I'm Not Buying USA Rare Earth Yet. Here's the 1 Thing I'm Waiting to See.
Key Points
The United States and China reached a trade agreement in late September.
While the U.S. and China plan to discuss trade of rare-earth elements, the U.S. still wants to shore up its domestic supply of the critical minerals.
For investors interested in rare-earth materials but who prefer to mitigate risk, a rare-earth ETF is a great choice.
In announcing the recent trade agreement between the U.S. and China, the White House recognized that the two nations will pursue talks addressing "U.S. concerns regarding supply chain shortages related to rare-earth and other critical minerals, with the goal of ensuring shipment levels return to appropriate levels."
But investors should hardly interpret this as a sign that the U.S. will lose interest in shoring up its rare-earth supply anytime soon. To this point, USA Rare Earth (NASDAQ: USAR) remains an obvious investment opportunity, though motivated as I am to become a shareholder, I'm holding off until this one thing happens.
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Look for important news in the coming months
USA Rare Earth's core asset is the Round Top deposit in Texas, which contains 15 of the 17 rare-earth elements that are in demand, including all heavy rare-earth elements. The company is making steady progress at lining up customers for when Round Top commences operations. During USA Rare Earth's second-quarter 2026 conference call, management acknowledged that it has "30 potential customers, many of the large multinationals on offtake for the nonmagnetic oxides and other products Round Top will produce."
But there's one critical step needed before commencing commercial operations: completing the definitive feasibility study.
Developing mining projects requires massive amounts of capital. To ensure the economic viability of developing a particular location as an asset, companies will conduct definitive feasibility studies that provide financial projections to determine whether the project will be profitable.
Management expects a definitive feasibility study for the Round Top project by the end of 2026 and will publish the results in early 2027.
Ensure your excitement for Round Top with the definitive feasibility study, then load up on shares
Recognizing the strong political enthusiasm for domestic rare-earth production, investors are right to pay close attention to USA Rare Earth stock. At this point, however, it's a little too speculative for my taste to pick up shares. Should the company demonstrate that the Round Top project can be a lucrative endeavor, though, I'll be more comfortable with starting a position in this rare-earth mining stock.
Scott Levine 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.