Pentagon Bets Big: $400M Secures 15% Stake in Rare Earth Giant MP Materials

The US Department of Defense just made a power play in the critical minerals space—dropping $400 million to grab a strategic 15% slice of MP Materials. Because nothing says 'national security' like hedging against China's rare earth monopoly.

Wall Street analysts are already salivating over the defense contractor spin-offs—because when the Pentagon writes checks, someone's getting rich. Probably not taxpayers though.

This isn't just an investment—it's a chess move. MP Materials controls America's only active rare earth mine. Now the military-industrial complex owns the board.

Litinsky, who owns over 14 million shares, saw his net worth rise by a similar amount. Historically, Washington has rarely invested directly in private businesses except to support essential technologies or to rescue firms of systemic importance, such as during the 2008 financial crisis, when banks received federal aid.

MP Materials operates the only mine for rare earth materials in the United States, located at Mountain Pass in California. There, the firm extracts elements like praseodymium and neodymium that are vital for manufacturing electric vehicles and advanced weapons systems.

Rare-earth magnets made from these metals power the F-35 Lightning II, unmanned drones, as well as submarines. For instance, each F-35 requires about 408+ KG of such materials. These materials are also used in Tomahawk missiles along with precision-guided bombs, which are part of a joint effort between the Navy and Air Force.

The U.S. does not want to depend on Chinese suppliers anymore

China controls around 55 percent of the world’s rare earth mining and 85 percent of its refining capacity. In April, China imposed export limits on 7 rare-earth materials and magnets, resulting in a 75 percent drop in U.S. magnet imports and widespread disturbance in the automotive, defense, and technology sectors.

At that time, Interior Secretary Doug Burgum noted the administration was weighing support for domestic mineral producers.

Since 2020, the Pentagon has invested more than $430 million to build up U.S. rare earth supply chains. These funds have supported the refinement and separation of mined elements and their conversion into finished magnets.

Under the new agreement, the Department of Defense will purchase $400 million of a new series of preferred stock in MP Materials, convertible into common shares at $30.03 each. Based on this deal, the Pentagon has the option to purchase more shares in the future.

The contract contains an offtake clause that guarantees the Pentagon will buy every battery produced at the planned facility over the coming 10 years. The company will use part of the funds to upgrade its operation at Mountain Pass, which was originally developed with about $45 million in Pentagon grants.

A key feature of the arrangement is a fixed price floor of $110 per kilogram for praseodymium-neodymium. This guarantee protects MP Materials from sudden price drops if global supplies surge.

Producers outside China have long complained that Chinese companies, buoyed by state support, can dump excess rare earths onto the market at below-cost prices, undercutting rivals. Neha Mukherjee, research manager of rare earths at Benchmark Mineral Intelligence, said this price floor “could enable junior developers and marginal producers to enter the market,” referring to it as a policy move that would change the game.

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