Highlights

• USA Rare Earth's UK subsidiary, Less Common Metals, will supply rare-earth alloys to Arnold Magnetic Technologies for aerospace and defense magnets.
• Contract volumes, pricing terms, or duration have not been disclosed.
• The deal offers incremental supply assurance, not transformational capacity creation.
• Key questions remain about feedstock scalability, China dependency, and government support.
• USAR shares rose 19% over six months, trading on policy optionality rather than operating fundamentals.
• The partnership is a necessary but incomplete step towards Western magnet supply chain independence.

---

USA Rare Earth’s latest downstream move—linking its newly acquired alloy business to a U.S. magnet manufacturer—revives a familiar question for investors: is this real supply-chain progress, or another incremental step framed as transformation?

The arrangement connects USA Rare Earth (opens in a new tab) (USAR), its UK-based subsidiary Less Common Metals (LCM) (opens in a new tab), and Arnold Magnetic Technologies (opens in a new tab), a portfolio company of Compass Diversified. Under the arrangement, LCM will supply rare-earth metals and alloys used in permanent magnets serving aerospace and defense markets.

At a strategic level, the message is appealing: strengthen U.S. and allied supply chains while reducing reliance on China. From a _Rare Earth Exchanges_™ (REEx) investor lens, however, the substance matters more than the storyline.

Deal Context: Incremental, Not Transformational

LCM is a credible asset. It has decades of operating history producing samarium, samarium-cobalt, and NdPr alloys, with established relationships across defense and automotive supply chains. USAR’s November 2025 acquisition of LCM meaningfully improved its downstream exposure relative to peers that remain largely upstream or oxide-focused.

Still, this agreement represents supply assurance, not capacity creation. No contract volumes, pricing terms, or duration have been disclosed. There is no announcement of new alloy capacity, magnet manufacturing expansion, or secured non-China separation feedstock. Arnold is diversifying inputs—prudently—but this does not mark a step-change in Western magnet independence.

Investor Lens: What Remains Unanswered

Promotional coverage frames the deal as strengthening U.S. and European supply chains. REEx views that as directionally correct but incomplete. Key questions investors should track include:

• What tonnage and term lengths underpin the relationship?
• How scalable is LCM’s non-China feedstock access at a competitive cost?
• To what extent do LCM inputs still rely on Chinese separation?
• Are government offtake agreements, price floors, or defense-linked guarantees involved?

Absent clarity, the partnership remains strategically interesting but economically uncertain.

Stock Check: Fundamentals vs. Momentum

USAR shares have risen 19% over six months, broadly in line with the sector. Fundamentals remain challenged. Negative forward earnings, limited cash-flow visibility, and weak valuation scores suggest the stock trades more on policy optionality than operating execution—an REEx-flagged pattern across much of the rare earth equity universe.

Peers such as MP Materials and Energy Fuels benefit from clearer government-linked demand signals, though each carries its own geopolitical and execution risks.

REEx Bottom Line

This is a credible but incremental development. It reinforces USAR’s downstream intent and defense-adjacent positioning, but it does not yet resolve the structural bottlenecks—heavy rare earth separation, feedstock security, scale (including refining), and cost competitiveness—that continue to constrain Western magnet supply chains. Investors should treat this as a necessary step, not an end-state.

Source: Zacks Equity Research (opens in a new tab), December 31, 2025

©!-- /wp:paragraph -->