Investments from government and industry propel MP Materials

It would be difficult to find a company that has ever had a better week than the one MP Materials experienced in July. On July 10, the company announced that it had agreed to partner with the U.S. Department of Defense (DoD) in a multi-year public private partnership that would make the DoD the largest shareholder of the rare earth mining company. Among the highlights, the multibillion-dollar package will accelerate the build-out of the company’s second domestic magnet manufacturing facility, the “10X Facility” and set a price floor for its output from the Mountain Pass Mine in California. About a week later, MP Materials and Apple announced a definitive long-term agreement. Apple will invest $500 million for MP Materials to supply the company with rare earth magnets manufactured in the United States from 100 percent recycled materials.. Under the agreement, MP Materials will supply Apple with magnets produced at its Fort Worth, TX, facility — known as Independence — using recycled rare earth feedstock processed at MP’s Mountain Pass Mine. The feedstock will be sourced from post-industrial and end-of-life magnets, marking a major milestone in both companies’ long-standing efforts to create sustainable, domestic supply chains. Reaction to the developments has varied, especially in regard to the deal with the DoD. Investors gave it a mark of approval and sent the company’s stock price soaring. Some people view the DoD investments as a long-overdue response to the market manipulation of rare earths by China and as a neccessary step toward onshoring the domestic rare earth supply chain. Rod Eggert, research professor and deputy director of the Critical Materials Innovation Hub at the Colorado School of Mines told me that while it was a newsworthy week for MP Materials, we should not leap immediately to broad conclusions. He did say that the agreement with MP Materials and DoD could be seen as “the next step in a more emphatic industrial policy by the U.S. government to prioritize particular sectors of the economy not just through research and development and workforce development but through direct investment.” As most readers are aware, China has dominated the rare earth sector for decades. Eggert said the United States has gradually become more agreeable to government support of mineral and material production. Previously, the support was in the form of research and development and workforce development funding, as well as through support of the World Trade Organization to help free up international trade. This development between MP Materials and the DoD goes beyond that. “This initiative marks a decisive action by the Trump administration to accelerate American supply-chain independence,” James Litinsky, founder, chairman and chief executive officer of MP Materials said in a statement. It seems logical that the DoD would partner with the only fully integrated rare earth producer in the United States. But the scale of the involvement has caused some concern in the mining sector. The Financial Times reported that some industry leaders and former government officials have expressed fear that the deal gives an unfair advantage to MP Materials. In an interview with CNBC’s “Squawk on the Street,” Litinsky addressed some of the concerns, saying, “This is not a nationalization. We remain a thriving public company and we now have a great new partner with our economically largest shareholder in DoD. We remain in charge of our company and we remain shareholder driven, and DoD wants that.” Government involvement and support of the domestic mining industry is not new. The United States’ dangerous reliance on foreign, and sometimes adversarial nations has spurred significant investment in the mining industry for more than a decade. But what is unique in this deal is that the DoD entered into a 10-year agreement establishing a price floor commitment. The DoD will guarantee a floor price of $110/kg for MP Materials’ neodymium-praseodymium (NdPr) products stockpiled or sold, a price nearly twice the current Chinese market level.The DoD has also agreed to ensure that 100 percent of the magnets produced at the future 10X Facility will be purchased by defense and commercial customers with shared upside. “When it comes to the magnets we have to think about these supply chains being vertically integrated,” Litinsky told CNBC. “We could have all the REEs (rare earth elements) and have them flowing, but if we can’t make a magnet economically it’s still going to China. The recognition is that if we are going to accelerate investment downstream with magnets, we also need to be sure there is a customer there who can provide fair economics.”

Investments from government and industry propel MP Materials

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