Welcome back to the first day of our Natural Resources Conference. My name is Bill Peterson, U.S. Metals and Mining Analyst, really pleased to have USA Rare Earth come back. They actually joined the conference last year, but a lot has changed since that timeframe. Rob Steele is the CFO. He's going to walk us through a couple slides here. I want to keep it interactive. I've definitely got a lot of questions, and there's so much going on in the space. I have no doubt we'll use all 30 minutes wisely. Rob, maybe over to you to introduce the company and where the company fits in the rare earth and magnet value chain.
Great. Thanks a lot, Bill. Great to be here today. USA Rare Earth's mission is to secure, reshore, and grow the rare earth industry for the United States and our allies. We started really on our current journey about 14 months ago when we de-SPACed and raised our initial slug of capital. Over the last 15 months, we've raised approximately $2 billion of equity capital and made five strategic transactions along the way. Our most recent transaction is the acquisition of Serra Verde, which we expect to close sometime this summer for $2.8 billion. Our goal is to lead at every step of the value chain, that would be if you look at upstream, that's mining and processing and separation, midstream, that's metal making and strip casting, and downstream, that's magnet making.
If you start with our capabilities on the mining side, we are making the acquisition of Serra Verde, which is a light and heavy rare earth mine. It is only one of three producing mines outside of China and the only one of the three that produces heavy rare earths. It's also unique because it's fully financed by the DFC and the Department of War into full production and has 100% offtake with an SPV that is backed by the U.S. government and Goldman Sachs. That SPV will purchase 100% of the offtake of their phase one Pela Ema mine. In addition to that, in downstream, we own the deposit called Round Top, Round Top is purely a heavy rare earth deposit that we are currently developing. We expect to be through our definitive feasibility study by year-end and publish our S-K 1300 early next year.
That asset will produce a range of products on the heavy side, dysprosium, terbium, gadolinium, gallium, yttrium, hafnium, and zirconium, all of which go for prices well in excess of $200 a kilogram. It is an extremely viable and economic mine. We will not produce lights or any products that are sub-economic at that facility. Alongside with these two developing mines and deposits, we are producing separation and processing capability. One of our lines will be at Round Top to exclusively process Round Top. In addition to that, we are creating what we call our third-party MREC line, that's mixed rare earth carbonate line, which is really designed to process ionic clays, that facility will be used to process Serra Verde and other ionic clays.
In addition, alongside that line, we will have a recycling line that is capable of processing our swarf from our magnet making. About, call it 15%-25% of our feedstock going forward will actually be our own recycled product. At the midstream, we acquired LCM last fall. LCM was the only commercial-scale metal and alloy maker outside of Asia, and we're rapidly scaling that facility in the U.K. and bringing that capability to the United States and into Europe. In the United States, we'll be expanding their capability to 10,000 metric tons of strip cast equivalent, and we'll be expanding their capability in Europe with our French project. We'll be scaling approximately 3,750 metric tons per annum of strip cast there, and that's part of our announced French project in working with the French government.
On the magnet side, we are standing up 10,000 metric tons on the back of our metal-making capability in the United States, and those facilities will be at Stillwater, Oklahoma, which will produce approximately 3,600 metric tons of magnets, and Blacksburg, South Carolina, that will produce approximately 6,400 metric tons of magnets. As you see at every step, this is a value chain. Each of these steps in the value chain not only will be vertically integrated, but will also have elements of each business that will sell to third parties. At the mine, we'll be selling different products like gadolinium or gallium or yttrium into the market. At metal, we already service third-party customers. More than half our business is with third parties right now. Of course, magnets will be 100% a third-party business. That's what we mean when we say value chain.
All of our business are intended to be economic and standalone. I think the last point I would make before we get into Q&A is that we have unmatched U.S. and alloy government support. We are backed by the Department of Commerce. We completed our $1.6 billion DFA here recently in the last month or so. We're also backed by the Development Finance Corp at Serra Verde, fully financed in production. We have a $19.3 million grant from the Department of Commerce, or sorry, Department of Energy. We have $14.2 million of funds from the Texas CHIPS Act is what we call it. We have significant support from the French government. They're our partner investing in Carester currently, and they also have expressed interest in supporting our development in the South of France. We also have offtake agreements and price floors via the SPV.
Significant funding and significant support going forward. I'll just pause there and we can jump into questions.
Yeah. Thanks, Rob. Maybe I want to talk with a couple of news items that came out in the last few days. One is around China and export restrictions, which these restrictions actually started last year, but now your company has actually been named as well as another U.S.-based rare earth company. What do you think are the key implications, I guess both for you directly but also indirectly? What is it signaling?
It proves the case. The first question we normally get from investors is, do you think China is just going to reduce restrictions and we're going to go back to 2010? Our point is that we believe that there is going to be, and there needs to be, a bifurcated market going forward, given the fact that China dominates well in excess of 90% of the market, and in fact, up to 99% of certain rare earths going forward. Rare earths contribute to about $10 trillion of our economy, we can't have that be in the control of a third-party actor such as China, this only proves the point that we need to stand up this capability outside of China.
Yeah. I guess the other piece of news was from this morning, where another peer that had been involved more in the midstream and a little bit of upstream is now moving into the downstream space with magnets. Maybe you can take a high-level view. What does this mean for the U.S. magnet projects? There's been so many announcements. How should investors consider the viability of all these projects as well as the competitive landscape over the next several years?
Well, first off, the transaction you're talking about is Energy Fuels' acquisition of VAC. We think this is a great transaction for them. In terms of magnet making capacity in the United States, we believe, and the U.S. government believes, that demand in the United States for earth magnets is approximately 50,000 metric tons, plus or minus. In Europe, it's somewhere between 40,000 and 50,000 metric tons as well. The expectation is that this market is going to more than double over the next 10 years. What you have right now is USA Rare Earth, we've announced 10,000 metric tons by 2029, 2030, that will be standing up. MP Materials has announced 10,000 metric tons, VAC has announced their initial phases of their facility, which is at 2,000-3,000 metric tons.
There's another group, Noveon, at 2,000, and Vulcan, which is trying to stand up a facility. All told, if all five of these facilities get up and running, there might be somewhere between 30,000-50,000 metric tons of magnet serving 100,000 metric ton market over time. We think there's more than enough room for all these facilities to come online. It's also important to understand that there's a broad range of industries that are served by the magnet industry. Everything from aerospace and defense, to automotive, to industrial, to windmills, to all kinds of different things. Think of magnets as complex parts. Some companies will be better at producing block. Some companies will be better at producing small, complex parts with advanced coatings. There's going to be a range of opportunities for each of these companies to play a different role in the industry.
We'll get to your magnet business in a minute, but maybe just stick on the market environment. How should we frame the ex-China market? You gave some idea of how large it can be from a metric ton point of view. I guess, what's structurally the areas of growth, especially in Western markets? What markets matter most for the Western players, and how should we think about future data or emerging demand, whether it be humanoid robots, drones, or other applications?
As I mentioned, 50,000 metric tons in the U.S., 40,000-50,000 metric tons in Europe. It's about 30,000-50,000 metric tons in Asia as well, non-China Asia. You've got some very large markets. If you were to do a breakdown of the industry, about somewhere between this is going to add up to, like, 120%, just so you know. It's a bit murky. 30%-40% are industrial motors, 30%-40% are mobility. That's automobiles, EVs, heavy equipment. Heavy equipment, this is where it overlaps a little bit with industrial. You've got about 10% of the industry is aerospace and defense. You've got windmills at 7%-9%. You've got healthcare at somewhere between 10%-15%. That's roughly what the industry looks like today. Over time, you have massive growth of certain industries.
When we think about things, we talk about humanoids as robots, but just look at industrial automation. Industrial automation is supposed to grow 45-fold. That's a lot of industrial robots. Those are industrial motors, and so those motors would fall in the industrial category. That is just massive growth in that category. You have data centers. Each data center will go through 20,000-40,000 drives a month. Each of those drives will have a magnet in it. Each of those drives will also have cooling, which involves motors, which involves magnets. You think about a lot of magnets coming in and out of the data center market. There's humanoid robots. If you listen to what Elon Musk says, he says there's going to be a billion of these things.
Let's say there's 100 million of these things. That's a lot of metric tons of magnets going forward. We haven't even touched about aerospace and defense, which is sort of the obvious one. Look at Ukraine, uses approximately 4 million drones a year for their limited war, I guess it's limited war. It's a real war, but it's in a limited zone in Ukraine. The United States only has plans for 100,000 or 200,000 right now, clearly needs to stand that up, and they're aggressively doing that. If the U.S. is going to produce millions and millions and millions of drones, that means we need millions and millions and millions of magnets going forward. A lot of opportunities for growth. We're working with all aspects of the industry right now.
We are working with drone companies, we are working with semiconductor companies, we are working with industrial motor companies, we're working with mobility companies and heavy equipment companies. We're working everywhere right now.
Before diving into your business, I want to talk a little bit about policy support, this slide summarizes some of the various jurisdictions. You've clearly benefited, as this slide points out. How do you see further policy support evolving in the U.S. as well as Western allies? I guess we're also aware that that bipartisan House Select Committee on China's introduced a bill for additional magnet metal and production tax credits. How important is this legislation, and what can it mean for USA Rare Earth specifically?
I think all the support is really important for an industry that is not only completely dominated by China, is also heavily subsidized by China, also uses industrial practices which are far from adequate in the Western world. When you have a significant price advantage and control advantage with an actor that will use this as political leverage, it's going to be really important that we similarly have some available tools to help us stand up this capability outside of China. There's talk not only of the legislation on tax credits, there's Project Vault, which is going to allow companies like ours to sell metal or potentially magnets into the vault or rare earth oxides and rare earths into the vault.
There's talk of consortiums forming with Western nations for not only price support, but market prices and/or different types of mechanisms to be able to support and/or invest in the market going forward. One of our best partners right now is France. They're one of the most forward-leaning, alongside Japan, with investing in the rare earth industry right now, and we're hearing talk of other governments beginning to come online as well to be able to support their industry, which industries are also dependent on rare earths and rare earth magnets.
Coming to your strategy, maybe starting with the upstream. First with Round Top. You have the PFS expected to be published around the end of third quarter, and I think DFS soon after. What are the gating items that can move the PFS and DFS timelines? How's the flowsheet progressing, and how should we think about the potential of the project?
Yeah. Just to correct that a little bit, our plan is currently to finish the DFS by year-end and publish our S-K 1300 next year. That's our target plan. We do have an interim step internally that we'll be working through in Q3. The key there is really working through our flowsheet with our hydrometallurgy facility and gathering the data necessary to support our DFS going forward and proving that we can make various forms of oxides using our separation process. As you think about standing up, which you should be expecting from us, is us to be able to talk about some of these progress throughout the year, which is what we're going to be doing going forward.
Then in Serra Verde, which you point out is a producing mine, pretty rich in heavies. I think you spoke to the rationale, but I guess there has been some news about the Brazilian government maybe taking action. I don't know. How would you respond, and how do you see this project evolving longer term?
Yeah. Serra Verde is currently owned by a holding company that sits outside of Brazil. That holding company is currently owned 2/3 by American private equity funds and 1/3 by a British, basically family office private equity fund backed by Sir Mick Davis. Serra Verde is already foreign-owned, even before this transaction is taking place. Because this entity is owned outside of Brazil, there's actually no transaction happening in Brazil, so there's no change of control. What that means structurally is that the Brazilian government technically does not have jurisdiction over the mechanics of the transaction because there is no change of control. I would also say that Brazil does not have a history of nationalizing any assets in any industry at all, even those that it views to be important, such as mining.
Moreover, in the mining industry in particular, there are several mines that are already foreign-owned, such as ours. Anglo American own several mines in Brazil right now. What we see is that in Brazil, there are elections going on right now going into the fall, and this is basically a result of the election process.
Yeah. Maybe touch on the midstream. Some of your slides kind of point out with the acquisition of LCM. You've taken a stake in Carester. How do these fit in the portfolio, and I guess how would you characterize your expertise across separation refining, strip casting, and metallization today?
Expertise is the key thing. These are industries that almost disappeared entirely outside of China. It's literally, we sort of have the last company standing in the industry right now. What's important is basically, as best you can, getting the capacity And the capability, the intellectual property, and the knowledge base of what is here, and making sure you have access to best of the best. We are standing up our own processing capability with super highly qualified people here in the United States. We also recognize it's important to support our processing capability, our metal processing and magnet potential in the south of France. That's why we invested in Carester, to be able to help there.
That deal also gives us access to their intellectual property, as one of the very few processors outside of China, and probably the best-known heavy rare earth processor outside of China, is Frédéric Carencotte.
I guess, can you speak of maybe a little bit more detail on the synergies there? You have Carester in France, and maybe that flow sheet can be replicated somewhere else. But also, your ability to handle the various kinds of feedstock. You mentioned MREC, for example.
Sure.
Feedstock's so important and needs to be pretty fine-tuned, as far as I understand.
That's why this is really cool with Carester and their capability and our capability. The lines we're standing up in separation in the United States are bespoke lines, meaning the separation line for Round Top is really designed for Round Top. So it's going to be optimized for that, which means it will be the lowest cost of separation for Round Top. Similarly, our third-party MREC line, which will process ionic clays, is being optimized for Latin American ionic clay deposits. So it's going to be really good at that. Similarly, our SWERF facility is designed for that. Carester, alternatively, has taken a different approach, which is pretty awesome.
Their approach has been, hey, let's work with a broad range of feedstock providers and mines, help them process their ore into an intermediate product that's somewhat similar, a similar product across different mines, that we in turn at Carester can process into the finished product. What's key there is because France has limitations on radionuclides, it does have to be radionuclide-free, whereas our third-party MREC line does not. It is a really interesting way of processing, you can imagine that we have access to that capability in the south of France. As you think about growth in the space, which is substantial, there's going to have to be a lot more processing capability, separation capability stood up. We have access to the Carester technology to be able to assist with anything we're doing globally.
Great. Maybe moving a little bit further downstream to the magnet business. Maybe first off, you can set the stage. How is the Blacksburg plant progressing on, in terms of Phase 1a?
It's early. We just commissioned Phase 1a here this spring, and we're currently in the process of speccing commercial-grade magnets for our customers. The process of signing up a customer is multifold. The first thing we do is provide them with lab samples, which they in turn test. Once we get through initial testing, then we start producing the grade that they're looking for, and we have the capability to produce on a commercial-grade line. Then from there, they test, and we rework the product until we get into the order. We're in that phase of producing more advanced formulas at commercial scale and working with our potential customers to get to a product that we can ultimately sell under a purchase order or a supply agreement.
Can you speak a little bit more with granularity on what type of customers you're working with today and how that should evolve? I think last year it was more like, I don't know, electric tools and small-scale things. Now, maybe EVs, we'd mentioned earlier about the markets moving to higher end.
It was initially a little bit more electric tools. You have to think about your customers over time in the context also of your magnet grades. What you start with are the simplest magnet grades using heavies, then you work your way up the chain, and there's over 40 general grades of magnet types. The customers that we're working is we are working with power tool customers, we're also working with drone companies. We're working with automotive parts companies. We're working with aerospace and defense companies of different types. We're working with energy companies. Most of our products are going to go into motors right now, there are a lot of products that go into motors or different types of actuators going forward.
I guess, how should we think about the evolution beyond Phase 1a and to reach your ultimate, I don't know if it's an ultimate goal, but?
We're going to be scaling Stillwater to 3,600 metric tons. Line 1b, which is our next 600 metric tons, getting us to 1,200 metric tons, will come online in Q1 of next year. Really the acceleration of our lines really happens when we start scaling up Blacksburg, which is going to be in the first quarter of 2028. That's when that facility starts having equipment installed, and we start going through our commissioning process in the second half of 2028.
In terms of, I guess, the downstream of that, we can think of actuator companies. Obviously, you've been pretty acquisitive. Would there be appetite to even go further downstream into the actuator or other even down a motor side or?
Yeah. People talk about it. I think it's too soon right now. If it were me, I would focus on making sure we can do the basics here, which is let's get some magnet customers. Let's get up and running there. Going forward, you could easily see how we would get into the more complex builds for our customers going forward, or work with somebody more closely that's doing that, and we can bring that capability back to the United States.
Yeah. Again, we hosted the team last year. Things have dramatically changed in terms of what you've acquired and what's yet to come. It feels like there's a lot on the plate. How should investors think about the execution in terms of what's in your control, what's not? Is there things that we should be worried about that are just not obvious?
Yeah. I think there's things that aren't under control or how other elements of the industry could stood up, how governments react, those types of things. Right now, in that regard, everything has been extremely straightforward and positive. I think frankly, there are always the unknowns. You worry about what extraneous could happen that we should be worried about. I would tell you that most of our focus right now is mostly on execution. That's where the worry is. Let's execute.
Yeah. I guess, how do you bridge this? Is this hiring the right people? How is that?
It's hiring the right people, which is extremely important for a company like ours. The screening process is really critical because this is hard work, and we expect a lot of our people. Our people are awesome. They work really hard, and they're extremely driven. If you were to see our team in Wheat Ridge, Colorado at our lab that's developing the mine, it looks more like a Silicon Valley software shop than it does an industrial facility because these people are working 24/7. 24/7 are our labs, certainly having the right people is critical, and it's the right thing to have the right people on our factory floor. It's also the reason why we have two facilities. We diversified our facilities across Stillwater and Blacksburg to make sure we had access to the right talent going forward and didn't oversaturate any given market.
Maybe kind of moving on to sources of cash. The $2.7 billion in committed and proposed, just can you remind us of how much that actually has been committed thus far, and what is yet to be, I guess, inked, and what are the key milestones to secure the additional financing?
Of this, $1.6 billion, $565 million, $19.3 million, $14.2 million have all been committed. The offtake has been committed. The Carester investment has still not been finalized yet, that's going to happen here in the next few weeks. The French incentives have not been committed yet. Those are under intent. They intend to help us out. There's also other things we're doing right now that could augment this.
I want to stop and see if there's any questions before moving on. Any questions? Maybe in terms of uses of cash, how should we think about the CapEx profile for this year and over the next few years?
Yeah. The CapEx profile for the business we've talked about, it's about all of our projects from the start of this year. Excluding everything we've spent so far this year, it's going to be about $4 billion going into 2030. Our sources of cash right now are, you think about those sources, we've got about $1.75 billion of cash on our balance sheet. We've got all these different funding sources going forward. We have Serra Verde, which is going to be throwing off significant cash as it ramps into its capacity, which not only gives you cash flow, but you think about debt capacity of a flywheel business that's selling into a government-backed SPV. There's significant leverage.
We have a number of different options in front of us. Obviously, we have our common stock. As you've seen, we've raised $2 billion in equity so far and have been judicious and smart in how we do that, and we would expect to be going forward.
How does acquisitions at this, I mean, I mentioned actuators. Is your portfolio pretty well set at this point? Is it about execution, or is there other parts of the portfolio you would think about augmenting?
Yeah. I think for us, as you've seen, what's really important to us is acquiring capacity. It's acquiring operations in the space. It's acquiring the right people. It's also access to intellectual property. We believe all of these things are extremely important. We also believe that those things are resident in other companies and other opportunities that are out there. We can have access to them through supply agreements, investments, JVs, partnerships, and acquisitions, and we're looking at all the above because we really believe there's additional opportunities to augment what we're doing.
I guess as we wrap up, you mentioned that Round Top is one milestone. What are the additional milestones that investors should be looking out for the balance of this year as well as next year?
The first thing is capability. Look for us announcing additional capability, and that capability could be things we're doing and progress we're making at Round Top. It could be progress we're making with metal-making capability. Recently, we announced the ability to make yttrium metal. We're the only company outside of China that can make yttrium metal. It's things like that. It's capacity, standing up additional capacity as we come online. At Magnax, it's going to be additional capabilities like additional magnet grades, additional types of technologies that we are currently working on that we hope to be able to announce. Ultimately across the value chain, it's customers. Look to customer announcements along the way to extent that our customers will allow us to.
Some of our customers who source from China currently are reticent to let us announce their names, but there's some that aren't, and you'll be seeing those as we go forward.
Well, Rob, 30 minutes is up, but really appreciate you sharing your insights and we'll look forward to following the progress. Thank you.
Awesome. Thank you.