MP Materials reaches multi-billion dollar deal with the Pentagon

MP Materials (NYSE: MP) has reached a multi-billion dollar public-private partnership with the U.S. Department of Defense (DoD) to establish a domestic supply chain for rare earth magnets, reducing U.S. reliance on foreign sources.
This deal will make the DoD MP Materials' largest shareholder, following its acquisition of $400 million in preferred stock. The company said Thursday that the investment is part of a broader federal government investment plan and a long-term strategic commitment. Following the news, the Nevada-based company's stock price surged over 53% in pre-market trading in New York to $46 per share, recently trading at $47, giving the company a market capitalization of nearly $7.2 billion. In a statement, James Litinsky, founder and CEO of MP Materials, said: “This move marks a decisive action by the Trump administration to accelerate U.S. supply chain independence.” MP Materials is the only rare earth element producer in the U.S., crucial for smartphones, jet engines, electric vehicles, and defense systems. The company plans to build a second magnet manufacturing plant at an unnamed location. This plant, called the “10X Factory,” is expected to be operational by 2028, at which point the company's total magnet production capacity will increase to approximately 10,000 tons per year. As part of the expansion plan, the company also plans to upgrade its Mountain Pass mine in California, enhancing its heavy rare earth separation capabilities and further solidifying its position as a national strategic asset. The mine currently integrates mining, separation, and refining operations within a single integrated facility. This strategic agreement comes at a time of increasing urgency for the U.S. to build a mine-to-magnet supply chain. China's decision in April to restrict rare earth exports highlighted U.S. vulnerabilities and intensified calls in Washington for a more resilient industrial base.

Lawmakers say the partnership aims to accelerate domestic production, strengthen supply chain security, and support dual-use technologies for both defense and commercial markets. The agreement includes several key commitments. The DoD signed a 10-year off-take agreement that sets a price floor of $110 per kilogram for neodymium-praseodymium (NdPr) materials. Analysts at Benchmark Mineral Intelligence said: “This price floor not only guarantees stable revenue for MP but also sends a strong price signal to the entire industry.” Neha Mukherjee, BMI’s rare earths research manager, wrote: “Prices outside of China have surged three to five times since the export controls were implemented, and this move could help normalize differentiated pricing and potentially lead to the formation of a rare earth price index outside of China.” The agreement also guarantees that magnets produced by the new 10X factory will be 100% allocated to defense and commercial uses for ten years after commissioning. BMI experts point out that the defense and electric vehicle industries—both severely impacted by Chinese export controls—will benefit. The U.S. has the highest global demand for defense magnets, projected to reach 5,000 tons by 2028, and is third in electric vehicle magnet demand after China. By 2030, U.S. electric vehicle magnet demand is projected to reach 145,000 tons. “The congressman and DoD agreement is not a flash in the pan. It’s a template for industrial policy, a national security investment, and a clear signal: the West is finally taking rare earth resilience seriously,” Mukherjee said. To fund the construction of the 10X facility, MP has secured a $1 billion commitment from JPMorgan and Goldman Sachs, subject to customary closing conditions. In addition, the company expects to receive a $150 million loan from the DoD within 30 days to support the Mountain Pass expansion project. The DoD also committed to purchasing a series of newly issued convertible preferred shares, as well as warrants to subscribe for additional common shares at an initial price of $30.03 per share. The transaction is expected to close on July 11, 2025. Upon conversion and exercise, the DoD will own approximately 15% of MP Materials’ outstanding common stock.

The Adamas Intelligence research team believes that the MP Materials and Pentagon agreement is a positive development for the rare earth industry outside of China. They expect this to lead to the implementation of price floors for key rare earth elements and, supported by tariff regimes, maintain stability in the global market. While price increases may force some end-users to seek alternatives, Adamas notes that this shift could ultimately benefit mission-critical sectors such as robotics, aerospace, and defense. Amid growing concerns about global supply chain tightness, prioritizing these industries helps ensure the supply of critical materials.

MP Materials currently operates the world's second-largest rare earth mine at Mountain Pass, which began production in 2017. Refining began in 2023, and the company plans to begin supplying rare earth magnets to General Motors by the end of the year. The company also commissioned a new magnet plant in Texas called Independence to support its downstream operations.