Why rare earths, MP materials producer of magnets saw its stock increase by 150%

MP is the only minor in the country’s rare land, at a time when the United States aspires to compete with the domination of the China supply chain in this area. Its share price has increased by 365% year to date, including an increase of 150% in just over a month.

MP’s market capitalization increased from just over $ 2 billion to $ 13 billion, entering a large capitalization territory – quite a bit for a company that has only brought in $ 204 million in revenues last year. It is an increase comparable to that of the Silicon Valley Palantir defense company – but with all the respect that I owe you to this company fueled by AI, Palantant actions have only increased by 140% of the year.

“I give MP a credit to have foresight and to be in the right place at the right time,” said Ben Kallo, Baird principal research analyst Fortune. “I think it’s surprising because I didn’t think the government would react in such a rapid and energetic way.

“I think the fire is in the belly of the officials of the supply chain to move away from China at the moment.”

MP is also the only producer of minors and specialized magnets integrated in the country, which has just opened a factory of metal and neodymium magnets in Fort Worth. Not the type to miss a marketing opportunity, MP has appointed this “independence” factory.

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Powerful magnets are also of crucial as little -known importance. They are used in electric vehicles, renewable energies, mobile phones, military equipment and, more recently, AI data centers. General Motors was MP’s first flagship customer for magnets.

From a military point of view, the magnets are just as crucial: they are used in drones, fighter planes, missile systems and nuclear submarines. More than 80% of the world’s world supply in neodymium is made in China. The United States has some manufacturers, while China has a few hundred.

The materials of “rare earths” are actually rare, but they are expensive to separate and refine. This growth takes financial support.

The Ministry of Defense bought $ 400 million in MP shares in July to become a 15%shareholder; On August 10, he saved his initial agreement with an additional 150 million dollars loan to MP to help extend his mining operations to Mountain Pass, California.

“We take decisive measures to restore our supply chain for domestic critical minerals, revive our industrial basis and rebuild our soldiers to achieve the peace objective of President Trump by force,” said Emil Michael, under-secretary of defense for research and engineering, in a statement. Michael is a former senior Uber leader.

Even outside the military, MP and the administration see the company developing due to the AI boom.

“We have the platform, the partners and the prospect to seize another huge track of opportunities,” said the founder, president and chief executive officer of the deputy, James Littinsky during the call of results of the company’s August 7. “And that does not hurt that we have a seat at the forefront and an important role in what could well become the most important commercial transformation of our generation, the era of physical AI.”

MP climb

MP is built on the ashes of the former owner of Mine Molycorp and his installations of Mountain Pass. Ten years ago, MolyCorp failed due to intense debt and the spill of China prices on the world rare land markets.

Seeing the case of thesis for the national exploitation of rare land, Litinsky and its JHL group cover fund joined MolyCorp’s obligations during its 2015 bankruptcy procedure. Litinsky finally folded its fund to buy Mountain Pass assets and train MP materials in 2017.

Litinsky had previously worked at the Fortress Investment Group, based in New York, and MP Materials became a public in 2020 when he merged with one of the many special acquisition companies in Fortress, or Spacs, as part of an agreement of $ 1.47 billion.

“One of the biggest question points and decline was:” How can these finance guys exploit a mine and make it work? “” Said Kallo. But MP cleaned its reception operations, kept the low debt and focused on vertical integration and growth. “They surprised the increase.”

The independence factory opened its doors in January and MP envisaged a more fluid growth trajectory. But, in the spring, the assault on Trump’s pricing war shaken things, and companies began to realize that they should not count on the Chinese supply chains so strongly.

“Many companies did not realize that their magnets came from China,” said Kallo. “He woke up a lot of people. These magnets enter everything. ”

It was at this time that the Wall Street-Izment of the Department of Defense under the second Trump administration entered the game.

Steve Feinberg, the new American deputy secretary for defense, is the billionaire co-founder of Cerberus Capital Management. Feinberg directed the unusual and historical agreement with Litinsky. He not only made Pentagon a shareholder of 15%; It included the promise of a total investment of several billion dollars because MP aims to extend its magnet production capacity of 10 times.

This expansion should be completed in 2028. The agreement also puts a floor on the prices of rare MP Earths materials for 10 years, helping to compensate for the possibility of spilling foreign price.

A spokesman for the Ministry of Defense said Fortune: “The reconstruction of critical minerals and sectors of rare earthly earths of the American industrial base will not occur overnight, but the DOD takes immediate measures to rationalize the processes and identify opportunities to strengthen the production of critical minerals.”

Four days after the announcement of the Pentagon agreement on July 15, MP announced a $ 500 million partnership with Apple to provide rare earth magnets that are entirely made from recycled materials, a commitment that would cause recycling extensions in the installations of Mountain Pass and Fort Worth. MP and Apple piloted advanced recycling technologies for five years before announcing the agreement.

“American innovation pilots everything we do at Apple, and we are proud to deepen our investment in the American economy,” said Apple CEO Tim Cook, in a press release. “Rare earth materials are essential to manufacture advanced technologies, and this partnership will help strengthen the supply of these vital materials here in the United States.”

MP used to send more of its raw materials to China due to a lack of American refining capacity. A potential stumbling block for MP was its smallest ownership participation still owned by Shenghe Resources Chinese, which had helped Litinsky to buy Molycorp in 2017. But the largest ownership of the US government combined with the new price floor and the Chinese rates on American exports allowed MP to stop its exports to China in April.

“We focus maniac on investment and execution in the United States of America,” said Litinsky in his call for results. He underlined: “During the years of implacable execution, this team transformed a mine site into bankruptcy and abandoned into an American national champion integrated vertically with a strategic and economic platform that counts.”