USA Rare Earth (Nasdaq: USAR) has announced the completion of a $1.55 billion capitalization of a U.S. government-backed Special Purpose Vehicle (SPV) for the Serra Verde offtake. Serra Verde, also known as the Pela Ema mine that is located in Goiás state, Brazil.
The capitalization agreement was announced on August 24 and establishes an SPV that will purchase all production from Phase 1 of the Pela Ema mine for a period of up to 15 years.
A Special Purpose Vehicle (SPV) is a company or legal entity created for a single, clearly defined purpose, generally to isolate financial risks or execute a specific transaction.
The SPV is backed directly by the U.S. Department of War, formerly the Department of Defense, which will provide $750 million in investment to the vehicle. The U.S. government has also signaled that it will purchase not less than $300 million of rare earth payable products over five years from the SPV.
The remaining $500 million in backing for the SPV will come from Senior Debt Facility from Tier-1 institutional bank and other investors.
USA Rare Earth said the financing will be essential to guarantee demand and establish and operate an integrated rare earth value chain from mine to magnet across the United States, the United Kingdom, and Brazil.
“We appreciate the strategic support and upsized funding commitment of the U.S. government and are proud to continue our strong partnership to build a secure and resilient rare earth supply chain,” said Michael Blitzer, Executive Chairman of USA Rare Earth.
With the SPV now capitalized, the structure is expected to support the financing and operational continuity of Serra Verde as USA Rare Earth moves toward completing the acquisition. The agreement also establishes price floors for the heavy rare earths dysprosium and terbium, which the company says would represent the first arrangement of its kind in the industry.
The establishment of these price floors satisfies one of the closing conditions for the proposed $2.8 billion Serra Verde acquisition in Brazil. The transaction is expected to close following a special meeting of USA Rare Earth stockholders and the Serra Verde board process scheduled for August 28, 2026.
What Does This Mean for USA Rare Earth?
The agreement establishes a financial structure to secure rare earth production from the Pela Ema mine while strengthening the financial and investment outlook for USA Rare Earth.
What the Contract Stipulates
- 100% Offtake Agreement: The Special Purpose Vehicle (SPV) commits to purchasing 100% of the rare earth materials produced during Phase 1 of the Pela Ema (Serra Verde) mine in Brazil.
- 15-Year Duration: The purchasing agreement is structured as a long-term 15-year contract, securing the mine’s output over the period.
- Guaranteed Price Floors:The contract establishes minimum purchase prices for the contracted materials. This provides additional protection against market volatility and helps de-risk the mine’s future cash flows.
- $1.55 Billion Capitalization:The SPV is fully funded to execute these purchases, backed by a $1.55B capital raise.
Who Has the Rights to the Minerals?
- The SPV — Initial Acquirer: As the direct signatory to the offtake agreement, the SPV will purchase the Phase 1 output directly from the mine.
- The U.S. Government — Guaranteed End User: The U.S. Government, through the Department of War, has secured a forward purchase agreement with the SPV. It has a commitment to buy at least $300 million worth of these strategic minerals over the next five years for defense and national security purposes.
- USA Rare Earth and Western Supply Chains: The remaining minerals acquired by the SPV will be directed into USA Rare Earth’s domestic processing facilities and sold into strategic Western markets.
The broader objective is to supply the U.S. technology, clean energy, and defense sectors while reducing reliance on traditional Asian supply chains.
See Also: USA Rare Earth Acquires Western Hemisphere's Largest Rare Earth Mine in $2.8 Billion Brazil Deal
The U.S. Government’s Involvement in Company Financing
USA Rare Earth is positioning itself as a cornerstone of the U.S. national security strategy to create a fully integrated domestic “mine-to-magnet” supply chain, reducing exposure to potential export restrictions from Beijing and dependence on non-Western supply chains.
The company has also received significant support from the U.S. government in 2026, becoming one of the major beneficiaries of Washington’s strategic push to secure critical mineral supply chains.
In January 2026, the U.S. government announced a funding package of up to $1.6 billion for USA Rare Earth, comprising up to $277 million in direct federal funding and up to $1.3 billion in senior secured loan capacity under the CHIPS Act. As part of the agreement, USA Rare Earth issued 16.1 million shares of common stock to the U.S. government, representing around 6% of the company’s total shares. The funding is intended to support the company’s broader development of its rare earth supply chain, including mining, processing, metal and alloy production, and magnet manufacturing.
These ongoing investments include the company’s high-powered magnet manufacturing plant in Stillwater, Oklahoma, which opened at the end of March 2026, and the Round Top rare earth mining and processing project in West Texas, which is planned to open by the end of 2028.
Now, with the new financing structure completed and demand secured for Phase 1 of Pela Ema through the SPV, USA Rare Earth is seeing further U.S. government involvement and endorsement of its strategy and is positioned to supply the U.S. Department of War through its expanding rare earth supply chain.
The Strategic Value of the Pela Ema Mine
The Pela Ema mine is a critical asset in the global rare earth supply chain, serving as a high-quality source of Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy), and Terbium (Tb).
The site is a comprehensive source of ionic clay, rich in both Light Rare Earth Elements (LREE) and Heavy Rare Earth Elements (HREE)—an exceptionally rare geological asset in the Western Hemisphere.
Ionic clay deposits are significantly easier and more cost-effective to mine, as they are generally located near the surface and do not require energy-intensive blasting, crushing, or milling. Furthermore, primary hard-rock deposits typically carry a larger environmental footprint, producing radioactive tailings that require long-term and complex management.
This operational profile contrasts sharply with USA Rare Earth’s core asset, the Round Top project in Texas. Round Top consists of rhyolite deposits—a volcanic rock that requires extensive crushing and complex heap-leaching processes to liberate minerals from the rock matrix, requiring a far more robust processing infrastructure.
Additionally, the Serra Verde operation has access to a reliable source of renewable energy, powered by two hydroelectric plants located just 25 km and 40 km from the site.
Pela Ema’s Production and Phase 2 Expansion Potential
With commercial operations beginning in 2024, Serra Verde is expected to conclude its first phase of ramp-up by mid-2027.
The target is to achieve the full nominal capacity of Phase 1 by the end of 2027, with annual production of approximately 6,400 tonnes of Total Rare Earth Oxides (TREO).
According to the latest report from the U.S. government, the United States produced 51,000 metric tons of rare earth oxide equivalent in 2025, making it the second-largest producer in the world.
Against this benchmark, Pela Ema’s projected 6,400 tonnes of annual Phase 1 production would represent approximately 12.5% of U.S. production. The comparison is particularly relevant because the newly established SPV has already secured the offtake for the mine’s entire Phase 1 production, effectively locking in the U.S. government as a buyer for material that has yet to be produced and securing access to a significant supply of this strategic resource.
Looking ahead to Phase 2 of the Pela Ema mine, the Serra Verde previously disclosed that production could double , potentially increasing its output to the equivalent of around 25% of current U.S. production. The beginning of Phase 2 was previously projected for around 2030, but growing U.S. government concerns over rare earth minerals could accelerate the timeline through additional investment from the government and private entities in USA Rare Earth.
This could have a significant impact on the company’s production profile, particularly because Pela Ema is a single asset that is already operational and the new investiments in exploration and tecnologies could enprove this expectations even further.
Strategic Importance Against Chinese Supply Dominance
Rare earth supply chain vulnerabilities have become a pressing issue for policymakers in Washington in recent years. With China controlling roughly 70% of global supply and the U.S. accounting for approximately 13%, there is growing concern over concentration in the market and increasing pressure for self-sufficiency and supplier diversification.
This strategic pivot has driven Washington to seek reliable international partners, placing Brazil in the spotlight.
While Brazil currently accounts for only 0.5% of global rare earth production, it holds 23% of the world’s proven reserves, second only to China’s 35%. This presents a significant opportunity for both nations: Brazil can develop new industrial sectors, while the U.S. can secure access to a reliable allied supplier.
Consequently, Brazil has witnessed rapid growth in foreign direct investment in the sector, primarily from Australian and American mining companies. Notable players include:
- Brazilian Rare Earths: An Australian company holding 1,410 km² of mining claims in the state of Bahia.
- Aclara Resources: Focused on providing Magnetic Rare Earth Oxides (MREOs) to a magnet production facility in South Carolina, U.S.
- Other key operators: Viridis Mining and Minerals, Meteoric Resources NL, Ionic Rare Earths Ltd, and Neo Performance Materials Inc. Many of these companies emphasize the environmentally friendly nature of their ionic clay-based extraction methods.
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