It is no secret that rare earth materials are increasing in importance globally in both civilian and defense industries. They are essential to just about all civilian and military technological applications. The recent trade wars have highlighted this concern. The Pentagon had made known that the Chinese near monopoly on rare earth refining and much of the mining put the US defense capability at risk. Until now, little to no action had been taken. The trade wars and Chinese restrictions on rare earth materials to gain an edge in negotiations brought the issue to great importance in the past few months.

On the morning of 10 July 2025, the financial news outlets announced that the Pentagon had acquired a $400M piece of MP Materials in the form of preferred stock. This represented 15% of the total shares of the owner and operator of the only functioning rare earth mine in the US. The announcement also detailed the $150M loan the Pentagon gave to the company.1 This announcement was also posted on the MP Materials website:

“MP Materials Announces Transformational Public-Private Partnership with the Department of Defense to Accelerate U.S. Rare Earth Magnet Independence

July 10, 2025

Multibillion-Dollar DoD Commitment to MP Materials to Catalyze Domestic Production; DoD Positioned to Become Company’s Largest Shareholder

Building on MP’s Existing Capabilities at Mountain Pass and Magnetics Operations in Texas, Company to Rapidly Construct ”10X” Magnet Manufacturing Facility to Reduce Foreign Dependency 10-year NdPr Price Floor Commitment and 10-year Magnet Offtake Agreement Positions MP as a National Champion with a Durable and Scalable Economic Platform

 

Company to Host Investor Conference Call Today at 8:30 a.m. Eastern Time

LAS VEGAS--(BUSINESS WIRE)-- MP Materials Corp. (NYSE: MP) (“MP Materials” or the “Company”) today announced it has entered into a transformational public-private partnership with the United States Department of Defense (“DoD”) to dramatically accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency.”2

Nationalization and Potential Effects on the Rare Earth Industry

The US government also put in a price floor of $110/kg of neodymium-praseodymium oxide (NdPr) for ten years with a promise to ensure that 100% of this rare earth made by the new MP facility will be purchased by DoD related and other US companies.

According to Rare Earth Exchanges in an article 18 July 2018, the DoD deal is “drawing fierce industry scrutiny.” $110/kg is nearly twice the current market price for the rare earth in question. This may allow MP to “undercut commercial bids using federal subsidies to shield its margins.” The article notes this is the same nationalist ‘heavy handed’ procedure used in China to stifle competition. It offers the following question to readers:

“How will the Pentagon justify a price floor far exceeding global benchmarks to US taxpayers?

Will other Western producers now require similar guarantees to compete?

What happens to prices and investor sentiment if global NdPr demand weaknes, yet US stockpiling surges?

Can MP’s still unbuilt magnet facility deliver 7,000 tonnes/year at commercial scale [by 2028]?”3

MP Materials’ mine, Mountain Pass Mine in California, was previously owned by MolyCorp that went bankrupt in 2015 and was revived by MP in 2017 and went public as MP stock in 2020. Readers should also note the ethical history of MP Materials. In 2022, MP was sued over allegations that “Shenghe (Chinese company) overpaid MP Materials for concentrates to artificially inflate MP Materials’ profits, which coincided with the expiration of MP Materials’ SPAC insider lockup period, and allowed MP insiders to sell shares at artificially high prices.” The were also investigated in 2022 for making “materially false and misleading statements regarding the Company’s business, operations, and compliance policies.”4

Potential influence on banks for funding

MP also announced the following on 10 July 2025 in its release:

“The Company has obtained a commitment letter from JPMorgan Chase Funding Inc. and Goldman Sachs Bank USA to provide $1.0 billion of financing for the costs of constructing and developing the 10X Facility, subject to customary terms and conditions set forth therein. In addition, within 30 days, the Company expects to receive the proceeds of a $150 million loan from DoD in connection with its plan to expand its heavy rare earth separation capabilities at Mountain Pass.”5

An obvious question arises: were these banking luxuries extended to other US rare earth companies as well? If not, potential for unfair government sponsored activity that can lead to a monopoly exists.

Insider Trading Potential

The announcement had an effect on MP as well as other major US rare earth companies as shown in the table below of closing prices from Yahoo Finance. Note MP’s outsized increase over rivals.

Closing Prices by Day for US Rare Earth Companies

Date  MP  USAR  UAMY  CRML

7 JUL 25 31.05  9.61  2.26  3.22

8 JUL 25 31.19  9.84  2.24  3.06

9 JUL 25 30.03  9.79  2.26  2.83

10 JUL 25 45.23  11.00  2.66  3.04

11 JUL 25 45.11  10.71  2.72  3.00

14 JUL 25 48.52  11.85  2.99  2.98

15 JUL 25 58.22  15.54  3.29  3.99  

16 JUL 25 58.55  14.26  3.74  4.10

17 JUL 25 60.26  15.45  3.73  4.36

18 JUL 25 63.22  14.62  3.87  4.48

Since the trade war began, the US rare earth stocks have been volatile and offered large gains to risk takers. Increases and decreases seemed tied to the news for the most part. Note in the stock chart how the price of MP decreased almost a third from ‘Liberation Day’ to early June with one more large dip before its exponential increase in the past few days. The opportunity is present for the President and others in the trade war policy realm to intentionally decrease prices for certain stocks with trade negotiation news that could perhaps allow the stocks to be purchased cheaper by those in the know. Transparency is key to prevent this.

There was also opportunity for those in the know within DoD (military and civilian) or any other government employees to start buying MP stock in advance of the 10 July announcement, which would be against trading regulations and the law. Shareholder purchases since early April 2025 should be scrutinized by name and association to the Pentagon to ensure this didn’t happen. Further, care must be taken to prevent this possibility in any other future large DoD ‘interventions’ in the business world.

Monitoring of government shares/profits

In essence this is an interesting move by the federal government and is a start to secure rare earth supplies for US defense and private sector production. It can have substantial upside if done correctly. However, at the same time, it has the potential for fraud, ethics violations, and suppression of free market forces in the fledgling US rare earth industry. DoD should provide a statement of transparency in the business deal and monitor recent stock purchases to ensure unethical insider trading did not take place. This is especially important with the Pentagon’s recent history of wartime fraud, inability to pass financial audits, revolving door for generals, and bloated budgets.

Leaders should be given the benefit of the doubt, but the current Chairman of the Joint Chiefs, GEN Caine, just a few months ago served on four different investment/venture capital firms. Just as the past SECDEF Austin came under scrutiny coming from Raytheon to SECDEF and watching his former company receive multibillion dollar contracts, great care must be taken to provide transparency and assurance that a conflict of interest of anyone in the Department of Defense or federal government isn’t benefitting from this arrangement or obtaining advanced investing intelligence ahead of the general public.

Additionally, MP Materials has a spotty ethical record since going public in 2020. Oversight is essential. As the taxpayers are funding this deal, the government should make public company operations and any less than ethical discoveries in MP Materials’ actions.

Noting that it will take three years or more to reach full production, the US should still proceed with caution in the trade war as the US defense industry is still vulnerable to export restrictions from its principle near peer enemy – China. If a long war were to break out in the next few years, the US may not be able to increase production of military hardware and machines.

  1. https://www.cnbc.com/2025/07/10/pentagon-to-become-largest-shareholder-in-rare-earth-magnet-maker-mp-materials.html?msockid=1eef7f9c69b861f53d476c7b689d607e
  2. https://investors.mpmaterials.com/investor-news/news-details/2025/MP-Materials-Announces-Transformational-Public-Private-Partnership-with-the-Department-of-Defense-to-Accelerate-U-S--Rare-Earth-Magnet-Independence/default.aspx
  3. www.rareearthexchanges.com, Pentagon’s $400M MP Materials Deal Sparks Industry Backlash Over Market Distortion, China-Style Intervention. 18 July 2025
  4. https://www.dandodiary.com/wp-content/uploads/sites/893/2022/02/MP-Materials-Corp-Complaint.pdf
  5. https://investors.mpmaterials.com/investor-news/news-details/2025/MP-Materials-Announces-Transformational-Public-Private-Partnership-with-the-Department-of-Defense-to-Accelerate-U-S--Rare-Earth-Magnet-Independence/default.aspx