Pentagon becomes largest shareholder in rare earth mining company MP Materials

The US Department of Defense (Pentagon) has established a public-private partnership with rare earth mining company MP Materials, becoming its largest shareholder and investing billions of dollars in production, it was announced Thursday.

This "transformational agreement (...) will dramatically accelerate the development of an end-to-end magnetic rare earth supply chain in the United States and reduce dependence on foreign sources," MP Materials explained in a press release.

The company plans to begin construction on a second magnet manufacturing facility as soon as a site is identified, thanks to a "billion-dollar investment package" and a "long-term commitment" from the Pentagon.

Production, which is expected to begin in 2028, aims to serve both defense and private sector customers.

This will give it a total production capacity of 10,000 tonnes per year, combined with its existing infrastructure located in Mountain Pass (California), considered the second largest rare earth mining site in the world.

Rare earths --- seventeen raw materials discovered in the late 18th century in Sweden, each with different properties --- are strategic for their application in energy transition and electronic technologies.

The global production chain is currently dominated by China.

The agreement provides for the Pentagon to acquire the equivalent of $400 million in new convertible preferred shares, as well as the right to purchase common shares at a price of $30.03 per share.

Once the transaction is completed, the Pentagon will hold a 15% stake in MP Materials, becoming its largest shareholder.

The government department also committed to paying a minimum price for ten years for the production of an alloy (NdPr) used mainly in engines and generators --- to "reduce the risks linked to external speculation in the market" and "guarantee a stable cash flow" for the company.

This will also ensure that all magnets produced by the second factory, called 10X, are purchased within ten years of its completion.

President Donald Trump's administration has expressed concern about the supply of rare earths, placing them at the center of an agreement with Ukraine signed in February and current trade negotiations with China.

Trump has also expressed his intention to take control of Greenland, a territory under Danish administration that contains 36.1 million tons of rare earths, according to the Geological Survey of Denmark and Greenland (GEUS).