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MP Materials surges on mega deal to boost US magnet supply

MP Materials has signed a multi-billion dollar deal with the Department of Defense to build a rare earth magnet factory. The U.S. is looking to reduce its dependence on foreign sources for this critical input. Shares of the company have risen by 41% during premarket trading.

The DoD is buying $400 million of preferred stock, and also receiving a warrant from the company, which will make it the largest shareholder.

China's restrictions in April, which impose a virtual monopoly in the refining and processing of rare earths, caused a drop in exports of rare earth magnets by 75% last month.

Later, the U.S. signed an agreement with China to accelerate rare earth approvals.

In March, U.S. president Donald Trump invoked emergency powers in order to increase domestic production of vital minerals that are used across the economy. This was part of an effort to counter China's near total control of this sector.

MP Materials announced that it will construct its second magnet production facility in the U.S. - the 10X Facility - at a location yet to be determined, for defense and commercial customers.

The company stated that the facility should be operational by 2028.

The DoD agreed to a NdPr floor price commitment of $110 per kilo for the product that is being stored or sold. Metal NdPr can be used to produce magnets for wind turbines and electric motors.

A 10-year agreement will also be signed by the defense and commercial sectors to purchase all magnets.

MP Materials plans to expand its heavy rare earth separation capability at Mountain Pass, a California facility. It will receive a loan of $150 million from the Defense Department.

Rare earths is a grouping of 17 metals, used in the production of magnets for electric cars, cell phones and other electronic devices.

(source: Reuters)