USA Rare Earth (Nasdaq: USAR) has started to ship mixed rare earth carbonate to the Pentagon funded special purpose vehicle US SIIE LLC from its Serra Verde’s Pela Ema operations in Brazil.
Commercial-scale shipments of mixed rare earth carbonate (MREC) started in October,with the first sales scheduled for this month, as part of the 15-year long 100% take-or-pay offtake agreement the company has with the US government.
The agreement provides floor prices for rare earths vital to produce an advanced permanent NdFeb magnet, a key product for the development of clean energy systems, generators and electronics.
“USA Rare Earth is the only scaled producer outside Asia of the vital heavy rare earths used in advanced permanent NdFeB magnets,” CEO Thras Moraitis said. “The start of commercial-scale shipments of MREC to our offtake partner is a defining milestone for USA Rare Earth and for the broader effort to build a secure, reliable and responsible non-China supply chain for the heavy rare earths that power tomorrow’s modern economy.”
The commercial shipments come at a time when Brazil and most Western governments are moving to protect its mineral resources to develop its potential domestically. The Brazilian federal government defined rare earths as a high-priority critical mineral in early November.
The neodymium, praseodymium, dysprosium and terbium needed to produce the magnet are coming from Serra Verde’s Phase 1 expansion, where production is ramping up towards an initial run rate of 4,000 tpa TREO by Q2 2027.
Shares in USA Rare Earth were up 10.8% to $8.78 apiece by mid-day Wednesday in
New York, valuing the company at $3.1 billion.
Serra Verde expansion
USA Rare Earths is currently expanding its Serra Verde operations in the state of Goiás in Brazil, and this new commercial shipping is a result of that.
The company said stage 1 of the optimization and expansion program was completed and commissioned within budget and on time, and commercial-scale production restarted with volumes and product quality being delivered as planned.
“We are ramping up and the optimized process is performing as we anticipated, with product quality ahead of planned specification, meeting our contractual obligations. We aim to continuously improve our execution and remain focused on ramping up production and shipments in a sustainable and responsible manner,” USA Rare Earth head of upstream in Brazil, Ricardo Grossi said.
The company is looking to ramp up annual production to 6,400 tonnes of TREO by the end of 2027, as it evaluates a possible Phase II expansion that could double output.
“As the first scaled processor of heavy rare earth-rich ionic clays outside Asia, Serra Verde’s processing technology is exclusively home grown, underlining the deep innovation and operational capabilities in Brazil,” Grossi added.
Offtake agreement
The agreement captures the current premium for heavy rare earths outside of China, pricing neodymium and praseodymium at $110/kg, dysprosium at $575/kg and $2,050 for terbium. USA Rare Earths said that the floor prices help derisk cash flows and incentivize investment in rare earth’s upstream production, while protecting production against any non-economic supply from other producers.
The company said that recent non-China prices for dysprosium oxide are up to 16 times higher than Chinese prices, and recent prices for terbium oxide are up to 9 times higher.
USA Rare Earths also receives 70% of the non-China market price above the applicable floor, less a fixed separation cost. Once the rare earth elements are separated, USA Rare Earth’s supply earns revenue from remaining valuable heavy rare earth elements, including yttrium.