The Department of Defense will soon become the largest shareholder in a rare earth minerals company after committing to purchase $400 million of the company’s preferred stock, according to a release on Thursday.
The multi-million dollar stock purchase by the Defense Department is convertible into shares of U.S.-based rare earth minerals company MP Material's common stock at $30.03 per share. The deal is expected to close on Friday, the release said, and will make the Pentagon a 15% shareholder of the company based on the company’s issued and outstanding shares as of July 9.
The company wrote that the partnership with the Pentagon intends to “dramatically accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency.”
The Defense Department previously has said it uses rare earth materials to produce magnets used in its defense weapons and that U.S. currently gets many of its rare earth minerals from China.
MP Materials shares rose more than 60% premarket after the announcement, CNBC reported.
The company said it plans to build its second domestic magnet manufacturing building called the “10X Facility,” with $1 billion in financing from JPMorgan $JPM Chase and Goldman Sachs $GS, to “serve both defense and commercial customers.” It estimated that once the facility is up-and-running and ready to start commissioning in 2028, the company will be able to manufacture 10,000 metric tons of rare earth magnets.
Once operational, the Pentagon agreed it and commercial customers will purchase 100% of the magnets produced there for a 10-year period. The agreement commits the Pentagon to a 10-year price floor of $110 per kilogram for MP Materials’ NdPr products, whether they're sold or not, a MP Materials noted that this compound is “essential” to making permanent magnets.
MP Materials said that it also plans to “add additional heavy rare earth separation capabilities at its Mountain Pass, California, facility” and that the Defense Department will loan the company $150 million for the project within the next 30 days.
“This initiative marks a decisive action by the Trump administration to accelerate American supply chain independence,” said MP Materials CEO James Litinsky in the release.