Litinsky had just realized his dream during the past quarter of becoming a large, fully integrated supplier of rare-earth magnets after reaching two transformational deals in July with the Department of Defense and Apple Inc. Those two deals will add to MP Materials’ contract with General Motors Co. to supply magnets for electric vehicles from a new plant in Fort Worth, Texas, that’s about to begin production.
Litinksy and co-founder
Michael Rosenthal had foreseen the crisis over China’s stranglehold on rare-earth materials when they pursued the 2017 purchase of a bankrupt rare-earth mine at Mountain Pass, California.
The agreements with the Pentagon, Apple and GM provide MP Materials with the capital and the marquee customers to rapidly increase production capacity for mining materials and producing finished magnets, which are used in automobiles, phones, aircraft and an astonishingly wide variety of products. They are also a template for expanding the rare-earth supply chain in the US.
“These agreements validate the mission we have pursued since Day 1 and mark a new chapter, not only for our company, but for the country,” Litinsky said on the call.
He added: “The rare-earth supply chain, long built on a single point of failure, had cracked. I said that Humpty Dumpty was not getting put back together again and that this moment would be transformational and remembered.”
That single point of failure he was referring to is, of course, China, which controls about 90% of the rare-earth magnets.
The
deal with Apple is monumental for MP Materials because its paves the way for the company to build a large magnet recycling facility. Apple provides the feedstock, such as old phones and other discarded electronics, giving MP Materials a big leg up for entering the recycling business.
The
Defense Department deal is monumental for the country. Under the agreement, the department put a floor on material prices and MP Industrial’s profits and will take all the volume produced if need be. This extraordinarily advantageous deal is the only way that a US company could defend itself from the onslaught of Chinese competitors fully supported by their government.
The Pentagon should do more of these deals to support the mining and processing of rare-earth materials and other specialty metals on which US industry depends and that are now controlled mostly by China. It’s unfortunate that the US government must enter these markets with subsidies because such support distorts markets, and the government is usually bad at picking winners.
But China’s practice of choosing champions and subsidizing them to gain market share has forced the US’ hand. The bad cocktail of authoritarian government coupled with a top-down variant of capitalism has allowed China to dominate markets such as shipbuilding and steel production and then move up the technology chain to drones and electric vehicles. Space rockets and robots are next.
The good news is that the effort to increase US production of these materials is bipartisan and the driver is the Pentagon. The first National Defense Industrial Strategy was
released in January 2024. A fire has now been lit under the current administration after President Donald Trump was forced to retreat from his 145% tariffs on Chinese goods after China cut off the supply of rare earths and industrial magnets, which threatened to shut down US factories.
The Defense Department didn’t just give away money. Part of the funding is in the form of preferred stock that is convertible to shares and a warrant that allows it to buy more shares. This allows the Pentagon to reap the benefit of the wealth it’s helping create at MP Materials.
Such deals should aim at other supply chain choke points and don’t have to be limited to rare earths. For example, tungsten isn’t classified as a rare earth, but it’s a specialty metal with unusual strength used in all kinds of industrial applications including armor-piercing munitions and jet-engine fan blades. The US no longer produces the metal while China, Russia and North Korea have captured 90% of the global supply.
The Pentagon in July provided a $6.2 million
award to Golden Metal Resources, the US unit of the UK-based holding company Guardian Metal Resources Plc, to perform a pre-feasibility study for a tungsten mine near Hawthorne, Nevada. Five years ago, the company scooped up the World War II-area mining site that produced the metal for ammunition on the bet that domestic production would become a national security issue.
Guardian bought another abandoned tungsten mine in Nevada that had been operated by Union Carbide, which is now a part of Dow Inc. Production there stopped after the Chinese drove down the price of the metal and put miners out of business.
Guardian aims to begin production at both projects by the end of 2028 and expects to produce as much 4,000 tons annually, which is the same amount that the US now imports from China. CEO
Oliver Friesen pointed out that MP Materials’ success began with a $9.6 million Defense Department technology investment in 2020.
“We want to be the champion of US tungsten, and we think we have the assets and the team to do that,” Friesen, who has previous experience working in Nevada with Barrick Mining Corp., said in an interview.
The Defense Department may have to step in with price supports for this metal and other rare-earth elements to encourage domestic production and break the Chinese stranglehold. While these mining operations should follow best practices to mitigate the harm to nature, undue roadblocks in the name of environmental protection shouldn’t prevent these crucial mining and processing operations from moving forward.
With Pentagon support and large customer contracts, MP Industrial now plans to expand its industrial magnet factory to 10,000 tons a year from 1,000 tons and will expand its mining operation at Mountain Pass, California, to keep pace.
“We have the platform, the partners, and the perspective to seize another enormous runway of opportunity,” Litinsky said.
The proliferation of modern gadgets, such as robots and driverless vehicles, will only drive more demand for these materials. It’s imperative that the US controls its own supply of these materials — even if it requires government support.
