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Pentagon Invests $400 Million in MP Materials to Curb U.S. Dependence on China for Rare Earths

In a landmark move to bolster America’s defense and manufacturing supply chains, the U.S. Department of Defense will invest $400 million in MP Materials, acquiring preferred stock that will make it the company’s largest shareholder, the miner announced Thursday.

This unprecedented investment signals a major shift in the U.S. strategy to counter Chinese dominance in rare earths—essential materials used in everything from F-35 fighter jets and drones to electric vehicles and consumer electronics.

A Strategic Stake in a Critical Industry

MP Materials operates the only active rare earth mine in the United States, located at Mountain Pass, California, roughly 60 miles from Las Vegas. The Pentagon’s capital infusion will fund an expansion of MP’s processing operations and the construction of a second U.S.-based magnet manufacturing facility, marking a major milestone in America's efforts to restore its rare earth supply chain.

Shares of MP Materials surged by 50% following the announcement, closing at $45.23, with the company’s market cap jumping by $2.5 billion to $7.4 billion.

Rare earth elements, particularly neodymium-praseodymium (NdPr), are vital for permanent magnets used in advanced weapons systems and clean energy technologies. As of 2023, China accounted for over 70% of U.S. rare earth imports, according to the U.S. Geological Survey, raising alarm among defense officials and policy makers.

Terms of the Deal: A Public-Private Partnership

The Pentagon is purchasing a newly issued class of preferred shares, convertible into MP’s common stock. It is also acquiring a 10-year warrant at $30.03 per share, allowing it to expand its stake. If fully exercised, the U.S. government will hold about 15% of MP Materials—nearly double the stake of CEO James Litinsky and larger than that of BlackRock, one of the miner’s major institutional investors.

“This is not a nationalization,” said Litinsky in an interview on CNBC. “We’re still a public company, shareholder-driven, and this is a powerful partnership to accelerate supply chain independence.”

New Magnet Facility and Long-Term Supply Agreements

The centerpiece of the deal is MP Materials’ plan to build a second magnet manufacturing facility, referred to as the 10X plant, which will supply both defense and commercial markets.

• The location is yet to be disclosed.
• Operations are expected to begin in 2028.
• Once operational, the plant will have a capacity of 10,000 metric tons of magnets per year.

The Defense Department has committed to purchasing 100% of the magnets produced at the new facility for the first 10 years of operation.

Additionally, the government has agreed to guarantee a minimum price of $110/kg for NdPr oxide. If market prices fall below that threshold, the Pentagon will cover the difference. If prices rise above that level, the government will earn 30% of the upside—a structure MP calls a “win-win” for U.S. taxpayers.

Financing and Further Expansion

To support MP’s rapid expansion:

• JPMorgan and Goldman Sachs are providing $1 billion in financing for the new plant.
• The Pentagon will provide an additional $150 million loan within 30 days to enhance rare earth separation at Mountain Pass.

Litinsky framed the deal as a model for future public-private partnerships, citing the urgent need to compete with “Chinese mercantilism.”

“This is how we build resilient, domestic supply chains while preserving market-driven innovation,” he said.

National Security, Economic Opportunity

The U.S. move comes as global demand for rare earths continues to rise, driven by growth in defense technologies, electric vehicles, and clean energy infrastructure.

The Biden and Trump administrations have both raised concerns about China’s leverage in critical minerals and supported policies to increase U.S. mining and refining capacity.

Interior Secretary Doug Burgum said in April that the administration is exploring direct equity investments in strategic mineral companies, and this MP deal may serve as the prototype.

Final Outlook

With the Pentagon now its largest shareholder, MP Materials is positioned to become the backbone of America’s rare earth supply chain. The partnership reflects a broader geopolitical shift—one where industrial policy, national defense, and corporate strategy are deeply intertwined.

As tensions with China continue and global competition for raw materials intensifies, the U.S. is taking bold steps to ensure it won’t be left behind in the race for critical resources.