The Department of Defense (DoD) has agreed to buy $400 million worth of preferred stock from MP Materials, the only operational rare earth mine in the United States located just outside Mountain Pass, California. The investment will help MP Materials build a second magnet manufacturing facility, with construction beginning in 2028.
The investment would make the DoD the largest shareholder with around a 15% stake, eclipsing the previous leaders [James] Litinsky (8.27%) and BlackRock Fund Advisors (8.27%). Additionally, JPMorgan and Goldman Sachs will provide $1 billion in financing for the second facility.
As part of the deal, the DoD has ensured that “100% of the magnets made at the new facility, called 10x, are purchased by defense and commercial customers for 10 years after the plant is built,” according to NBC News.
Currently, the U.S. imports around 95% of Rare Earth Elements (REEs) it consumes, mainly from China. In April, China imposed restrictions on seven of the 17 REEs exported to the U.S. in response to President Trump’s reciprocal tariffs. Those restrictions eased up in July; however, the dependence on China for those materials is likely a motivation behind this investment.
Rare Earth Elements (REEs) are a group of 17 metallic elements that are used for advanced military technologies, as they possess unique magnetic, luminescent, and electrochemical properties. These are critical components in modern guidance systems, precision-guided munitions, radar, and satellite systems.
For example, the F-35 requires an estimated 900 lbs of REEs for its manufacturing, while a Virginia-class submarine needs more than 9,000 lbs. According to FairObserver, even with the mining operation of MP Materials, the U.S. is still dependent on China for processing the ore extracted in Mountain Pass.
According to a March 2024 release, the Pentagon’s Manufacturing Capability Expansion and Investment Prioritization (MCEIP) previously invested $45 million into MP Materials prior to this stock purchase.
Per a March 2024 DoD release:
Through the Office of the Assistant Secretary of Defense for Industrial Base Policy, the Manufacturing Capability Expansion and Investment Program directorate has embarked on a five-year rare earth investment strategy to build “mine-to-magnet” domestic capacity at all critical nodes of the rare earth supply chain. Those critical nodes include sourcing, separation, processing, metallization, alloying and magnet manufacturing.
The first of those critical nodes, the sourcing of rare earth elements, means mining rare earth elements out of the ground. Today in the U.S., there is only one rare earth mine currently active and selling to the commercial market.
Separation includes a series of processes that take out extractable rare earth elements from other elements and compounds in the mineral rock. Processing involves concentrating separated rare earth elements and then chemically treating them to produce high-purity rare earth oxides or rare earth salts. The metallization step transforms rare earth salts into rare earth metals. Depending on the application, those metals can be combined with various alloying elements to produce a variety of rare earth alloys.
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