Inflection Point Acquisition Corp., USA Rare Earth enter combination agreement

USA Rare Earth and Inflection Point Acquisition Corp. II have entered into a definitive business combination agreement, which will result in USARE becoming a publicly traded company. USARE is developing a vertically integrated US REE magnet supply chain, with an early-mover advantage to become a significant ex-China producer. Founded in 2019, the Company has permanent magnet production equipment on site at its Stillwater, Oklahoma location. Phase 1 of the magnet facility is expected to be operational at the end of 2025 and will have a production capacity of up to 1,200 tpa, initially supplied by third party feedstock. The Company has plans to expand production capacity by an additional three phases for total production capacity of approximately 4,800 tpa by 2028. USARE intends to supply and scale the future of the Company’s magnet production from its control of the mining rights to the Round Top Mountain deposit in West Texas through its subsidiary. Round Top is an above-ground mineral deposit containing at least 15 of the 17 rare earth elements, plus lithium and other industrial minerals. The Company has successfully piloted proprietary rare earth separation technology, and, once mining at Round Top begins, plans to deploy that technology as part of a closed-loop process for the separation of rare earth minerals. With an early mover advantage and diversified mix of target customers, USARE has a unique opportunity to become a leading domestic supplier of REE magnets and heavy REEs required for electric vehicles, green energy, and defense industries, as well as a strategic national asset for critical US industries to advance domestic growth and supply sustainability. The Proposed Business Combination implies a pro forma combined enterprise value of $870 million, excluding additional earnout consideration. This assumes an $800 million pre-money valuation of USARE, 100% rollover of USARE equity and excludes any amounts in the IPXX trust account. Existing USARE investors and investors affiliated with IPXX have agreed to a prefunded PIPE investment of ~$25 million upon the signing of the Business Combination Agreement, and we are seeking to upsize this PIPE with additional funding in connection to closing, with $9 million already committed. USARE expects to use the net proceeds from the Proposed Business Combination for general corporate purposes, including progressing the development of its Stillwater magnet facility. Under the terms of the Business Combination Agreement, USARE’s existing equityholders will convert 100% of their equity ownership stakes into the combined company and are expected to own approximately 84% of the post-combination company upon consummation of the Proposed Business Combination, excluding any IPXX investors who do not choose to redeem their shares. The Proposed Business Combination is expected to be completed in early 2025, subject to customary closing conditions, including regulatory and stock approvals. The combined public company is expected to be named “USA Rare Earth, Inc.” and to list its common stock and warrants to purchase common stock on Nasdaq, subject to satisfaction of Nasdaq’s listing requirements. The Proposed Business Combination has been unanimously approved by the managers of USARE and the board of directors of IPXX.