MP Materials’ stock surged more than 50% Thursday—here’s why

On Thursday, the United States Department of Defense (DOD) entered a major deal with MP Materials. The DOD agreed to buy $400 million of MP Materials newly created preferred shares stock. The move will make the U.S. military the company’s largest stakeholder.

In the hours after the deal, the company’s stock surged more than 50%.

MP Materials owns and operates the only operational rare earth mine in the U.S., located in Mountain Pass, California. It is the world’s second-largest rare earth mine (the largest is in China). The purchase is part of a major effort to reduce foreign dependence on rare earths, a group of 17 chemical elements found within the earth’s crust, which are necessary in creating magnets that are essential in military weapons systems.

The company says the DOD’s investment will allow for a major expansion of its operations, announcing that it will use the funds to construct the 10X Facility, its second domestic magnet manufacturing facility, at a location that is yet to be chosen. The company estimated that, upon completion, its total U.S. rare earth magnet manufacturing capacity will reach 10,000 metric tons. “This initiative marks a decisive action by the Trump administration to accelerate American supply chain independence,” said James Litinsky, founder, chairman, and CEO of MP Materials in a press release. “We are proud to enter into this transformational public-private partnership and are deeply grateful to President Trump, our partners at the Pentagon, and our employees, customers and stakeholders for their unwavering support and dedication.”

The preferred shares bought by the DOD can be converted into common stock, the press release explained. The deal also includes a warrant convertible at $30.03 a share for 10 years, allowing the U.S. to purchase additional common stock.

Under the deal, the U.S. government is committed to a 10-year agreement in which it will buy MP Materials for a minimum price of $110 per kg for its neodymium and praseodymium output. Once the 10X Facility is complete, it has agreed that “all magnets produced at the 10X Facility will be purchased by defense and commercial customers with shared upside,” per the press release.

MP Materials said it has obtained a commitment letter from JPMorgan Chase Funding Inc. and Goldman Sachs Bank USA, which will provide $1B in financing the 10X Facility. It also said it expects a $150 million loan from the DOD within 30 days.

The DOD has been consistently working to ensure access to rare earth materials in recent years. Since 2020, it has spent more than $439 million on establishing supply chains for the materials in an effort to move away from relying on shipments from overseas. “DOD’s strategic investments are building capability at multiple stages of the rare earth supply chain and will provide a clear signal to private capital that the time is right to build additional resiliency,” Danielle Miller, acting deputy assistant secretary of defense for industrial base resilience, said last year.

Miller continued, “We are on track to meet our goal of a sustainable, mine-to-magnet supply chain capable of supporting all U.S. defense requirements by 2027.”

The sale comes as concerns around China’s control over the industry have surged. Previously, Shenghe Resources, which is partly owned by the Chinese government, was MP Materials’ the sole customer. However, the company said earlier this year that due to China’s 125% tariffs (put into place after Trump’s tariffs on Chinese goods) it would no longer send materials to China. “Selling our valuable critical materials under 125% tariffs is neither commercially rational nor aligned with America’s national interest,” MP Materials said in a statement at the time.

The DOD’s new investment, which represents about a 15% stake in the company, is scheduled to close on July 11, 2025.