USA Rare Earth vs. MP Materials: Which Mining Stock Should You Buy in 2026?

Critical minerals are becoming a hot topic amid rising trade tensions between the U.S. and China. According to research from The Motley Fool, China accounts for 70% of extraction and an eye-popping 90% of processing of these key rare-earth elements, giving the country a dominant position in the rare-earth supply chain.

As China tightens exports on some key rare-earth elements and magnets, U.S. policymakers are taking action. In the past year, the government has invested in two up-and-coming mining stocks, USA Rare Earth (NASDAQ: USAR) and MP Materials (NYSE: MP), to secure access to these crucial resources.

If you're considering an investment in either of these two mining stocks, one stands out as a better buy in 2026.

Image source: Getty Images.

USA Rare Earth is ramping up production and mining abilities

In January, USA Rare Earth secured $3.1 billion in much-needed capital, including a non-binding letter of intent for $1.6 billion from the U.S. Department of Commerce. As part of this funding, the government will provide $1.3 billion in senior-secured loans and another $277 million in direct funding. In return, the government gets a 10% equity stake in the up-and-coming mining company. The company also raised an additional $1.5 billion in private funding.

USA Rare Earth will use this capital to expand its manufacturing facility in Stillwater, Oklahoma, where it will produce sintered neodymium-iron-boron (NdFeB) magnets. These magnets are crucial for defense and consumer technologies, including electric vehicles, wind turbines, defense systems, missiles, and fighter jets.

To hit the ground running, the company acquired Less Common Metals, a United Kingdom-based company. The acquisition provides the company with the feedstock for strip-cast alloy required for its Stillwater facility, enabling it to build magnet-making capabilities that don't rely on Chinese sources. Final commissioning of its Stillwater facility is expected in the first quarter of this year, paving the way for the plant to move toward commercial production.

Looking further down the road, the company wants to develop the Round Top mine in Texas. This mine is rich in heavy rare-earth elements, including dysprosium and terbium, which are critical for producing high-performance magnets. It hopes to start commercial production here in 2028.

MP Materials has a major deal with the U.S. government

MP Materials is a little further along. It owns the Mountain Pass rare-earth mine and processing facility in California, which is one of only two large-scale light rare-earth production facilities not located in China, and the only one located in North America. At its Mountain Pass facility, MP produces refined rare-earth oxides, specifically neodymium-praseodymium (NdPr) oxide, the primary ingredient in powerful magnets used in key technologies.

The company has also benefited from governments seeking to secure critical minerals and rare-earth elements. Last year, it entered into a public-private partnership with the U.S. Department of Defense. As part of this agreement, the department established a price floor of $110 per kilogram for its NdPr products over 10 years and took a 15% ownership stake in the company in return.

The company has a facility in Fort Worth, Texas, where it produces magnet precursor products, including NdPr metal. In the fourth quarter, the company achieved a record 718 metric tons of NdPr oxide production, a 74% year-over-year increase. The company expects the facilities' capacity to expand to 3,000 metric tons of magnets annually. A second facility, the 10X facility, is also in the works and will increase its U.S. magnet manufacturing capacity to 10,000 metric tons annually.

As part of its agreement, the DoD has committed to purchasing 100% of the 10X facility's output on a cost-plus basis. It is committed to purchasing the entire output and guarantees the facility an annual minimum earnings before interest, taxes, depreciation, and amortization (EBITDA) of $140 million. The company also has a deal with Apple to supply it with rare-earth magnets manufactured from 100% recycled materials, with shipments expected to begin in 2027.

One stock stands out as a better buy

USA Rare Earth and MP Material have work to do to expand their mining and processing capabilities. Both companies have received government funding as the U.S. looks to create a domestic supply chain for these critical minerals.

MP Materials has a head start with its Mountain Pass mine and a processing facility in Fort Worth, Texas, while USA Rare Earth has yet to launch its Stillwater facility and still has to develop its Round Top mine in the coming years. For these reasons, MP Materials stands out as the better mining stock to buy right now.

Courtney Carlsen has positions in Apple, MP Materials, and USA Rare Earth. The Motley Fool has positions in and recommends Apple and is short shares of Apple. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.