Pentagon to become largest shareholder in rare earth miner MP Materials; shares surge 50%

MP Materials owns the only operational rare earth mine in the U

At Mountain Pass, California

It will build a second magnet manufacturing facility in the U

With the support of the Pentagon

Rare earths are key components in a range of military weapons systems

In this articleMP your favorite stocksCREATE FREE ACCOUNTwatch now6:3306:33MP Materials CEO on deal with the Defense DepartmentSquawk on the StreetThe Defense Department will become the largest holder in rare earth miner MP Materials after agreeing to buy $400 million of its preferred stock, the company said Thursday

MP Materials owns the only operational rare earth mine in the U

At Mountain Pass, California, 60 miles outside Las Vegas

Ceeds from the Pentagon investment will be used to expand MP's rare earths cessing capacity and magnet duction, the company said

Rare earths are used in magnets that are key components in a range of military weapons systems including the F-35 warplane, drones and submarines, according to the Defense Department

Was almost entirely dependent on foreign countries for rare earths in 2023, with China representing 70% of imports, according to the U

Rare earths have been a central point of contention in recent trade disputes between the U

Interior Secretary Doug Burgum said in April that the Trump administration was considering making direct equity investments in critical mineral companies to break U

MP Materials CEO James Litinsky described the Pentagon investment as a public-private partnership that will speed the buildout of an end-to-end rare earth magnet supply chain in the U

Watch now4:4604:46Rare earth deal with China is 'long-term' industrial crisis, says MP Materials CEOClosing Bell: Overtime"I want to be very, this is not a nationalization," Litinsky told CNBC's "Squawk on the Street" on Thursday. "We remain a thriving public company

We now have a great new partner in our economically largest holder, DoD, but we still control our company

We control our destiny

Miners are facing a unique threat from "Chinese mercantilism," Litinsky said

The Pentagon investment in MP could serve as a model for similar deals with other U

Companies, the CEO said. "It's a new way forward to accelerate free, to get the supply chain on shore that we want and make sure that mercantilism is not going to hurt our ability to do so," Litinsky said

To buy additional common stock

Exercising the convertible preferred s and the warrant would leave the Pentagon holding a 15% stake in MP Materials as of July 9, nearly twice the 8. 61% held by Litinsky and the 8. 27% held by BlackRock Fund Advisors, according to FactSet data

MP Materials will build its second magnet manufacturing facility in the U

To serve defense and commercial customers with support from the Pentagon

This manufacturing capacity is enough to "meaningfully support U

Defense and commercial needs," Litinsky told investors on a call Thursday morning

NdPr is a rare earth compound used to make permanent magnets

Will pay MP Materials the difference in a quarterly cash payment, Litinsky said

The Pentagon, in turn, will receive 30% of the upside above $110 per kilogram once MP Materials' second magnet facility is operational, the CEO said

The Defense Department negotiated a very tough deal, Litinsky said. "The taxpayers are going to make a lot of money," the CEO said

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