Summary
Night Market Research has published a short report on USA Rare Earth (NASDAQ: USAR), an Oklahoma-based rare earths company pursuing a “mine-to-magnet” strategy. The report alleges that both ends of USAR’s plan—mining rare earths from its Round Top project in Texas and manufacturing magnets in Oklahoma—are fundamentally flawed. NMR claims USAR’s assets are low quality, its equipment outdated, and its commercial prospects weak, estimating as much as 75% downside for the stock.
Who is USA Rare Earth?
USA Rare Earth is a rare earth metals company that went public via SPAC in March 2025. Its business model centers on developing a vertically integrated supply chain: mining and processing rare earths at its Round Top project in Texas and manufacturing permanent magnets at a facility in Oklahoma. The company was co-founded by Australian mining promoter Mordechai Gutnick and has since pivoted from exploration toward magnet production, aligning its narrative with U.S. government efforts to reshore critical materials. Despite this, critics argue the company lacks the technical expertise, intellectual property rights, and viable resources necessary to succeed.
Key Points from Report
Round Top or “Round Flop”?
- Round Top has been explored for decades without success; multiple mining companies abandoned the site.
- The project’s Total Rare Earth Oxide (TREO) content is just 0.06%—1/100th of MP Materials’ Mountain Pass mine, and only three times natural earth abundance.
- Industry experts told NMR the deposit is “not a resource,” noting richer concentrations exist in ordinary sand on beaches in Asia.
- The 2013 and 2019 Preliminary Economic Assessments relied on unrealistic assumptions, projecting Round Top would produce multiples of global demand for rare minerals like thulium and lutetium.
Magnet Manufacturing Mirage
- USAR bought secondhand Hitachi Metals equipment in 2020, which experts say lacked proprietary software and is now outdated.
- Industry sources called the equipment “scrap metal” and stressed that magnet manufacturing requires complex processes and IP rights USAR doesn’t have.
- USAR has repeatedly delayed magnet production—from 2021 to 2026—yet still claims it will reach 1,200 tons of capacity per year.
- Experts doubt USAR can make anything beyond low-value commodity magnets, undermining the company’s lofty pricing assumptions.
Shaky Commercial Partnerships
- USAR has touted agreements with obscure or tiny companies, including StudBuddy (a $10 Amazon product) and PolarStar (operating out of a suburban house).
- A more credible partner, Moog, is only prototyping USAR’s magnets, not committing to large-scale purchases.
- USAR’s own CEO admitted initial production will exclude heavy rare earth magnets (critical for EVs and aerospace), limiting revenue potential.
Stock Promotion and Insider Selling
- In May 2025, USAR hired Outside the Box Capital, a penny stock promoter with a poor track record (average client returns of -71%).
- Paid promotions soon appeared across X, Instagram, and YouTube hyping USAR shares.
- Insiders and SPAC sponsors have already cashed out millions. In July 2025, USAR filed to register ~115M shares for resale, including nearly 44M warrants. Sponsor Michael Blitzer sold ~$35M of stock in August.
Activ8 Analysis
This report paints a deeply troubling picture of USA Rare Earth’s prospects. On the mining side, Round Top appears uneconomic, with ore grades far below industry norms and feasibility studies built on implausible assumptions. On the manufacturing side, USAR seems reliant on outdated equipment, lacking necessary IP rights and technical expertise to compete with established players.
The company’s reliance on questionable stock promotion, continual delays in production guidance, and partnerships with fringe firms raise further doubts about its credibility. For investors, the confluence of weak assets, governance concerns, and promotional tactics suggest a narrative driven more by hype than by substance.