By Katha Kalia, Eric Onstad and Ernest Scheyder
(Reuters) -MP Materials unveiled a multibillion-dollar deal with the U.S. government on Thursday to boost output of rare earth magnets and help loosen China’s grip on the materials used to build weapons, electric vehicles and many electronics.
Under the deal, which sent MP’s shares up nearly 50%, the U.S. Department of Defense (DoD) will become the largest shareholder in Las Vegas-based MP, making it Washington’s most high-profile investment to date in the critical minerals sector.
Rare earths are a group of 17 metals used to make magnets that turn power into motion. China halted exports in March as part of a trade spat with U.S. President Donald Trump that showed some signs of easing late last month, even as the broader tensions underscored the need for greater U.S. output.
MP operates the only U.S. rare earths mine and is working to boost domestic processing and magnet production.
The DoD will guarantee a floor price of $110 per kilogram for the two most-popular rare earths, a price nearly twice the current Chinese market level, which has languished at low levels and has long deterred investment. MP received an average of $52 per kilogram for those same rare earths in the second quarter.
MP will also build a new factory for rare earth magnets, lifting the company’s output to 10,000 metric tons a year, with the new factory launching in 2028.
“This is a game changer for the ex-China industry and a much-needed surge in magnet production capacity,” said Ryan Castilloux, managing director of consultancy Adamas Intelligence.
The price floor especially is one that had long been sought by U.S. critical minerals companies who have complained about China’s market manipulations. Past owners of MP’s California mine, for example, went bankrupt in part due to Chinese competition.
In a Thursday regulatory filing, MP said that the DoD was funding the investment in part through a Cold War-era piece of legislation known as the Defense Production Act, and that it could not guarantee the U.S. Congress would continue to fund the agreement in perpetuity.
MP is investing $600 million of its own funds into the expansion projects.
CHINESE DOMINANCE
Companies have been scrambling to source rare earths after China imposed restrictions, leading to a 75% drop in rare earth magnet exports from the country last month and causing some auto companies to suspend production.
Trump in March invoked emergency powers to boost domestic production of critical minerals as part of a broad effort to offset China’s near-total control of the sector.
