US government will be a shareholder in mining company that bought Serra Verde

The United States government will become a shareholder in USA Rare Earth, an American company that announced the purchase of the Brazilian mining company Serra Verde, in one of the largest recent operations involving rare earths in the world.

The American government's entry into the company's capital is part of a billion-dollar package agreed between USA Rare Earth and the US Department of Commerce and announced this Wednesday (3). The agreement provides access to up to US$1.6 billion to build an integrated chain of rare earths, metals, alloys and magnets in the United States.

Under the terms announced by the company, USA Rare Earth will issue to the US Department of Commerce 16.1 million common shares and approximately 17.6 million warrants, instruments that give the right to purchase shares in the future.

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In practice, the US government will not only be the company's financier.

It will also have direct exposure to the company's performance, in a move that reinforces Washington's strategy of supporting companies considered central to reducing American dependence on chains dominated by China.

USA Rare Earth announced, in April, the purchase of Serra Verde for US$ 2.8 billion. The operation involves the Pela Ema mine, in Minaçu, Goiás, one of the few projects in commercial operation in the world outside of Asia with the production of heavy rare earths, a group of elements used in sectors such as defense, energy, electric vehicles, semiconductors and high-tech equipment.

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The transaction still depends on regulatory and shareholder approvals to be completed.

But, if confirmed, it will place a Brazilian asset considered strategic within a company that will have direct participation from the United States government.

The case comes amid the global race for critical minerals. Countries such as the United States, China, Australia, Canada and members of the European Union have expanded industrial policies, public financing and control instruments over supply chains considered sensitive.

Rare earths are a group of 17 chemical elements used in high-technology products. Among them are neodymium, praseodymium, dysprosium and terbium, essential for the production of high-performance permanent magnets.

These magnets are applied in wind turbines, electric vehicles, data centers, defense systems, medical equipment, satellites and semiconductors.

China still dominates a large part of the global rare earth chain, especially in the separation, processing and magnet production stages.

For this reason, the United States has sought to accelerate projects capable of creating a domestic "mine to magnet" chain, an expression used by the sector to describe the integration between mining, chemical separation, metallurgy, alloy production and magnet manufacturing.

In the statement, USA Rare Earth said the definitive agreements with the Department of Commerce provide access to up to $277 million in federal funding and up to $1.3 billion in loans secured under the CHIPS program, designed to strengthen the American semiconductor industry.

The inclusion of rare earths in the CHIPS package shows that the American government has started to treat critical minerals as part of the infrastructure necessary for the country's technological and industrial production.

In addition to Serra Verde, USA Rare Earth is developing the Round Top project in Texas, aimed at producing heavy rare earths and other critical minerals.

The company also intends to expand the manufacturing of neodymium-iron-boron magnets in the United States, with the goal of reaching 10 thousand tons per year.

For specialists in the mineral sector, the operation involving Serra Verde reinforces Brazil's strategic weight in the new geopolitics of critical minerals.

The country has relevant reserves of rare earths, niobium, lithium, graphite, nickel, copper and other minerals linked to the energy transition and the defense industry.

The Brazilian challenge, however, is still to move beyond mining.

Today, most national projects are in the initial research, licensing, metallurgical testing or financial structuring phase. The production of separated oxides, metals, alloys and magnets still depends on high investments, technology and long-term contracts with industrial buyers.

The entry of the American government into the capital of Serra Verde's controlling company should also expand the debate in Brazil about mineral sovereignty, attracting foreign investment and adding value in the national territory.

In Congress, a proposal is already being processed to create a national policy on critical and strategic minerals.

The text approved by the Chamber provides mechanisms to stimulate processing, mineral transformation, innovation and industrialization in the country, but a relevant part of the rules will still depend on regulation by the federal government. The text is now under analysis in the Senate.

Behind the scenes, members of the mineral sector assess that Brazil is experiencing a window of opportunity, but still runs the risk of occupying only the first stage of the global chain: that of supplier of raw materials for structured industrial hubs abroad.

The American movement highlights this contrast.

While Washington mobilizes public capital, financing, equity participation and industrial policy instruments to form a complete rare earths chain, Brazil is still discussing how to transform its geological potential into effective industrial capacity.

Serra Verde is considered one of the country's most advanced assets in this sector. The company produces rare earth concentrates from ionic clays.

The operation between USA Rare Earth and Serra Verde, therefore, goes beyond a private acquisition.

It directly connects a Brazilian mineral asset to the United States' industrial and national security strategy.

For Brazil, the case tends to increase pressure for a clearer policy for critical minerals, with a focus not only on attracting foreign capital, but also on ensuring that a larger part of the chain - processing, separation, technology and industry - is developed in the country.

Source: CNN