The Metals Company vs. USA Rare Earth: Which Speculative Materials Bet Actually Pays Off First?

Critical minerals are essential for such industries as defense, aerospace, technology, and alternative energy, and TMC The Metals Company (NASDAQ: TMC) and USA Rare Earth (NASDAQ: USAR) are two companies seemingly positioned to benefit from a transformative trend in this vital area of the mining industry.

While the world has largely relied on China for the supply of critical minerals, this is becoming increasingly untenable for the U.S. and its allies amid shifting geopolitical dynamics and the threat of losing access to these resources.

With the U.S. taking steps to ensure it has other avenues for sourcing critical minerals, is TMC or USA Rare Earth the mining stock more likely to pay off for investors over the next three years? Let's have a closer look.

Image source: Getty Images.

Why USA Rare Earth looks like a better buy than TMC right now

USA Rare Earth's business model centers around the mining and processing of rare-earth elements, including neodymium, praseodymium, dysprosium, terbium, and gallium. Meanwhile, TMC's model hinges on extracting polymetallic nodules from the seabed, which contain metals such as cobalt, copper, manganese, and nickel.

While both companies are seemingly positioned to benefit from the U.S.'s push to improve domestic sourcing capabilities for critical minerals, I think USA Rare Earth is the speculative minerals bet that's more likely to pay off first. Here's why.

• On Sept. 4, USA Rare Earth published a press release announcing that it had completed its $2.8 billion acquisition of Serra Verde -- a Brazil-based mining company that is the only scaled producer of the "core four" rare-earth (neodymium, praseodymium, dysprosium, and terbium) in the Western Hemisphere.
• The deal looks to be transformative for USA Rare Earth.
• While USA Rare Earth generated just $5.8 million in revenue in the second quarter and posted a $46.3 million operating loss, the company projects that its newly integrated Serra Verde business will achieve an annualized run rate for earnings before interest, taxes, depreciation, and amortization (EBITDA) between $550 million and $650 million by the end of next year.
• Along with contributions for its Round Hill mining project in Texas, the company expects that the combined businesses will achieve approximately $1.8 billion in adjusted EBITDA in 2030.

In other words, USA Rare Earth expects to move from a company posting barely any sales relative to its valuation to one generating significant EBITDA profits by 2030. Along with the encouraging EBITDA forecast, strong direct support from the U.S. government also bolsters the investment case for the stock.

With the finalization of their agreement in June, the U.S. government provided funding that gave it a roughly 10% equity position in USA Rare Earth, which could be increased to as much as 16% by exercising stock warrants. Additionally, the U.S. Department of Defense provided $750 million in direct investment in a special-purpose vehicle (SPV) that also included a $500 million credit facility from a Tier-1 institutional bank and a five-year purchase agreement for rare earth valued at least $300 million.

Before the update on the SPV, Serra Verde had already announced a 15-year offtake agreement with multiple U.S. government agencies and private companies, securing access to 100% of its Phase I production of magnetic rare earth and guaranteed pricing floors for dysprosium and terbium. Assuming reasonable management of operating costs and progress in refining capacity, the company appears to have a clear path to posting strong profits.

Why TMC currently looks like the trickier investment play

Like USA Rare Earth, TMC is a company with tailwinds at its back, driven by the U.S.'s need to reduce its reliance on China for critical minerals. It's also seen meaningful government support aimed at accelerating its initiatives.

• In April 2025, President Donald Trump signed an executive order titled "Unleashing America's Offshore Critical Minerals and Resources." The order aimed to accelerate permit approvals for seabed mining in international waters.
• The order explicitly called for the U.S. Secretaries of Defense and Energy to assess the feasibility of using defense stockpile resources to enter into contract agreements for nodule-derived minerals.
• The executive order directly aligns with and provides support for what TMC is aiming to do.

While the National Oceanic and Atmospheric Administration (NOAA) subsequently determined that TMC's permit application complied with the Deep Seabed Hard Mineral Resources Act, the company said that expectations for official certification had been pushed out to October -- but that's not the final step in the NOAA process.

After certification, NOAA will still need to officially issue the permit to The Metals Company. While the company had once expected to have its permit by the first quarter of 2027, it no longer anticipates this. TMC has asserted that the certification delay has actually helped support the permit's "legal defensibility," but the postponement highlights the uncertainty surrounding the timeline for launching commercial operations.

The seabed mining specialist maintains that it's still on track to begin commercial vessel commissioning in next year's fourth quarter. On the other hand, there's a fair chance that TMC will face legal challenges from both domestic and international sources.

There are still significant questions about TMC's path and timeline for clearing regulatory hurdles and beginning commercial operations. Meanwhile, the Serra Verde acquisition has USA Rare Earth on track to generate substantial revenue and EBITDA in the near future. With those dynamics in mind, I think USA Rare Earth stands out as the stronger play right now.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.