Is USA Rare Earth a Buy After Its New Magnet Facility News?

Earlier this year, the Trump administration launched Project Vault, a $12 billion initiative designed to establish a U.S. Strategic Critical Minerals Reserve. The purpose is to stockpile critical minerals and protect domestic manufacturers from potential global supply chain disruptions.

This is one of the initiatives to boost the supply and manufacturing of rare-earth elements and other critical minerals in the U.S. The U.S. has also provided funding to domestic companies to boost their mining and processing capabilities.

USA Rare Earth (NASDAQ: USAR) is one such beneficiary. The company recently announced a new facility in South Carolina that will help it scale the production of key magnets used in modern technologies. Here's what investors need to know about the move and what's next from here.

USA Rare Earth has made some major moves over the past year

This month, USA Rare Earth selected Cherokee County, South Carolina, as the site for its new manufacturing facility. The company will invest $1.2 billion in the 800,000-square-foot facility, where it plans to manufacture 6,400 metric tons of sintered neodymium-iron-boron (NdFeB) permanent magnets and 5,000 metric tons of refined rare-earth metals. Site work will start later this year, with the facility expected to come online in 2028.

The move comes as USA Rare Earth looks to boost the domestic production of critical minerals and the permanent magnets made from them, which are key components in many of today's technologies, including electric vehicles, wind turbines, defense guidance systems, and consumer electronics.

Image source: Getty Images.

Earlier this year, the U.S. government invested $1.6 billion in USA Rare Earth through the CHIPS and Science Act, including $1.3 billion in senior secured loans and $277 million in direct federal incentives. In return, the Department of Commerce received 16.1 million shares of common stock and approximately 17.6 million warrants.

The new facility is just one of several moves made by USA Rare Earth in the past year, as the U.S. looks to reduce its dependence on China for critical minerals. In recent months, USA Rare Earth has acquired Serra Verde Group for $2.8 billion and Less Common Metals for about $220 million, bridging the timing gap between the development of its resource-rich Round Top mine in Texas, which will begin commercial production in 2028.

Is USA Rare Earth a buy?

Investors bullish on the U.S. build-out of its critical minerals supply chain may find USA Rare Earth intriguing, but it will take time for the company to scale up and begin generating meaningful revenue. Analysts covering the stock project sales of $79 million this year, $550 million next year, and $1.4 billion by 2028.

With its expanded manufacturing capabilities, the company looks to produce 10,000 metric tons per year of NdFeB permanent magnets and 10,000 metric tons of heavy rare-earth metals and alloys by the early 2030s, potentially positioning USA Rare Earth as a key player in the U.S.'s ongoing "mine-to-magnet" initiative.

Courtney Carlsen has positions in USA Rare Earth. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.