A wheel loader operator fills a truck with ore at the MP Materials rare earth mine in Mountain Pass, California, January 30, 2020.
Steve Marcus | Reuters
The Defense Department will become the largest shareholder in rare earth miner MP Materials after agreeing to buy $400 million of its preferred stock, the company said Thursday.
MP Materials owns the only operational rare earth mine in the U.S. at Mountain Pass, California. The company said it will use the proceeds of the Pentagon's investment to expand its rare earths processing capabilities and its magnet production capacity.
Shares of MP Materials jumped more than 40% premarket on the news.
The Pentagon is buying a newly created class of preferred shares that are convertible into MP Materials' common stock. It is also buying a warrant that allows it to purchase additional common stock in the rare earth miner. The convertible shares and the warrant for common stock would represent about a 15% stake in MP Materials as of July 9.
Interior Secretary Doug Burgum said in April that the Trump administration was considering making direct equity investments in critical mineral companies to break U.S. dependence on China.
MP Materials is building a second domestic magnet manufacturing facility to serve defense and commercial customers with support of the Pentagon.
The Defense Department will ensure that 100% of the magnets produced at the facility, called 10X, are purchased by defense and commercial facilities for a decade-long period after the plant is built.
This is a developing story. Please check back for updates.
