MP Materials’ Stock Price Hits New High – Pentagon Becomes Largest Holder

MP Materials' stock price (NYSE: MP) has soared today, adding 46% at the latest look. The company, operator of the only active rare earth mine in the United States, is experiencing a seismic shift in its trajectory following a landmark agreement with the U.S. Department of Defense (DoD).

The DoD's $400 million investment in MP Materials' preferred stock, announced today, will make the Pentagon the company's largest shareholder and send ripples throughout the rare earth element (REE) market. MP's stock is now more than 170% above where it began the year.

The investment comes at a pivotal moment. The United States has long been heavily reliant on foreign nations, particularly China, for its supply of REEs.

In 2023, China accounted for roughly 70% of U.S. rare earth imports, a dependence that has become a major point of contention in trade disputes and a source of concern for national security officials. Rare earths are essential components in a wide range of military applications, from the magnets used in the F-35 fighter jet and drones to the critical systems in submarines.

The DoD's investment in MP Materials is a direct response to this vulnerability, aiming to secure a domestic supply chain and reduce reliance on geopolitical rivals.

The proceeds from the DoD's investment will be strategically deployed to expand MP Materials' processing capacity and magnet production capabilities at its Mountain Pass, California mine.

This expansion is crucial for creating a fully integrated domestic supply chain, from mining and processing to the manufacturing of finished magnets. The company plans to build a new magnet manufacturing facility, the 10X Facility, with operations expected to commence in 2028. This facility is projected to produce approximately 10,000 metric tons of rare earth magnets annually.

Further solidifying the agreement, the DoD has committed to a 10-year price floor of $110 per kilogram for neodymium-praseodymium (NdPr) products, providing MP Materials with a stable and predictable revenue stream. Moreover, a decade-long offtake agreement guarantees the purchase of 100% of the magnets produced at the 10X Facility by defense and commercial customers.

MP Materials has also secured significant additional financing, including a $1 billion commitment from JPMorgan Chase and Goldman Sachs to support the construction of the 10X Facility. The company anticipates receiving a $150 million loan from the DoD to further expand its heavy rare earth separation capabilities at the Mountain Pass site.

This multi-faceted approach, combining government investment, private financing, and long-term purchase agreements, underscores the strategic importance of MP Materials to the U.S. economy and national security.

The path to rare earth independence is not without its challenges. The Mountain Pass mine, while the only active rare earth mine in the U.S., has faced environmental concerns and operational hurdles in the past.

Scaling up production and processing capacity will require significant capital investment, technological innovation, and adherence to stringent environmental regulations. Furthermore, competing with established global players, particularly those in China, will necessitate continuous cost optimization and product development.