Shares of USA Rare Earth (NASDAQ:USAR) gained 5% in early trading on Wednesday after the company announced it had entered into definitive agreements with the U.S. Department of Commerce, providing access to as much as $1.6 billion in funding to support the buildout of its rare earth operations.
Federal Funding Package Supports Long-Term Growth Strategy
The financing arrangement includes up to $277 million in direct federal support alongside up to $1.3 billion in senior secured loan capacity available through the CHIPS Act program.
Funding will be released in stages and remains subject to the achievement of specific project milestones.
When combined with the $1.5 billion private investment in public equity completed in January 2026 and earlier fundraising efforts, USA Rare Earth now has approximately $3.5 billion of committed capital earmarked for its expansion plans.
Round Top Project Moves Closer to Commercial Production
A significant portion of the funding will be directed toward advancing the Round Top heavy rare earth and critical minerals project located in Hudspeth County, Texas.
The company is targeting commercial production from the site in 2028.
The agreements also support the development of processing and separation capabilities for materials produced at Round Top, including dysprosium, terbium, yttrium and other strategically important critical minerals.
Plans to Build Domestic Manufacturing Capacity
USA Rare Earth intends to use the capital to strengthen the domestic rare earth supply chain through its subsidiary Less Common Metals.
The company aims to establish 10,000 metric tons per year of heavy rare earth metal and alloy production capacity, capabilities that are currently unavailable within the United States.
In addition, USAR plans to expand neodymium-iron-boron magnet manufacturing operations in Stillwater, Oklahoma, and Blacksburg, South Carolina, with a targeted combined capacity of 10,000 metric tons annually.
Commerce Department Receives Equity Stake
As part of the agreements, USA Rare Earth will issue approximately 16.1 million common shares to the U.S. Department of Commerce, along with roughly 17.6 million warrants.
The capital will be distributed progressively as the company meets predetermined development and operational milestones tied to its expansion program.