MP Materials (NYSE:MP) said it has entered a public-private partnership with the U.S. Department of Defense to shore up critically-important American rare earth supplies.
Las Vegas based MP operates the only fully integrated rare earth mining and processing facility in the country. California's Mountain Pass mine is the second largest rare earth mine in the world, bought when MP was founded in 2017.
DoD agreed to buy $400 million in new preferred shares, convertible into common stock, and will receive a warrant allowing more purchases. MP will get $1 billion in financing for the costs of constructing and developing its second domestic magnet plant. The flagship Independence magnet facility in Fort Worth, Texas came online in January.
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China controls the world supply of heavy rare earths – dysprosium and terbium, and light rare earths – neodymium and praseodymium. These materials are used in military defense systems, consumer electronics and alternative energy technologies.
The U.S. relies almost 100% on foreign sources for processed rare earth materials that make high tech magnets. According to the Atlantic Council, China now controls over half of global rare earth mining production and 90% of separation and refining capacity. Experts view this as a security threat, drawing the attention of the White House.
"This initiative marks a decisive action by the Trump administration to accelerate American supply chain independence," said MP Materials CEO James Litinsky. "We are proud to enter into this transformational public-private partnership and are deeply grateful to President Trump, our partners at the Pentagon, and our employees, customers and stakeholders for their unwavering support and dedication."
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MP extracts and purifies rare earth to manufacture strong and highly efficient magnets for military and commercial use. It estimates the new "10X Facility" will begin taking orders in 2028, when it hopes to reach an estimated 10,000 metric tons of magnet manufacturing capacity. It will also expand separation operations at the Mountain Pass site, where materials are extracted, separated and refined in one secure location.
DoD has established a 10-year $110 per kilogram price floor for MP Materials magnetic products stockpiled or sold and will share profits, according to the press release. It has also guaranteed that 100% of magnets produced at the 10X Facility will be purchased by defense and commercial customers. DoD may now be MP's largest shareholder, representing about 15% of all shares prior to the deal.
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Mining investors jumped on the July 10 announcement, lifting MP stock more than 250%, as of Aug. 10. The company priced 11.8 million new shares at $55 on July 17, yielding about $650 million to fund the DoD deal. Sector rivals have also rallied, with Ramaco Resources (NASDAQ:METC) touching an all-time high after CEO Randall Atkins told CNBC about "back-channel discussions" with the DoD.
Apple (NASDAQ:AAPL) jumped to the front of the MP queue after committing $500 million on July 15. The tech icon will partner to expand MP's Texas facility, designing a series of neodymium magnet manufacturing lines specifically designed for Apple products. Apple has also agreed to a $200 million prepayment for the purchase of magnets used in iPhone and iPad production.
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