The Pentagon is slated to become the largest shareholder in rare-earth miner MP Materials. The Department of Defense has agreed to buy $400 million of MP’s stock and provide the Las Vegas-based miner with a $150 million loan, according to an announcement by the company on Thursday, July 10.
MP Materials currently owns the only rare-earth mine in the U.S., which is located in Mountain Pass, California. According to the company’s chief executive, Jim Litinsky, the company is working to substantially increase the U.S. supply of rare earth minerals and address a “single point of failure” in the nation’s defense industrial base.
Litinsky told investors on a call Thursday, “Recent events have underscored the urgency of this mission.”
Rare earths are fundamental to energy and technological needs
Rare earth minerals, otherwise known as “rare earths,” are needed to make industrial magnets in semiconductors, military aircraft such as drones, as well as defense equipment and commercial vehicles. China essentially runs a monopoly on the market currently, but the United States is seeking to change that, in part, through this investment. Industry analysts say that rare earths are the key to the future of energy globally.
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Electric vehicles take six times more minerals to make than the standard gas car, which can make them hundreds of pounds heavier on average.
Competing against and working with China
The Trump administration directed the Commerce Department to probe the potential national security problems that could pop up if key minerals, and the products they’re used in, are imported from foreign countries. President Donald Trump said the investigation could lead to additional tariffs against Beijing. China, in turn, retaliated by halting supplies of vital materials to U.S. automakers.
U.S. Treasury Secretary Scott Bessent announced a new agreement during the week of June 29 with Beijing that will ramp up the supply of rare earth magnets. However, the Biden and Trump administrations have aimed to boost the domestic supply chain of rare earths.
Despite competition, MP Materials is the most established and touts itself as the “national champion” in its efforts to create a completely incorporated supply chain. MP also received a $45 million investment from the Biden administration in 2022 and is set to begin producing magnets for General Motors soon.
On top of its shareholder investment in MP Materials, the Pentagon is extending a $150 million loan to assist the firm in developing its supply chain at Mountain Pass. In addition to the investment from the Department of Defense, MP Materials has also received a reported $1 billion in corporate financing.
Details of the deal
In return for the Pentagon’s investment, MP Materials has agreed to construct a second facility to produce rare earth magnets and the Department of Defense is committed to guarantee that everything is bought at the factory by a defense or commercial consumer for a decade after it is built.
Litinsky said that he realizes that the new partnership with the Pentagon is “ultimately on behalf of the taxpayers and our national security” and promised to make sure that the job is “done right.”
