USA Rare Earth Inc.

11/12/2026 | Press release | Distributed by Public on 11/12/2026 15:55

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to help the reader understand our results of operations and financial condition. It should be read in conjunction with the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, "Financial Statements (unaudited)," of this Quarterly Report on Form 10-Q (the "Notes"). The following discussion may contain forward-looking statements. Forward-looking statements are not guarantees of performance. Although we believe these forward-looking statements are reasonable when made, we cannot assure you that we will achieve the plans or expectations referenced in our forward-looking statements. Our actual results and the timing of events may differ materially from those expressed or implied as a result of various factors, including those set forth in the sections titled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements."
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Overview
We are a rare earth, critical minerals and advanced materials company. Our vision is to be the world's leading rare earth enterprise, a pioneering company that excels at every stage of the value chain, from the earth to the magnet and beyond. We endeavor to deploy our expertise with speed and purpose, allocate capital with discipline and rigor, and mitigate geopolitical and operational risk. We intend to be the partner of choice for nations, industries and communities that depend on a secure, sustainable supply of the rare earths and other critical materials and derivative technologies that power the modern world.
Upon our acquisition of SVRE Holdings Ltd. ("Serra Verde") on September 3, 2026, we own and operate the Serra Verde Pela Ema mine and processing facility in Goiás, Brazil, the only scaled producer outside Asia of all four key rare earth elements used in neodymium-iron-boron ("NdFeB") permanent magnets: neodymium ("Nd"), praseodymium ("Pr"), dysprosium ("Dy") and terbium ("Tb"). Serra Verde commenced the production phase ("commercial production") in 2024, and optimized Phase 1 production commenced in September 2026.
In November 2026, we commenced sales of a heavy mixed rare earth carbonate ("MREC") from Serra Verde to US SIIE, LLC ("US SIIE") under a 15 year, 100% take-or-pay offtake agreement (the "Offtake Agreement"), as defined below) for Phase 1 production, subject to guaranteed price floors with annual price escalation, and shared upside to higher market prices.
We own the Round Top heavy rare earth element ("HREE") deposit near Sierra Blanca, Texas, which our analysis shows contains one of the largest HREE deposits in North America.
We own and operate a fully automated and instrumented hydrometallurgical demonstration facility at our Wheat Ridge, Colorado research and development center that was commissioned in June 2026 and commenced production of separated rare earth oxide samples in July 2026. We also own and operate Less Common Metals Ltd. ("Less Common Metals"), a metal-making facility located in Cheshire, United Kingdom, one of the few commercial producers outside of Asia with the capability to convert rare earth element and critical mineral oxides into metals and alloys. Additionally, we own and operate a rare earth magnet manufacturing facility in Stillwater, Oklahoma ("Stillwater Facility"). The Stillwater Facility was commissioned in the first quarter of 2026 and began NdFeB magnet sales in the third quarter of 2026.
Factors Affecting Comparability of Results
During 2025 and 2026, we completed three transactions that materially affect the comparability of the results discussed below. On March 13, 2025, we consummated our business combination with USA Rare Earth, LLC and became a publicly traded company listed on Nasdaq under the symbol "USAR." On November 18, 2025, we acquired Indian Ocean Rare Metals Pte. Ltd., the parent of Less Common Metals Ltd. ("Less Common Metals"), a rare earth metal and alloy manufacturer based in Cheshire, United Kingdom. On September 3, 2026, we acquired SVRE Holdings Ltd. ("Serra Verde"), the parent company of the Serra Verde Group, which operates a rare earths project in Brazil that is currently in commercial production.
The three and nine months ended September 30, 2026 include the results of Less Common Metals for the full period and of Serra Verde from its acquisition date through September 30, 2026. The prior-year periods include neither business. In addition, we began generating revenue from our magnet manufacturing operations in the third quarter of 2026, and no such revenue was recorded in the prior-year periods. Accordingly, revenue, gross loss, and operating expenses for the three and nine months ended September 30, 2026 are not comparable to the corresponding periods in 2025.
For a complete description of the 2025 business combination and Less Common Metals transactions, refer to Note 2, "Merger Transaction and Acquisition," in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Annual Report") filed with the Securities and Exchange Commission ("SEC") on March 30, 2026. For a complete description of the Serra Verde acquisition, refer to Note 13, "Merger Transaction and Acquisition."
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Recent Developments, Key Trends, Opportunities and Uncertainties
Our revenues for the three and nine months ended September 30, 2026 were derived primarily from our metal-making operations and our neo magnet manufacturing production. We incurred a net income of $11.7 million and a net loss of $68.3 million for the three and nine months ended September 30, 2026, respectively. Our historical results are not indicative of our future results, and our ability to generate sufficient revenue to achieve profitability will depend largely on the successful development and scaling of our integrated mine-to-magnet platform and our global value chain.
Acquisition of SVRE Holdings Ltd.
On September 3, 2026, the Company completed the acquisition of 100% of the issued and outstanding shares of SVRE Holdings Ltd. ("Serra Verde"). Serra Verde operates the Pela Ema rare earths project located in Minaçu, Brazil and is currently in commercial production. The Pela Ema mine is unique as the only mine outside Asia currently capable of supplying all four key rare earth elements ("REE") used in neodymium-iron-boron ("NdFeB") magnets at scale, namely as neodymium, praseodymium, dysprosium and terbium, together with other vital REEs, such as yttrium. This transformative acquisition has created what we believe is one of the only fully integrated mine-to-magnet platform outside China, with active capabilities across mining, processing, separation, metallization and magnet making across three continents.
Serra Verde's strategic importance is also reflected in its Offtake Agreement (as defined and described below) with US SIIE, LLC ("US SIIE"), which provides contractual price floors for neodymium, praseodymium, dysprosium and terbium while preserving participation in higher market prices.
We believe the acquisition strengthens our U.S. and allied government relationships and provides multiple embedded growth opportunities, including a potential Phase 2 doubling of Pela Ema's production capacity. The transaction also added significant leadership depth with the appointment of Thrasyvoulos Moraitis and Sir Mick Davis to our Board and Mr. Moraitis as Chief Executive Officer, effective October 1, 2026.
The total purchase consideration was approximately $2.57 billion, consisting of $300.0 million in cash, 126.8 million shares of our common stock valued at $17.85 per share, equating to approximately $2.26 billion, and $9.63 million of pre-combination rollover restricted stock unit value. The share consideration includes 372 thousand shares that were retained to settle income tax obligations of certain Serra Verde employees, which were not delivered to those employees.
See Note 13, "Merger Transaction and Acquisition - SVRE Holdings Ltd. Acquisition" of the Notes for further information regarding the acquisition.
Offtake Agreement and Capitalization Arrangements
On April 20, 2026, then a subsidiary of Serra Verde and now an indirect subsidiary of the Company, SV Management Switzerland AG ("SVMS"), entered into an offtake agreement (the "Offtake Agreement") with US SIIE, LLC ("US SIIE") for the sale of products from the Pela Ema mine. The Offtake Agreement provides a commercial sales channel for production from the Pela Ema mine, with contractual pricing support through established floor prices while preserving participation in higher market prices. The Offtake Agreement runs until the earlier of the delivery of products produced from 198 million metric tons run of mine ore, or 20 years after the commercial operations date. We expect the Offtake Agreement to run for approximately 15 years.
Under the Offtake Agreement, the purchase price is based on contractual floor prices for the payable rare earth elements, with US SIIE also paying SVMS additional amounts when applicable market index prices exceed the contractual floor prices. The payable rare earth elements are terbium, dysprosium, neodymium and praseodymium, and the floor prices (stated per kilogram of oxide equivalent) currently are $2,050 for terbium, $575 for dysprosium, $110 for neodymium and $110 for praseodymium. SVMS is required to sell, and US SIIE is required to purchase and take delivery of (or pay for if not taken), 100% of the production of products from Phase 1 of the Pela Ema mine, subject to limited exceptions: (i) quantities used for testing and process development, (ii) non-payable products and other minerals that US SIIE declines to purchase, and (iii) products supplied to the U.S. International Development Finance Corporation as interest payments on its financing.
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
For products delivered as mixed rare earth carbonate ("MREC"), the purchase price for each payable element equals the applicable floor price less a fixed separation cost, multiplied by the contained oxide-equivalent quantity and a fixed recovery yield. For separated rare earth oxides, the purchase price is the applicable floor price multiplied by the quantity of oxide delivered. The separation costs and recovery yields applicable to the payable elements are fixed for the term of the Offtake Agreement and are not subject to adjustment.
US SIIE also pays SVMS 70% of the amount, if any, by which the value of the delivered payable elements calculated using a market index price exceeds their value calculated at the floor price. SVMS invoices US SIIE for 80% of the estimated purchase price and index-based amount for each shipment before the scheduled loading date, and the balance is settled in the month following delivery once final quality results are determined.
The Offtake Agreement prohibits specified restricted persons from owning or being involved in separation facilities in which we or SVMS have an interest, and requires that those facilities not be located in non-allied nations. SVMS may not undergo a change of control, other than specified permitted transactions, without the prior written consent of the U.S. Department of War, and any non-U.S. directors of SVMS must be from an aligned nation and approved by the Department of War.
On August 21, 2026, SVMS and US SIIE amended the Offtake Agreement to revise the U.S. government financial commitments required to support US SIIE in meeting its obligations under the Offtake Agreement as a condition to the effectiveness of the parties' sale and purchase obligations. As amended, such financial commitments consist of $750 million of funding to US SIIE, a commitment letter for a $500 million senior debt facility (which has not been documented, closed or funded) from a Tier-1 institutional bank, and one or more forward purchase contracts for purchase from US SIIE of at least $300 million of products over five years. The condition was met on August 21, 2026.
In connection with the Offtake Agreement, in September 2026, Merger Sub II LLC, a wholly owned subsidiary of the Company, entered into an Amended and Restated Call Option Agreement (the "Call Option Agreement") with US SIIE and Middlebury Merger Sub Ltd. ("Middlebury"), our indirect, wholly owned subsidiary which indirectly owns Serra Verde Pesquisa e Mineração Ltda. ("SVMS") and the Pela Ema mine. Under the Call Option Agreement, upon specified triggering events, US SIIE may acquire the entire equity of Middlebury at fair market value determined by a panel of independent experts. Triggering events consist of (i) solely in the event the U.S. government is not a lender, insolvency or similar circumstances involving SVMS, (ii) ceasing to use the Pela Ema mine site in Brazil or suspending activities in connection with the mine for a period of sixty days or more, (iii) breach of fundamental obligations under the Offtake Agreement, (iv) assignment of the Offtake Agreement or a change of control in breach of the Offtake Agreement, and (v) an event of default under financing documents entered with new lenders and written notice of the intention of such new lenders to foreclose on their collateral. See Note 6, "Commitments and Contingencies - Call Option Agreement," of the Notes for additional information regarding the Call Option Agreement.
No sales were made under the Offtake Agreement during the three or nine months ended September 30, 2026, and no triggering event had occurred under the Call Option Agreement as of September 30, 2026. In October 2026, we began commercial-scale shipments to US SIIE and recorded sales in November.
Acquisition of Texas Mineral Resources Corp.
On March 4, 2026, we entered into a definitive Agreement and Plan of Merger with Texas Mineral Resources Corp. ("TMRC"). On August 7, 2026, we closed the acquisition of TMRC, pursuant to which we acquired 100% of the outstanding shares of TMRC. Following this acquisition, we are now the sole operator and 100% economic beneficiary of the "Round Top Project," which consists of the operations and rights related to Round Top Mountain and the Round Top Mountain HREE metals deposit. This transaction secured full ownership control of the Round Top Project, and has allowed us to streamline operations, governance and decision-making.
This transaction was valued at approximately $73.9 million based on the closing price of our common stock on August 7, 2026. The aggregate merger consideration consists of approximately 3.8 million shares of our common stock, with cash paid in lieu of fractional shares. See Note 5, "Variable Interest Entity," of the Notes for additional information regarding the TMRC acquisition.
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Proposed Investment in Carester SAS
On April 9, 2026, we entered into a binding letter of intent, and subsequently on July 23, 2026, we entered into a definitive agreement to acquire a 13.6% equity interest in Carester SAS ("Carester"), the parent company of Caremag SAS. This transaction is part of a broader initiative, in partnership with Carester, the Government of France and InfraVia, to build an integrated value chain platform for rare earth processing, metal and alloy production and magnet making in Lacq, France. If the investment is completed, the platform will unite the technological expertise, process innovation, and production capacity of our manufacturing operations and those of Carester with the goal of accelerating development and strengthening our capabilities across the rare earth value chain. In parallel, USA Rare Earth, through Less Common Metals - Europe, is developing a 3,750 metric tons per year ("MTPA") metal and alloy production facility. We believe the partnership will create one of Europe's most complete rare earth industrial ecosystems.
The proposed consideration of $45.3 million consists of €28.3 million in cash, or approximately $32.1 million, and equity consideration of €11.7 million, or approximately $13.2 million, payable in shares of our common stock, in each case subject to customary adjustments, including the potential substitution of cash in lieu of our common stock. The proposed transaction is further subject to, among other things, receipt of applicable regulatory approvals, and the satisfaction of customary closing conditions and there can be no assurance that the transaction will be completed.
As of September 30, 2026, the transaction had not closed.
Third Quarter 2026 Business Highlights
Wheat Ridge Magnet Swarf Recycling Production
On July 14, 2026, we announced that our Wheat Ridge Facility, produced commercial-grade dysprosium oxide and neodymium-praseodymium oxide samples from recycled swarf sourced from our magnet manufacturing facility at Stillwater, Oklahoma (the "Stillwater Facility"). The oxides are expected to be sent to Less Common Metals for qualification and conversion into rare earth metals and strip cast for supply to our magnet manufacturing facilities. This production validates our magnet swarf recycling flowsheet and positions us as one of the few Western producers capable of separating commercial-grade heavy rare earth oxides outside Asia.
Results of Operations
A discussion regarding our financial condition and results of operations for the three and nine months ended September 30, 2026, compared to the three and nine months ended September 30, 2025, is presented below.
Revenue, Gross Loss and Gross Margin
The following table sets forth our revenue, cost of revenue, gross loss and gross margin for the periods indicated.
Three Months Ended September 30, 2026
Nine Months Ended September 30, 2026
(In thousands, except for percentage)
Revenue $ 3,002 $ 14,521
Cost of revenue 22,884 35,880
Gross loss $ (19,882) $ (21,359)
Gross margin (662.3) % (147.1) %
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Comparison of the three months ended September 30, 2026 and 2025
Revenue was $3.0 million for the three months ended September 30, 2026, of which $2.8 million was generated by Less Common Metals and $0.2 million was generated from our neo magnet operations. Cost of revenue for the three months ended September 30, 2026 was $22.9 million, resulting in a gross loss of $19.9 million and a negative gross margin. The gross loss was primarily due to non-inventoriable labor and material costs associated with initial production of neo magnets and mining activities, and an inventory count adjustment at our metal making facility. Gross margin was also directly affected by the under absorption of labor and overhead costs due to raw material supply constraints and higher raw material costs at Less Common Metals.
Comparison of the nine months ended September 30, 2026 and 2025
Revenue was $14.5 million for the nine months ended September 30, 2026, of which $14.3 million was generated by Less Common Metals and $0.2 million was generated from our neo magnet operations. Cost of revenue for the nine months ended September 30, 2026 was $35.9 million, resulting in a gross loss of $21.4 million and a negative gross margin. The gross loss was primarily due to non-inventoriable labor and material costs associated with initial production of neo magnets and mining activities, and an inventory count adjustment at our metal making facility. Gross margin was also directly affected by the under absorption of labor and overhead costs due to raw material supply constraints and higher raw material costs at Less Common Metals.
Concentration of Revenue
Revenue Attributable to Primary Geographical Markets
Three Months Ended September 30, 2026
Nine Months Ended September 30, 2026
(In thousands)
United States $ 1,059 $ 3,761
Europe 1,804 10,305
Asia 139 455
Total revenue $ 3,002 $ 14,521
Operating Expenses
The following table sets forth our results of operations and the amount of change between the periods indicated. The period-to-period comparison of financial results is not necessarily indicative of future results.
Three Months Ended September 30, Change Nine Months Ended September 30, Change
2026 2025 2026 2025
(In thousands, except for percentages)
Operating expenses
Selling, general and administrative $ 103,656 $ 11,410 $ 92,246 $ 157,438 $ 24,666 $ 132,772
Research and development 16,519 4,451 12,068 41,536 8,717 32,819
Amortization of intangible assets 1,386 - 1,386 4,099 - 4,099
Total operating expenses $ 121,561 $ 15,861 $ 105,700 $ 203,073 $ 33,383 $ 169,690
Comparison of the three months ended September 30, 2026 and 2025
Selling, general and administrative ("SG&A") expenses. The increase of $92.2 million was primarily due to an increase in consulting and legal costs of $68.0 million and $8.6 million, respectively, primarily related to business acquisitions, an increase in employee compensation and benefits of $14.8 million, associated with increased headcount as we expanded our organizational infrastructure, including the added headcount from the acquisitions of Less Common Metals and Serra Verde on November 18, 2025 and September 3, 2026, respectively, and other costs of $0.8 million.
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Research and development ("R&D") expenses. The increase of $12.1 million was primarily due to an increase in development costs of $7.7 million, facility costs of $3.4 million and other costs of $1.0 million.
Amortization of intangible assets increased by $1.4 million and was due to intangible assets acquired in connection with the acquisition of Less Common Metals.
Comparison of the nine months ended September 30, 2026 and 2025
Selling, general and administrative expenses. The increase of $132.8 million, was primarily due to higher consulting and legal costs of $77.1 million and $19.7 million, respectively, primarily related to merger and acquisition activities, and entry into the Dept. of Commerce's DFA and LGA, and an increase in employee compensation and benefits and stock-based compensation of $24.0 million and $11.4 million, respectively, both associated with an increase in headcount as we expanded our organizational infrastructure, including added headcount from the acquisitions of Less Common Metals and Serra Verde on November 18, 2025 and September 3, 2026, respectively. The increase was further driven by other costs of $0.6 million.
Research and development expenses. The increase of $32.8 million, was primarily due to higher development costs of $15.7 million, an increase in employee-related costs and stock-based compensation of $6.2 million, reflecting higher headcount, including the added headcount from our acquisitions of Less Common Metals and Serra Verde on November 18, 2025 and September 3, 2026, respectively. The increase was further driven by facility and insurance costs of $6.5 million, consulting costs of $2.5 million, and other costs of $1.9 million.
Amortization of intangible assets increased by $4.1 million and was due to intangible assets acquired in connection with the acquisition of Less Common Metals.
Three Months Ended September 30, Change Nine Months Ended September 30, Change
2026 2025 2026 2025
(In thousands, except for percentages)
Other income (expense), net
Interest income $ 1,212 $ 1,310 $ (98) $ 1,684 $ 2,262 $ (578)
Dividend income 11,390 - 11,390 37,839 - 37,839
Grant income 208 - 208 654 - 654
Gain (loss) on fair market value of financial instruments, net 136,567 (142,426) 278,993 115,432 (216,788) 332,220
Interest expense and other expense, net (1,327) (17) (1,310) (5,691) (116) (5,575)
Total other income (expense), net $ 148,050 $ (141,133) $ 289,183 $ 149,918 $ (214,642) $ 364,560
Other income (expense), net.
•Dividend income increased by $11.4 million and $37.8 million for the three and nine months ended September 30, 2026, respectively, over the comparable periods in the prior year, primarily due to returns on money market funds, such as our investments in a prime money market fund and a U.S. Government money market fund.
•Grant income increased by $0.2 million and $0.7 million for the three and nine months ended September 30, 2026, respectively, over the comparable periods in the prior year, reflecting grant revenue generated by Less Common Metals, which was acquired on November 18, 2025. Grant income for the current period includes only post-acquisition activity, whereas the prior period did not include any grant income from these operations.
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
•Gain (loss) on fair market value of financial instruments, net reflected a gain of $279.0 million and $332.2 million for the three and nine months ended September 30, 2026, respectively, over the comparable periods in the prior year. The 2026 gains were driven primarily by the decline in our share price since the June 3, 2026 issuance of warrants to the U.S. Department of Commerce (the "Government Grant Warrants"), partially offset by the earnout liability loss recognized from the share conversion in the second quarter of 2026. The 2025 losses were driven primarily by increases in our share price on the Common Stock warrants, Series A warrants, and earnout liabilities, including a $36.9 million day-one loss on the Common Stock warrants issued in May 2025. See Note 2, Fair Value Measurements.
•Interest expense and other expense, net primarily reflects:
◦$4.5 million of liquidated damages recorded under the Registration Rights Agreement during the second quarter of 2026. The liquidated damages were triggered by the suspension of the Company's Form S-1 (File No. 333-293172), originally filed on February 3, 2026, from March 30 through June 5, 2026;
◦$2.2 million of interest expense related to the U.S. DFC loan during the three and nine months ended September 30, 2026; and
◦unrealized losses from our investment in a prime money market fund, and interest expense on the Barclays Bank PLC trade cycle loan facility previously entered into by Less Common Metals, which was repaid in full in the first quarter of 2026. These losses were partially offset by unrealized foreign exchange gains.
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 Change 2026 2025 Change
(In thousands, except percentages and basis points)
(Loss) income before income taxes $ 6,607 $ (156,994) $ 163,601 $ (74,514) $ (248,025) $ 173,511
Income tax benefit (5,099) - (5,099) (6,189) - (6,189)
Effective tax rate 8.3 % - % 830 bps
Income tax benefit. The increase in the benefit from income taxes of $5.1 million and $6.2 million for the three and nine months ended September 30, 2026, respectively, compared to the comparable periods of the prior year was primarily attributable to the forecasted taxable activities of our Less Common Metals and Serra Verde subsidiaries following the acquisitions on November 18, 2025 and September 3, 2026, respectively.
Effective tax rate. Our effective tax rate of 8.3% for the nine months ended September 30, 2026 differs from the statutory tax rate of 21% due to changes in valuation allowances in the United States and Switzerland, foreign tax benefits generated on current year losses, and recurring permanent differences and discrete items that may occur in any given year, but are not necessarily consistent from year-to-year.
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Liquidity and Capital Resources
Overview
We are an early-stage company with a limited operating history. As we expand our production capacity, we expect to incur significant operating expenses without generating sufficient revenues to cover these expenditures.
We believe that our existing cash and cash equivalents together with cash generated by future financing activities, including our ability to raise capital under our universal shelf registration statement, will be sufficient to fund our near-term operating and capital expenditure requirements for at least the next twelve months. We will require additional capital to fund our long-term capital requirements, particularly those associated with the full development of the Round Top Project, the build-out of the Stillwater Facility, the development of the Blacksburg Facility, the expansion of the Less Common Metals - UK facility, the development of the Less Common Metals - Europe manufacturing facility and the continued costs of operating and developing the Pela Ema mine. We may also incur significant future cash outflows related to strategic investments and/or acquisitions. We intend to pursue external sources of financing to support our funding needs, including equity financings and debt financings, depending on market conditions and other factors.
The amount and timing of our capital expenditures is within our control and subject to management's discretion. We retain the flexibility to defer a portion of planned capital expenditures depending on a variety of factors, including, but not limited to industry conditions, increased costs, delays in project development, the availability of necessary equipment, infrastructure and capital, capital needs of other strategic initiatives and market conditions. Our goal is to allocate our capital to advance our objectives and maximize returns.
To meet certain milestones under the Dept. of Commerce DFA and LGA, respectively (the "Funding Agreements") to partially reimburse us for our capital expenditures, we will be required to raise a significant amount of capital by the end of 2027. Under the Funding Agreements, we are required to raise equity (which could include, at our option, up to $300.0 million of convertible loan notes) in the following amounts by the corresponding dates:
•On or prior to March 31, 2027, we are required to raise an additional aggregate amount of equity equal to $375.0 million, plus the total cash acquisition costs for the acquisition of Serra Verde.
•On or prior to December 31, 2027, we are required to raise an additional aggregate amount of equity equal to $875.0 million.
Under the Funding Agreements, we are also required to establish a revolving credit facility in an aggregate principal amount not to exceed $250.0 million by June 30, 2027. In addition to the equity raise requirements described above, we are required to raise an aggregate amount of equity that is sufficient to satisfy the cash collateral required under such working capital facility.
There can be no assurance that any government funding or other funding will be obtained, or as to the timing or amount of any proceeds. Debt financings may impose additional operational limits on our business and increase our interest expense, and equity or equity-linked financings could result in additional dilution to our shareholders. If we do not raise equity to satisfy the equity milestones described above, we may seek to modify such milestones under the Funding Agreements through discussions with the Department of Commerce. There can be no assurance that any agreement for a modification will be obtained.
Our ability to raise additional capital on acceptable terms is subject to market conditions, our operational progress, and our ability to satisfy applicable milestones and conditions, and there can be no assurance that such additional capital will be available on acceptable terms or at all.
Sources and Uses of Cash
Our primary sources of liquidity have consisted of equity financing. For the nine months ended September 30, 2026, we had a net loss of $68.3 million, which included a non-cash fair value gain on financial instruments of $115.4 million. Net cash used in operating activities during the period was $228.2 million. As of September 30, 2026, we had $1.09 billion in unrestricted cash and cash equivalents.
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
We expect to continue to use cash in our consolidated operating activities for the foreseeable future as we invest in commercializing our integrated mine-to-magnet platform. Our primary near-term uses of cash include:
•Stillwater Facility development - continue to qualify sintered NdFeB permanent magnet production, expansion of production, and building metal making operations, a portion of which could be funded through the DFA and LGA, and procuring feedstock;
•Round Top Project advancement - funding a Definitive Feasibility Study and, ultimately, mine construction; a portion of which could be funded through the DFA, LGA, and TSIF grant agreements;
•Blacksburg Facility development - developing our new magnet manufacturing and refined metals operation in Bailey Industrial Park, Blacksburg, a portion of which could be funded through the DFA and LGA;
•Serra Verde - implementation of the flowsheet optimization and debottlenecking project;
•Consolidated separation plant development - developing a consolidated separation plant to process recycled swarf from our magnet production and mixed rare earth carbonate primarily from Serra Verde;
•Less Common Metals expansion - expanding the current manufacturing site in Cheshire, United Kingdom.
•Less Common Metals - Europe - developing a rare earth processing, metal and alloy production and magnet making facility in Lacq, France; and
•General corporate and administrative expenses - supporting our growing operations, including personnel, legal, regulatory, and compliance costs.
Investment in Carester SAS. The Carester investment, when completed, has an aggregate estimated value of €40.0 million, or approximately $45.3 million. Upon consummation of the transaction, the proposed investment would require a cash payment of €28.3 million, or approximately $32.1 million. The remaining consideration consists of equity consideration of €11.7 million, or approximately $13.2 million, to be settled through the issuance of shares of our common stock, subject to customary adjustments, including the potential substitution of cash in lieu of our common stock.
U.S. Department of Energy Critical Materials Innovation, Efficiency and Alternatives Program. The Dept. of Energy grant provides reimbursement of up to a maximum amount of $19.3 million on certain allowable costs to support development of a pilot-scale rare earth element separations project. Final award terms, project scope, budget, and timeline are subject to negotiation with the Dept. of Energy. Any award is subject to successful completion of negotiations with the Dept. of Energy and the execution of a definitive funding agreement.
Texas Semiconductor Innovation Fund. The TSIF Grant Agreement provides for reimbursement of certain allowable costs directly allocable to the Round Top Project up to a maximum amount of $14.2 million. The TSIF Grant Agreement grant funds are disbursed on a cost reimbursement basis only and are subject to our strict compliance with the terms and conditions of the TSIF Grant Agreement.
Facility Leases. We lease facilities under fixed noncancelable operating leases that expire on various dates through fiscal year 2032. See Note 6, "Commitments and Contingencies - Leases," of the Notes for additional information related to our fixed noncancelable operating leases.
Cash Flows
Nine Months Ended September 30,
2026 2025 Change
(In thousands)
Net cash used in operating activities $ (228,187) $ (21,087) $ (207,100)
Net cash used in investing activities (375,600) (13,398) (362,202)
Net cash provided by financing activities 1,414,763 275,333 1,139,430
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Operating Activities. Net cash used in operating activities increased by $207.1 million compared to the comparable prior-year period. The changes in non-cash adjustments were primarily driven by:
•a $332.2 million non-cash unrealized fair value gain primarily related to the Series A Warrant and the Government Grant Warrant liability, partially offset by the unrealized fair value loss related to the Earnout Share conversion;
•a $12.4 million increase in stock-based compensation; and
•a $7.7 million increase in depreciation and amortization, due primarily to acquisition-related property and intangible assets.
The changes in operating assets and liabilities were primarily driven by:
•an increase in cash used for accounts receivable and inventory, due primarily to the addition of Less Common Metals' receivables and inventory balances following the acquisition of Less Common Metals on November 18, 2025 and the addition of Serra Verde's inventory balances following the acquisition of SVRE Holdings Ltd. on September 3, 2026;
•an increase in cash used for prepaid and other assets, due primarily to prepaid rent and advanced payments to suppliers for future inventory deliveries;
•an increase in cash used for accounts payable, due primarily to expenditures associated with development of the Round Top Project, an increase in vendor payments related to the acquisition of SVRE Holdings Ltd. on September 3, 2026, and the timing of vendor payments; and
•an increase in cash provided from accrued expenses, due primarily to an increase in payroll and payroll taxes related to the acquisition of SVRE Holdings Ltd. on September 3, 2026, and equipment expenditures.
Investing Activities. Net cash used in investing activities increased by $362.2 million compared to the comparable prior-year period, due primarily to the acquisition of SVRE Holdings Ltd. on September 3, 2026, and capital expenditures to build out our manufacturing process at our Stillwater Facility.
Financing Activities. Net cash provided by financing activities increased by $1.14 billion compared to the comparable prior-year period, primarily due to proceeds from the $1.50 billion private investment in public equity financing, net of transaction costs, completed in January 2026, partially offset by payments for security issuance costs and the repayment of the Barclays Bank PLC trade cycle loan facility.
Off-Balance Sheet Arrangements
Other than as described in this Quarterly Report, we do not have any other off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. See Note 6, "Commitments and Contingencies," of the Notes.
Purchase Obligations and Other Commitments
In the normal course of business, we enter into purchase orders with vendors for manufacturing and research and development equipment and with suppliers for inventory used in the manufacture of our products. Capital equipment purchase orders are generally non-cancelable due to long lead times and generally relate to forecasted equipment needs for our Phase 1b and 2a manufacturing line expansions at our Stillwater Facility, facility construction, capital equipment purchases for magnet- and metal-making activities, and research and development activities at RTMD. Inventory purchase orders are generally fulfilled within one year of the order date.
USA Rare Earth, Inc. | Q3'2026 Quarterly Report (Form 10-Q) |
Critical Accounting Estimates
Our Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and require management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities and results of operations. Actual results could differ materially from these estimates.
Significant estimates include goodwill and other assets arising from business combinations, asset and liability valuations, including earnout and warrant liabilities, deferred taxes and related valuation allowances, and other fair value measurements. See Note 1, "Organization - Significant Accounting Policies" in the Notes to the Consolidated Financial Statements included in our 2025 Annual Report for a description of our critical and other significant accounting policies.
Recent Accounting Pronouncements
For a discussion of certain recent accounting pronouncements, see Note 1, "Organization - Significant Accounting Policies - Recently Issued Accounting Pronouncements Not Yet Adopted," of the Notes.
USA Rare Earth Inc. published this content on November 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 12, 2026 at 21:55 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]