USA Rare Earth has announced plans to buy Brazilian rare earths miner Serra Verde in a deal worth $2.8 billion in cash and shares, as it seeks to challenge China’s dominance of the supply chain.
The Oklahoma-headquartered company said it will pay $300 million in cash and $126.9 million in its own newly issued stock for the transaction, which it expects to complete in the third quarter of 2026, subject to closing conditions and regulatory approvals.
Rare earths have come to the fore as a key bargaining chip in the ongoing geopolitical rivalry between the U.S. and China, which produces nearly 70% of the world’s rare earths from mines and almost 90% of refined rare earths, which includes materials imported from other countries.
Western officials have repeatedly flagged Beijing’s supply chain dominance as a strategic challenge, particularly given that critical mineral demand is expected to grow exponentially, as the clean energy transition picks up pace.
“The world has become too dependent on a single source and it’s high time to break that dependency,” USA Rare Earth CEO Barbara Humpton told CNBC’s “Squawk Box” on Monday.
She added the deal would allow “access to a producing mine that produces the four magnetic rare earths that are going to be serving our industry.”
Neodymium is displayed at the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. factory in Baotou, Inner Mongolia, China, on Wednesday, May 5, 2010.
Bloomberg | Bloomberg | Getty Images
Rare earths refer to 17 elements on the periodic table that have an atomic structure that gives them special magnetic properties. These materials are vital components to a vast array of modern technologies, from everyday electronics, such as smartphones, to electric vehicles and military equipment.
‘A strategic nexus’
USA Rare Earth’s CEO said Serra Verde’s global importance was underscored by its 15-year offtake agreement with a special purpose vehicle by various U.S. government entities, as well as private capital sources, for 100% of its production of four rare magnetic rare earth elements: neodymium, praseodymium, dysprosium and terbium.
These are all critically important to the manufacture of high-performance permanent magnets.
Las Vegas-based company MP Materials conducts mining operations on April 29, 2021, at Mountain Pass Rare Earth Facility in Mountain Pass, California.
Benjamin Hager | Las Vegas Review-journal | Getty Images
Speaking to CNBC about the announcement, Serra Verde Group CEO Thras Moraitis said the U.S. government has been “very active” in trying to spur upstream investment, particularly when it comes to creating floor prices for rare earths.
“Rare earths represent a strategic nexus where national and energy security, and technological supremacy, converge,” he added in a statement.
“The Western rare earth sector stands at a critical inflection point, as governments and strategic industries urgently seek reliable sources of critical rare earths — particularly scarce heavy rare earths.”
Shares of USA Rare Earth fell 3.4% in premarket trading. The stock is up around 68% year-to-date through to Friday’s close, however.