Thank you, everyone, for joining us at the Midwest Ideas Conference in Chicago. I'm Philip Cooper, Managing Director of ThreePart Advisors. Our next presentation comes from USA Rare Earth, a critical minerals and technology company dedicated to establishing a fully integrated domestic supply chain for rare earth elements. Joining us today from the company is Rob Steele, Chief Financial Officer, and Lionel McBee, Vice President of Investor Relations. Rob?
Great. Thank you. It's great to be here today, especially this time of year. I was a 30-year veteran in investment banking on Wall Street, and these last two weeks of August, we always took off. I never expected there to be such a great turnout for an event like this, but I really appreciate the ThreePart guys. So far, this has been fantastic, and it's great to see you all here today. Just to introduce you to our mission at USA Rare Earth, it's pretty simple. Our plan is to reshore the rare earth minerals and magnet industry. It sounds like a simple mission, but it's extremely important nationally and also something that drives our culture and our strategy. Let me tell you a little bit why. The rare earth minerals and magnet market is somewhere around a $35 billion- $40 billion industry outside of China currently.
In terms of rare earth magnets, about 50,000 tons are sold in the United States every single year, and that market is growing to 100,000 tons over the next 10 years, really being driven by things like EVs and AI and robotics. Just so you understand what critical minerals and rare earth magnets are used in, a rare earth magnet is used in anything where electricity is utilized to turn something into motion. Think of a motor. It's also used to turn motion into electricity. Think of generators and sensors. The really big picture here is that if you look at what rare earths and rare earth magnets power, it's literally trillions of dollars of the U.S. economy. Every major industry, whether it be food, the entire food supply chain, all the way up through appliances, relies on rare earths and rare earth magnets.
The entire defense industry relies on rare earths and rare earth magnets, and the list goes on and on. You could literally go through every industry: oil and gas, the power industry, the technology industry, and what you'll find is without rare earths and rare earth magnets, these industries actually cannot function whatsoever. For example, a heavy rare earth such as terbium is used in advanced magnets in robotics, in missile systems, in defense, and a range of other industries. Critical minerals such as gallium are also used in defense, and they're also used in semiconductors and data centers. These are really, really critical elements that power our industries. What's the problem? The issue is that, in particular, the U.S. and Western Europe, and somewhat in Asia, but mostly U.S.
and Western Europe have been asleep at the wheel over the last 20- 30 years, and we let the industry go offshore to China. Now China controls 90%- 98% of just about every market in the rare earths. As you know, this is something that they've used and leveraged as recently in recent trade negotiations with the Trump administration. You saw Trump yesterday talking about 200% tariffs because of the need to supply the U.S. for rare earths. That's because U.S. industry is desperate for rare earths and rare earth magnets to actually power our economy. If you look at some of the key areas that China controls, gallium, 98% of the gallium market is controlled by China. They actually source and process 98% of that.
Advanced semiconductors, as I mentioned, missile systems like the Patriot missile system or the SM-2 missile system, these are missiles that defended Israel recently, are all dependent on gallium. Absolutely critical. 90% of rare earth ore processing and refinery happens in China. What does that mean? That is the process of taking ore and turning it into rare earth oxide and metals. They control 90% of that. That's even for ore that's sourced outside of China. The Australians ship some of their ore to China to be processed. The Brazilians, Cerveij, sends their ore to China to be processed. MP Materials, which is an American company up till April of this year, was sending it to China to be processed. That's because the know-how and the capacity exists in China.
That's also because that industry has been heavily subsidized by the Chinese government, and they also have much looser environmental laws than we have in the United States. If you look at magnet production, China controls 85%- 90% of the production of magnets. Approximately 240,000 metric tons of magnets are currently produced in China. When you have something like the trade war we have today, U.S. companies in particular are desperate for a clear, consistent supply chain that can't get cut off. As I mentioned, the Trump administration has recognized this and is focusing very heavily on it right now. They made a major investment in MP Materials earlier this year in May, which was a landmark announcement and something that we applaud at USA Rare Earth. The investment was several-fold. It involved an equity investment. It involved a loan.
The government received warrants in the transaction, and they also had an off-take agreement for magnets for the Department of Defense, as well as a price floor on NdPr. Neodymium praseodymium is one of the key ingredients in making rare earth magnets, and MP Materials, as they're a light rare earth mine, has a lot of NdPr at the facility. The commitment they had on magnets was to get to 10,000 metric tons of production by 2030. That's an important metric. I mentioned earlier that the market today in the U.S. is around 50,000 metric tons. What the government has invested in is roughly 20% of today's market or as little as 10% of where the market's going to be over the next 10 years.
It's great they made this investment, but it only covers a very small portion of the actual market for rare earth magnets in North America, and it doesn't cover the broader industry very effectively because it is a Department of Defense stockpile and off-take agreement. This just gives you a sense of the pie chart in terms of industries and industry breakdown by metric tons of magnets that they are utilized. The defense and aerospace industry, as I mentioned, uses 7%- 10%. What that says, simple math says that 90 to 93% of the market is wide open for another player, and we believe that's us. Which one is it showing? OK, so it's showing me. OK, got it. I'm looking at the wrong slide. Thank you. If you look at the market itself today, on the left is a 50,000 metric ton bar.
What you see is that you can barely see a little blue line there. That represents the government's current investment in MP Materials because MP Materials is only standing up a 1,000 metric ton line currently. A very, very small portion of today's market is actually covered by government support. In 2030, when the MP facility has stood up, it's going to be roughly 10% of a 90,000 ton market. Only a very small portion of the market will be covered going forward. Again, a massive opportunity for another player to be in the market. In terms of what USA Rare Earth, what do we have? USA Rare Earth has two key elements of the rare earth supply chain. The first is we own an 80% interest in Round Top Mountain. Round Top Mountain is a heavy rare earth deposit. It also has critical minerals of gallium and beryllium.
Gallium, I mentioned, is for semiconductors. Beryllium is for the nuclear power industry. A very important element to that. I'll spend a little bit more on heavy rare earths in a second, but they are the more valuable rare earths than light rare earths. As I mentioned, MP Materials is a light rare earth mine. We are a heavy rare earth deposit. In terms of our tip of the spear, we have a magnet facility that is currently being stood up in Stillwater, Oklahoma. This is a 310,000 square foot building. It's already in place. We already have our initial phase of equipment that we acquired several years ago from Hitachi. It's gently used, as we like to say, magnet-making equipment. We're currently finalizing the final stages of our first 600 metric tons. In addition to that, we've already signed 70 customers. I say signed.
We're working with 70 customers across multiple industries and have signed 12 MOUs with several customers. What we're doing is standing up a line that's going to be accessible by that 90%- 93% of the market that is not currently served by the U.S. government or MP Materials. In terms of where we are, our metal and magnet production is in Stillwater, Oklahoma, which is a great location. The state of Oklahoma is fantastic to work with from the standpoint of business, and we have access to great labor and mid-level engineers, not only for the local population, but we're right adjacent to Oklahoma State University, and we also draw from the University of Oklahoma. Our deposit is Round Top Mountain. That's in Sierra Blanca, Texas. It's about 90 miles southwest of El Paso, Texas.
It is a very, very large deposit and one of the most explored in the United States. Our research and development lab, what that is, is our facility that is developing our flow sheet. These are mining engineers out of the Colorado School of Mines, among other schools, that are helping us create the science and techno-economic analysis that we're going to be utilizing here to develop that into a mine. I'm going to slip two pages forward here and talk a little bit about heavies. Just to give you a sense of the differences in pricing between light rare earths and heavy rare earths and critical minerals, the current market pricing, and this pricing, by the way, is a quote index. These indexes are not great. The heavy rare earths and critical minerals are actually more expensive than this. Light rare earths, generally speaking, are pretty cheap.
Lanthanum and cerium, which is what MP Materials has most of, sell for less than $2 a kg currently. NDPR sells for less than $100 a kg. It's around $72. Heavy rare earths, on the other hand, dysprosium, terbium, lutetium, sell for hundreds of dollars a kg to thousands of dollars a kg. When you look at things like beryllium and gallium, you're getting into the $1,000 range. Here, this index quotes $1,000 per kg for gallium. If you actually tried to go out and buy gallium right now, it would probably be quoted around $6,000 a kg. This stuff is really, really hard to get and is an important asset as we look to develop our mine. In terms of our magnet facility, I talked a little bit about what we're doing there.
We're standing up a line, phase 1A, for 600 metric tons, which we'll be commissioning in the first quarter of next year. We're actually going to be testing that line here in Q3 and Q4. We're going to start running metal through it. We'll talk a little bit later about how magnets are actually made and what they consist of. We actually have to put metal through the line to start commissioning it. As part of developing our lab, our second lab, which is a magnet lab at Stillwater, we're currently speccing product across multiple industries, and we will likely be announcing POs in the next three months. These are actual purchase orders from customers that will give us a sense for volume and price going forward. As we develop more customers, then we'll be announcing the next phases of our line.
The next phase would be line 1B, and that would be 600 metric tons, which if we start investing in that this year, we should have, by the end of next year, well north of 600 metric tons annual run rate in production and possibly 1,200 metric tons in production. Really rapid growth at that facility. That facility itself has capacity for 5,000 metric tons, which, if we were to use a retail price of around $150 to $175 a kg, means that 5,000 metric tons ultimately can get you to around $750 million- $800 million of revenues out of that facility. The facility can also be expanded. There are 30 acres of land, and there's a lot of capability we can add there. We can add another line of 5,000 metric tons, capital dependent. If we had the capital today, we could just buy it and build it.
In theory, we can stand up 10,000 metric tons of production faster than MP Materials can if we have the capital. It's a pretty powerful location to be at. In addition to that, we've got capacity to do other parts of the processing. As I mentioned, on one end, we have a deposit. On the other hand, we have magnets. There are interim stages of processing all the way through metal making that are required. One of those stages, metal making, is something that we are considering investing in. That's something we can actually put on site if we need to. We have the room to do it. In terms of our management team, we are putting in place a management team with highly experienced people. Most people that we have at senior positions have over 25, 30 years of experience in things like manufacturing and sales and systems.
We currently have around, we were at 50 employees two weeks ago. We're now at 65 employees, and we expect to be at 100 employees by year-end. We're rapidly growing. This next chart gives you a little sense of timeline. The top line is our innovation lab. I realize it's a little hard to read, but we commissioned that innovation lab, which is the lab that will be speccing magnets for our customers in Q1. That is operational. We're working with the 12 customers we have MOUs with to create magnets that will hopefully turn into purchase orders. We expect to be commissioning and standing up line 1A, and then hopefully line 1B we'll announce later this year, such that we'll get to 1,200 metric tons, roughly, of annual run rate capacity by the end of next year, early 2027. From there, expanding to 4,800 metric tons.
We're currently working on our flow sheet in Sierra Blanca, Texas, and we expect that we'll have that flow sheet done, which again is our techno-economic analysis that allows us to prove that the science and the math can actually work on that facility sometime in the next six months or so. In terms of recent momentum, our commissioning is currently tracking ahead of schedule. We do expect to be commissioned in Q1. Our final equipment arrives at the end of this year, early next year. We source that equipment from domestic sources, from Korea and from Japan. We expect that we'll be up and running, as I mentioned, with 600 annualized metric tons by year-end. In addition to that, as you look at our customer base, we have MOUs with 12 customers, but we actually have 70 customers in our pipeline.
Those total 70 customers represent a total of 5,000 to 7,000 metric tons of demand. We have high confidence, is the way we like to say it, in about 2,000 metric tons of demand. Our MOUs cover between 300 to 400 metric tons of demand. We feel very, very good about where we're headed, and that list is growing every single day. At Round Top, we've done some things like successfully separated gallium. It's one thing to say that the deposit has gallium in the ground. It's another thing to be able to take it out of the rock and separate it into gallium and gallium oxide. We've been able to do that, and we've already been able to separate rare earth concentrate from the ore. All these are good steps in the progression toward a flow sheet.
In terms of our customers, I think the only thing to add is that our customers are in multiple industries, which is fantastic. Again, essentially reinforcing the fact that we can go after that 90 to 93% of the market that's not currently covered by MP Materials. It's in oil and gas. We've got drone manufacturers. We have people in data centers. We have robotics, to name a few. We also have folks in the automobile supply industry as well. Over time, we expect that there could be larger customers that could potentially take down one of our full lines. People like to use the word off-take agreements. These are things we're looking at with some major players where they could take down 1,200 or 2,400 or even 3,200 metric tons out of the facility.
The question always is, what's the right balance between potentially higher margin, medium-sized customers versus when somebody does an off-take agreement, they tend to want to finance, but they also tend to squeeze you on margin. Taking lower margin, larger contracts that might give you more visibility. That's currently a dynamic that we're working through. Good news is that we do expect to be announcing POs here in the next three to four months. We are currently quoting price right now as we speak. In terms of where we're headed, we have $130 million of cash on our balance sheet. We've raised over $140 million in the last six months. We are actively engaged with the U.S. government in conversations. We get asked about this a lot and what the process is. The U.S. government, you know, it is a multi-headed organization.
We're currently talking to the Pentagon, which is part of, of course, the Department of Defense. We're talking to the Department of Energy. We're talking to the Department of Commerce. We're also talking to the Exim Bank right now about multiple options for them to give us grants or invest in our company, most likely in the form of loans, although equity is not off the table as we speak. I don't expect that there will be a deal like MP Materials. Having said that, we may be able to get elements of that deal, like loans, loan guarantees, and potentially equity. As I mentioned, in terms of headcount, we're growing rapidly. We'll double our headcount before year-end. In Q3, Q4, we're going to spend about $60 million of CapEx prior to any further announcements about expanding our line or investing in advanced capabilities.
This is one of the pages I wanted to spend a little time on. The two dark portions of the arrow, on the left, you see the deposit. That's a heavy rare earth deposit. On the other end, you see the magnets. That's our magnet manufacturing plant. There's a lot of steps in between that are actually crucial to making magnets and processing rare earths and critical minerals. Most of that, as I mentioned, is in China. Only a very, very small portion is outside of China. We currently outsource that middle piece to a couple of partners. One of those partners is in Korea called Korea Strategic Metals, KSM. They're owned by ASM, a publicly traded company in Australia. They provide us with strip casts. We also outsource our strip cast to another party called Less Common Metals, LCM, out of the UK. There's a variety of other sources.
What I would say is, we get asked this all the time, do those two parties currently have the capacity to supply your future needs? The answer is they don't. They actually have to expand their lines with us to be able to grow to meet the market demand. This piece is a really important element of our supply chain that we're looking to formalize more advanced agreements on. The other piece on the bottom is also really important to note. That piece is recycling. If we know that the market for magnets in North America is 50,000 metric tons per year, what does that also mean? It means that there's tens of thousands, if not 50,000 metric tons, of end-of-life magnets coming into the scrap market every year.
Currently, a lot of that stuff gets sent to China to be processed because it's very expensive to process and hard to get at, or it gets thrown in the landfill. There are ways, and we are looking at ways, to be able to take not only our SWRF, that's a magnet term for our leftover product that didn't get processed in the final magnets, as well as developing a supply chain for recycling. If you can take ore and process it ultimately into metal, you should be able to take metal and process it into metal. We already have a process and flow sheet to be able to take end-of-life magnets and turn them back into magnets through our process. Recycling is a really, really important element of the story. To finish up, we often get compared to MP Materials, and people say, are these guys your competition?
We're actually very complementary. The space is massive, and they only address a small portion of what is actually needed. Some of our capabilities actually work really well with theirs. I think first and foremost, just rare earths. They're a light rare earth-focused mine. We're a heavy rare earth-focused deposit. We also have gallium and beryllium in significant amounts, which is something that is completely absent from MP Materials' mine. In terms of magnets, they're targeting 10,000 metric tons by 2030. They actually still have to build their building and stand up their equipment. We're targeting at least 5,000 metric tons by the end of 2028. We're going to get to scaled production much quicker. In terms of the industry served, MP is focused on General Motors. That's their first 1,000 metric ton line. The Department of Defense with their DOD off-take.
We're focused on more than 10 industries out there that we intend to supply, focusing on that broader market. I think the last piece is really important. The GDP of the industries that we serve is in the trillions. Trillions and trillions of dollars of GDP that we serve. The GDP of what they serve in the defense industry and GM is around a trillion. We have a much broader market opportunity in our minds. I think the last point on the left is, how do we stack up from a market cap standpoint? We're currently somewhere between $1.3 billion and $1.5 billion, depending on the day. MP Materials is north of $12 billion. It looks like a pretty attractive investment opportunity to me. With that, I'll open it up to questions. Please.
Question on the Round Top. Any permitting issues? How are you dealing with that to be able to go?
Yeah, I mean, we're in the great state of Texas, first and foremost, which is a business-friendly state. We're on state land. In particular, what you worry about are environmental concerns. The state of Texas has been very, very, very helpful in that regard, also with regard to looking at local permitting, potential water supply to the area, and potential power supply to the area. All very practical. I mean, it's very different. It's a mountain. Archaeologically, there's a lot of rattlesnakes that we have to deal with out there.
Second, more data.
No issues. Thank you. No, we don't have any issues on that. Yes, sir.
OK, I should know this. Why not just use iron?
Because they're not as effective. They don't have the power of magnetism and the life. They demagnetize really easy. That's why you have to add boron, neodymium, praseodymium. For high-performance magnets, you actually need to add some terbium and some gallium to them, as well as dysprosium. Some other techniques called grain boundary diffusion actually make them work effectively. It's about the strength of the magnetism. If you saw one of our magnets, our high-powered magnets, and you just sort of held it out and tossed it against metal, it'll fly across the room and stick to a metal wall. They're very powerful.
OK, I also, and this would be very much better, the Chinese have spent years developing proper technology to separate these metals and process them. We don't have that in this country.
We have the capability. Everything that we have in this country is essentially at pilot scale or below. It is very small scale in terms of processing capability. We do have the know-how, and it's developing. That is essentially what we're creating out in Wheat Ridge, Colorado, our Denver facility, to develop that actual processing capability.
Jumped in on off of that. Showed the supply production chain. Specifically, you talk about processing. It's the biggest pinch point outside of the other. Obviously, if you get the older capacity, that's great. You have as far as planning the interim, it's almost like you produce. You almost have to send it away in the ether and then come back with.
Yeah, no. What we would do with the deposit, once we prove it's a mine, is we actually have to make it a proven reserve. That's called a mine, SK 1300. When we develop our flow sheet, we'll actually start a pilot facility. What a pilot facility is, is a heap leach and a hydromet, which is a baseline processing facility to make rare earth concentrate. Rare earth concentrate is the very first stage of this. It still would require outsourced processing, which we've already talked to other non-China sources who can help us process that. Those are multiple sources like Solvay or Keryster or UCOR or Rare Earth Salts. There are a bunch of different places to process it. Each of those parties is developing more scale technology over time.
Our feeling is, by the time we get there, there should be the capability to start processing that into rare earth oxide. We would need to work with another party, unless we develop it on our own, to take that oxide, process it into the metal, and then take the metal, process it into the alloy. We take the alloy, which is called strip casting here, and send it to magnets. All those pieces do have to be developed either through us or at scale. We're looking very closely at how we develop and secure those portions of the supply chain. Yes, sir.
In the U.S., pure play rare earth, they're MP Materials. You guys, how many other players are there?
I mean, PurePlay rare earths, there aren't many. PurePlay. Yeah, yeah.
Your customers that you buy China?
Yeah, so we have MOUs, which some of our MOUs are publicly disclosed with parties like Moog, which is defense and data centers. There's ePropelled, which is a drone company for both commercial and military-grade drones. They supply motors to a lot of the stuff that's being used in Ukraine and to the U.S. government. We've got them. We got Moog. We've got PolarStar, which is in the defense industry for a part. It's actually not for a weapon system. It's actually for a part in one of their latches. It's basically like a latch, a joint that utilizes a magnet. That's an entryway into other industries. There'll be more on the way. Not all of our customers right now want to be announced. With our POs, we should be able to start announcing more customers.
Within those 70 customers, to give you a sense for it, there are some very, very large automotive-related guys. There's very large heavy equipment people in there. There's very large industrial players. A lot of big players within that group.
Just in light of the time of our advantage and the characteristics, the prior chart that was up there, why wouldn't the Department of Defense want to be part of it?
We would agree. I mean, there was a little bit of a difference there from the standpoint of time. MP Materials, as you know, has been around for a long time. It had some fits and starts. That management team has done a fantastic job running the thing. When Liberation Day happened this spring, what happened was they cut off the supply and processing of concentrate to China. That mine was already losing money, right, because they have the light rare earths, and they were producing below cost. The Department of Defense will tell you this, they were having financial problems. That's the only functioning mine. In addition to that, if you look at who's in the Department of Defense, they're ex-Cerberus guys. MP Materials had a relationship with Cerberus going back to 2020 and 2019, where Cerberus was looking to invest.
If you talk to John Gallagher in the Department of Defense, there was a long history there. John Gallagher's efforts at Cerberus included rare earths, so he's very knowledgeable. They had a history with MP. You had the imperative to make sure that the only functioning rare earth mine in North America was alive. We applaud that deal because it's both a great deal for the industry and it's a great deal for the government.
You said you wouldn't expect to be a similar piece for the UK.
I think there's going to be financing for sure. I'm not expecting that we're going to get a magnet off-take from the Department of Defense because they're covered. They're already covered, right, going forward. In terms of a price floor, that's to be seen. I'm not sure whether or not they will do that as well. I do expect there'll be hundreds of millions of dollars coming out of the government that we'll have access to. Yes.
Do you plan with the deposition of Blake in heavy? You said that the government's fine with him, and that's why he would then give you heavy, which is not going to happen.
Yeah, you do need heavies for defense applications. Do we know why, whether or not the government feels comfortable with their supply of heavies? We do not. We know the government has talked to us about how we could be complementary to MP Materials because in theory, we could supply them with heavies, right? They mentioned this. The Department of Defense mentioned this. As to whether or not the government is going to do something here in that regard, it remains unclear. We'll certainly be the first to tell you once we hear.
In this case, no longer accepted.
I mean, for me, I'm more a student of the heavies. The heavies are used in some of the advanced magnetic applications that we currently utilize. The critical minerals, as I mentioned, are used in technology like chips, guidance systems, and beryllium is used for nuclear power. All sort of high value add, high growth industries that they're used in.
Have you started to get prototyping?
We have. Yeah. We're prototyping for all of the parties we have MOUs with and many others as well. We're working on a flow sheet for our deposit right now, which is the process of, it's a techno-economic analysis that demonstrates you have the science. You know what the stages are. You know what chemicals, it's a chemical process. It uses acids. You know what the ratios of acids you need to use, how long it needs to be processed, how long it needs to be recycled. You can take that stuff, that rare earth concentrate, and begin to separate it into oxides. Yes.
MP Materials is the big name here, but Energy Fuels has had two announcements.
Yeah.
In rare earths, like including one this morning.
With Vulcan, yeah.
They tend to have a, you know, they're producing dysprosium oxide. You said they're, you know, terbium oxide by the end of next year. Are they closer to a competitor? You described it.
They're further down the chain than we are. If you look at, and we're very encouraged by this, the other way here, real quick, we're running over. They're here. They're not here. They're here. What they do is they have mineral sands that are processed by Chemars, and then they have a processing capability. They use their facility. They use beryllium. They basically clean it up, and then they process it using rare earths. They stop here. Where Vulcan is, is Vulcan is here, and they still have to do all this. This is really hard.
OK, that's dumb.
No one knows how to do that.
OK.
Just so you know, that's a really, really hard thing to do.
Great.
Questions? Great. Thank you. Really appreciate it.