Pentagon to become largest shareholder in rare earth miner MP Materials; shares surge 50%

The Defense Department volition go the largest shareholder successful uncommon world miner MP Materials aft agreeing to bargain $400 cardinal of its preferred stock, the institution said Thursday.

MP Materials owns the lone operational uncommon world excavation successful the U.S. astatine Mountain Pass, California, astir 60 miles extracurricular Las Vegas. Proceeds from the Pentagon concern volition beryllium utilized to grow MP's uncommon earths processing capableness and magnet production, the institution said.

Shares of MP Materials jumped much than 50% connected the news.

Rare earths are utilized successful magnets that are cardinal components successful a scope of subject weapons systems including the F-35 warplane, drones and submarines, according to the Defense Department.

The U.S. was astir wholly babelike connected overseas countries for uncommon earths successful 2023 with China representing astir 70% of imports, according to the U.S. Geological Survey. Rare earths person been a cardinal constituent of contention successful caller commercialized disputes betwixt the U.S. and China.

Interior Secretary Doug Burgum said successful April that the Trump medication was considering making direct equity investments successful captious mineral companies to interruption U.S. dependence connected China.

MP Materials CEO James Litinsky described the Pentagon concern arsenic a public-private concern that volition velocity the buildout of an end-to-end uncommon world magnet proviso concatenation successful the U.S.

"This inaugural marks a decisive enactment by the Trump medication to accelerate American proviso concatenation independence," Litinsky said successful a statement.

The Pentagon is buying a recently created people of preferred shares convertible into MP Materials' communal stock, successful summation to a warrant that allows the U.S. to bargain further communal stock. The Defense Department's concern converts astatine a fixed terms of $30.03 per share. It does not person a currency dividend.

The convertible shares and the workout of the communal banal warrant would adjacent astir a 15% involvement successful MP Materials arsenic of July 9, astir doubly the 8.61% held by Litinsky and the 8.27% held by BlackRock Fund Advisors, according to FactSet data.

MP Materials volition physique a 2nd magnet manufacturing installation successful the U.S. to service defence and commercialized customers with enactment from the Pentagon. The facility, whose determination wasn't disclosed, is expected to commencement commissioning successful 2028 and volition bring MP Materials uncommon world magnet manufacturing capableness to 10,000 metric tons.

The Defense Department is guaranteeing that 100% of the magnets made astatine the caller facility, called 10X, are purchased by defence and commercialized customers for 10 years aft the works is built.

The Pentagon volition gaurantee a terms level for 10 years of $110 per kilogram for NdPr products that are stockpiled oregon sold by MP Materials. NdPr is simply a uncommon world compound utilized to marque imperishable magnets. The U.S. volition wage MP Materials the quality betwixt $110 per kilogram and the marketplace price.

JPMorgan and Goldman Sachs are providing $1 cardinal to assistance concern the manufacturing facility. MP Materials besides expects to person a $150 cardinal indebtedness from the Pentagon to grow its uncommon world separation capabilities astatine Mountain Pass.