Could Investing $10,000 in USA Rare Earth Make You a Millionaire?

Investing in the stock market is an excellent way to build long-term wealth, and many investors dream of finding the next big thing that could generate substantial returns. One area of interest is the mining of critical minerals and rare-earth elements. According to research by the Motley Fool, China accounts for 90% of rare-earth element processing, and the United States is seeking to reduce its dependence on China by fostering domestic rare-earth mining.

USA Rare Earth (NASDAQ: USAR) is one of the companies leading the way and has made serious investments to build out its mine-to-magnet business. With support for rare-earth mining and processing growing, could investing $10,000 in USA Rare Earth today make you a millionaire? Let's dive into the numbers to find out.

USA Rare Earth seeks to become a top domestic supplier of rare-earth magnets

In the United States, rare-earth elements and critical minerals have become a national security concern, especially magnet metals such as neodymium, praseodymium, dysprosium, and terbium, which are used in defense applications, technology, and renewable energy infrastructure.

This year, the U.S. government launched Project Vault, a $12 billion initiative to establish a Strategic Critical Minerals Reserve. In January, USA Rare Earth secured nearly $1.6 billion in funding to support the build-out of its rare-earth mining and processing business. The U.S. Commerce Department provided a $1.3 billion senior secured loan and $277 million in direct incentives. In exchange, the U.S. government took a 10% minority stake in the company.

USA Rare Earth has its work cut out for it, building a magnet manufacturing plant in Stillwater, Oklahoma. The company also aims to develop the Round Top project in Texas, with production expected to begin in 2028. In the meantime, the company has made some major acquisitions to meet its near-term needs.

Image source: Getty Images.

In December, it acquired Less Common Metals, a U.K.-based manufacturer of specialized rare-earth metals and alloys, for approximately $220 million. Last month, it acquired Serra Verde Group for about $2.8 billion. The Brazilian rare-earth company owns the Pela Ema rare-earth mine and processing plant in Goiás, Brazil, which is currently the only large-scale commercial producer outside Asia to deliver all four magnetic rare-earth elements.

Is USA Rare Earth a millionaire maker?

For an investor to turn $10,000 into $1 million, a lot would have to go right for USA Rare Earth. It would need to substantially scale up its business and processing capabilities, and successfully develop the Round Top Project, where it will deliver rare-earth elements and large quantities of gallium and lithium.

The market value of the company would need to increase 100-fold, and it would have to become a vital mining and processing company for the Western world. Right now, USA Rare Earth has a market capitalization of $5.7 billion, so a 100-fold increase would bring it to $570 billion. For perspective, BHP Group is the largest publicly traded mining stock with a market capitalization of $214 billion.

USA Rare Earth has made progress on its mine-to-magnet strategy, and recent acquisitions have accelerated some of its timelines. Investors who are bullish on the U.S.'s rare-earth build-out may see it as a risk worth taking, but don't expect the stock to make you a millionaire anytime soon.

Courtney Carlsen has positions in USA Rare Earth. The Motley Fool recommends BHP Group. The Motley Fool has a disclosure policy.