USA Rare Earth, Inc. (USAR)

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader understand our results of operations and financial condition. It should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes included in Part I, Item 1, “Financial Statements (Unaudited),” in this Quarterly Report on Form 10-Q (the “Notes”). The following discussion may contain forward-looking statements. Forward-looking statements are not guarantees of performance. Although we believe these forward-looking statements are reasonable when made, we cannot assure you that we will achieve the plans or expectations referenced in our forward-looking statements. Our actual results and the timing of events may differ materially from those expressed or implied as a result of various factors, including those set forth in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We are building a leading global rare earth value chain, from mine to magnet and beyond. We intend to secure, reshore, and grow the materials intelligence and production technologies required to stand up a resilient rare earth industry. This advanced industrial operating system should strengthen supply-chain security for the national defense, manufacturing and technology of the United States (“U.S.”) and its allies. Our plan is to build an integrated platform to encompass the entire rare earth value chain: extraction and separation of rare earth oxides; conversion of oxides into metals, alloys and strip-cast; and production of sintered neodymium-iron-boron (“NdFeB”) permanent magnets, which we also refer to as neo magnets. This capability should address the supply-chain vulnerabilities created by China’s current dominance of rare earth processing, and metal and magnet manufacturing.

Factors Affecting Comparability of Results

During 2025, we completed two transactions that materially affect the comparability of the results discussed below. On March 13, 2025, we consummated our business combination with USA Rare Earth, LLC and became a publicly traded company listed on Nasdaq under the symbol “USAR.” On November 18, 2025, we acquired Less Common Metals Ltd. (“Less Common Metals”), a rare earth metal and alloy manufacturer based in Cheshire, United Kingdom.

As a result, the three and six months ended June 30, 2026 reflect Less Common Metals’ operations, while the prior-year period reflects none. All of our revenue for the three and six months ended June 30, 2026 is attributable to Less Common Metals. Accordingly, revenue, gross loss, and operating expenses for the three and six months ended June 30, 2026 are not comparable with the corresponding line items for the three and six months ended June 30, 2025.

For a complete description of both transactions, refer to Note 2, “Merger Transaction and Acquisition,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2025 (the “2025 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 30, 2026.

Recent Developments, Key Trends, Opportunities and Uncertainties

We are an early-stage company with a limited operating history and intend to grow our global value chain through capital and operational expenditures, as well as through strategic initiatives. These investments may exceed our revenues over the next several years. Our revenues for the three and six months ended June 30, 2026 were derived solely from our metal-making operations following the acquisition of Less Common Metals in 2025, and we have not yet generated revenues from our neo magnet manufacturing or mineral production. We incurred a net loss of $80.0 million for the six months ended June 30, 2026. Our historical results are not indicative of our future results, and our ability to generate sufficient revenue to achieve profitability will depend largely on the successful development and scaling of our integrated mine-to-magnet platform and our global value chain.

USA Rare Earth, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 27

Table of Contents

Proposed Investment in Carester SAS

On April 9, 2026, we entered into a binding letter of intent, and subsequently on July 23, 2026, we entered into a definitive agreement to acquire a 13.6% equity interest in Carester SAS (“Carester”), the parent company of Caremag SAS (“Caremag”), for cash and equity consideration amounting to approximately $45.7 million. The proposed consideration consists of €28.3 million in cash, or approximately $32.4 million, and equity consideration of €11.7 million, or approximately $13.3 million, payable in shares of our common stock, in each case subject to customary adjustments, including the potential substitution of cash in lieu of our common stock. As of June 30, 2026, the transaction had not closed. We expect to close the investment in the third quarter of 2026, subject to customary closing conditions and regulatory approvals.

This transaction is part of a broader initiative, in partnership with Carester, the Government of France and InfraVia, to build an integrated value chain platform for rare earth processing, metal and alloy production and magnet making in Lacq, France. If the investment is completed, the platform will unite the technological expertise, process innovation, and production capacity of our manufacturing operations and those of Carester with the goal of accelerating development and strengthening our capabilities across the rare earth value chain. In parallel, USA Rare Earth, through Less Common Metals – Europe, is developing a 3,750 metric tons per year (“MTPA”) metal and alloy production facility at the same location. We believe the partnership will create one of Europe’s most complete rare earth industrial ecosystems.

The proposed transaction is further subject to, among other things, the negotiation and execution of definitive agreements, receipt of applicable regulatory approvals, and the satisfaction of customary closing conditions and there can be no assurance that the transaction will be completed.

Proposed Acquisition of SVRE Holdings Ltd.

On April 19, 2026, we entered into a definitive agreement to acquire 100% of SVRE Holdings Ltd., the parent company of Serra Verde Group (“Serra Verde”), for a proposed consideration of approximately $2.83 billion, consisting of $300.0 million in cash and 126.8 million shares of our common stock, subject to customary adjustments. Serra Verde operates the Pela Ema rare earths project in Brazil and is currently in commercial production. The Pela Ema mine is unique as the only mine outside Asia currently capable of supplying all four magnetic REEs at scale, neodymium, praseodymium, dysprosium and terbium, together with other vital REEs, such as yttrium. This transformative acquisition, if completed, will create what we believe will be the only fully integrated mine-to-magnet platform outside China, with active capabilities across mining, processing, separation, metallization and magnet making across three continents.

Serra Verde's strategic importance is further evidenced by its 15-year offtake agreement with a special purpose vehicle capitalized by the U.S. Government, which features contractual price floors covering 100% of Serra Verde's Phase 1 production of neodymium, praseodymium, dysprosium and terbium.

We believe this acquisition strengthens our U.S. and allied government relationships and provides multiple embedded growth opportunities, including a potential Phase 2 doubling of Pela Ema’s production capacity. The transaction also adds significant leadership depth through the expected appointment of Thrasyvoulos Moraitis and Sir Mick Davis to our Board upon closing, with Mr. Moraitis initially serving as President of the combined company, and Chief Executive Officer (“CEO”) of the combined company after our current CEO retires on October 1, 2026.

On July 24, 2026, we filed a proxy statement on Schedule 14A with the SEC seeking shareholder approval of the Serra Verde acquisition at a special stockholder meeting scheduled for August 28, 2026. The transaction remains subject to customary closing conditions, including shareholder approval, receipt of applicable regulatory approvals, and the absence of material adverse effects. There can be no assurance that the transaction will be completed. The transaction is subject to customary closing conditions, including receipt of shareholder approval and applicable regulatory approvals, and there can be no assurance that it will be completed.

USA Rare Earth, Inc. | Q2'2026 Quarterly Report (Form 10-Q) | 28

Table of Contents

Texas Semiconductor Innovation Fund

On May 11, 2026, we entered into a grant agreement with the Office of the Governor of the State of Texas (the “OOG”) pursuant to the Texas Semiconductor Innovation Fund (“TSIF”) (the “TSIF Grant Agreement”), Grant No. TSIF 26-016P. Under the grant agreement, the OOG has agreed to reimburse us for certain allowable costs directly allocable to the Round Top Project, up to a maximum amount of $14.2 million.

The TSIF Grant Agreement proceeds are intended to support the development of Round Top Mountain as a domestic source of heavy rare earth elements and select technology metals, including dysprosium, hafnium, terbium, and other elements essential for high-performance permanent magnets used in the aerospace, defense, semiconductors, data center, physical AI, energy, mobility, healthcare, and numerous industrial sectors.

The TSIF Grant Agreement grant funds are disbursed on a cost reimbursement basis only, and payment is dependent upon our strict compliance with the terms and conditions of the TSIF Grant Agreement, including applicable reporting, audit, and performance requirements. The TSIF Grant Agreement terminates upon the completion of the grant project, on December 31, 2028, or upon the depletion of grant funds, whichever occurs first.

U.S. Department of Energy

On May 21, 2026, we were selected by the U.S. Department of Energy (the “Dept. of Energy”) to receive up to $19.3 million in funding under the “Critical Materials Innovation, Efficiency and Alternatives” program to support development of a pilot-scale rare earth element separations project. The total project value is approximately $50.5 million, including $19.3 million in the Dept. of Energy funding and $31.2 million in the non-Dept. of Energy funding. Final award terms, project scope, budget, and timeline are subject to negotiation with the Dept. of Energy. As of June 30, 2026, we had not received funding or executed a final award agreement. Selection for award negotiations does not constitute a binding commitment of federal funding. Any award is subject to successful completion of negotiations with the Dept. of Energy and the execution of a definitive funding agreement.

U.S. Department of Commerce

On June 3, 2026, we entered into a Direct Funding Agreement (“DFA”) of $277.0 million and a Loan Guarantee Agreement (“LGA”) of $1.30 billion with the U.S. Department of Commerce (the “Dept. of Commerce”). We issued 16.1 million shares valued at $451.4 million and a warrant to acquire 17.6 million shares with an exercise price of $17.17 initially valued at $430.9 million as conditions precedent. As of June 30, 2026, no disbursements or advances had been received; initial funding is subject to milestone approval. See Note 13, “Government Grants – U.S. Department of Commerce CHIPS Act Awards,” of the Notes for additional information regarding the Dept. of Commerce agreements.

Acquisition of Texas Mineral Resources Corp.

On March 4, 2026, we entered into a definitive Agreement and Plan of Merger with Texas Mineral Resources Corp. (“TMRC”). On August 7, 2026, we closed the acquisition of TMRC, to which we acquired 100% of the outstanding share

[Excerpt truncated for page length; source filing is linked above.]

Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to help the reader understand our results of operations and financial condition. It should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8, “Financial Statements and Supplementary Data,” in this Annual Report on Form 10-K. The following discussion may contain forward-looking statements. Forward-looking statements are not guarantees of performance. Although we believe these forward-looking statements are reasonable when made, we cannot assure you that we will achieve or realize these plans or expectations. Our actual results and the timing of events may differ materially from those expressed or implied as a result of various factors, including those set forth in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary.”

Overview

We are building a leading global rare earth value chain, from mine to magnet and beyond. We intend to secure, reshore, and grow the materials intelligence and production technologies required to stand up a resilient rare earth industry. This advanced industrial operating system should strengthen supply-chain security for the national defense, manufacturing and technology of the U.S. and its allies. Our plan is to build an integrated platform to encompass the entire rare earth value chain: extraction and separation of rare earth oxides; conversion of oxides into metals, alloys and strip-cast; and production of sintered NdFeB permanent magnets, which we refer to as neo magnets. This capability should address the supply-chain vulnerabilities created by China’s current dominance of rare earth processing, metal and magnet manufacturing.

Recent Developments, Key Trends, Opportunities and Uncertainties

We are an early-stage company with a limited operating history. We incurred a net loss of $298.5 million for the year ended December 31, 2025 and had an accumulated deficit of $387.4 million as of December 31, 2025. Our 2025 revenues were derived solely from our Less Common Metals business for a portion of the year following the Less Common Metals Acquisition, and we have not yet generated revenues from neo magnet manufacturing or mineral production. We expect to sustain substantial operating expenses without generating sufficient revenues to cover those expenditures for the foreseeable future. Our historical results are not indicative of our future results, and our ability to generate sufficient revenue to achieve profitability will depend largely on the successful development of our integrated mine-to-magnet platform. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical results of operations. We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose significant risks and challenges, including those discussed below and in Part I, Item 1A, “Risk Factors.”

Less Common Metals

In the fourth quarter of 2025, we completed the acquisition of Indian Ocean Rare Metals Pte. Ltd., which includes Less Common Metals Ltd. (“Less Common Metals”), its manufacturing subsidiary located in Cheshire, United Kingdom. Less Common Metals is a leading scaled ex-China rare earth metal and alloy manufacturer. The acquisition of Less Common Metals is the vital link in our end-to-end REE supply chain by adding value through processing of REE oxides, rare earth metals and transition metals into specialized and often complex alloys of close compositional control, low and consistent levels of impurities and controlled microstructures. See Note 2, “Merger Transaction and Acquisition – Acquisition of Indian Ocean Rare Earth Metals Pte. Ltd.” of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K (the “Notes”) for further information regarding the acquisition.

Private Investment in Public Entity Financing (“PIPE”)

On January 28, 2026, we completed a private placement of 69.8 million shares of our common stock for gross proceeds of $1.5 billion (“$1.5B PIPE”). We intend to use the net proceeds from the $1.5B PIPE to accelerate the build-out of our mine-to-magnet value chain, including the development and expansion of mining, processing, metal-making and magnet manufacturing capabilities, as well as for working capital and general corporate purposes.

USA Rare Earth, Inc. | 2025 Annual Report (Form 10-K) | 55

Table of Contents

Expected U.S. Government Transaction

On January 26, 2026, we announced that we had entered into a non-binding letter of intent (the “Letter of Intent”) with the U.S. Department of Commerce covering a total of $1.6 billion, including $277.0 million in direct funding awards under the CHIPS Act, and $1.3 billion in senior secured debt with a 15-year term with an expected rate of Treasury plus 150 basis points (“bps”) (collectively, the “Expected U.S. Government Transaction”).

As conditions to entry in definitive documentation for the Expected U.S. Government Transaction (the “Definitive Agreements”), we must satisfy certain conditions, including, without limitation: (i) raise at least $500 million from non-federal sources (which we satisfied with the $1.5B PIPE), (ii) obtain two memoranda of understanding from semiconductor end or midstream users, (iii) obtain neodymium praseodymium oxide and MREC feedstock supply agreements with a term at least through 2027, (iv) exercise a surface purchase option with the Texas GLO, (v) implement certain third-party recommendations and third-party validation of nuclear material licensing requirements at our Colorado Facility, and (vi) define a power infrastructure plan for our magnet manufacturing facility in Stillwater, Oklahoma.

In addition, the U.S. government’s $277.0 million in direct funding awards includes a condition that we issue to the U.S. government, $277.0 million of common stock (approximately 16.1 million shares issued at $17.17 per share). The $1.3 billion in senior secured debt also requires the issuance of warrants to the government representing an additional 10% of the Company’s fully diluted shares outstanding prior to the $1.5B PIPE (approximately 17.5 million shares with an exercise price of $17.17 per share and a 10-year exercise period). The U.S. government’s ownership in the Company is expected to represent between 8% and 16% of the fully diluted shares outstanding prior to the $1.5B PIPE depending on whether the warrants are assumed to be exercised. Issuance of both the direct funding awards and senior secured debt are dependent on our ability to meet certain key performance indicators.

The Letter of Intent for the Expected U.S. Government Transaction provides, and the Definitive Agreements for such collaboration will provide, that the grant and debt financing from the government will be released to us in phases over time subject to our achievement of specified business milestones related to the development of the Round Top deposit, development and expansion of processing and separation facilities, development and expansion of metal making and strip casting facilities, development and expansion of the magnet manufacturing facility, and obtaining additional equity and debt financing. There are four milestones related to Round Top with targeted achievement dates from December 2026 to December 2028: design, scale-up and completion of a definitive feasibility study; early works; solvent extraction; and completion of construction. There are two milestones related to our metal making and strip casting facilities with targeted achievement dates from March 2027 to December 2027: supply, technical feasibility, and construction; and qualification for production and commercialization. There are four milestones related to the development and expansion of our magnet manufacturing facilities with targeted achievement dates from June 2026 to March 2028: initial production capability and demand validation; and incremental production capability and demand validation. In addition, to meet certain milestones to obtain funding awards and debt under the Expected U.S. Government Transaction and execute on our current business plan, we will be required to i) raise at least $600 million of additional equity by December 31, 2027 to satisfy our estimated $4.1 billion of required long-term capital expenditures; and ii) establish a $250 million revolving credit facility by December 31, 2026.

In addition to the Letter of Intent for the Expected U.S. Government Transaction, we signed a non-binding letter of intent with the U.S. Department of Energy’s National Energy Technology Laboratory to collaborate to advance HREE separation technologies at our Colorado Facility and Round Top deposit, leveraging digital twin technology.

The Expected U.S. Government Transaction is expected to accelerate and de-risk our growth objectives across mining, processing, metal-making and magnet manufacturing, and is anticipated to support a business that by 2030 should:

•extract of up to 40,000 metric tons per day of rare earth and critical mineral feedstock from the Round Top deposit, which is expected to begin commercial production in 2028;

•process a combined 8,000 MTPA of third-party MREC and HREE and critical mineral oxides and concentrates at Round Top, which are and largely unavailable domestically;

•reshore 10,000 MTPA of HREE metal- and alloy-making and strip-casting capacity, capabilities that do not currently exist in the U.S., through the expertise of Less Common Metals; and

USA Rare Earth, Inc. | 2025 Annual Report (Form 10-K) | 56

Table of Contents

•process 2,000 MTPA of swarf, which is a result of our magnet production.

We believe that, if consummated on the terms described in our non-binding Letter of Intent with the U.S. Department of Commerce, the Expected U.S. Government Transaction would represent a transformative source of capital that accelerates the development of our integrated rare earth value chain and positioning as a domestic supplier of REE and neo magnets for both commercial and national security applications.

However, the transaction remains subject to the negotiation and execution of Definitive Agreements, the satisfaction of numerous conditions, and final government approvals, and there is no assurance it will be consummated on the anticipated terms or at all. Even if Definitive Agreements are reached, funding is expected to be disbursed in tranches tied to the achievement of specified milestones, and failure to meet any milestone could result in a withholding or clawback of funding. If the transaction is not completed, we would need to identify alternative sources of capital, which may not be available on acceptable terms, and our ability to execute our business plan could be materially impaired.

Development of the Stillwater Facility and Production of Neo Magnets

We believe that the successful commissioning and ramp-up of our Stillwater, Oklahoma magnet manufacturing facility represents one of our most significant near-term commercial opportunities. If developed as planned, the Stillwater Facility would position us as one of the few domestic producers of sintered NdFeB permanent magnet, enabling us to serve customers across the defense, electric vehicle, and industrial sectors and to generate meaningful product revenues for the first time. We believe domestic production of neo magnets addresses a critical gap in the U.S. supply chain and that demand from both commercial and government customers for domestically sourced magnets should be substantial and grow over time.

However, we have no history of commercial magnet manufacturing, and the Stillwater Facility remains under dev

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]