• MP Materials announces a multibillion-dollar deal with the U.S. Department of Defense.
• The deal aims to reduce U.S. reliance on China for critical rare earth elements.
• The Pentagon will invest $400 million for a 15% stake in MP Materials.
• A new facility to produce rare earth magnets will increase output significantly.
• The agreement includes a price guarantee that far exceeds current market rates.

MP Materials has secured a significant multibillion-dollar partnership with the U.S. government intended to bolster domestic production of rare earth elements, crucial for military applications and green technologies such as electric vehicles and wind turbines. This initiative aims to mitigate the severe supply chain risks posed by China's dominant position in this sector, where it controls approximately 90% of the global processed output of these vital minerals, according to Reuters and Channel News Asia.

Under this agreement with the U.S. Department of Defense (DoD), the Pentagon will become the largest shareholder in MP Materials, acquiring a 15% stake through a $400 million investment. This investment includes a guaranteed price for crucial rare earths at nearly double the current Chinese market price, a move that is expected to significantly enhance domestic production capacity and encourage future investments, reports Newsweek and Channel News Asia.

As part of the deal, MP Materials plans to develop a new magnet manufacturing facility aimed at producing 10,000 metric tons of permanent magnets annually by 2028, thereby increasing the capacity to serve both defense and commercial markets. This move follows a dramatic drop in rare earth exports from China due to export restrictions earlier this year, which severely impacted industries dependent on these materials, according to Reuters and Newsweek.

MP's CEO James Litinsky has described this partnership as a critical step in addressing national security needs while maintaining a commitment to free market principles. The Pentagon's investment reflects a broader strategic initiative outlined by former President Trump to increase domestic production of critical minerals, reducing reliance on Chinese sources. This initiative is viewed as pivotal in reinforcing U.S. supply chain independence, reports Reuters and Channel News Asia.

The Defense Department has committed to paying a minimum of $110 per kilogram for rare earth elements necessary for magnet production, significantly above current market prices. This pricing strategy indicates a long-term investment in stabilizing the domestic supply chain and ensuring that American industries have reliable access to these essential materials, according to Newsweek and Channel News Asia.