The Protection Division will change into the most important shareholder in uncommon earth miner MP Supplies after agreeing to purchase $400 million of its most well-liked inventory, the corporate mentioned Thursday.
MP Supplies owns the one operational uncommon earth mine within the U.S. at Mountain Move, California, about 60 miles exterior Las Vegas. Proceeds from the Pentagon funding shall be used to broaden MP’s uncommon earths processing capability and magnet manufacturing, the corporate mentioned.
Shares of MP Supplies have been final up about 50% on the information.
Uncommon earths are utilized in magnets which might be key elements in a variety of army weapons methods together with the F-35 warplane, drones and submarines, in keeping with the Protection Division.
The U.S. was nearly completely depending on overseas international locations for uncommon earths in 2023, with China representing about 70% of imports, in keeping with the U.S. Geological Survey. Uncommon earths have been a central level of rivalry in current commerce disputes between the U.S. and China.
Inside Secretary Doug Burgum mentioned in April that the Trump administration was contemplating making direct fairness investments in vital mineral firms to interrupt U.S. dependence on China.
MP Supplies CEO James Litinsky described the Pentagon funding as a public-private partnership that can pace the buildout of an end-to-end uncommon earth magnet provide chain within the U.S.
“We perceive that this partnership is in the end on behalf of the taxpayers and our nationwide safety, and with that comes an incredible accountability to get this performed proper,” Litinsky advised traders on a name Thursday morning. “Securing America’s provide of uncommon earth supplies and magnets is important to our financial and nationwide safety.”
Public-private partnership
The Pentagon is shopping for a newly created class of most well-liked shares convertible into MP Supplies’ widespread inventory, along with a warrant convertible at $30.03 a share for 10 years that permits the U.S. to purchase further widespread inventory.
Exercising the convertible most well-liked shares and the warrant would go away the Pentagon holding a few 15% stake in MP Supplies as of July 9, practically twice the 8.61% held by Litinsky and the 8.27% held by BlackRock Fund Advisors, in keeping with FactSet knowledge.
MP Supplies will construct a second magnet manufacturing facility within the U.S. to serve protection and industrial prospects with assist from the Pentagon. The power, whose location wasn’t disclosed, is anticipated to start out commissioning in 2028 and can carry MP Supplies uncommon earth magnet manufacturing capability to 10,000 annual metric tons.
This manufacturing capability is sufficient to “meaningfully assist U.S. protection and industrial wants,” Litinsky mentioned.
The Pentagon has agreed to purchase 100% of the magnets made on the new facility, known as 10X, for 10 years after the plant is constructed to assist protection wants and the industrial market. JPMorgan and Goldman Sachs are offering $1 billion to assist finance the manufacturing facility, whose location wasn’t disclosed.
The Pentagon can also be guaranteeing a minimal value of $110 per kilogram for 10 years for neodymium-praseodymium oxide, or NdPr, that is stockpiled or bought by MP Supplies. NdPr is a uncommon earth compound used to make everlasting magnets.
If the market value is under $110 per kilogram, the U.S. can pay MP Supplies the distinction in a quarterly money cost, Litinsky mentioned. The Pentagon, in flip, will obtain 30% of the upside above $110 per kilogram as soon as MP Supplies’ second magnet facility is operational, the CEO mentioned.
The Protection Division negotiated a really powerful deal, Litinsky mentioned. “The taxpayers are going to make some huge cash,” the CEO mentioned.
MP Supplies additionally expects to obtain a $150 million mortgage in 30 days from the Pentagon to broaden its uncommon earth separation capabilities at Mountain Move.
