The Defense Department volition go the largest shareholder successful uncommon world miner MP Materials aft agreeing to bargain $400 cardinal of its preferred stock, the institution said Thursday.
MP Materials owns the lone operational uncommon world excavation successful the U.S. astatine Mountain Pass, California, astir 60 miles extracurricular Las Vegas. Proceeds from the Pentagon concern volition beryllium utilized to grow MP's uncommon earths processing capableness and magnet production, the institution said.
Shares of MP Materials soared astir 50% to adjacent astatine $45.23. Its marketplace capitalization grew to $7.4 billion, an summation of astir $2.5 cardinal from the erstwhile trading session.
Rare earths are utilized successful magnets that are cardinal components successful a scope of subject weapons systems including the F-35 warplane, drones and submarines, according to the Defense Department.
The U.S. was astir wholly babelike connected overseas countries for uncommon earths successful 2023, with China representing astir 70% of imports, according to the U.S. Geological Survey. Rare earths person been a cardinal constituent of contention successful caller commercialized disputes betwixt the U.S. and China.
Interior Secretary Doug Burgum said successful April that the Trump medication was considering making direct equity investments successful captious mineral companies to interruption U.S. dependence connected China.
MP Materials CEO James Litinsky described the Pentagon concern arsenic a public-private concern that volition velocity the buildout of an end-to-end uncommon world magnet proviso concatenation successful the U.S.
"I privation to beryllium precise clear, this is not a nationalization," Litinsky told CNBC's "Squawk connected the Street" connected Thursday. "We stay a thriving nationalist company. We present person a large caller spouse successful our economically largest shareholder, DoD, but we inactive power our company. We power our destiny. We're shareholder driven."
U.S. miners are facing a unsocial menace from "Chinese mercantilism," Litinsky said. The Pentagon concern successful MP could service arsenic a exemplary for akin deals with different U.S. companies, the CEO said.
"It's a caller mode guardant to accelerate escaped markets, to get the proviso concatenation connected enactment that we privation and marque definite that mercantilism is not going to wounded our quality to bash so," Litinsky said.
Public-private partnership
The Pentagon is buying a recently created people of preferred shares convertible into MP Materials' communal stock, successful summation to a warrant convertible astatine $30.03 a stock for 10 years that allows the U.S. to bargain further communal stock.
Exercising the convertible preferred shares and the warrant would permission the Pentagon holding astir a 15% involvement successful MP Materials arsenic of July 9, astir doubly the 8.61% held by Litinsky and the 8.27% held by BlackRock Fund Advisors, according to FactSet data.
MP Materials volition physique its 2nd magnet manufacturing installation successful the U.S. to service defence and commercialized customers with enactment from the Pentagon. The facility, whose determination wasn't disclosed, is expected to commencement commissioning successful 2028 and volition bring MP Materials uncommon world magnet manufacturing capableness to 10,000 metric tons annually.
This manufacturing capableness is capable to "meaningfully enactment U.S. defence and commercialized needs," Litinsky told investors connected a telephone Thursday morning.
The Pentagon has agreed to bargain 100% of the magnets made astatine the caller facility, called 10X, for 10 years aft the works is built to enactment defence needs and the commercialized market. JPMorgan and Goldman Sachs are providing $1 cardinal to assistance concern the manufacturing facility.
The Pentagon is besides guaranteeing a minimum terms of $110 per kilogram for 10 years for neodymium-praseodymium oxide, or NdPr, that is stockpiled oregon sold by MP Materials. NdPr is simply a uncommon world compound utilized to marque imperishable magnets.
If the marketplace terms is beneath $110 per kilogram, the U.S. volition wage MP Materials the quality successful a quarterly currency payment, Litinsky said. The Pentagon, successful turn, volition person 30% of the upside supra $110 per kilogram erstwhile MP Materials' 2nd magnet installation is operational, the CEO said.
The Defense Department negotiated a precise pugnacious deal, Litinsky said. "The taxpayers are going to marque a batch of money," the CEO said.
MP Materials besides expects to person a $150 cardinal indebtedness successful 30 days from the Pentagon to grow its uncommon world separation capabilities astatine Mountain Pass.
English (US) ·