Uncle Sam's magnetic field lures mining M&A

USA Rare Earth

22/04/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Jonathan  Guilford

NEW YORK, April 21 (Reuters Breakingviews) - The United States learned the hard way that sourcing rare-earth minerals goes beyond digging them up. China's stronghold extends even deeper when it comes to purifying materials that keep modern industry running. A $2.8 billion acquisition by USA Rare Earth USAR.O sets up a challenger, with the U.S. government providing the most valuable element.

Since Beijing tightened export controls on rare earths last year, the White House has been scrambling to coordinate an industrial response. It even took a stake in miner MP Materials and guaranteed a floor price for its products. China excavates 54% of the minerals used to make magnets, but also refines and processes more than 90% of worldwide supply, the International Energy Agency estimates.

Serra Verde, which operates a mine in Brazil, operates across the chain. The company has now secured an offtake agreement with a special-purpose vehicle capitalized in part by Uncle Sam, which also establishes minimum prices.

The deal goes some way to alleviating the main issue: rare earths are existentially important but economically insignificant, with production running to maybe $6.5 billion in 2024. China’s efficient dominance means prices are often too low to sustain upstarts.

USA Rare Earth could use the support to validate its deal binge. The $5 billion company bought Britain’s Less Common Metals last year to secure alloy and metalmaking capabilities. It followed by acquiring Texas Mineral Resources to consolidate ownership of its Round Top mining and separation project. Then it agreed to a 12.5% equity investment in France’s Carester, a leader in processing.

It's a promising array. Serra Verde can deliver elements as mixed carbonates, with between $300 million and $400 million of EBITDA projected by 2027. If it instead produces refined oxides, the annual rate could be $250 million higher.

Plugging into USA Rare Earth’s refining aims to unlock that value. The optimistic earnings outlook implies that Serra Verde's margin would exceed 70%, based on 4,400 tons of output at an average of $190 per kilogram; MP Materials is on track for 56% by 2030, according to Visible Alpha.

Serra Verde presumably benefits from geology, mining soft ionic clay rather than hard rock. It also brings with it Chairman Mick Davis, an industry veteran who helped orchestrate the 2001 merger of BHP and Billiton and built Xstrata into a resources giant before selling it to Glencore in 2013.

His experience should come in handy, considering the deal illustrates how selective government intervention can incentivize M&A. The urge will be to put Uncle Sam’s blessing to maximum effect.

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CONTEXT NEWS

USA Rare Earth said on April 20 that it had agreed to buy Brazilian rare-earths miner Serra Verde in a cash-and-stock deal valued at $2.8 billion, based on the buyer’s undisturbed share price.

The transaction caps a string of acquisitions for USA Rare Earth, including British metal and alloys producer Less Common Metals and a stake in French processing firm Carester.

Serra Verde has secured a 15-year offtake agreement with a special purpose vehicle capitalized by U.S. government agencies and private sources, which has agreed to set a price floor for 100% of its supply of four magnetic rare earth elements.

Moelis is advising USA Rare Earth and Goldman Sachs is advising Serra Verde.

China vs. US rare-earth rivalry is very lopsided https://www.reuters.com/graphics/BRV-BRV/BRV-BRV/jnvwrkgkrpw/chart.png

(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)

((For previous columns by the author, Reuters customers can click on GUILFORD/ Jonathan.Guilford@thomsonreuters.com))