What happened? The American rare earth company MP surged by 50%.

Yesterday, the American rare earth company MPMaterials (ticker: MP) suddenly surged by more than 50%, and continued to rise in pre-market trading today. This article will answer three questions: (There's a small surprise at the end)

1. What does MP do?

2. How important is MP?

3. Interpretation of the major positive developments

What does MP do?

MP is the largest rare earth materials producer in the Western Hemisphere and the only core company in the U.S. with the potential to rebuild the rare earth supply chain. Its business covers the upstream (mining), midstream (processing), and downstream (magnet production) of the rare earth supply chain, making it a key force in countering China's dominance in rare earths.

The company owns the only operating rare earth mine and processing base in North America, the MountainPass rare earth mine. The MountainPass mine began production in 1952. It boasts one of the highest-grade rare earth deposits in the world, with an average rare earth oxide (REO) grade exceeding 7%, far above the global average (about 1-2%). From the 1960s to the 1990s, it was a major global source of rare earths.

In 2021, the company launched its "Mine to Magnet" strategy, investing in rare earth separation and magnet production facilities with the goal of establishing a full supply chain. In 2022, the company optimized its separation plant, significantly improving processing efficiency. It is currently building the first large-scale neodymium-iron-boron (NdFeB) magnet factory in the U.S. in Fort Worth, Texas, expected to begin production by the end of 2025.

The proven reserves of the MountainPass mine are approximately 26 million tons. With an REO grade of 7.06%, it contains about 1.8 million tons of extractable rare earth oxides. The mine's lifespan is estimated to exceed 30 years, ensuring long-term supply capacity. Additionally, its proximity to major markets (California's tech industry and Texas's manufacturing sector) keeps logistics costs low.

In 2023, MPMaterials initiated a partnership with a U.S. national laboratory to develop low-cost, high-efficiency rare earth recycling technologies.

Summary: MPMaterials is a leader in the U.S. rare earth industry. With the high-quality resources of the MountainPass mine and its vertical integration strategy, it plays a central role in rebuilding the U.S. rare earth supply chain.

How important is MP?

As we all know, one of the industries most constrained by China in the U.S. is rare earths, as most high-tech fields rely on rare earth permanent magnet materials—especially in high-precision defense weaponry.

Currently, China's "cascade extraction technology" can achieve ultra-high-purity separation of 99.9999% (6N grade), while MPMaterials' solvent extraction method in the U.S. has long struggled to achieve purity levels above 95% for heavy rare earths like dysprosium (Dy) and terbium (Tb), falling short of military-grade material requirements (5N grade or higher).

Here’s a chart illustrating MP’s strategic importance in the U.S.:

It can be said that MP is currently one of the most important companies in U.S. defense. China holds an absolute monopoly on high-end rare earth permanent magnets. Without Chinese rare earths, the production of high-precision U.S. defense weapons would nearly grind to a halt.

What have U.S. government and businesses done? Interpretation of the positive developments

Key points of cooperation between the U.S. government and the Department of Defense (DoD) with MP:

(1) Equity investment

The DoD invested $400 million to purchase newly issued convertible preferred shares and warrants from MP, with a conversion and exercise price of $30.03 per share. Equity stake: Upon completion of the transaction (expected by July 11, 2025), the DoD will hold approximately 15% of MP's common shares, becoming the largest shareholder.

(2) Financing support

DoD loan: A $150 million loan is expected to be provided within 30 days to expand the heavy rare earth separation capacity at the MountainPass mine.

Commercial financing: JPMorgan Chase and Goldman Sachs have committed to providing $1 billion in financing for the construction of a second magnet factory ("10X Facility").

(3) Price guarantees and procurement agreements

NdPr price floor: The DoD guarantees a 10-year price floor of $110/kg for NdPr oxide. The current market price of NdPr (July 2025) is around $70-80/kg, so this price guarantee significantly reduces market volatility risks.

Magnet procurement: The DoD has committed to purchasing the entire output of the "10X Facility" for 10 years, serving defense (e.g., F-35, drones) and commercial clients (e.g., General Motors). This procurement agreement ensures stable sales channels for MP's magnets, covering high-growth markets.

(4) Restrictions

Ban on sales to China: The agreement prohibits MP from selling rare earth products to regions deemed "adversarial," including China.

There are several major positive developments here. First, the government and businesses are providing ample funding. Currently, MP needs significant capital expenditures for R&D and capacity expansion, and this funding is a lifeline.

Second, the commercial terms are highly favorable, with procurement prices well above current market levels and a 10-year price floor—extremely supportive.

In short, MP's future core value lies in whether it can successfully produce 10,000 tons of magnet materials. If MP achieves this, it will mark a huge leap forward for the U.S. rare earth permanent magnet industry, and MP's commercial value will soar.

Endnote surprise: MP's former third-largest shareholder was Shenghe Resources (600392), a Chinese rare earth company that hit the daily limit up today. This company played a crucial role in reviving MP's production and, of course, has also procured large quantities of rare earth resources from MP. $MP Materials(MP.US)