Jul 19, 2025 Current Resources

Rare Earths Rally After the Pentagon Picks a Winner

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.

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By Alex Kimani - Jul 18, 2025, 4:00 PM CDT

The Pentagon’s landmark deal with MP Materials guarantees magnet prices and gives the U.S. government a direct equity stake.
Rare earth stocks worldwide soar as investors rotate into Western producers and juniors following the MP announcement.
Apple quickly follows with a $500M commitment to source recycled magnets from MP, boosting the reshoring momentum.

Shares of rare earths companies have exploded higher since MP Materials (NYSE:MP) unveiled a game-changing deal with the U.S. Department of Defense that marks the most aggressive federal intervention in the rare earths space in decades. The DoD-backed investment package will see the Nevada-based producer build out a fully domestic magnet supply chain and lock in long-term pricing support for neodymium-praseodymium, the critical alloy used in everything from fighter jets to iPhones. MP shares have doubled in just days, taking year-to-date gains north of 275% and re-rating the entire Western rare earths complex.

The deal isn’t just about cash; it’s about control. Under the agreement, the Pentagon will take a 15% equity stake in MP through a $400 million preferred share issuance and secure warrants for additional common stock down the road. The government is also extending a $150 million loan, while JPMorgan and Goldman Sachs are syndicating $1 billion in private financing to bring MP’s so-called “10X Facility” online. Construction is already underway, with commissioning slated for 2028.

The real deal sweetener is a $110/kg floor price guarantee for NdPr magnets, nearly double today’s spot price of $63. That pricing mechanism, backed by the full faith and credit of the U.S. government, creates a bulletproof margin environment for domestic producers and resets the cost basis for long-term buyers across defense, autos, and consumer electronics, according to Reuters.

Analysts say it's the rare earths equivalent of a strategic petroleum reserve, but for permanent magnets.

MP’s planned capacity of 10,000 metric tons per year will cover a significant chunk of U.S. magnet demand and more than double current domestic output. For defense planners, the numbers are even more compelling: that volume would be enough to secure magnet supply for the entire F-35 fleet, major missile systems, and naval sonar applications—all without touching Chinese exports.

The move immediately drew follow-on activity. Apple Inc. said it would invest $500 million to source NdFeB magnets from MP made entirely from recycled feedstock. The tech giant, which has faced mounting scrutiny over its reliance on Chinese rare earths, said production would begin in 2027 and ramp up to cover “hundreds of millions” of devices per year. Apple will source from MP’s upgraded facility in Mountain Pass, California, and its soon-to-be-operational Texas plant, using material pulled from discarded devices and scrap.

The Apple deal adds enormous commercial legitimacy to MP’s scale-up and underscores the trend toward localization at the OEM level. Recycled magnet manufacturing has long been viewed as a technical curiosity. Now it’s a $500 million line item on Apple’s strategic sourcing agenda.

Meanwhile, rare earth equities have gone vertical. Lynas Rare Earths (OTCPK:LYSDY) surged to a two-year high after Jefferies hiked its price target from A$6.40 to A$10, calling the company “the next logical beneficiary” of U.S.-led reshoring. Iluka Resources exploded 30% in a single session—its biggest one-day gain on record—as investors rotated into any name with near-term capacity outside China. Australian juniors like Liontown and Sayona also caught a bid.

MP added to the frenzy by announcing a $500 million common stock offering to fund continued expansion and working capital—triggering a minor pullback in the stock but doing little to dent the broader narrative. Capital is pouring into rare earths like it’s 2011.

Defense contractors were quick to endorse the move. Lockheed Martin, prime contractor for the F-35, said it welcomed efforts to “strengthen secure, resilient supply chains.” Analysts say the move will de-risk magnet inputs for THAAD batteries, Virginia-class submarines, and next-gen missile systems. At the industrial level, General Motors and Stellantis are evaluating new sourcing options for permanent magnet EV motors as they accelerate domestic platform rollouts.

What sets this deal apart is its structure. Rather than handing out tax credits or indirect subsidies, the U.S. government is writing equity checks, underwriting price floors, and letting commercial lenders come in behind. The structure resembles the CHIPS Act, but more serious. Analysts say this model could be replicated for battery anodes, graphite, and even gallium.

Still, execution risks loom. MP will need a reliable pipeline of rare earth oxide feedstock, and while it has upstream capability at Mountain Pass, questions remain about whether that will scale fast enough. Labor and permitting hurdles in both California and Texas could delay full ramp-up. And there's the broader question of how quickly defense and OEM contracts can be converted into long-term offtake agreements.

As of mid-July 2025, Beijing has remained quiet. No official response from the Chinese government or state media has been issued in response to the Pentagon-MP announcement. That silence is notable. In 2024, Chinese officials warned against “artificially constructing supply chains” without China. That language has not been repeated publicly this year.

But observers note that China's influence remains concentrated in refining, oxide conversion, and separation, areas where Western capacity still lags. Any serious U.S. effort to localize rare earths will inevitably collide with these structural realities, and Beijing may yet respond through informal levers like export permit delays or price manipulation.

By Alex Kimani for Oilprice.com

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