USA Rare Earth shares soar on news of Serra Verde acquisition / Photo: Serra Verde screen shot
Quotes of USA Rare Earth, a mid-cap producer of rare earth metals, soared by more than 13% on April 20. The company announced the purchase of Serra Verde Group, the only major producer of all four rare earth elements outside of Asia, making it a global leader in the industry. "This deal has been expected for years," broker Noble Capital Markets wrote. Wedbush Investment Bank advised buying USA Rare Earth shares against this backdrop.
Details
USA Rare Earth shares jumped more than 13% to $22.58 on the Nasdaq on April 20. This is the maximum mark for them since early February.
Investors reacted to the company's reported acquisition of Serra Verde Group, owner of the Pela Ema rare earth element mine in Brazil.
The deal will total about $2.6 billion, of which USA Rare Earth will pay $300 million in cash and the rest in newly issued special purpose shares. The parties plan to complete the transaction in the third quarter of 2026, subject to regulatory approval.
What's interesting about the deal
Brazil's Serra Verde is the only major producer outside Asia of all four rare earth elements: neodymium (Nd), praseodymium (Pr), dysprosium (Dy) and terbium (Tb). These materials are used to produce permanent magnets that power car motors, wind turbines, defense systems and advanced electronics, Noble writes.
China accounts for about 90% of global production of recycled rare earth elements, writes Reuters. Beijing is "holding the world hostage" because of control over the export of these materials, U.S. President Donald Trump said in the fall.
The deal between USA Rare Earth and Serra Verde poses "a direct challenge to that dominance," Noble notes.
"USA Rare Earth is now the world leader in rare earth elements. We will become a major supplier to all the other players in the industry ... helping the entire industry scale," CEO Barbara Hampton said in an April 20 conference call with analysts (as quoted by Fortune).
On the same day, April 20, Serra Verde announced that it had entered into a 15-year agreement to supply 100% of its production to a special purpose vehicle (SPV) funded by various U.S. government agencies and private capital sources - with guaranteed minimum prices for each of the four magnetic rare earth elements.
"The government-guaranteed minimum revenue significantly reduces the asset's risks and demonstrates how seriously Washington views the security of the rare earth element supply chain as a national priority," Noble writes.
If market prices for rare earth metals exceed the minimum levels, both USA Rare Earth and SPV will share the profit from the price increase, Reuters notes. The agency also recalls that last year the U.S. government set for another producer of rare earth metals in the U.S. - the company MP Materials a minimum price for its products. This agreement included a condition that the U.S. government was to compensate MP for losses in case the price of rare earth elements fell below a certain level. USA Rare Earth did not receive such an offer, the agency writes.
What about the stock
On the back of the USA Rare Earth and Serra Verde Group deal, investment bank Wedbush for the first time assigned a rating to USA Rare Earth shares and cut its buy recommendation on them, Yahoo Finance shows. The target price set for them by analysts is $29, up 28% from the last closing price.
The company's securities have a total of six ratings from Wall Street analysts and all of them are buy. The average target of $33.2 implies their growth potential of 47%.
USA Rare Earth quotes have soared nearly 90% since the beginning of the year.
