MP Materials will build a new rare earth magnet plant in a multibillion-dollar deal with the U.S. Department of Defense as the U.S. looks to cut foreign dependency for the critical input, sending the company’s shares up 41 per cent in premarket trading.
The DoD will buy US$400 million worth of preferred stock and will also receive a warrant, the company said, positioning the department to become its largest shareholder.
Restrictions imposed in April by China, which dominates the global production of rare earths and holds a virtual monopoly on refining and processing, had caused a 75 per cent drop in rare earth magnet exports from the country last month.
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The U.S. later signed a deal with China to speed up rare earth approvals.
U.S. President Donald Trump in March invoked emergency powers to boost domestic production of critical minerals used widely across the economy as part of a broad effort to offset China’s near-total control of the sector.
MP Materials said it would construct its second magnet manufacturing facility in the U.S., the ’10X Facility’, at a still-to-be-decided location to serve defence and commercial customers.
The facility is expected to be commissioned in 2028, the company said.
The DoD has agreed to a 10-year NdPr price floor commitment of US$110 per kilogram for the stockpiled or sold product. NdPr is a metal used to make magnets for electric motors and wind turbines.
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Additionally, all magnets produced will be purchased by defence and commercial customers under a 10-year offtake agreement.
MP Materials expects to add additional heavy rare earth separation capabilities at its California-based Mountain Pass facility for which it will receive a US$150 million loan from the defence department.
Rare earths are a group of 17 metals used to make magnets that turn power into motion for electric vehicles, in cell phones, and other electronics.
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Reporting by Katha Kalia in Bengaluru; Editing by Sriraj Kalluvila