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NEW YORK: A US rare earth company announced Thursday an agreement with the Pentagon granting the government a stake in the venture in exchange for billions of dollars to finance additional manufacturing.
Las Vegas-based MP Materials described the arrangement as a “transformational public-private partnership” that includes a “multibillion-dollar package of investments” and long-term commitments from the Department of Defense .
It will allow MP to construct a second domestic magnet manufacturing facility, according to a company press release, and to expand production at MP’s Mount Pass, California facility — the only large-scale rare earth mining and processing operation in North America.
Under the arrangement, the Pentagon agreed to purchase $400 million of newly created MP preferred stock, convertible to common stock.
Ultimately, the agreement will result in the DoD holding 15 percent of MP’s common shares, making it the company’s largest shareholder, MP said in its press release.
It is rare for the Pentagon to take stakes in private companies. AFP asked the Pentagon for comment on the announcement but had yet to hear back.
Rare earths are critical building blocks in many US weapons systems and are also needed for smartphones, automobiles and other goods. The dearth of capacity in the United States — and the continued dominance of China — has emerged as a growing worry in Washington.
China controls close to 70 percent of global rare earth production, according to some estimates.
MP said the partnership with DoD would “catalyze domestic production, strengthen industrial resilience, and secure critical supply chains for high-growth industries and future dual use applications.”
The new magnet facility, whose location has yet to be chosen, is expected to begin operating in 2028, bringing MP’s total US rare earth magnet manufacturing capacity to an estimated 10,000 metric tons, the press release said.
The partnership between MP and the Pentagon includes a 10-year agreement establishing a price floor of $110 per kilogram for MP products and DoD assurance that 100 percent of the magnets made at the second factory will be purchased by the Pentagon and commercial customers.
Shares of MP finished the day 50.6 percent higher.