William Blair initiates coverage of USA Rare Earth at "outperform"

Investing.com - The U.S. government could announce a sizable investment in USA Rare Earth Inc., after the company highlighted recent "positive discussions" with the White House, analysts at William Blair said in a note to clients.

The analysts including Neal Dingmann and Bert Donnes added that USA Rare Earth extracts minerals viewed as a crucial to a host of industries and has made acquisitions boosting its metal-making operations.

Along with the development of a mine in Texas, USA Rare Earth anticipates that a neo magnet manufacturing site in Oklahoma should start production in the first half of next year.

"We expect the combination of these factors to generate long-term shareholder return," the analysts said in a note initiating their coverage of the stock at "outperform."

Shares of USA Rare Earth have more than doubled so far this year to touch all-time highs, with much of the gains coming in recent weeks. Ahead of the market open on Monday, the company’s market value stood at $3.16 billion.

One factor underpinning the advance has been a report that suggested CEO Barbara Humpton was in close discussions with the administration of President Donald Trump. Humpton was responding to a query about USA Rare Earth’s potential interest in forging a deal with the White House, which has targeted an uptick in the domestic production of critical minerals as part of a bid to offset China’s dominance in the sector.

Rare earths are a group of 17 metals, which, after being mined, are turned into magnets that have the potential to power motion. These materials are key components in a range of industries, from auto manufacturing and smartphones to the defense sector.

China has moved to expand its controls over rare earth exports, fueling a jump in shares across the segment. But the wider bans have sparked a fresh round of a trade fight between the U.S. and China, with Trump threatening to slap triple-digit tariffs on China in retaliation -- although both sides have seemingly attempted to ease the latest tensions.

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