MP Materials is making headlines after the U.S. Department of Defense announced a $400 million investment, becoming the company’s largest shareholder. Shares of MP Materials soared nearly 50% on the news, closing at $45.23, and propelling its market cap to $7.4 billion.
But what exactly is MP Materials — and why is the Pentagon investing so heavily?
MP Materials: The U.S.’ rare earth lifeline
MP Materials owns and operates Mountain Pass. It’s the only active rare earth mine in the United States, located in California’s Mojave Desert. Rare earth elements are critical to modern defense and tech systems, used in:
- Fighter jets like the F-35
- Submarines and drones
- Smartphones, EVs, and wind turbines
- Permanent magnets powering electric motors and missile systems
Why is the Pentagon investing in MP Materials?
The U.S. has historically relied on imports from China, which supplied about 70% of America’s rare earths in 2023, according to the U.S. Geological Survey. But escalating trade tensions and supply chain disruptions have prompted urgent moves to onshore critical mineral supply chains.
The Pentagon’s $400 million stake, via newly issued preferred shares and a long-term warrant, positions it to hold 15% ownership — more than CEO James Litinsky or BlackRock.
“This is not a nationalization,” Litinsky told CNBC. “We remain a public company — but now we have a strategic, economically driven government partner.”
Building a U.S.-based rare earths supply chain
MP’s deal with the Pentagon will fast-track multiple expansion projects:
- New Magnet Factory: MP will build a second magnet manufacturing facility, called the “10X Facility,” to be operational by 2028. The DoD has agreed to buy 100% of its output for 10 years.
- Output Boost: The new facility will expand MP’s magnet production capacity to 10,000 metric tons annually — enough to “meaningfully support U.S. defense and commercial needs.”
- Loan Support: A $150 million loan from the Pentagon will help upgrade the company’s separation capabilities at Mountain Pass.
- Price Guarantees: The Pentagon will guarantee a $110/kg price for MP’s NdPr oxide (a key magnet material), nearly double the current Chinese market rate.
This price floor aims to reduce volatility and prevent market manipulation — issues that previously drove rare earth producers in the U.S. into bankruptcy.
Strategic timing amid global trade tensions
The deal follows years of concern over China’s dominance in rare earth production. In March, China temporarily halted rare earth exports during a trade dispute, highlighting just how vulnerable U.S. supply chains are.
“This is a game changer for the ex-China industry,” said Adamas Intelligence’s Ryan Castilloux.
“It’s a much-needed surge in magnet production capacity.”
The move is part of a broader strategy announced by Interior Secretary Doug Burgum, who declared, “It’s not just drill, baby, drill. It’s mine, baby, mine.”
A public-private model for national security?
The Pentagon’s investment — under the Defense Production Act — is seen as a model for future public-private deals to accelerate critical mineral independence.
“The taxpayers are going to make a lot of money,” said Litinsky, noting that the DoD will receive 30% of the upside above $110/kg once the 10X Facility goes online.
In the meantime, JPMorgan and Goldman Sachs are backing a $1 billion loan to finance the new plant, signaling Wall Street’s confidence in MP’s future.
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