What USA Rare Earth (USAR) Said on Its Q3 Earnings Call

Key Points

• Raw-material shortages constrained Q3 results: USA Rare Earth reported $3 million in revenue, down from the prior quarter, as dysprosium oxide and samarium metal shortages limited production.
• Reported profit reflected a non-cash gain: The company posted $12 million in net income, but its adjusted net loss was $126 million, or $0.44 per share. It ended the quarter with $1.2 billion in cash, cash equivalents and restricted cash.
• Management is targeting a 2027 production ramp: Serra Verde aims for annual output of about 4,000 tons of rare earth oxides in 2027, then 6,400 tons at stage 2 steady state. USA Rare Earth also made its first commercial magnet sale and is expanding Stillwater’s manufacturing capacity.

USA Rare Earth NASDAQ: USAR reported third-quarter revenue of $3 million as shortages of critical raw materials constrained production, while executives outlined plans to ramp up rare earth output and expand magnet manufacturing in 2027.

Revenue declined from the second quarter because of shortages of dysprosium oxide and samarium metal, CEO Thras Moraitis said on the company’s earnings call. Revenue for the year to date was $14.5 million.

The company also completed its merger with Serra Verde and made its first commercial magnet sale from its Stillwater, Oklahoma, facility during the quarter. Serra Verde began commercial-scale shipments of mixed rare earth carbonate in October, with initial sales recorded in November.

Results and cash position

USA Rare Earth reported net income attributable to the company of $12 million, driven by a $137 million non-cash fair-value gain on warrant and earnout liabilities. Diluted net loss per share was $0.02. Excluding the fair-value gain and other adjustments, adjusted net loss was $126 million, or $0.44 per share, CFO Rob Steele said.

Operating expenses were approximately $121 million. Steele said selling, general and administrative expenses rose from the prior quarter as headcount, merger and acquisition costs, and legal expenses increased. Research and development spending also rose with the Round Top drilling program and the addition of Serra Verde.

The company ended the quarter with $1.2 billion in cash, cash equivalents and restricted cash. The decline from the second quarter primarily reflected $190 million in net cash paid for Serra Verde, $148 million of operating cash used and $106 million in capital expenditures and equipment deposits, Steele said.

Cost of goods sold increased as the company began expensing certain costs associated with Serra Verde production and Stillwater sales that had previously been capitalized. Steele said gross margins were also affected by higher raw material costs, but the company expects improvement as utilization rises and legacy contracts at its LCM metals and alloys business are repriced over the first half of 2027.

Serra Verde ramp and pricing

USA Rare Earth expects to sell at least 325 tons of total rare earth oxides, or TREO, from Serra Verde in the fourth quarter. Steele said the actual basket price for products sold had averaged about $97 per kilogram quarter to date, compared with an average floor-price basket value of about $43 per kilogram.

Moraitis said the $97 figure is the amount USA Rare Earth receives after an imputed separation cost and the special purpose vehicle’s share of proceeds above the floor price. Steele attributed the higher realized basket price to record non-Chinese prices for dysprosium and terbium.

The company is currently selling mixed rare earth carbonate and monetizing only the four elements used in neodymium-iron-boron magnets. Its planned separation facilities could allow it to capture value from other elements, including yttrium, Steele said.

Management said it is targeting a Serra Verde stage 1 production run rate of approximately 4,000 tons annually in 2027, followed by a stage 2 steady-state rate of about 6,400 tons annually by year-end. Stage 2 was 40% complete, with more than 75% of its capital committed, Moraitis said.

Magnet expansion and customer qualification

USA Rare Earth’s first Stillwater sale consisted of sintered neodymium-iron-boron block magnets delivered to a high-performance materials manufacturer. The company expects to sell finished magnet prototypes to multiple customers by year-end.

Stillwater’s completed Line 1a has annual capacity of 600 tons. Installation of Line 1b is underway and is expected to add another 600 tons. Executives gave different commissioning targets on the call: Moraitis cited the first quarter of 2027, while Steele cited the second quarter.

The company has signed letters of intent and memorandums of understanding covering approximately 2,500 tons of magnets and has secured purchase orders across industrial, mobility, aerospace and defense markets, Moraitis said. Steele cautioned that current prototype sales are low volume and that customer qualification can take from six to nine months to as long as two years.

Round Top and separation plans

At the Round Top project, the first 1,200 results from more than 5,500 assays were consistent with historical data and showed a 72% heavy rare earth distribution, Moraitis said. The company expects an S-K 1300 report in the third quarter of 2027 and is seeking to be ready for a final investment decision in the second half of that year.

Moraitis said USA Rare Earth expects to begin construction of a U.S. separation plant in early 2027. The company also has a pending investment in Carester, whose French heavy rare earth separation facility is expected to begin production in early 2027. In the meantime, Moraitis said, the company is sourcing dysprosium oxide in small quantities and has ordered two furnaces to expand samarium metal capacity.

About USA Rare Earth (NASDAQ:USAR)

USA Rare Earth, Inc is developing a U.S.-focused supply chain for rare earth materials and permanent magnets used in electric vehicles, wind turbines, electronics, aerospace and defense applications. Its planned activities span mineral extraction, materials processing and magnet manufacturing.

The company is advancing the Round Top deposit in West Texas, a project that contains rare earth elements as well as other minerals used in advanced technologies. USA Rare Earth has described the deposit as a potential source of both light and heavy rare earths, which are important inputs for high-performance magnets and other industrial products.

USA Rare Earth is also developing magnet manufacturing capabilities in Stillwater, Oklahoma, and owns Less Common Metals, a U.K.-based producer of rare-earth metals and alloys.

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