In July 2025, the U.S. Department of Defense (DoD) executed a landmark deal to acquire $400 million of preferred stock in MP Materials, placing it on track to become the company's largest shareholder, with an effective stake of approximately 15% once stock conversion and warrants are exercised (MP Materials, 2025). This multibillion-dollar public-private agreement marks a pivotal pivot in U.S. strategy to reclaim supply chain independence in critical minerals.
MP Materials operates the Mountain Pass rare earth mine in California, the only large-scale rare-earth project in the U.S., and owns downstream magnet manufacturing facilities in Texas (Wikipedia, 2025).
Key Components of the Deal
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Equity Investment & Stock Conversion: The DoD purchased $400 million in newly issued convertible preferred stock at a conversion price of $30.03/share, with warrants to buy more shares over 10 years (MP Materials, 2025).
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Price Floor Guarantee: The Pentagon committed to a floor price of $110/kg for neodymium-praseodymium (NdPr) oxide—about double China's market rate (Supply Chain Digital, 2025).
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Guaranteed Offtake Agreement: For 10 years starting in 2028, the DoD will buy 100% of MP's magnet output from its upcoming “10X Facility” (MP Materials, 2025).
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Loan and Bank Financing: The deal includes a $150 million federal loan and $1 billion in private financing led by JPMorgan and Goldman Sachs (MP Materials, 2025).
Strategic and Economic Significance
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National Security
China supplied over 70% of U.S. rare earth imports as of 2023. Rare-earth magnets are crucial to military platforms like F‑35 fighter jets, missiles, and sonar systems (CNBC, 2025). -
Domestic Production Boost
The 10X Facility is projected to produce 10,000 metric tons per year of rare-earth magnets—enough to meet nearly 50% of U.S. demand (Mining Technology, 2025). -
Investor Confidence
MP Materials' stock surged more than 50% following the deal. Analysts praised the move as a “blueprint” for future public-private defense-sector partnerships (Investopedia, 2025). -
Use of Defense Production Act (DPA)
The DoD leveraged the DPA Title III authority, part of a broader plan including over $439 million in awards to revitalize domestic mineral processing (Defense.gov, 2025).
Capital Deployment by MP Materials
MP will allocate funding to:
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Scale heavy rare-earth separation at Mountain Pass (MP Materials, 2025)
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Build and launch the 10X magnet manufacturing facility
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Integrate its mine-to-magnet supply chain, supporting both defense and commercial contracts (Proactive Investors, 2025)
Risks and Criticisms
Critics of the deal warn the deal mirrors China's state-backed industrial strategies, potentially crowding out private competition. Still, many U.S. lawmakers argue such intervention is justified to counter Beijing's dominance (Financial Times, 2025).
Looking Ahead
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The 10X Facility is scheduled to begin production in 2028
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Heavy rare-earth capabilities will expand within 24 months
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The Pentagon may explore additional equity stakes or guaranteed supply contracts with other U.S. producers (Defense.gov, 2025)
Conclusion
The Pentagon's $400 million investment in MP Materials marks a defining step in rebuilding U.S. rare-earth independence. Through this combination of capital, pricing guarantees, and supply agreements, Washington is cementing a domestic defense-aligned critical minerals base—and signaling it may not be the last such deal.
