The Pentagon invests $400 million in MP Materials, challenging China’s rare earth monopoly.

The Pentagon is investing $ 400 million in MP Materials , a U.S. producer of rare earths, in an unusual deal that underscores the Trump administration’s determination to break China’s dominance over critical minerals and strengthen domestic supply chains.

The announcement, made Thursday by MP Materials, reveals that the Pentagon will become the company’s largest shareholder, acquiring a 15% stake , and will invest billions to build a 10,000-metric-ton magnet manufacturing plant, which is expected to begin operations in 2028.

James Litinsky, founder and CEO of MP Materials, called the initiative "a decisive step to accelerate the independence of the American supply chain." The Pentagon did not immediately respond to requests for comment.

MP Materials shares soared more than 48% on the news, boosting Litinsky's personal wealth, which includes more than 14 million shares, by about $200 million.

The U.S. government rarely invests directly in private companies. It does so only in exceptional cases, to support technologies crucial to national interests or to bail out systemically important companies, such as Wall Street banks during the financial crisis. Las Vegas-based MP Materials operates the only rare earth mine in the United States, in Mountain Pass , California, extracting elements such as neodymium and praseodymium, essential for weapons systems and electric vehicles.

Rare earth magnets are critical to military systems such as the F-35 Lightning II fighter (which requires 900 pounds of rare earths), Predator drones, and Virginia- and Columbia-class submarines. They are also used in Tomahawk missiles and guidance systems developed jointly by the U.S. Air Force and Navy. Reliance on Chinese supplies of rare earths is considered a national security risk.

China controls 55% of global mining capacity and 85% of refining. In April, Beijing imposed export restrictions on seven rare earth elements and permanent magnets, causing severe disruption to the automotive, defense, and technology industries, with magnet exports dropping 75%.

Interior Secretary Doug Burgum then stated that the Trump administration was considering investments in domestic producers of critical minerals. Since 2020, the Pentagon has invested over $430 million to develop domestic rare earth supply chains, including separation, refining, and conversion into metals and magnets.

The agreement with MP Materials calls for the Pentagon to purchase $400 million in preferred stock convertible into common stock at $30.03 per share, with an option for additional purchases . It also includes a 10-year purchase agreement for all batteries produced at the plant and upgrades to the Mountain Pass facilities, already funded with approximately $45 million from the Pentagon.

A key element of the agreement is a guaranteed minimum price of $110 per kg for neodymium-praseodymium, which protects MP Materials from losses in the event of oversupply. Western producers complain that Chinese counterparts, thanks to state subsidies, are flooding the market at artificially low prices. Neha Mukherjee, head of rare earth research for Benchmark Mineral Intelligence, called the commitment "a critical step in reshaping global rare earth supply chains," noting that the minimum price could encourage new producers and developers to enter the market. This investment reflects a broader strategy to reduce dependence on foreign supplies and strengthen national security, amid growing geopolitical competition for control of critical resources.

---

---

The article The Pentagon invests 400 million in MP Materials: the move that challenges China's rare earth monopoly comes from Scenari Economici .

---

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/pentagono-mp-materials-terre-rare-cina/ on Sat, 12 Jul 2025 08:00:11 +0000.