies with a mix of mining, material processing, and, for a few, magnet manufacturing capabilities. The big difference? USAR wants to be a true end-to-end player—mining to magnets—all on U.S. soil.

Emily Carter

Yeah, and that end-to-end ambition means a lot of capex and a tough learning curve. On valuation, Softgate’s base case uses a DCF model—assuming the Stillwater plant ramps roughly on schedule, a WACC around 12%, and fairly chunky upfront investment. The mid-case risk-adjusted fair value? Close to $20 per share, but that’s only if milestone execution stays on track.

David Mitchell

Investors are watching three things: One, does Stillwater ramp on time and budget? Two, does LCM’s alloy tech integrate smoothly into the process? And three, how fast does the Round Top project progress? Any major government contract—say, from the Department of Defense—could also move the stock dramatically.

Emily Carter

But there is real binary project risk here. If one link in the chain fails, it can undercut the whole thesis. At the same time, that's also the optionality for investors—get it right and the upside is huge; miss a step and, well, it's a tough lesson in execution-driven project investing.

Emily Carter

Maybe let’s summarize what could go right—and what could go sideways. On the plus side, USAR’s got a first-mover advantage for U.S. magnet scale, heavy rare earth exposure, and solid technology thanks to LCM. That’s rare, no pun intended.

David Mitchell

On the flip side, they've got zero commercial revenue today, a complex project build with significant capital at risk, and resource permitting that takes years, not months. Cost overruns or delays at Stillwater or Round Top could easily knock the whole schedule back—and let’s not forget the risk from supply chain or policy shifts, or even commodity price swings in rare earths and lithium.

Emily Carter

Opportunities? If they secure a DoD or big OEM magnet contract, or prove they can earn a premium for "made-in-America" magnets, investor sentiment could turn on a dime. Also, recycling and co-product credits—like lithium or gallium—could boost long-term economics and de-risk the story.

David Mitchell

Biggest things to watch in the next year? Stillwater’s commissioning milestones, LCM integration updates, the pilot shipments, and new MOUs or offtake deals. That's where the equity story will sink or swim. And, as always, keep an eye on quarterly cash burn versus budget—runway is not infinite, especially in heavy industry rollouts like this.

David Mitchell

So to wrap, USAR is basically a high-risk, high-optionality play that could be the linchpin for onshoring U.S. critical magnet supply. It’s a bet on the company not just hitting a bunch of operational milestones, but also on policy tailwinds sticking around. If they deliver—even on half the plan—the stock and the sector story could re-rate materially.

Emily Carter

We’d honestly love to hear your questions—shoot us an email or connect with us on social. And we’re thinking of doing a deep dive soon: either on the weird geology at Round Top or the ins and outs of actual magnet manufacturing tech. If that sounds good, let us know!

David Mitchell

Also, don’t forget: listeners can grab the one-page fact sheet, our peer comparison slide, and a handy glossary of rare earth terms. All those assets plus the full research report are linked in the description and over at research.softgatecapital.com.

Emily Carter

Just a gentle reminder, folks—none of this is investment advice, an offer, or a solicitation; it’s purely for your information, and while the data is as thorough as we could make it, always do your own due diligence. Full disclaimers on the site.

David Mitchell

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Emily Carter

David, always a pleasure dissecting the strategic minerals drama.

David Mitchell

Same here, Emily. Thanks for tuning in, everyone. Until next time.

Emily Carter

Bye all—catch you on the next one!