Key points
- The Department of War led a $1.55 billion government-backed vehicle to buy Serra Verde's output, including a $750 million equity piece.
- The 15-year deal sets the first guaranteed price floors on dysprosium and terbium, two heavy rare earths China controls.
- The offset is dilution: the $2.8 billion Serra Verde purchase issues about 126.8 million new shares, close to 50% more. USA Rare Earth (USAR) slid about 5% by midday before the August 28 vote.
USA Rare Earth (USAR) was down about 5% by midday Monday, trading near $18, in the same session it confirmed that a U.S. government-backed vehicle built to buy its future Brazilian output had been enlarged to $1.55 billion. The stock trades more than 50% below the $43.98 it reached last October.
The headline number is easy to misread. None of that $1.55 billion goes to USA Rare Earth directly. It capitalizes a special-purpose vehicle that sits between the government and the mine, and that vehicle has agreed to buy all of the first-phase output from Serra Verde, the Brazilian producer USA Rare Earth is in the process of acquiring, for the next 15 years.
What the $1.55 billion actually buys
The Department of War assembled the package through its Economic Defense Unit, and it comes in three parts:
- A $750 million equity investment from the Department of War, made through its Industrial Base Analysis and Sustainment program and raised from the $500 million first contemplated.
- A $500 million commitment from a money-center bank, structured as a senior secured facility that the company describes as a commitment letter rather than funded money.
- A $300 million purchase commitment from the Defense Logistics Agency, which agrees to buy at least that much finished product over five years.
What makes the contract unusual is the floor built into it. The offtake guarantees minimum prices for all four magnet metals: neodymium, praseodymium, dysprosium and terbium. The company says the floors on the last two, dysprosium and terbium, are the first of their kind. Those are the heavy rare earths that keep a magnet stable at high temperatures, and the ones China leans on when it wants to remind the West who controls the supply.
"This historic $1.55 billion investment is a major step towards securing one of the most vital supply chains for our warfighters and our economy," said George K. Kollitides II, who runs the Economic Defense Unit.
It isn't the first federal money behind the project. In February, Serra Verde lined up a $565 million loan from the U.S. International Development Finance Corporation to expand its Pela Ema mine in Brazil's Goias state, a deal that also handed the government an option to take a minority stake in the company. The Department of War has backed other corners of the defense supply chain this summer, from a $400 million scandium loan to Sunrise Energy Metals to an $820 million push into domestic drone motors.
The cost on the other side: dilution
That support comes attached to a large bill for existing shareholders. To acquire Serra Verde, USA Rare Earth agreed in April to a $2.8 billion purchase, priced at $300 million in cash plus about 126.8 million newly issued shares. Set against the 248 million shares already outstanding, that is close to a 50% increase in the share count, and it leaves Denham Capital, Serra Verde's current owner, with a sizable stake in the combined company.
Those new shares are the counterweight to Washington's backing. The government has guaranteed the mine a buyer and a floor under its prices, which takes real risk off the underlying business. The larger share count spreads whatever that business ends up earning across a much wider base of owners.
Completing the $1.55 billion vehicle clears one of the conditions for the acquisition to close. The rest runs through a shareholder vote set for August 28, after which USA Rare Earth expects to finish the deal in the third quarter.
Any payoff is still years out. The company is targeting full production of about 6,400 metric tons of rare-earth oxide a year by the end of 2027, and has guided investors toward $550 million to $650 million of annual run-rate EBITDA by then, rising to about $1.8 billion by 2030. Today it operates at a loss and carries a market value near $4.5 billion.
What USA Rare Earth would own once the deal closes is a single company that mines the ore, refines it and turns it into magnets, across the United States, the United Kingdom and Brazil. "Serra Verde is one of the world's most advanced rare earth projects and the only commercial producer of all four magnetic rare earths outside Asia," said Michael Blitzer, the company's executive chairman.
Prices as of midday on August 24, 2026. This is general market information, not investment advice.
