This partnership aims to enhance the US’s strategic independence in critical minerals, which are essential for both defense and commercial applications
In a significant move to bolster domestic rare earth production, MP Materials, a Las Vegas-based rare earth company, announced on Thursday a landmark agreement with the US Department of Defense (DoD). The deal grants the Pentagon a substantial stake in the company in exchange for billions of dollars in financing to expand manufacturing capabilities. This partnership aims to enhance the US’s strategic independence in critical minerals, which are essential for both defense and commercial applications.
MP Materials described the arrangement as a “transformational public-private partnership,” involving a “multibillion-dollar package of investments” and long-term commitments from the DoD. The agreement will enable MP to construct a second domestic magnet manufacturing facility and expand production at its Mount Pass, California site. Mount Pass is currently the only large-scale rare earth mining and processing operation in North America, making it a crucial asset for US supply chain security.
Under the terms of the agreement, the Pentagon will purchase $400 million of newly created MP preferred stock, which is convertible to common stock. This investment will ultimately result in the DoD holding 15 percent of MP’s common shares, making it the company’s largest shareholder. Such direct investment by the Pentagon in private companies is rare, highlighting the strategic importance of this deal.
Rare earths are essential components in many US weapons systems and are also critical for the production of smartphones, automobiles, and other goods. The US has long been concerned about its limited domestic capacity and China’s dominance in the rare earth market. China controls nearly 70 percent of global rare earth production, according to some estimates. This has led to growing concerns in Washington about supply chain vulnerabilities, particularly in the context of geopolitical tensions.
MP Materials emphasized that the partnership with the DoD would “catalyze domestic production, strengthen industrial resilience, and secure critical supply chains for high-growth industries and future dual-use applications.” The new magnet facility, whose location has yet to be determined, is expected to begin operations in 2028. Once operational, it will bring MP’s total US rare earth magnet manufacturing capacity to an estimated 10,000 metric tons.
The partnership also includes a 10-year agreement establishing a price floor of $110 per kilogram for MP products. The DoD has assured that 100 percent of the magnets produced at the second factory will be purchased by the Pentagon and commercial customers. This arrangement provides MP with a stable market for its products, reducing financial risks and ensuring a steady revenue stream.
Market reaction to the announcement was positive, with MP’s shares finishing the day 50.6 percent higher. Investors and industry analysts see this deal as a significant step towards reducing the US’s reliance on foreign rare earth supplies and enhancing its strategic independence.
The partnership between MP Materials and the DoD underscores the growing importance of securing critical minerals for national security and economic stability. As the US seeks to diversify its supply chains and reduce vulnerabilities, such public-private collaborations are likely to become more common. The deal also highlights the broader trend of governments around the world taking steps to ensure the availability of essential resources in an increasingly competitive global landscape.
While the Pentagon has not yet commented on the announcement, the strategic implications of this partnership are clear. By investing in MP Materials, the US government is not only securing a critical supply of rare earths but also fostering domestic industry and innovation. This move is expected to have far-reaching effects on both the defense and commercial sectors, positioning the US for greater resilience and competitiveness in the years to come.
The agreement between MP Materials and the Department of Defense represents a significant milestone in US efforts to secure critical rare earth supplies. It marks a new chapter in public-private collaboration, aiming to enhance domestic production, strengthen industrial resilience, and secure critical supply chains. As the US continues to navigate geopolitical challenges and supply chain vulnerabilities, such strategic partnerships will play a crucial role in shaping the future of critical mineral production and national security.
