MP Materials Stock Skyrockets On Multi-Billion Dollar Department Of Defense Deal To Boost US’s Rare Earth Magnet Supply

Shares of MP Materials Corp. (MP) surged almost 41% in Thursday’s pre-market trading session after the company entered into a multi-billion-dollar deal with the U.S. Department of Defense.

In a filing with the U.S. Securities and Exchange Commission (SEC), MP Materials announced a public-private partnership with the Department of Defense to build out a new rare earth magnet facility in the U.S.

MP Materials’ shares have surged a whopping 93% year-to-date and 110% over the past 12 months. However, Stocktwits data shows the retail sentiment around MP Materials stock was in the ‘extremely bearish’ territory over the past week.

“With a multibillion-dollar package of investments and long-term commitments from DoD, MP Materials will construct the Company’s second domestic magnet manufacturing facility (the “10X Facility”) at a soon-to-be-chosen location to serve both defense and commercial customers,” the company said in its filing.

MP Materials expects its 10X Facility to be commissioned by 2028, taking the total U.S. rare earth magnet capacity to 10,000 metric tons.

Further, the company also expects to add additional heavy rare earth separation capabilities at its existing facility in Mountain Pass, California.

Detailing the terms of the deal, MP Materials said the Department of Defense has agreed for a 10-year period to a floor price of $110 per kilogram of neodymium-praseodymium (NdPr), which is a crucial component for high-performance magnets used in electric vehicles, wind turbines, and other high-performance technologies.

Further, the DOD will absorb 100% of the rare earth magnets manufactured at the 10X Facility for a period of 10 years following its commissioning.

Toward this, MP Materials has secured $1 billion in finance commitments from JPMorgan Chase and Goldman Sachs, as well as $150 million in financing from the DOD for the Mountain Pass facility.

In addition to this, the DOD will also subscribe to $400 million of MP Materials’ preferred stock convertible to common stock by July 11, with an option to increase its subscription at a later date.

As a result of this transaction, the DOD is on course to become the largest shareholder of MP Materials, with its purchase representing a 15% stake in the company.

The MP Materials and DOD deal comes at a time when the U.S. is staring at a shortage of critical rare earth magnets amid an ongoing tariff war with China – the Xi Jinping-led country controls 90% of the world’s total rare magnet supply, according to the New York Times.

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