USA Rare Earth Advances Mine-to-Magnet Strategy with Less Common Metals Acquisition

USA Rare Earth Acquires Less Common Metals, Bolstering Ex-China Supply Chain

USA Rare Earth Inc. (USAR) has entered into a definitive agreement to acquire Less Common Metals (LCM), a UK-based producer of rare earth metals and alloys. This strategic acquisition is designed to accelerate USAR's "mine-to-magnet" strategy, establishing a complete and independent rare earth supply chain outside of China.

The Event in Detail

On September 29, 2025, USA Rare Earth (USAR) announced the acquisition of Less Common Metals (LCM) for a consideration of $100 million in cash and 6.74 million shares of USAR common stock. Based on a reference investment price of $15.00 per share, this values the transaction at approximately $201 million. Concurrently, USAR secured a $125 million common equity investment from an existing shareholder at the same $15.00 per share price, providing crucial capital support.

LCM is recognized as the world's most established ex-China rare earth metal and alloy producer. Operating a 67,000 square foot facility in Cheshire, UK, LCM specializes in critical rare earth metals such as Samarium, Samarium Cobalt, Neodymium Praseodymium, Dysprosium, and Terbium. Its unique capabilities include processing both mined and recycled materials, establishing it as the only proven Western producer of rare earth metals and alloys at a commercial scale. The transaction is anticipated to conclude in Q4 2025, subject to customary closing conditions.

Analysis of Market Reaction

The acquisition significantly enhances USAR's strategic position in the global rare earth market. By integrating LCM's established metal and alloy production capabilities, USAR gains immediate access to a proven customer base and specialized expertise, substantially shortening its timeline to commercial viability. This integration is expected to accelerate revenue generation, as opposed to years of internal development to establish similar capabilities.

From a financial perspective, the $125 million equity investment is particularly noteworthy. This capital infusion directly addresses previously disclosed "substantial doubt" about USAR's ability to continue as a going concern, as mentioned in their Q3 2025 financial statements, providing essential operating runway. While USAR reported a net loss of $143 million in Q2 2025 (compared to a net income of $51.83 million in Q1 2025), the company maintained a cash balance of $121.8 million at the end of Q2 2025, increasing to $128.1 million as of August 7, 2025.

This transaction creates meaningful barriers to entry for competitors, solidifying USAR's defensible market position with limited non-China competition in the rare earth sector. The strategic value of acquiring LCM's unique capabilities, which historically have been dominated by Chinese entities, underscores the critical nature of this vertical integration.

Broader Context & Implications

The acquisition of LCM positions USAR as the only Western company with a complete "mine-to-magnet" supply chain, a critical development given that China currently accounts for 92% of global rare earth elements processing capacities. This move aligns with growing Western government initiatives, including those from the U.S. Department of Defense (DOD), to onshore critical mineral supply chains for national and energy security. LCM already holds established defense contracts, including a recent DLA award, and maintains relationships with allied governments across the UK, France, US, Japan, and Australia.

The combined entity will leverage LCM's capabilities to supply USAR's planned 5,000-ton Oklahoma magnet facility, which is on track for 1Q26 commissioning. Initial product shipments are projected to be 200-400 tons in 2026, against an anticipated market demand of 5,000-7,000 tons. USAR has already signed 12 MOUs and JDAs representing approximately 300 tons of annual production, with a high-confidence pipeline exceeding 2,000 tons from over 70 prospective customers in aerospace, defense, data center, and automotive sectors.

Furthermore, LCM's ability to process recycled rare earth oxides provides an important pathway for sustainable manufacturing practices within the rare earth supply chain.

Looking Ahead

While the acquisition significantly de-risks USAR's supply chain and provides a robust foundation for growth, investors will monitor the successful integration of LCM into USAR's operations. Potential challenges include integration risks and delays in securing regulatory approvals for the transaction. The significant capital requirements for future expansion and implementation will also remain a focal point. However, with its comprehensive mine-to-magnet supply chain and strong governmental alignment, USA Rare Earth is poised to become a key player in the global rare earth industry, reducing Western reliance on external suppliers for critical materials. Future economic reports and policy decisions regarding critical minerals will be important factors to watch in the coming quarters.