MP Materials Secures Multi-Billion Dollar Deal with U.S. Government

Las Vegas, Nevada — MP Materials announced a significant deal with the U.S. government on July 10, aimed at expanding the production of rare earth magnets. The agreement is part of ongoing efforts to reduce reliance on China, which has a stronghold on the supply of these critical materials.

The deal allows the U.S. Department of Defense (DoD) to become the largest shareholder of MP Materials, a company based in Las Vegas that operates the only rare earths mine in the United States. Following the news, MP’s shares surged nearly 50%.

Rare earths, a group of 17 metals essential for devices like electric vehicles and advanced weapons, have been the focus of U.S. efforts to bolster domestic production. The DoD will guarantee a price floor of $110 per kilogram for the two most commonly used rare earth elements, a significant increase compared to current Chinese market prices.

MP Materials reported receiving an average of $52 per kilogram for those rare earths in the second quarter of 2023. The investment includes a new factory that will help increase the company’s rare earth magnet output to 10,000 metric tons per year by 2028.

Ryan Castilloux, managing director of the consultancy Adamas Intelligence, noted the deal marks a critical shift for the global rare earth industry. He emphasized that the pricing guarantee addresses complaints about China’s market manipulation.

MP’s CEO, James Litinsky, expressed confidence in the initiative, affirming it meets a national security need while still pursuing a free market approach. In addition to the DoD’s investment, MP is committing $600 million of its own funds to expand its operations.

As China has imposed restrictions on the export of critical minerals, American companies have felt the pinch, leading to production halts in some sectors. The deal is anticipated to strengthen the U.S. supply chain and enhance production capabilities for rare earth magnets.

In a landmark move, the Department of Defense will acquire a 15% stake in MP Materials through a purchase of $400 million in preferred stock. The transaction is set to close on Friday.