HyProMag USA's Texas Hub: A Financial and Supply-Demand Analysis

The financial case for HyProMag USA's Texas hub hinges on a stark imbalance. The United States faces a critical vulnerability: China controls over 90 percent of the global magnet supply. This concentration isn't just a trade issue; it's a strategic choke point for everything from electric vehicles to defense systems. The recent imposition of export controls by Beijing underscored that risk, forcing the U.S. to seek alternatives. The answer is a multi-year build-out of domestic capacity, and HyProMag USA's hub-and-spoke model is positioned to fill a specific gap in that strategy.

The broader plan is for the U.S. to develop a network of regional recycling and manufacturing centers. HyProMag's proposed facility in Fort Worth is designed as one such node, using its patented HPMS technology to recycle end-of-life magnets. The goal is to create a sustainable, long term domestic supply of NdFeB magnets, reducing reliance on imports. This aligns with a government push to incentivize domestic producers, as seen in the recent $150 million loan to MP Materials. Yet, the path is long. The project's feasibility study is underway, with initial revenue targeted for the second half of 2026. The financial viability of this multi-year build-out depends entirely on executing against persistent global supply constraints.

The long-term demand outlook, however, provides the necessary rationale. The market for recovering critical materials from waste is projected to explode, exceeding US$66 billion per year by 2046. This growth is driven by surging demand for magnets and batteries, coupled with regulatory pressure to recycle. For HyProMag, this means the strategic imperative is clear: the U.S. needs a domestic source of rare earths, and the recycling market is the fastest-growing path to that goal. The Texas hub aims to be a key part of that solution, but its success will be measured not by a quick profit, but by its ability to scale and secure a place in a supply chain that is being reshaped by geopolitics and long-term demand.

Financial Metrics and Projected Returns

The financial projections for HyProMag USA's expanded network paint a picture of significant long-term value, but the immediate path is one of staged investment. The core project, the Texas Hub, is the foundation. Its initial feasibility study, based on a three-vessel setup, already showed promise with a post-tax Net Present Value of $409 million using current market prices. The expanded plan, however, dramatically scales that potential. The concept study for a three-hub platform-Texas, South Carolina, and Nevada-forecasts a post-tax NPV greater than $2 billion and a real IRR of 38.7% when applying forecast market prices. This leap underscores the financial rationale for the multi-year build-out: it's a bet on securing a dominant share of a market that is projected to grow into the hundreds of billions.

Ownership structure adds a layer of complexity to this financial picture. HyProMag USA itself is a 50:50 joint venture between CoTec and Maginito. Mkango Resources, the parent company of HyProMag Limited, holds a 50% stake in HyProMag USA, meaning its direct exposure is through this joint venture. This structure means Mkango's financial upside is tied to the success of the entire U.S. platform, not just the initial Texas facility. The company's role is to provide the patented HPMS technology and strategic direction, while CoTec and Maginito manage the U.S. operations and secure funding.

The timeline for generating that value is critical. The initial U.S. Project targets its first revenue in the second half of 2026. This is a hard milestone, following the completion of the feasibility study. The expanded plan, with pre-feasibility studies now underway for the South Carolina and Nevada hubs, assumes a slower ramp, with the three plants commissioning between 2027 and 2029. The financial metrics, therefore, represent a long-term horizon. The high IRR and NPV are compelling, but they are built on the assumption that the company can successfully navigate the next few years of permitting, securing feedstock, and executing the phased build-out. For Mkango, the exposure is substantial, but the returns are not immediate. The financial case hinges on the company's ability to deliver on the staged revenue targets and then scale the platform as planned.

Production Capacity and Execution Timeline

The tangible progress toward HyProMag USA's ambitious capacity goals is now visible on the ground. The company has moved beyond concept studies to physical deployment, with Inserma Hard Disk Drive ("HDD") recycling machines arriving at ILS facilities in South Carolina and Nevada. These machines are now on site and entering commissioning activities, marking a concrete step toward operational milestones for those two planned hubs. This delivery supports the broader rollout of the company's U.S. recycling platform and provides a clear bridge to subsequent operational phases.

The expansion plan itself is defined by a clear target: tripling magnet production capacity. The completed concept studies outline a strategy to increase total HyProMag USA magnet and alloy output from 1,552 metric tons NdFeB to 4,656 metric tons NdFeB per annum by 2029. This threefold growth is the foundation for the financial projections, which forecast a post-tax NPV exceeding $2 billion for the expanded platform. The plan is to achieve this through a hub-and-spoke model, with the initial Texas Hub serving as the central node.

The timeline for scaling operations is tightly coupled to the execution of this model. The feasibility study for the initial Texas Hub is based on a specific configuration: a hub-and-spoke model using three HPMS vessels and one magnet manufacturing hub. This study, which is now underway, will provide the engineering and cost basis for the first phase. The expanded concept studies for South Carolina and Nevada are already complete, paving the way for pre-feasibility work to begin. The company's stated goal is to have the three plants commissioning between 2027 and 2029, with initial revenue from the Texas Hub targeted for the second half of 2026. The arrival of equipment in the other states is a key early signal that this phased build-out is gaining momentum.

Catalysts, Risks, and Market Dynamics

The path to HyProMag USA's ambitious capacity targets is now defined by a series of concrete milestones and mounting external pressures. The company has already cleared a major hurdle: pre-feasibility studies for the South Carolina and Nevada hubs have commenced. The next critical watchpoint is the completion of these studies, which will determine the final site configurations, permitting needs, and capital requirements for the expansion. Success here is essential to maintain momentum toward tripling production capacity by 2029.

Simultaneously, the execution risk at the core project remains high. The initial Fort Worth hub is on a tight schedule, with site permitting targeted for completion by Q4 2025 and a joint decision on construction due in H1 2025. Any delay in this permitting phase or in the commissioning of the first HPMS vessels would directly threaten the goal of initial revenue in the second half of 2026. The company is also navigating a complex funding landscape, relying on shareholder loans from CoTec while seeking U.S. government grants and strategic partnerships for feedstock and off-take.

The external market dynamic is the most powerful catalyst, but also a source of volatility. China's recent expansion of its rare earth and permanent magnet export controls, including the implementation of a foreign direct product rule (FDPR), has fundamentally reshaped the competitive landscape. This move, which strengthens Beijing's leverage and undercuts U.S. industrial efforts, directly amplifies the strategic imperative for domestic recycling capacity like HyProMag's. It acts as a powerful tailwind, potentially accelerating demand for U.S.-sourced magnets and justifying the project's high IRR. Yet, it also introduces a layer of geopolitical uncertainty that could affect supply chains and pricing for the raw materials needed for the company's own operations.

The bottom line is that the project's success is now a race against time on multiple fronts. The company must execute its phased build-out flawlessly while navigating regulatory hurdles, all as the U.S. government and industry seek alternatives to a constrained and politicized global supply. The catalysts are clear-the policy push and the capacity gap-but the risks of delay or execution misstep are equally tangible. For now, the market is watching for the completion of the pre-feasibility studies and the smooth progression of the Texas Hub's permitting to see if the company can translate its promising financial projections into operational reality.