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

Texas Mineral Resources

02/02/2021 23:34

(Adds details, background)
    By Ernest Scheyder
    Feb 2 (Reuters) - 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.  urn:newsml:reuters.com:*:nL1N28N1T7
    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.  urn:newsml:reuters.com:*:nL1N28F2AS 
    Goldman Sachs Group Inc  GS.N  and BMO  BMO.TO  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.
 urn:newsml:reuters.com:*:nL1N2K82AU urn:newsml:reuters.com:*:nL1N2HX14Z
    USA Rare Earth rival MP Materials Corp  MP.N , 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.  urn:newsml:reuters.com:*:nL2N2EM0WJ
    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  LYC.AX , in an attempt to
boost domestic production. The Pentagon has not given grants to
USA Rare Earth or partners.  urn:newsml:reuters.com:*:nL1N2K7341 urn:newsml:reuters.com:*:nL3N2CA1UE urn:newsml:reuters.com:*:nL2N2ES1JC
    USA Rare Earth, which is developing the Texas site with
Texas Mineral Resources Corp  TMRC.PK , has said it does not
need U.S. government funding to advance its development plans.
 urn:newsml:reuters.com:*:nL1N28N1T7 

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FACTBOX-Rare earths projects under development in U.S.    
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 (Reporting by Ernest Scheyder; Editing by David Gregorio)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))