Quick Read
- The U.S. Department of Defense invested $400 million in MP Materials, making it the company’s largest shareholder.
- MP Materials’ stock price surged by 50%, closing at $45.23, after the announcement.
- The deal includes a new magnet manufacturing facility, expected to be operational by 2028.
- The Pentagon’s guaranteed price floor for rare earth materials aims to stabilize the U.S. supply chain.
- This investment is part of a broader U.S. strategy to reduce reliance on Chinese rare earth imports.
The rare earth sector, critical to modern technology and defense systems, witnessed a seismic shift on July 11, 2025, when the U.S. Department of Defense (DoD) announced a $400 million investment in MP Materials. This move, aimed at bolstering domestic production of rare earth magnets, has positioned the Pentagon as the largest shareholder in the Las Vegas-based company. Shares of MP Materials surged by over 50%, closing at $45.23, and elevating its market capitalization to $7.4 billion, as reported by Fingerlakes1.com.
Why Rare Earths Matter
Rare earth elements are indispensable in the production of advanced technologies, including smartphones, electric vehicles, wind turbines, and defense equipment such as fighter jets and submarines. However, the U.S. has long relied on imports, with nearly 70% of its rare earth supply coming from China as of 2023, according to the U.S. Geological Survey. This dependency has made the supply chain vulnerable, particularly amid escalating trade tensions with China.
China’s dominance in the sector—accounting for 90% of rare earth magnet production—has often been leveraged as a geopolitical tool. For instance, in March 2025, China temporarily halted rare earth exports during trade negotiations, exposing the fragility of global supply chains. The Pentagon’s investment in MP Materials is a strategic move to mitigate these risks and establish a robust domestic supply chain.
The Pentagon-MP Materials Deal
The DoD’s $400 million stake in MP Materials includes the purchase of preferred shares and a long-term warrant, granting it approximately 15% ownership. This makes the Pentagon the largest shareholder, surpassing CEO James Litinsky and BlackRock. The deal also involves a $150 million loan to upgrade MP’s rare earth separation capabilities at its Mountain Pass mine in California.
A cornerstone of this partnership is the construction of a second magnet manufacturing facility, dubbed the “10X Facility,” slated to be operational by 2028. This facility will increase MP Materials’ magnet production capacity to 10,000 metric tons annually, meeting both defense and commercial needs. The DoD has committed to purchasing 100% of the output for 10 years at a guaranteed price of $110 per kilogram—nearly double the current market rate in China. This price floor aims to stabilize the market and prevent the volatility that has previously led to bankruptcies in the U.S. rare earth sector.
Global Implications and Industry Reactions
The Pentagon’s investment has sent ripples across the global rare earth industry. Shares of Australian rare earth producers, such as Lynas Rare Earths and Iluka Resources, surged in response to the news, as reported by News.Az. Analysts view the deal as a signal of the U.S.’ strong push for rare earth independence, potentially benefiting alternative suppliers outside China.
The agreement is also seen as a model for public-private partnerships aimed at enhancing national security. “This is not a nationalization,” emphasized MP Materials CEO James Litinsky in an interview with CNBC. “It’s a strategic, economically driven government partnership.” The deal aligns with broader U.S. strategies to onshore critical mineral supply chains, as articulated by Interior Secretary Doug Burgum’s call to “mine, baby, mine.”
Future Outlook
With Wall Street backing, including a $1 billion loan from JPMorgan and Goldman Sachs, MP Materials is poised for significant growth. However, challenges remain, including market volatility and the need to diversify revenue streams beyond its largest customer, China’s Shenghe Resources, which accounted for 80% of its revenue last year.
Nonetheless, the Pentagon’s investment marks a transformative moment for the U.S. rare earth industry, reducing reliance on imports and strengthening national security.
As global trade dynamics evolve, the MP Materials-Pentagon partnership underscores the critical importance of securing supply chains for strategic resources.