U.S. Military Becomes Largest Shareholder of Rare Earth Firm MP Materials in Landmark Deal

MP Materials (NYSE: MP), the only fully integrated rare earth producer in the U.S., announced a multi-billion-dollar agreement with the U.S. Department of Defense (DoD) aimed at ramping up rare earth magnet production. This move is part of a broader initiative to reduce reliance on China for critical materials used in weapons systems, electric vehicles, and electronic products.

The agreement also makes the DoD the largest shareholder of the Las Vegas-based company, representing one of the most significant U.S. investments in critical mineral industries to date.

Following the announcement, MP Materials’ stock surged nearly 50%, closing at $43.95 on Thursday, the highest since April 2022. The company’s year-to-date stock performance has nearly doubled, reflecting growing investor confidence in its strategic role in the domestic supply chain.

MP Materials: A Strategic Asset for U.S. Rare Earth Supply

MP Materials is America’s only company with a fully integrated rare earth supply chain, encompassing mining, refining, advanced processing, and magnet manufacturing. The company operates the only rare earth mine in the U.S., located at Mountain Pass, California. Historically, MP Materials exported mined rare earth ores to China for processing, with China-based Shenghe Resources as its biggest customer. However, the company ceased ore exports to China in April 2025 as part of its pivot toward building a fully domestic supply chain.

Key Elements of the Agreement

This landmark deal includes several transformative components aimed at enhancing MP Materials’ production capacity and reducing foreign dependency:

1. Price Assurance: The DoD has set a price floor of $110/kg for MP Materials’ key rare earth products, neodymium and praseodymium (NdPr), which are critical for magnet production. This price is nearly twice the current Chinese market price for these materials. By comparison, MP’s second-quarter average sale price was only $52/kg. The price floor guarantees revenue stability for MP Materials while boosting its competitiveness.
2. Equity and Ownership Changes: The DoD will purchase $400 million in preferred stock and associated warrants from MP Materials. If exercised, these ownership rights would give the DoD 15% equity in the company, surpassing the 8% stake owned by Shenghe Resources, a Chinese investor. Upon completion of the deal, the U.S. government will become MP Materials’ largest shareholder. The transaction is set to close on Friday, July 11, 2025.
3. Production Expansion: MP Materials plans to build a new magnet manufacturing facility—dubbed the “10X Facility”—which is expected to significantly boost annual magnet production capacity to 10,000 metric tons by 2028. To support this expansion, the DoD has committed to a 10-year supply agreement, guaranteeing the purchase of all magnets produced at this facility for both defense and commercial applications. Additionally, MP Materials secured $1 billion in financing commitments from JPMorgan Chase and Goldman Sachs for the development of the facility. To further enhance rare earth separation capabilities at its Mountain Pass site, MP will receive a $150 million loan from the DoD within 30 days to expand its heavy rare earth processing operations.

Rare Earths: A Strategic Battleground

Rare earth elements, a group of 17 metals, are indispensable for modern technology, with rare earth magnets playing a critical role in converting electrical energy into mechanical motion. However, the U.S. currently relies heavily on China, which dominates the global rare earth industry, controlling mining, processing, and magnet production.

The geopolitical race for rare earth independence has intensified in recent years. Under the Trump administration, the U.S. invoked emergency powers to advance domestic production of critical minerals to counter China’s near-monopoly in the field. On the other hand, China has introduced export restrictions on key rare earth materials, which caused a 75% drop in China’s magnet exports last month. This has disrupted global supply chains, forcing several automotive manufacturers to halt production.

Consulting firm Adamas Intelligence views this agreement as a game-changer for rare earth production outside of China. Ryan Castilloux, Managing Director of Adamas Intelligence, noted that the expansion of U.S. magnet production capacity is an essential step in decoupling global supply chains from China’s influence.

James Litinsky, MP Materials’ Founder, Chairman, and CEO, emphasized the significance of the partnership: This initiative marks decisive action by the U.S. government to accelerate supply chain independence. It meets national security needs while maintaining the market-driven operations of a public company.

Conclusion

The agreement between MP Materials and the DoD solidifies MP Materials’ role as a national strategic asset, paving the way for a robust and independent U.S. supply chain for rare earth magnets. By expanding capacity and guaranteeing stable pricing, the deal is set to reshape the rare earth industry globally, while ensuring long-term national security and economic sustainability for critical sectors such as defense, clean energy, and advanced technologies.

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