MP Materials experienced a jump of about 50% due to a significant deal with the U.S. Department of Defense (DoD), catapulting the stock to its highest level since 2022. This deal is a milestone for the company and the rare earth market in the U.S.
Key Details of the Deal
- The U.S. Department of Defense will become the largest shareholder of MP Materials, acquiring preferred shares worth $400 million at a price of $1,000 per share, with a PIK (Payment-in-Kind) dividend of 7%. There is an option to issue additional preferred shares worth up to $350 million.
- Additionally, MP Materials will receive a secured credit facility of at least $1 billion, provided by JPMorgan and Goldman Sachs. Of this, $650 million is earmarked for a new production facility (“10X Facility”).
- A long-term purchase agreement lasting ten years secures sales guarantees for neodymium-iron-boron (NdFeB) permanent magnets at a minimum price that is double the current Chinese market price (around $110/kg).
Significance of the Deal
MP Materials is currently the only integrated rare earth producer in the U.S. The contract aims to significantly reduce dependence on the Chinese monopoly in rare earths – China controls about 90% of the world’s processed production.
The investment strengthens the national supply chain for critical raw materials such as rare earths, which are essential for military applications, electric vehicles, and renewable energy sources like wind turbines.
For investors, this deal signifies not only an immediate stock jump due to the Pentagon’s confidence as a major shareholder and strategic partner but also long-term growth potential through secured sales markets and financial stability. MP Materials positions itself as a key player in an increasingly geopolitically significant global raw materials market.