The Ministry of Defense becomes the largest shareholder in rare Earth Miner MP materials After the company had agreed to buy 400 million US dollars of its preferred stocks, the company announced on Thursday.
MP Materials has the only operational mine of rare earth in the USA on Mountain Pass, California, about 60 miles outside of Las Vegas. The proceeds from the Pentagon investment are used to expand the processing capacity and magnetic production of the MP of the rare earth, the company said.
The shares of MP materials rose by about 50% and close at $ 45.23. The market capitalization rose to $ 7.4 billion, which was an increase of around 2.5 billion US dollars compared to the previous trading session.
Rare earths are used in magnets, which according to the Ministry of Defense are key components in a number of military weapon systems including the F-35 fighter aircraft, drones and submarines.
The United States was almost exclusively dependent on rare earths abroad in 2023, with China, according to the US Geological Survey, about 70% of imports. Rare earths were a central point of dispute in the recent trade disputes between the United States and China.
In the Interior Minister Doug Burgum said in April that the Trump government is considering making direct equity investments in critical mineral companies in order to break China's US dependency.
James Linsky, CEO of MPs
“I want to be very clear, this is not a nationalization,” Linsky told CNBCs “Squawk on the Street” on Thursday. “We remain a flourishing public company. We now have a great new partner in our economically largest shareholder DOD, but we still control our company. We control our fate. We drove with shareholder.”
US miners are “Chinese mercantilism,” said Linsky before a unique threat. The Pentagon investment in MP could serve as a model for similar shops with other US companies, said the CEO.
“It is a new way to accelerate free markets, to bring the supply chain ashore that we want and ensure that mercantilism will not harm our ability,” said Linsky.
Public-private partnership
The Pentagon buys a newly created class of preferred shares that can be converted into the regular shares of MP Materials, in addition to an arrest warrant that can be converted to $ 30.03 per share for 10 years and enables the USA to buy additional regular shares.
The exercise of the convertible shares and the arrest warrant would keep the Pentagon about 15% of MP materials on the 9th July, almost twice as high as 8.61% of the 8.27% of Blackrock Fund Advisors held by LiTinsky.
MP materials will build its second Magnet manufacturing facility in the USA to serve defense and commercial customers with the support of the Pentagon. The facility, the location of which has not been disclosed, is expected to be commissioned in 2028 and becomes MP materials for the production of MP materials less often at 10,000 tons per year.
This production capacity is sufficient to “support the US defense and the commercial needs sensibly,” Linsky told investors when calling on Thursday morning.
The Pentagon has agreed to buy 100% of the magnets mentioned in the new facility 10x for 10 years after the construction of the work to support defense needs and the commercial market. JPMorgan and Goldman Sachs offer 1 billion US dollars to finance the production facility.
The Pentagon also guarantees 10 years a minimum price of $ 110 per kilogram for neodymm-paseodymoxide, or NDPR, which is stored or sold by MP materials. NDPR is a rare earth connection used to produce permanent magnets.
If the market price is less than $ 110 per kilogram, the USA MP materials pay the difference in a quarterly cash payment, said Linsky. The Pentagon will in turn receive 30% of the upward trend of $ 110 per kilogram as soon as the second magnetic system of MP materials is in operation, said the CEO.
The Ministry of Defense has negotiated a very difficult deal, said Linsky. “The taxpayers will make a lot of money,” said the CEO.
MP Materials also expects to receive a loan of 150 million US dollars from the Pentagon in 30 days in order to expand its skills to separate rare earths on Mountain Pass.