USA Rare Earth to explore public offering at value over $1 billion

Round Top rare earths project is located outside El Paso, Texas. Image from USA Rare Earth.

USA Rare Earth LLC has hired bankers to explore going public in a deal that could value the strategic minerals company at more than $1 billion, according to a source familiar with the matter and documents seen by Reuters.

The company, which is developing the Round Top rare earths deposit in Texas, is considering an initial public offering (IPO) or going public via a special purpose acquisition company (SPAC), though it does not plan to issue debt, according to the source and documents.

Any offering is expected to raise between $300 million to $500 million, which would be used in part to finance the Texas mine and processing facility. The company hopes to have it operating by 2023.

Investors are growing more interested in exposure to rare earths, 17 minerals used to build weapons and electronics. China is the world’s largest producer and has threatened to stop exporting these minerals to the United States.

Investors are growing more interested in exposure to rare earths, 17 minerals used to build weapons and electronics

Goldman Sachs Group Inc and BMO are serving as advisors to USA Rare Earths. Company representatives did not immediately respond to a request for comment.

Goldman also is handling the company’s negotiations with potential customers.

Reviving domestic rare earths production has become a priority in Washington as relations with China have grown more frayed, and with U.S. lawmakers leery of relying on a rival for critical defense components.

U.S. President Joe Biden has repeatedly said he wants to boost manufacturing, a goal that likely would require more domestically-produced minerals. He plans to issue an executive order this month mandating a review of critical U.S. supply chains, sources separately told Reuters on Tuesday.

USA Rare Earth rival MP Materials Corp, which controls California’s Mountain Pass mine, went public last year in a SPAC deal worth nearly $1.5 billion. Its stock price has more than doubled since its November debut.

A SPAC is a shell company that raises funds in an initial public offering (IPO) with the aim of acquiring a private company, which then becomes public as result of the merger. For the company being acquired, the merger is an alternative way to go public over a traditional IPO.

The U.S. Department of Defense has awarded grants to several rare earths producers in the past year, including MP as well as Australia’s Lynas Rare Earths Ltd , in an attempt to boost domestic production. The Pentagon has not given grants to USA Rare Earth or partners.

USA Rare Earth, which is developing the Texas site with Texas Mineral Resources Corp, has said it does not need U.S. government funding to advance its development plans.

(By Ernest Scheyder; Editing by David Gregorio)

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