WASHINGTON: MP Materials unveiled a multibillion-dollar deal with the US government on Thursday (July 10) to boost output of rare earths and help loosen a stranglehold by top producer China on the minerals vital for military applications, electric vehicles and wind turbines.
The US Department of Defense (DoD) will become the biggest shareholder in MP, the only integrated US producer of the 17 minerals, of which China controls 90 per cent of global processed output.
The DoD will also guarantee a floor price for key rare earths at nearly twice the current Chinese market price, which has languished at low levels and has long deterred investment.
The deal sent MP’s shares rocketing nearly 50 per cent.
“This is a game changer for the ex-China industry and a much-needed surge in magnet production capacity,” said Ryan Castilloux, managing director of consultancy Adamas Intelligence.
NEW FACTORY FOR RARE EARTHS
MP will build a new factory for rare earth permanent magnets, lifting the company’s output to 10,000 metric tons a year, with the new factory launching in 2028.
The super-strong magnets power EV and wind turbine motors, as well as drones and fighter jets for the military.
Companies have been scrambling to source rare earths after China imposed restrictions in April, leading to a 75 per cent drop in rare earth magnet exports from the country last month and causing some auto companies to suspend production.
TRUMP INVOKED EMERGENCY US PRODUCTION
US President Donald Trump in March invoked emergency powers to boost domestic production of critical minerals as part of a broad effort to offset China’s near-total control of the sector.
China’s iron grip on the sector extended to MP, with China’s Shenghe Resources one of MP’s biggest shareholders, with a stake of about 8 per cent, and with MP having sent most of its ore to China for processing.
But the DoD will vault above Shenghe to take an effective stake of 15 per cent through buying US$400 million worth of preferred stock, plus receiving warrants.
MP will also stop sending any material to China for processing.
“We’re getting an important national security need met, but we’re maintaining our free market public company approach,” MP’s CEO James Litinsky told an investor call.
DoD PAYING FAR MORE THAN CHINA FOR MINERALS
MP Materials said it would construct its second magnet manufacturing facility in the US, the ’10X Facility’, at a still-to-be-decided location to serve defence and commercial customers.
The DoD has agreed to guarantee a minimum price of US$110 per kilogram over 10 years for neodymium-praseodymium (NdPr), the two key rare earths needed for magnets, paying MP for the difference to the global market price set by China, which is currently around US$60.
MP Materials expects to add additional heavy rare earth separation capabilities at its California-based Mountain Pass facility, for which it will receive a US$150 million loan from the Defense Department.
