Rare-earth miner MP Materials soared during stock market trade on Thursday after announcing a multibillion dollar public-private partnership with the U.S. Department of Defense to "dramatically accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency."
The stock surged nearly 51% to 45.27 at the close for Thursday's stock market, after declining 3.7% to 30.03 on Wednesday, testing a 29.72 buy point. The move Thursday by MP Materials stock marks its highest level in around three years, dating back to early 2022.
MP owns and operates the only significant rare earths mine and processing facility in the U.S., just east of Los Angeles. MP is developing a rare earth magnet production facility in Fort Worth, Texas, which it expects to be producing finished neodymium-iron-boron magnets by the end of this year.
Under the agreement announced Thursday with the Defense Department, MP Materials will construct a second domestic magnet manufacturing facility "at a soon-to-be-chosen location to serve both defense and commercial customers."
DOD To Buy $400 Million Of MP Stock
As part of the deal, the DOD will buy $400 million of new preferred MP stock with warrants for more. The Pentagon is buying a newly created class of preferred shares convertible into MP Materials' common stock, in addition to a warrant that allows the U.S. to buy additional common stock. The total would come out to be around 15% of MP Materials stock, which would make it the top shareholder of MP Materials, according FactSet ownership statistics.
The announcement comes amid the ongoing trade war between President Donald Trump and China, with rare earth metals at the heart of negotiations. China is a major exporter of rare earth metals, which are crucial for U.S. manufacturing of autos, robotics and other high-tech gear. China restricted rare earth exports earlier this year, and has continued to limit some shipments even after Trump and China reached tentative accords.
Jefferies analyst Laurence Alexander on Monday downgraded MP Materials to a hold rating, from a previous buy rating. Alexander raised the price target to 33, up from 32, writing that China's shift to short-term export licenses for rare earth magnets "reduces the risk of near-term shortages."
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"The global policy response will likely focus on driving supply, while the demand outlook remains mixed for MP's key markets of electronics, windmills, electric vehicles and robots," Alexander wrote Monday.
MP Materials' Deal With Defense Department
The new facility is expected to be commissioned in 2028 and bring MP Materials' total U.S. rare earth magnet manufacturing capacity to an estimated 10,000 metric tons, according to the company. For 10 years after the construction of the new facility, the Defense Department has agreed to "ensure that 100%" of the magnets will be purchased by defense and commercial customers, according to the press release.
MP Materials reported Thursday it also expects to add additional heavy rare earth separation capabilities at its Mountain Pass, California, facility.
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The Defense Department has also committed to a 10-year price floor of $110 per kilogram for MP Materials' products, which will "reduce vulnerability to non-market forces and ensuring stable and predictable cash flow with shared upside."
"This initiative marks a decisive action by the Trump administration to accelerate American supply chain independence," MP Materials CEO James Litinsky said in the press release Thursday.
"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," Litinsky added.
MP Materials stock has a 62 Composite Rating out of a best-possible 99. The stock also has a 94 Relative Strength Rating and an EPS Rating of 2.
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