U.S. stock market rare earth stocks collectively surged before the market opened, as rare earth magnet manufacturer MP Materials received investment from the Pentagon to expand production and build a factory
The U.S. Department of Defense will invest $400 million in MP Materials, the only company operating rare earth mines in the United States, becoming its largest shareholder. The new factory is expected to be operational by 2028, with an annual production capacity of 10,000 tons. The company has also secured $1 billion in financing commitments from JP Morgan and Goldman Sachs. MP Materials' stock surged nearly 50% in pre-market trading, driving a collective rise in rare earth-related stocks
On the 10th, media reports indicated that the U.S. Department of Defense, headquartered at the Pentagon, will become the largest shareholder of rare earth mining company MP Materials by purchasing $400 million in preferred stock to support the company's expansion of rare earth processing capacity and magnet production scale.
The company operates the only rare earth mine in the United States. The Department of Defense's investment will help MP Materials build a second magnet manufacturing plant, expected to be operational by 2028, with an annual capacity of 10,000 tons of rare earth magnets.
The collaboration also includes the Department of Defense providing MP Materials with long-term price guarantees and product procurement commitments for a period of ten years to ensure a stable supply of rare earth magnets.
Following the news, MP Materials' stock price surged nearly 50% in pre-market trading, driving a collective rise in rare earth-related stocks. USA Rare Earth rose over 21% at one point, while Energy Fuels increased nearly 11%.
New Factory Enhances Domestic Capacity
With the support of the Department of Defense, MP Materials will build a second magnet manufacturing plant to serve defense and commercial customers. This plant, named "10X," is expected to begin trial operations in 2028, with a rare earth magnet manufacturing capacity of 10,000 tons. Rare earth magnets are widely used in key areas such as electric vehicles, wind turbines, and military electronic devices.
Reports indicate that the Department of Defense will purchase newly issued convertible preferred stock from MP Materials while also obtaining warrants to purchase common stock. According to the company, these convertible shares and warrants will account for approximately 15% of MP Materials' total equity as of July 9.
Company CEO James Litinsky stated:
"This move marks a decisive action taken by the Trump administration to accelerate the independence of the U.S. supply chain."
The company also expects to increase heavy rare earth separation capacity at its Mountain Pass facility in California, solidifying its position as a national strategic asset, where high-purity rare earth materials can be extracted, separated, and refined at the same location.
The Department of Defense has committed to ensuring 100% procurement of the magnet products produced by the plant for ten years after its completion. Additionally, the Department of Defense has set a price floor of $110 per kilogram for MP Materials' NdPr products, with the same ten-year guarantee. NdPr is a key rare earth compound used in the manufacture of permanent magnets.
In addition to the Department of Defense's investment, JP Morgan and Morgan Stanley will provide $1 billion in financing support for the construction of the manufacturing plant. MP Materials also expects to receive a $150 million loan from the Department of Defense to expand the rare earth separation capacity at the Mountain Pass mine
