USA Rare Earth Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2026

Key Takeaways

  • Positive Sentiment: Strategic platform expansion advanced: USA Rare Earth announced plans to acquire Serra Verde, invested in heavy rare-earth processor Carester, selected Blacksburg, South Carolina, for a second U.S. magnet and metals facility, and closed its acquisition of Texas Mineral Resources, consolidating Round Top ownership.
  • Positive Sentiment: Customer demand is building: The company has more than 100 potential magnet customers, over 20 in qualification, and MOUs and letters of intent covering approximately 2,500 metric tons of annual demand. Production purchase orders are already in hand, with first magnet sales expected by year-end.
  • Positive Sentiment: Management expects to benefit from a widening non-China pricing premium amid severe supply shortages, particularly for heavy rare earths. The company has already implemented higher prices, which it expects to flow through in upcoming quarters.
  • Neutral Sentiment: Second-quarter revenue was approximately $6 million, while operating expenses were about $45 million due partly to M&A, legal, and consulting costs. Adjusted net loss was $33.5 million, or $0.15 per share, and gross margins were pressured by elevated raw-material costs.
  • Positive Sentiment: The company ended the quarter with roughly $1.5 billion in cash and remains on schedule for Round Top commercial operations in late 2028, U.S. metal and alloy and magnet capacity targets by 2029, and its Round Top definitive feasibility study by year-end. CEO Barbara Humpton will be succeeded by Thras Moraitis on October 1.
AI Generated. May Contain Errors.
Earnings Conference Call
USA Rare Earth Q2 2026
00:00 / 00:00

There are 10 speakers on the call.

Operator

Please note this event is being recorded. I would now like to turn the conference over to J.B. Lowe, Vice President and Head of Investor Relations. Please go ahead.

Speaker 1

Thank you, Gary. Good afternoon and welcome to USA Rare Earth's 2026 second quarter earnings conference call. With me today are Barbara Humpton, Chief Executive Officer, and Rob Steele, Chief Financial Officer. Following Barbara and Rob's updates across our business and quarterly results, we will open the lines for Q&A. I would like to remind participants that today's discussion may contain forward-looking statements. Please refer to the press release and our SEC filings for a discussion of risk factors. Listeners who do not have a copy of the press release or associated presentation may access these documents by visiting the investor relations section of the company's website. With that, I'll turn the call over to Barbara.

Speaker 2

Thank you, J.B. Let me start with the progress we made this quarter as a company and the vision we have going forward. USA Rare Earth is building the global leader in rare earths. Every link from the rock in the ground to the finished magnet and beyond across three continents. These materials sit inside the motors, servos, semiconductors, aircraft, robotics, medical devices, and defense systems a modern economy runs on. For a generation, the capability to produce them has been consolidated almost entirely into one country. We're putting it back into allied hands, and we're doing it now. This ranks among the most vital industrial projects underway today, and I want to be clear about our ambition. We intend to lead it. For decades, price governed this industry because availability was assumed. Availability, or lack thereof, is what governs the rare earth industry now.

Speaker 2

Once a company understands what an interruption will do to its production line, its commitments, and its business model, availability drives every decision that follows. The consequence of being wrong is existential. The Chinese government's recent export restrictions on Western companies, including USA Rare Earth, crystallize that risk. For us, they reinforce why this company exists. For the rest of the industry, they're a wake-up call. More and more companies have now concluded that single source dependency on a strategic competitor, one that has become a geostrategic adversary, is a risk they can no longer tolerate. That conclusion is driving companies to rebuild their supply chains around long-term, reliable, and trustworthy sources. A two-tier market is emerging. A China tier and a new non-China tier. The two price differently, contract differently, and behave differently.

Speaker 2

We are building USA Rare Earth to anchor the non-China tier and to be its partner of choice. Outside of China, heavy rare earths used in magnets are scarcer today than at any point in recent memory, and pricing reflects this reality. Western prices for dysprosium oxide, for example, are up over 90% in 2026 alone, as measured by Benchmark Mineral Intelligence, reaching nearly $2,000 per kilogram in August, over nine times the price of the product in China. This same tightness runs across other rare earths and critical minerals such as lutetium, gallium, gadolinium, hafnium, zirconium, and yttrium. Western prices for yttrium oxide, which has only started to be tracked within the last year since it essentially does not exist outside in the West, has risen over 60% since March and is over 200 times the price in China.

Speaker 2

Scarcity is the defining condition of this industry today. Availability is the lens I would ask you to apply to our strategy, which is to supply these scarce materials responsibly at scale. Scaling requires capabilities that are themselves significant barriers to entry, as very few companies outside of China can do this work because it is largely a lost art in the West. That is what makes the integrated value chain we are building so valuable. A mine without processing is a stranded asset. Processing without metal and alloy-making capability is a science project. A magnet manufacturing facility without a secure, heavy, rare earth feedstock is a zombie. Tolling any of these steps through an adversary is a bottleneck. That is why we have to link this chain together and why we moved so urgently to build capability at each link. This quarter is when that architecture snapped together.

Speaker 2

In the second quarter, we announced three significant events. First, our intent to acquire Serra Verde, which will give us the only scaled operating source of both light and heavy magnetic rare earths outside Asia. Second, we announced our investment in Carester, bringing world-class heavy rare earth processing capability and intellectual property into the platform. Third, we selected Blacksburg, South Carolina for our second U.S. magnet and metals facility, where we have already broken ground and ordered long lead time equipment. Underpinning all of this was our signing definitive documentation with the Department of Commerce following an exceptionally rigorous diligence process that included site visits, multiple RFPs, and coordination across numerous agencies. Beyond the capital already appropriated to reimburse us for our expenses, we view these agreements as a validation of our asset base, our business model, and our growth plans, and they significantly de-risk our path to full-scale production.

Speaker 2

Even as we assembled these pieces, we advanced our capabilities at each link in our platform. At Serra Verde, the optimization and growth project, which aims to increase efficiency and production capacity, is in the process of recommissioning. The project is developing as expected toward the restart of commercial production and ramp up at the mine and processing operation on time and within budget. In April, we announced our first commercial production of yttrium metal at Less Common Metals, one of very few producers outside China of a metal essential to high-temperature aerospace applications and high-performance semiconductors. In May, we announced grants from the Texas Semiconductor Innovation Fund and the U.S. Department of Energy to advance our platform, providing further external validation that our platform is essential national infrastructure. In June, we commissioned our hydrometallurgical facility in Wheat Ridge, Colorado.

Speaker 2

Last month, in July, we produced our first commercial-grade dysprosium and NdPr oxide samples from our own recycled magnet manufacturing SWARF. One of the few Western producers able to execute this technically demanding process outside Asia. Lastly, just last week, we closed on the acquisition of Texas Mineral Resources Corp., which consolidates our ownership interest in Round Top and allows for streamlined operations, governance, and decision-making. The new paradigm is evident in the commercial pull we are seeing. An underappreciated feature of this market is that only half of rare earth demand comes from permanent magnets. The other half is demand for the elements themselves, in catalysts, phosphors, polishing compounds, et cetera. Nowhere is this more evident than in the work we are advancing at Round Top.

Speaker 2

We have already engaged over 30 potential customers, many of them large multinationals, on offtake for the non-magnetic oxides and other products Round Top will produce. We are working closely with several of them on Memorandums of Understanding, joint development agreements, and other avenues of innovation. This deep engagement extends to our midstream and downstream businesses. More and more customers are no longer asking whether they need a non-China supply, but are now asking how quickly we can deliver one. Many are sourcing outside China for the first time in decades, if not ever, and are still learning where these capabilities exist. We engineer alongside them. In some cases, we have been working with customer engineering teams for six months or more on specifications, tolerances, and qualification protocols. We see this customer intimacy as a competitive differentiator.

Speaker 2

These are often multi-decade decisions for our clients, designing our material into platforms that will exist for years, and the length of our sales cycle respects the commitment this represents. Let me close with where we are going. On August 28th, there will be a shareholder vote to approve the acquisition of Serra Verde. Upon closing, we will have mining, processing, metal and alloy making, and magnet manufacturing spanning three continents. Our work from here is to move material through every link at scale, to convert qualification into contracts, and to become the supplier the West builds around. My proudest accomplishment is that we have built a company that attracts the most capable people in our industry. Over the past year, world-class experts have chosen to join us. Entire organizations chose to join us, too.

Speaker 2

The teams at Less Common Metals, Carester, and Serra Verde each had a choice about their future, and each chose this platform. In an industry where capabilities outside China are limited, this may be our most durable advantage. It is also why I have such confidence in this next chapter. This is the last quarterly call I will host as CEO, as Thras Moraitis takes over on October 1st. The board of directors has had a bold vision for this company, and I am proud to have been part of it. Thras shares this vision for scaling and expanding our platform. I could not be more confident handing him the baton, and I intend to run hard straight through the handoff. There is a great deal to accomplish between now and October 1st. It has been a privilege to help build and lead this company.

Speaker 2

I'm proud of what the team has accomplished, and I'm even more excited about what it will accomplish next. With that, let me hand it to Rob.

Speaker 3

Thank you, Barbara. Before I begin, I'd like to say on behalf of the more than 325 employees of USA Rare Earth, thank you for your vision, your leadership, and your belief in what we could accomplish together. Since you joined us last October, that conviction has helped transform our ambition into reality. As you described, we are helping to define a new industry paradigm. Building an integrated rare earth platform outside of China takes capital, technical depth, government relationships, and the ability to execute multiple complex work streams at once. What matters is relentless commitment, character, and operational excellence. The steps Barbara described are evidence of all three. We said what we would do, and then we went out and did it and more.

Speaker 3

This past year also demonstrated that our team can get things done at extraordinary speed, which is essential given the critical nature of our mission. We will continue to move at pace, and we will not sacrifice our values to do it. Turning to our Q2 results. Revenues for the quarter, which represents sales to third parties, were approximately $6 million, derived from our metal and alloy making business at Less Common Metals. Gross margins were impacted by higher raw material input costs, which are associated with the supply challenges that the entire industry is facing. This issue is most acute in heavy rare earths, and we are actively engaging with alternative supply sources ahead of our anticipated access to feedstock from Serra Verde and Carester. As a result, our position in the supply-constrained market conditions provides the opportunity to establish appropriate non-China pricing.

Speaker 3

Because of what we've been building here at USA Rare Earth, we have considerable market insight. Therefore, we believe there is an opportunity for positive momentum in pricing to develop going forward. Operating expenses in the quarter were approximately $45 million, including higher M&A, legal, and consulting costs related to our highly strategic global transactions. This was partially offset by lower R&D costs compared to the first quarter as our magnet business moved into production in the second quarter and associated costs are now reflected in inventory rather than R&D. We reported a net loss attributable to common stockholders of $10.3 million or $0.05 per share. This includes a non-cash fair value adjustment of approximately $22.4 million related to our warrant and earn out liabilities. Excluding this, our adjusted net loss was $33.5 million or $0.15 per share. Turning to the balance sheet.

Speaker 3

We ended the quarter with approximately $1.5 billion in cash and cash equivalents. This position gives us the flexibility in the near term to execute and accelerate our mine to magnet strategy as we pursue both organic and inorganic growth. Capital expenditures for the quarter were $66 million. During the quarter, we signed definitive agreements with the Department of Commerce, one of the 2026 targets we laid out in our Q1 earnings release. This financing is a milestone-based CapEx reimbursement program, meaning we are reimbursed only after we achieve specific milestones. In our view, this protects the U.S. taxpayer and aligns private capital with government investment. We expect to apply for our first reimbursement distribution in the coming months.

Speaker 3

At the same time, we continue to build out our platform in line with the long-term schedule we laid out in January to all stakeholders, with Round Top targeting commercial operations in late 2028 and 10,000 tons of both metal and alloy and magnet manufacturing capacity in the United States by 2029. Now to operations. This quarter at Round Top, we began the resource upgrade drilling program, drilling over 10,000 feet of additional core across a three-rig campaign. Early assay results are in line with our expectations for resource grade and confirm heavy rare earths distribution above 70%. The definitive feasibility study remains on track for year-end completion and publication of the SK1300 in early 2027. At our Wheat Ridge R&D headquarters, the hydrometallurgical facility is now operating all three demonstration circuits.

Speaker 3

The Round Top flow sheet, third-party MREC separation, and magnet SWARF recycling. Data from these circuits will feed both our definitive feasibility study for Round Top and the design and engineering of our consolidated separation plan. Wheat Ridge is also where we plan to do forward-looking materials work using quantum computing, AI, and digital twins to help develop new processing capabilities. We are doing this in partnership with the Colorado School of Mines, the Department of Energy, as well as to enhance our own proprietary capabilities. In metal and alloy making, third-party demand for LCM's specialized capabilities remain strong from both magnet manufacturers and specialty alloy customers. However, as I mentioned, raw material shortages have impacted the entire industry, including LCM. Our supply chain team is working to secure feedstock ahead of our access to both Carester and Serra Verde.

Speaker 3

In magnets, our Stillwater team now stands at 140 people, and we are targeting 200 by year end, a measure of how quickly this facility is scaling. Commercially, the pipeline continues to build. We are in active commercial dialogue with over 100 potential customers, with many in negotiation, and more than 20 already in qualification discussions. To date, we have secured MOUs and LOIs covering 2,500 metric tons with large multinationals across the aerospace and defense, industrial automation, industrial motors, and automotive sectors. We have also received production purchase orders from customers in the industrial motion control sector and the aerospace and defense sector. We have received additional prototype purchase orders for finished parts from customers across aerospace and defense, industrial automation, and industrial motor sectors and have received semi-finished block purchase orders from accounts across these same industries.

Speaker 3

With production purchase orders already in hand, we expect these efforts to translate into our first magnet sales by the end of the year. On the technology side, our R&D team is developing new grades and formulations driven directly by customer requirements, including grain boundary diffusion, or GBD, and heavy rare earth-free formulations that can be suitable for a portion of the magnet market. These R&D efforts can help lower our cost base. In addition, developing new products within a customer specification puts our engineers alongside theirs, which shortens qualification and positions us to be the designer of choice. That is what turns a purchase order into a multi-year relationship, and it is the most durable form of customer intimacy that we can build.

Speaker 3

On quality, Stillwater is ISO 9001 certified today, and we are working toward the more demanding AS9100, the quality management standard for aviation, space, and defense industries in 2027. Finally, on integration, a great deal of work this quarter went into integrating systems, controls, reporting, supply chain, and commercial coordination across LCM and our U.S. operations, and preparing for Serra Verde. We have no time to waste and are focused on building this platform to reliably deliver to our customers and to our nation partners. With that, operator, we are now ready to open the lines for Q&A.

Operator

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is from Neal Dingmann with William Blair. Please go ahead.

Speaker 4

Hi, good afternoon. Barbara, congratulations, and Thras as well. Barbara, you've done a great job. Rob, maybe my first question is something you just said on the POs. I think, did you say around 2,500 metric tons already? If so, is the plan to continue to even build upon that? I'd love to hear, are these long-term arrangements? What type of orders are we talking in years, perhaps?

Speaker 3

Yeah, that is 2,500 tons of annual demand. And we are looking at expanding that currently well beyond that. So the additional customers that we talked about, the more than 100 that are in the pipeline, and the other 20 that we talked about that are in near-term qualification, are going to build that demand further. And our supply agreements are going to range from single purchase orders to annual agreements, and then over time, as we've talked about, we will enter into selectively into offtake agreements based upon the economics of the transactions.

Speaker 4

Great. Then just a follow-up. Couldn't help but notice you mentioned about the positive momentum in pricing. Could you just talk, again, what you mean exactly, maybe color on that, how quickly that will be seen sort of running through the system?

Speaker 3

Yeah. So we've already gone out with higher prices on our products, and we expect that that'll be seen in the upcoming quarters.

Speaker 4

Excellent. Thank you all.

Operator

The next question is from George Gianarikas with Canaccord Genuity. Please go ahead.

Speaker 5

Hi, everyone. Thank you for taking my questions. Barbara, I just want to say it's been a pleasure working with you. Maybe to focus on Serra Verde, the acquisition expected to close pretty soon. Can you just sort of outline for us the remaining regulatory approvals or closing conditions that are out there, particularly in Brazil? Maybe a second part to that, Serra Verde is expected to deliver about $600 million in annualized EBITDA by the end of 2027. What are the key operational bottlenecks as you understand them before you've closed it, that maybe present risk or opportunity by the end of the year? Thank you.

Speaker 3

Yeah, sure. The Serra Verde transaction is in the process of being closed. The shareholder vote, which is the last remaining hurdle, is on August 28th, and we'll be closing the transaction shortly after that. There are no more regulatory hurdles with regard to that transaction. In terms of where Serra Verde is headed, what we've talked about is the business scaling to 6,400 metric tons of TREO by the end of capacity, that's run rate capacity, by the end of 2027. As we close the transaction at the end of the month, we'll be providing more insights on the business going forward.

Speaker 5

Thank you. Just as a follow-up question, I just want to hit a little bit on what you talked about, Rob, in terms of the heavy supply bottlenecks. What are you seeing exactly? When did that start to come to fruition? Any additional color would be very helpful. Thank you.

Speaker 3

Yeah. Taking a step back, the raw material shortages, I think, highlight and legitimize the whole reason why we're creating this global supply chain outside of China. As you know, Serra Verde is a heavy, it does have lights, but it's a heavy rare earth mine, and will be the largest heavy rare earth mine in production outside of China. Similarly, Round Top is focused on only heavy rare earths and won't have light rare earths. I think the key point there is that we are solving this problem. In the short run, as we've seen, pricing has increased, and product is more scarce in the non-China market. But as we said, we are making plans with additional suppliers to be able to access the product in the near term.

Speaker 5

Thank you.

Operator

The next question is from Jeff Grampp with Northland Capital Markets. Please go ahead.

Speaker 6

Good afternoon, guys. Thanks for the time. I was curious on the Hydrometallurgical facility that you guys are ramping up here. You've had a couple of positive updates lately on those early efforts, but just wondering how we should expect communication of various milestones on those different flow sheets, over the coming months and quarters. Thanks.

Speaker 3

Yeah, look, we are going to be coming out with relevant milestone updates as we progress throughout the year. There will be several more along the way that will be relevant. We still are on track to complete our DFS by year-end and publish our S-K 1300 going into early next year. We feel very good about what we are. As we have done in the past, we will be announcing milestones as we hit them.

Speaker 6

Got it. Okay. Thanks, Rob. For my follow-up, I know the labor pool has been a point of focus for you guys, given the lack of Western expertise in the sector over the past years and decades. Just wondering for an update there, any tightness in any areas? Have you guys generally been able to secure the labor needed to ramp at the pace that you guys are targeting?

Speaker 2

Yeah, let me jump in on this one, Jeff. I think one of the things that we have been most proud of is the depth of the talent that already exists at the board level and executive management and on down through the company. When I joined last fall, we were talking about tens of employees. Now we are talking about hundreds of employees. With the acquisition of the Serra Verde group, truly, we have a very robust team with deep expertise. Now, yeah, building the expertise in metal making, magnet making, as we have discovered, what we have had to do is partner with others. You may have seen just last week, there was a mining roundtable at the U.S. Department of State. The president attended, so did the Executive Chairman of our board, Mike Blitzer.

Speaker 2

A big topic there was talent development, and we have been working with the very institutions that are engaged now with the U.S. government, providing new programs for building talent. What we have found is that folks are driven by this mission, and that where people have transferable skills, folks who come from the ceramics industry in automotive find that their capability translates really well into magnet making. Of course, all of the functional experts that we need to manage the business, they are delighted to come join a really capable team like this. I think the future is bright, and I know that, as I say, I am very proud that USA Rare Earth is leading the pack in attracting the best and brightest into this industry.

Speaker 6

Appreciate those details, Barbara. I'll turn it back. Thank you.

Operator

The next question is from Subash Chandra with StoneX. Please go ahead.

Speaker 7

Yeah, thank you. Hey, Rob, you mentioned magnet sales for magnet sales by year-end. Just curious how you might characterize qualification period among your various customers, and is there a pace that you think is reasonable to qualify based on the kind of magnets they want and the pace at which you book revenues?

Speaker 3

Yeah, look, we're in the process of qualification with several parties, and you see that in our prototype POs. In addition, we have production POs already in hand. Qualification period really varies depending on the customer and the application, and what the finishing requirements are for the specific magnet. So it's hard to say what the exact period is for any one industry or any one customer, because they can vary within the same industry, and they can vary even with the same customer if they're looking at two different types of products. Having said all that, based upon where we are with qualification in our purchase orders, we do expect we'll be in sales by the end of the year.

Speaker 7

Okay, thanks. Serra Verde, is the SPV arrangement, is that retained upon close or do you integrate that and sort of replace the SPV?

Speaker 3

The SPV is not a company that is owned by USA Rare Earth. It is a special purpose vehicle that has been stood up by the U.S. government, in particular the Department of War and third party financiers, to be able to execute offtake for Serra Verde going forward. So that entity sits outside of USA Rare Earth and will continue to sit outside USA Rare Earth upon the closing of our acquisition of Serra Verde. So it is independent.

Speaker 7

Okay. Thanks, Rob.

Operator

The next question is Suji D'Silva with Roth Capital. Please go ahead.

Speaker 8

Hi, Barbara. It's Asram. Apologies for any background noise. I'm at the airport. Just for the Stillwater revenue generating capacity in 2027, just can you give us a framework for how that ramps up here from 2026 when you start recognizing revenue there?

Speaker 3

Yeah. So what we said on capacity, we'll have 600 metric tons of run rate capacity at Stillwater by year-end, and then we're standing up the next 600 metric tons in Q1 of next year. So we'll have 1,200 metric tons early on in the year. We haven't really provided any more guidance with exactly how that ramps from there. But that is our near-term plans for standing up our capability, and we remain on track to do it.

Speaker 8

Okay. All right. Thanks, Rob. Then maybe just as a follow-up, can you talk about what the plan is for Stillwater versus Blacksburg in terms of, would those be in sequence or in parallel as starting point, just to understand how you plan to use the two together?

Speaker 3

Yeah. So the Stillwater facility is already standing up equipment, and that'll ultimately be 3,600 metric tons of magnet making and 5,000 metric tons of metal making capacity. Blacksburg, which has just broken ground, so that facility has not been built yet, will not be essentially operational until early 2028. The shell won't even be completed until the end of 2027. So that will be sequenced later than Stillwater, but both facilities are expected to be their full capacity by the end of 2029. At Blacksburg, we'll have 5,000 metric tons of metal making and 6,400 metric tons of magnet making at that facility.

Speaker 8

Okay. Thanks, Rob. Barbara, best of luck.

Speaker 2

Thank you.

Operator

Again, if you have a question, please press star then 1. The next question is from Derek Soderberg with Cantor Fitzgerald. Please go ahead.

Speaker 9

Yeah. Hey, everyone. Thanks for taking my questions. I wanted to start with just the MOUs and some of the demand that you guys have been talking about. I think you've said 12 MOUs. Stillwater's progressing. It's commissioned. I was just curious if any of those MOUs have been converted to definitive binding offtake agreements, or anything like that? Then I've got a follow-up.

Speaker 3

Yeah, we have converted several into production purchase orders. Those are converting from prototype to purchase orders going forward.

Speaker 9

Yeah. Could you quantify any of that by chance?

Speaker 3

Yeah, we are not quantifying it at this point in time, but as we move forward, we will be providing more information as the facility ramps up.

Speaker 9

Got it. There is my follow-up. It seems like the recycling technology that you are working on in Wheat Ridge seems to be progressing. I was curious if you can maybe share what portion of the feedstock do you guys expect to come from sort of that recycling versus newly mined. Any detail on that would be great. Thanks.

Speaker 3

Yeah. SWARF, generally speaking, will represent 20%-30% of our finished magnets. In theory, if we're producing 10,000 metric tons and all of those magnets are finished, then we might generate a couple thousand metric tons of SWARF per year. That SWARF can be taken and then recycled back into essentially raw material, oxides that can be turned into metal and then back into magnets. It could end up being as much as 20%-30% of our supply going forward.

Speaker 9

Got it. Super helpful. Appreciate it.

Operator

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

Speaker 2

Oh, thank you so much. No closing remarks from me today. I appreciate everybody joining us and looking forward to the future.

Operator

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

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