USA Rare Earth Q1 2025 Earnings Report

USA Rare Earth EPS Results

• Actual EPS: -$0.19
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

USA Rare Earth Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

USA Rare Earth Announcement Details

• Quarter: Q1 2025
• Date: 5/14/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 13, 2025
• Conference Call Time: 6:00PM ET

USA Rare Earth (NASDAQ:USAR), Inc. is domestic supplier of rare earth magnets and heavy rare earth elements. It is developing a vertically integrated, domestic supply chain for rare earth element magnet production, with a facility in Stillwater, Oklahoma, and mining rights to the Round Top heavy rare earth and critical minerals deposit in West Texas. The company was founded in May 2019 and is headquartered in Stillwater, OK.

USA Rare Earth Q1 2025 Earnings Call Transcript

Key Takeaways

• USA Rare Earth is commissioning a 310,000 sq ft NDFEB magnet facility in Stillwater, OK, aiming to bring its first 1,200 metric tons production line online in H1 2026 with ~$150–200 million revenue and scale to 5,000 metric tons annually at full capacity.
• The company has secured over $100 million in cash post-SPAC merger and PIPE financing, plans to invest ~$60–65 million in plant capex this year, and expects quarterly SG&A of $8–9 million to support >2× headcount growth.
• At Round Top in West Texas, management is advancing its proprietary ion exchange flow sheet and pre‐feasibility study, targeting pilot plant development over the next two years to unlock heavy rare earths and gallium.
• USA Rare Earth is prototyping magnets in its new innovation lab, has initial MOUs for ~20 tons/year, and is in qualification talks with small to medium industrial, EV, medical, and defense customers for 2026 deliveries.
• The long‐term strategy centers on building an integrated domestic supply chain—from mineral processing and metal making to magnet manufacturing—to control costs and reduce reliance on Chinese imports.

Presentation

[Operator]

AirEarth First Quarter twenty twenty five Earnings Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Lionel McBee, Vice President of Investor Relations. Please go ahead.

[Lionel McBee, VP - IR at USA Rare Earth]

Good afternoon, everyone, and welcome to USA Rare Earth's twenty twenty five First Quarter Earnings Conference Call. My name is Lionel McBee, and I am the Vice President of Investor Relations. I'm here today with our Chief Executive Officer, Joshua Ballard and our Chief Financial Officer, Rob Steele. During today's call, we may make projections and other forward looking statements under the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995 regarding future events or the future financial performance of the company. These statements may discuss our business, economic and market outlook, growth expectations, new products and their performance, cost structure and business strategy.

[Lionel McBee, VP - IR at USA Rare Earth]

Forward looking statements are based on information currently available to us and on management's beliefs, assumptions, estimates and projections. Forward looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. We refer you to the documents the company files from time to time with the SEC, specifically the company's Form 10 ks and Form 10 Q. These documents identify important factors that could cause actual results to differ materially from those contained in our projections and forward looking statements. All statements made during this call are made only as of today, 05/14/2025, and the company expressly disclaims any intent or obligation to obtain forward looking statements made during this call to reflect subsequent events or circumstances unless otherwise required by law.

[Lionel McBee, VP - IR at USA Rare Earth]

With that, at this point, I will turn the call over to Josh.

[Joshua Ballard, CEO at USA Rare Earth]

Thank you, Lionel. I want to thank all of you for joining our very first earnings call since we merged with inflection point and started trading on March 14. It's been an exciting past couple of months and much has happened at the company as well as in the world and in our industry culminating in our $75,000,000 equity raise just two weeks ago. We are in a firm financial position and moving swiftly to scale. It's an exciting time at USAA Rare Earth full of a lot of hard work, but incredibly rewarding work.

[Joshua Ballard, CEO at USA Rare Earth]

In this first call, I want to lay out our long term vision and strategy for the large number of investors who have not had the opportunity to hear it. We will discuss our current status as well as the short term milestones that will serve as key markers as we seek to methodically create value for our shareholders each year while we build a growing and cash flow generating business. We understand that we must build trust with the wider investment community to ensure that value is created while this long term story is being built. To do that, you must see the future and believe that we can achieve it. Let's start with painting the big picture of that future.

[Joshua Ballard, CEO at USA Rare Earth]

Global geopolitical tensions have caused this quiet industry to rise to the top of conversation for weeks. Even my 86 year old mother now understands how critical rare earths are to our day to day lives. She knows that incredibly powerful and compact rare earth permanent magnets underpin much of our modern technology, quietly translating electricity into motion in profound and unexpected ways. The export ban from China of certain heavy rare earths and these permanent neo magnets are not only a political statement as it hammers critical American sectors such as defense, automotive, aerospace and robotics, but a personal one as well. Gadolinium is used as a contrasting agent in millions of MRI scans every year.

[Joshua Ballard, CEO at USA Rare Earth]

Itrium is used in radiation therapy for certain cancers. Permanent neo magnets are in the computers you are working on, your mobile phones, the cars we drive, the airplanes we fly in and the list goes on. America gave up its ability to not only mine and process these minerals, but to make the metals and critically important magnets as well. It's a Manhattan Project moment for America to invest and rebuild this lost art that makes up a combined approximately $40,000,000,000 plus industry. And of course, you can look at USA Rare Earth as a microcosm of this entire industry, which we are at the forefront of.

[Joshua Ballard, CEO at USA Rare Earth]

We are actively building the largest fully domestic Neo Magna manufacturing facility in The United States. To support this facility, we're developing our own rare earth mineral processing technology to unlock our heavy rare earth deposit in West Texas. We'll also look to rebuild rare earth metal making either on our own or together with partners to return this capability home to America. I often get the question as to why it is so important for us to look at building each stage of the rare earth magnet supply chain. After all, it's no small task.

[Joshua Ballard, CEO at USA Rare Earth]

My answer is that we must build a business that can compete for decades to come, not just for the next couple of years. All this noise in the market today is temporary. Tariffs will come and go and memories are short. To compete globally, we must control costs at every stage of the supply chain. We will do this either by building on our own or partnering closely with others in the industry to achieve the same.

[Joshua Ballard, CEO at USA Rare Earth]

We have a unique opportunity today to grow USA Rare Earth into the premier rare earth mineral and magnet company in The United States. We saw an incredible opportunity before the election last year and recent events have only made this opportunity even more real and more urgent. We believe that we are witnessing a permanent change to how America and likely the world views China's tight hold to these important resources. What you will see is that our intent is to build a great business with a methodical and focused approach without hype to take advantage of this significant dislocation in this market. Let's get into it and I'll start with our strategy and an update on our magnet business.

[Joshua Ballard, CEO at USA Rare Earth]

Our near term value creation event is the commissioning of our 310,000 square foot NDFEB or NEO magnet facility in Stillwater, Oklahoma. I believe we have put an aggressive but achievable plan in place to commission this plant by early next year and couldn't be more pleased with our progress to date. Ultimately, this facility will produce nearly 5,000 metric tons of Neo magnets, hundreds of millions of magnets with revenues of roughly $700 to $800,000,000 annually at full capacity. Let's put the size of this facility into the perspective of the broader neo magnet market. By 2026, the overall neo magnet market is estimated to be at roughly 250,000 metric tons per year per Adamas Intelligence and is on track to double the 500,000 metric tons over the next decade.

[Joshua Ballard, CEO at USA Rare Earth]

The United States is estimated to be about 20% of this market or nearly 50,000 metric tons per year, which is also expected to approximately double over the same period. Currently, The U. S. Imports nearly all of its neo magnets from China. Therefore, even if our facility was at full capacity today, we would be only 10% of the overall U.

[Joshua Ballard, CEO at USA Rare Earth]

S. Market, which is looking to at least double in the coming decade. Our strategy is one of execution. We have a large market hungry for domestic supply, which is non existent. We are bringing known manufacturing technologies back to The U.

[Joshua Ballard, CEO at USA Rare Earth]

S. To sell into that hungry market. There's no smoke and mirrors here, no fantastical assumptions about a market that may or may not exist, no unfounded belief in a product that hasn't yet been proven. We are simply building a plant with known technologies to make great quality products for a market asking for domestic supply. The only real question to ask ourselves is how fast can we build and scale it.

[Joshua Ballard, CEO at USA Rare Earth]

We are actively working to build and commission our first production line which will be 25 of our capacity or 1,200 metric tons per year, which should translate into roughly 150,000,000 to $200,000,000 in revenue. Our target is to commission this line in the first half of twenty twenty six and then scale up to 1,200 metric tons by the end of next year. There are three stages to achieve this. The first two stages will happen concurrently. First, we are building out and enhancing the infrastructure of our facility to optimize the plant floor for commercial neo magnet production.

[Joshua Ballard, CEO at USA Rare Earth]

Second, we must commission the existing equipment that we have on-site. This equipment, which we purchased used a few years ago, is what I call the backbone of our first line. This backbone takes the metal we purchase, turn that turns that metal into a powder, presses that powder into large blocks, cuts those large blocks into pieces close to size and then centers or cooks those pieces into hardened magnets in our furnaces. This process will be essentially the same for all customers. We already shaking out and commissioning this equipment, which we will finish this year.

[Joshua Ballard, CEO at USA Rare Earth]

The final stage will be to commission the finishing equipment, which is on order from vendors in The U. S, South Korea and Japan. This finishing equipment includes capabilities such as grinding, polishing, coating and grain boundary diffusion. To be clear, this is a very aggressive schedule, although an achievable one. However, we should not be blind to the inherent risks associated with it.

[Joshua Ballard, CEO at USA Rare Earth]

Outside of typical potential construction delays, there are two key risks to be aware of, which we will address and update you on throughout the year as we make progress. First, while our existing equipment was only used for a brief period of time and has been well taken care of, it has not been run for a number of years. To avoid any delays in shipping product next year, we are testing this equipment thoroughly with the original vendors throughout this year. Second, while we have built a strong foundational team of great engineers who are very versed in magnets and production, we must continue to bring in specialized talent to accelerate our scale up and to ensure we build high quality magnets for our customers. We are tackling this challenge in three ways.

[Joshua Ballard, CEO at USA Rare Earth]

One, we are seeking individuals with high volume manufacturing experience who come from related areas such as ceramics. Two, we will build a robust quality management system to identify and fix errors as early in the process as possible. And three, we will leverage Magnet expertise inside and outside of the company to train and enhance our team. Despite some of these challenges, we are confident in our ability to get high quality labor in Oklahoma. For example, Stillwater is the home of Oklahoma State University and there are scores of technical schools within the 100 miles of our plant that can provide low cost, high value labor as we scale.

[Joshua Ballard, CEO at USA Rare Earth]

In addition to building our plant, we are also building a pipeline of customers to fill it in 2026. Our singular goal this year is to secure commitments for product deliveries in 2026. To do so, we are talking to a diverse array of customers from EV manufacturing, auto supply, industrial applications, robotics, medical supply companies, defense, consumer products among others. We will also be hiring to augment and grow our sales team. I should be clear that while we have been building relationships with customers for the past couple of years, we started our sales process in earnest with the commissioning of our innovations lab this past March.

[Joshua Ballard, CEO at USA Rare Earth]

We are now prototyping magnets, which allow our customers to physically test and qualify our product. This along with the significant and positive change in our financial position has changed the tenor of discussions. Many customers are excited to potentially partner with us to bring their supply back home to America. Unlike most of our peers in this market, we are building this plant for a wider and more diverse set of customers and industries. Our first line will be focused on small to medium sized customers anywhere from 20 tons per year up to a few hundred tons per year.

[Joshua Ballard, CEO at USA Rare Earth]

Focusing on a diverse and manageable set of customers will allow us to start with simpler products at somewhat lower volumes, better margins and to build up the volume in a thoughtful manner and with great partners. Of course, we will also seek to build a mix of larger customers and we are actively in discussions with several large auto and industrial manufacturers today. This qualification process will take some time and we do not expect revenues from this type of high volume customer next year. But in the meantime, we will build a great business with our partners in the small to medium sized customer base. As our pipeline solidifies in the coming quarters, we will be able to talk more definitively about our revenue and profit expectations for next year.

[Joshua Ballard, CEO at USA Rare Earth]

Our goal is to fill the capacity of our first line by the end of twenty twenty six or early twenty twenty seven. We believe we are well placed with feedstock for the plant for the next few years to support that growth. However, despite our big goals, we are also manufacturers. We understand that we have to walk before we run. We will start slowly in the first half of the year as we commission equipment, shake out our plant and build and test our processes to ensure we are making high quality magnets following commissioning.

[Joshua Ballard, CEO at USA Rare Earth]

Once we are comfortable, we can scale and maintain quality, we will begin to add more significant volumes. This will allow us to build a strong foundation from which we can scale much swifter in 2027. We are also looking at how we can scale faster to meet this moment in history. We believe we can scale to the full 5,000 tons over the next couple of years under the right conditions. The critical gating factor for us to execute on a more accelerated plan is financing.

[Joshua Ballard, CEO at USA Rare Earth]

Capital is the fuel that will run this machine and I think we have proven that we can raise money when we need it. Rob will talk more about this in a moment. Let's now turn to our Round Top deposit, where we continue work to unlock the long term value that can be created from our unique heavy rare earth deposit in West Texas. Ultimately, our goal is to produce both the feedstock for our magnet facility as well as to sell excess material minerals to the market. We view our Round Top asset as a national asset, one that is unique among its peers here in The United States.

[Joshua Ballard, CEO at USA Rare Earth]

Round Top Mountain has been extensively researched starting in the 1980s with over 45,000 feet of boreholes drilled that show a consistent deposit rich in heavy rare earths and other tech metals. Most known deposits in The U. S, including the one operating rare earth mine in California are rich in the light rare earths, lanthanum and cerium, the most abundant and low value of all rare earths, as well as some neodymium and prasioodymium, the two minerals critical for centered neomagnum manufacturing. Our deposit is unique and that it is rich in the heavy rare earths that were recently put on the export control list by China. We have all the heavy rare earths in Round Top with significant amounts of high value minerals such as dysprosium, terbium, lutetium among others, in addition to the key magnet minerals neodymium and prasiodinium.

[Joshua Ballard, CEO at USA Rare Earth]

Round Top also has one of the largest known deposits of gallium, which was banned by China in 2024 and is critical to the semiconductor and defense industries. I often get questions from people who've been following our progress as to why it is taking us so long to develop Round Top. Let's talk about the challenges at our deposit, but also why we are feeling more confident today. Rare earth minerals are rare because they are dispersed throughout the rock in very low concentrations. At Round Top, many minerals are found in hundreds of parts per million or less.

[Joshua Ballard, CEO at USA Rare Earth]

Therefore, you have to process a lot of rock and even once you've extracted these minerals in bulk from the rock, it is still challenging to separate them into individual oxides. Each deposit has its own unique challenges and impurities and so approaches to process in the ore differ from one deposit to the next. Our ore at Round Top Mountain, for example, is high in calcium, iron and aluminum, which creates difficulties as we seek to remove those impurities to extract the valuable rare earths and tech metals that will make this deposit a financial success. We are also seeking to separate out and sell a wide range of minerals adding further complexity. Our great team in Colorado has been working diligently on the process engineering for Round Top for over three years.

[Joshua Ballard, CEO at USA Rare Earth]

And despite challenges, we are finding success. We have now established many of the processes that we will use at the mine. We have also separated many of the rare earths from Round Top ore individual into individual oxides that exceed 99% purity using our proprietary ion exchange technology. Based on these successes, we've been ramping up our work in Colorado this year. We have four main areas of focus today.

[Joshua Ballard, CEO at USA Rare Earth]

One, we are scaling up our production of leach solution to move from batch to continuous testing at our facility in Colorado. We have significantly increased the amount of rock being processed to create enough bulk solution to run continuously through our processes. Two, with increased bulk solution, we can now establish processes to extract those minerals present in lower quantities in the rock, but that are important to Round Top's values such as gallium and uranium. Three, once we have successfully established our processes for these remaining minerals, we can focus on specific areas of the flow sheet to reduce future capital and operating expenses to support a higher ROI. Four, finally, we are seeking to establish a method for recycling and reusing the acids and reagents used in processing.

[Joshua Ballard, CEO at USA Rare Earth]

This will allow us to minimize spend as well as to be responsible stewards of the land. Let's also discuss the broad framework from which we will develop Round Top in the coming years, which I prefer to break out into five stages. The first two stages consist of first, the flow sheet, which sets the methods by which you will mine the rock and process the minerals and second, the pre feasibility study, which independently establishes the value of the deposit and thereby projected ROI of the project. We are at these early stages today in our development of Round Top and these activities reflect relatively low levels of spending. I view these investments as a low cost option that may unlock incredible value for the company in the coming years.

[Joshua Ballard, CEO at USA Rare Earth]

With success, we will move into the third stage, which is the development and construction of a pilot plant. Here, we would invest tens of millions of dollars. However, this would only happen after we have established and communicated the value of the future mine. Following the pilot plant, large investments will begin in the fourth and fifth stages when we publish a definitive feasibility study and then finally we would proceed to the engineering and construction of the mine itself. Today, are targeting to establish the flow sheet, finish our pre feasibility study and build a pilot plant over the next couple of years.

[Joshua Ballard, CEO at USA Rare Earth]

If successful, this will generate considerable value to USA Rare Earth long before we begin the larger investments in the mine itself. The work that happens this year is the critical milestone to taking this important step and will define whether we hold to that timeline. We will continue to keep you updated throughout each quarter on our progress. Our next milestone is to generate enough product of each of the individual monetizable minerals to allow us to finalize our flow sheet, which we'll update you on in August. Both our Magna facility and our development work at Round Top are big projects.

[Joshua Ballard, CEO at USA Rare Earth]

However, the world and geopolitics have turned in our favor. Despite the uncertainty in the market, we believe that on balance this uncertainty is good for USA Rare Earth. In addition to the operational approach I described today, we have also launched a significant outreach program to the federal government in the past few months. I've spoken to many people in both the executive office as well as many of the agencies and will continue to do so. There's clearly an incredible urgency throughout the federal government today seeking solutions to help stand up this supply chain in America.

[Joshua Ballard, CEO at USA Rare Earth]

I look forward to seeing what the administration will do in the coming months. With that, I will hand it over to Rob to walk through our financial position and how the year will unfold.

[Rob Steele, CFO at USA Rare Earth]

Thank you, Josh, and thank you everyone for joining us today. We are bringing the rare earth mineral supply chain back to The U. S. And I'm excited to share our financial plans and our first quarter financial update. Our merger with inflection point in mid March gave us the access to the capital markets that we needed and we have already raised $90,000,000 in proceeds from our pipe and from our SPAC related forward purchase agreements.

[Rob Steele, CFO at USA Rare Earth]

We now have over $100,000,000 on our balance sheet and are well positioned to execute on the initial phase of our strategic plan. As Josh described earlier, our plan is to ultimately grow our rare earth magnet production to 5,000 metric tons per year and further advance our Round Top Mountain project once we have achieved a successful flow sheet. In Stillwater, we are not only investing in the physical build of our plant, but also in our teams, operational infrastructure and systems to ensure we can achieve our key goals and produce a quality and consistent product for our customers. To support this build and prepare for future growth, we are adding team members in key roles ahead of our revenue ramp, which will largely affect our SG and A expense. As of 03/31/2025, we had nearly 40 full time employees and expect to more than double our headcount by year end.

[Rob Steele, CFO at USA Rare Earth]

The majority of our hires will be at our Stillwater facility, but will also include key executives as well as sales and support staff. Therefore, should generally expect our SG and A to grow in a manner consistent with our planned growth in headcount and our investments in infrastructure and systems. For 2025, we expect our per quarter operating expenses to fall between 8,000,000 and $9,000,000 In order to commission our Stillwater magnet facility, we expect to invest approximately 60,000,000 to $65,000,000 of capital in the plant build this year. This number could change as we progress the engineering and proceed to quoting some of the larger aspects of the project. We should also note that we are uncertain today of how tariffs could affect this number, especially as it relates to the steel purchases and the finishing equipment we will be receiving from overseas.

[Rob Steele, CFO at USA Rare Earth]

However, worst case, we believe the effect will remain in the single digit millions, if in fact unavoidable. Now to our financial results. For our first quarter of twenty twenty five, we generated an operating loss of $8,700,000 versus an operating loss of $4,700,000 year on year, mainly driven by increases in SG and A expenses related to our merger. Approximately $3,700,000 of this increase in SG and A was related to merger related expenses. Our R and D expense decreased year over year due to efforts to minimize spend until our merger was completed.

[Rob Steele, CFO at USA Rare Earth]

Net income attributable to common was $51,800,000 or $0.58 per fully diluted share, driven by a $60,300,000 non cash gain from marking to market our warrant and earn out liabilities. Excluding this gain, we would have reported an adjusted net loss of $8,500,000 or an adjusted net loss per share of $0.19 which is more indicative of our current operating performance. In terms of liquidity, we finished the quarter with 23,400,000 of cash on our balance sheet with no significant debt and subsequently raised a $75,000,000 pipe. This combined with the receipt of approximately $15,000,000 from investors exercise of our forward purchase agreements, net of operating expenses and capital spending affords us a cash position as of 05/09/2025 of over $100,000,000 In short, we're in a good place today and we will be investing significantly in our growth. We have ample potential options to fund future phases of our plan and we would expect our cost of capital to improve as we make progress, including from non dilutive governmental sources.

[Rob Steele, CFO at USA Rare Earth]

And frankly, as Josh mentioned, if we are able to obtain the capital we need to accelerate our strategy, we will certainly seek to do so. Now let's go to Q and A.

[Operator]

We will now begin the question and answer session. And your first question today will come from Suji Desilva with ROTH Capital. Please go ahead.

[Suji Desilva, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Hi, Josh. Hi, Rob. Congrats on the successful transaction and the first earnings report here. I look forward to many So, maybe you can talk about this customer MOU that you already have in place. Can you talk about how you got that done given that the Innovation Lab just got commissioned?

[Suji Desilva, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

I thought that will be a key part of the process. And then more specifically going forward with the pipeline as you try to bring additional customers on, what's the lead time from engaging a customer to being in a position to potentially ramp production magnets for them?

[Joshua Ballard, CEO at USA Rare Earth]

Yes. Thanks Suji. Good to talk to you. We have been talking to these customers for the last year or so. So the conversations have been ongoing.

[Joshua Ballard, CEO at USA Rare Earth]

Once the lab was commissioned last month, they were already ready to go. So they were excited to get started and we've gotten started. So we're working through the qualification process with them now meaning we're working out the grade to give them prototypes that they can test within their products. So that it's all tested out before we get to production next year. And I would add we've had one announcement but we're working with other customers everything from a multibillion dollar industrial aerospace manufacturer to automotive supply.

[Joshua Ballard, CEO at USA Rare Earth]

So speakers, there's all sorts of customers that we're talking to and we believe we'll have more announcements soon as the year progresses. And what was the second side of your question Suji?

[Suji Desilva, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

No, just asked what the lead time would be from engaging a customer to being in a position to provide production for them?

[Joshua Ballard, CEO at USA Rare Earth]

Yes. And I think well obviously we can't provide production until we commission early next year. But generally the qualification process with these small to medium sized customers we think will be roughly around a three to six month time period which shorter than it would be for an auto manufacturer for example, which could be a year or two, but relatively quick. Right. And

[Suji Desilva, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

then when you do secure a win for these customers or as you will in the future, will these be second sources for large existing programs where you'll come in? Or would you envision that more being a customized product, a new design opportunity where you're sole sourced? What's more likely the scenario here?

[Joshua Ballard, CEO at USA Rare Earth]

I think it'll be a mix of both. We're seeing we're talking to customers who are very interested in diversifying their current supply, which means we'd be displacing their current supplier who's likely coming from China. And then we do have a few instances where we're being brought in on new projects where we would be the sole supplier at least the initial one coming in at any rate. So I think it'll be a mix of both, but we're definitely seeing us just potentially displacing current vendors as well.

[Suji Desilva, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay, great. And just lastly, I want to understand on the manufacturing side as you qualify this equipment that you acquired a few years ago. Is the equipment you already have that you're qualifying sufficient to get to the fully full capacity or will you need to acquire additional equipment? If so, is that equipment available in the global marketplace? What will be the lead times there etcetera? Thanks.

[Joshua Ballard, CEO at USA Rare Earth]

Yes. We'll need to augment that equipment a little bit to get to the 1,200 tons for the full line. That's why we're initially commissioning at 600 tons. So there'll be a couple of pieces of equipment to augment what I call that backbone, which is what that existing equipment covers everything from the strip cast metal to powderizing and depressing into the centering furnace. And then on the finishing equipment as well, we'll need a little bit more.

[Joshua Ballard, CEO at USA Rare Earth]

And on the finishing side, we've been purposely waiting a little bit until the pipeline firms up because that can be a little more dependent on customers. So we want to make sure we order equipment that we're going to be fully utilizing once we go live with it.

[Suji Desilva, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay. I appreciate the color. Thanks Josh. Thanks Rob.

[Joshua Ballard, CEO at USA Rare Earth]

You bet.

[Operator]

And your next question today will come from Derek Soderbergh with Cantor Fitzgerald. Please go ahead.

[Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald]

Yes. Hey Josh and Rob, thanks for taking the questions and my congrats as well on the merger. So Josh, sort of mentioned financing as a gating factor. Wondering if there's any potential for customer funding. Has that been part of the discussion with customers who are sort of intent on securing supply?

[Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald]

And then I'm curious whether government incentives are going to play a role in funding your scale up? And then I've got a follow-up.

[Joshua Ballard, CEO at USA Rare Earth]

Okay. Yes, on the customer side that could very well become part of the conversation, with for two reasons. One, if it's a much larger customer, number one, but more importantly, if a customer needs more bespoke equipment. Our initial customers, I don't believe will need more bespoke equipment. I think they're going to be good bread and butter customers that we can serve with the existing equipment we're building.

[Joshua Ballard, CEO at USA Rare Earth]

And then on the government side, absolutely we're actively speaking with government agencies quite a bit right now. I'm headed to Washington next week again. And we're going to be submitting and working on that throughout the year. So I'm hopeful that that'll work out. We certainly believe that the government is going to be supportive this year, but we'll see what happens in the coming months.

[Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald]

Got it. Got it. That's helpful. And then I was just wondering if you could talk about the feedstock supply during the initial ramp. How robust is the feedstock supply chain outside of China?

[Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald]

What are the limiting factors to securing feedstock from that portion of the market? And then should you have the ability to take any from that China supply chain? Is that something you'd consider in the near term?

[Joshua Ballard, CEO at USA Rare Earth]

Yes. I think when you think about feedstock, let's break it out into two pieces. One is whether or not you need heavies or not, I guess is the piece. If you don't need heavies and you're just using the light rare earths and your typical iron and boron, I think we're very comfortable on that feedstock as we start out for the first couple of years. We have a great relationship with our suppliers.

[Joshua Ballard, CEO at USA Rare Earth]

We're looking at how else we can diversify that supply, especially at the ore level. And then of course, looking at bringing the actual metal making here back to The United States, which I described in my prepared remarks. Everybody currently is more challenged with the heavy rare earth because of the export controls that are in place, which we'll see how much they loosen here in the coming weeks. But importantly, these initial customers that we're working on and planning on rolling out early next year will not need heavy rare earths. These are all magnets, center neo magnets, at the level where we don't need to add heavy rare earths or grain boundary diffusion in order to support them.

[Joshua Ballard, CEO at USA Rare Earth]

So we feel pretty good as we start out where we're sitting today and then we'll see how things shake out in the market on the heavy rare earth side as well along with everybody else.

[Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald]

Got it. That's helpful. And then just one final one for me. Just any additional details on that first customer MOU? What portion of your planned production might that customer offtake in terms of tons?

[Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald]

And then curious, just taking a step back on pricing, curious if there might be a premium attached to U. S. Production, just given how scarce the sourcing is for those types of magnets and rare earths. So just wondering, just on pricing, if there's anything you can say on if there's potentially a premium attached to your pricing versus maybe the global price? Thanks.

[Joshua Ballard, CEO at USA Rare Earth]

Yes. We mentioned in our press release that we'd be doing up to about 20 tons per year for this customer. So I think it's a good healthy amount. It's at the it's within the range that we're targeting for this first line. So we're actually quite happy with that.

[Joshua Ballard, CEO at USA Rare Earth]

And probably not 20 tons next year because we'll be starting a bit later in the year, on Jan one, right? But typically annually will be about that and they're growing quite quickly actually as a company. And then on the pricing side, yes, absolutely. Yes, I think the entire market outside of China is going to be priced at a premium higher than China. I think there's no doubt with that.

[Joshua Ballard, CEO at USA Rare Earth]

What we're seeing is that our preliminary kind of budgetary pricing we're giving to customers, we obviously still have a lot to work through with tariffs and everything else throughout this year. But we're coming in well in line with what folks are seeing outside of Europe and Japan and some of the other Magna companies that exist globally outside of China.

[Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald]

Perfect. Thanks guys.

[Joshua Ballard, CEO at USA Rare Earth]

You bet. Thanks, Derek.

[Operator]

And your next question today will come from Michael Mathison with Sidoti and Co. Please go ahead.

[Michael Mathison, Analyst at Sidoti & Company]

Congratulations on the achievements this quarter you guys.

[Joshua Ballard, CEO at USA Rare Earth]

Thanks Michael.

[Michael Mathison, Analyst at Sidoti & Company]

I just have a couple of questions. You answered many of them already. Can you provide some detail on the arrangement with TMRC at Round Top? Is that revenue sharing or how exactly does that work?

[Joshua Ballard, CEO at USA Rare Earth]

It's I mean, they we share, I forget the exact percent, it's about 81%, nineteen % of the deposit together. So it would be a shared 8119% of profit that would come out of that entity today.

[Michael Mathison, Analyst at Sidoti & Company]

And just I'm guessing you're the 81%?

[Joshua Ballard, CEO at USA Rare Earth]

Yes, that's right. Yes, exactly. We're the 81%. We have we control the management of the deposit as well.

[Michael Mathison, Analyst at Sidoti & Company]

Thanks. Secondly, just my last question that was a very positive revenue forecast. Just some quick arithmetic, it seems to me that brings you pretty close to positive EBITDA. Do you feel comfortable with that or is that more of a '27 goal?

[Joshua Ballard, CEO at USA Rare Earth]

'27, yes. So next year we want to get to a monthly we want to fill out the capacity by the end of next year or early twenty twenty seven. We're obviously going to start a lot lower as we start out and then we'll build up to that throughout the year. And if we're able to hit that by the end of the year or into early twenty twenty seven on a going run rate, we believe that it's possible we could hit that. But we got to get there first here over the next, call it, year or so.

[Michael Mathison, Analyst at Sidoti & Company]

Great. That's very helpful. Thank you. Congratulations again.

[Joshua Ballard, CEO at USA Rare Earth]

Thanks Michael.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Lionel McBee for any closing remarks.

[Lionel McBee, VP - IR at USA Rare Earth]

Thank you, operator, and thank you all again for joining us today. We look forward to speaking with you again in early August for our second quarter results call. Thanks and have a good evening.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Lionel McBee, VP - IR
• Joshua Ballard, CEO
• Rob Steele, CFO

Analysts

• Suji Desilva, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC
• Derek Soderberg, Director, Senior Equity Research Analyst at Cantor Fitzgerald
• Michael Mathison, Analyst at Sidoti & Company