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The Trump administration is injecting $1.6 billion into USA Rare Earth (USAR), an Oklahoma-based miner, securing roughly a 10% stake in the company. This includes $277 million in equity for 16.1 million shares plus warrants for another 17.6 million at $17.17 per share, alongside $1.3 billion in senior secured debt via a Commerce Dept. facility under the 2022 CHIPS Act.

The funds will support USAR's Round Top mining project in Texas and a magnet facility in Oklahoma, aimed at boosting domestic production of rare earth elements vital for EVs, wind turbines, electronics, and defense tech. USAR went public via a SPAC reverse merger in March, 2025, but remains pre-revenue with no output yet. Shares will likely surge on Monday, but should investors jump in now?

Trump's Push for Rare Earth Independence

President Trump's focus on rare earths stems from their critical role in defense systems like fighter jets and missiles, tech gadgets, electric vehicles, and renewable energy infrastructure. With China controlling over 80% of global processing, Trump has pursued aggressive strategies to secure U.S. access.

In early 2025, Trump negotiated a minerals agreement with Ukraine, granting the U.S. preferential extraction rights and revenue shares from its reserves in exchange for reconstruction aid amid the ongoing war. Last year, the administration invested $400 million in MP Materials (MP), becoming its largest shareholder to expand U.S. rare earth magnet production. He also revived his idea of buying Greenland for its vast rare earth deposits and recently signed a framework deal emphasizing mineral rights to counter Chinese influence.

The USAR deal marks the largest such move, signaling a broader push for minerals independence amid escalating geopolitical tensions and rising demand for clean energy and national security technologies.

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USAR's Long Road to Viability

Despite the hype, USAR hasn't started production at Round Top. Last month, it announced plans to begin commercial output in late 2028, accelerating the timeline by two years from prior expectations thanks to promising solvent-extraction piloting results and optimizations. This includes launching a Hydromet demonstration facility in Colorado early in 2026 to run continuous circuits, gather data, and complete a definitive feasibility study by early 2027 – potentially saving tens of millions and enabling faster progress.

The $1.6 billion infusion – plus over $1 billion in private financing – provides the capital to potentially speed things further and fund drilling, heap leach studies, and engineering in 2026. However, challenges remain: permitting delays, construction complexities, environmental hurdles, and technical risks in heavy rare earth extraction could still push timelines back. As a pre-revenue firm burning cash with no near-term sales, USAR is years from profitability, making it a speculative, high-risk investment despite the strategic backing.

Bottom Line

The announcement's timing raises some eyebrows, too. USAR shares jumped 9.1% on Friday – before the investment reports surfaced – and have soared 48% over the prior five days, with year-to-date gains more than doubling the stock amid momentum trading. Short interest also hit a record 16.9 million shares by late the end of December, fueling squeeze speculation. It's a lot of movement on no news from the company making the timing curious.

While shares may climb further on official confirmation and hype, I'd still hold off on buying. Because USAR has a long road yet before it even begins production, let alone at scale, faces execution risks and volatility from milestones or setbacks, better entry points will undoubtedly emerge as the story develops.

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