USA Rare Earth Inc. (USAR) experienced a significant surge in its stock price, skyrocketing by 62% in pre-market trading on Monday. This remarkable increase follows reports of a substantial $1.6 billion investment package from the Trump administration. Under this deal, the administration secures a 10% ownership stake in the company, thus becoming its largest public shareholder.
The investment deal entails the acquisition of 16.1 million shares, along with warrants for an additional 17.6 million shares, all priced at $17.17 each. This price aligns closely with the company”s recent trading levels, reflecting investor optimism about the deal. Furthermore, a separate $1 billion private investment linked to this package is expected to be detailed in an announcement on Monday.
In recent months, USA Rare Earth has been collaborating with Texas Mineral Resources to establish a mining operation in Sierra Blanca, Texas, which is projected to commence operations by 2028. Additionally, the company is set to open a magnet manufacturing facility in Stillwater, Oklahoma, later this year.
This strategic investment aligns with the Trump administration”s ongoing efforts to bolster domestic production of critical minerals, particularly rare earth elements. Last year, the administration also made equity investments in firms such as MP Materials, Lithium Americas, and Trilogy Metals. A senior official from the Trump administration hinted at the potential for additional agreements within the U.S. mining sector, emphasizing the importance of domestic sources for rare earth materials essential for national defense and emerging technologies.
Rare earth elements play a crucial role in a wide range of applications, including consumer electronics, electric vehicles, and military systems. With China currently dominating the global rare earth processing industry, the U.S. government is keen to establish more robust domestic supply chains.
The market reacted positively to the announcement, with USA Rare Earth shares trading up by approximately 38.5% before the market opened. The stock had already seen an impressive climb of over 100% in January alone. Other companies in the rare earth mining sector also saw gains, with shares of Trilogy Metals, Lithium Americas, and MP Materials increasing by 5% to 12.4% in response to the news.
Overall, the surge in USA Rare Earth”s stock reflects investor confidence in the U.S. government”s commitment to securing critical mineral resources amid increasing global competition and supply challenges.
