The Pentagon is making a direct $400 million investment in US rare earths producer MP Materials, underscoring the Trump administration’s urgent push to reduce reliance on China for critical minerals and strengthen domestic supply chains, according to the Financial Times.
MP Materials announced on Thursday that the Department of Defense will become its largest shareholder with a 15 percent stake and plans to invest billions more to build a magnet manufacturing facility capable of producing 10,000 metric tonnes annually, scheduled to begin commissioning in 2028.
“This initiative marks a decisive action by the Trump administration to accelerate American supply chain independence,” said James Litinsky, MP Materials’ founder and CEO. The Pentagon did not immediately comment on the announcement.
MP Materials operates the United States’ only rare earth mine, located at Mountain Pass, California, extracting key minerals like neodymium and praseodymium essential for manufacturing advanced weapons systems and electric vehicles.
Rare earth magnets produced from these minerals are critical components in military technology, including the F-35 Lightning II fighter jets, Predator drones, and Virginia- and Columbia-class submarines. For example, a single F-35 jet requires approximately 900 pounds of rare earth elements.
The US government regards its dependence on China for rare earth minerals as a national security risk. China currently controls 55 percent of global rare earth mining capacity and 85 percent of refining, making it the dominant player in this strategic sector.
Tensions escalated in April when Beijing imposed export restrictions on several rare earth elements and permanent magnets, severely disrupting industries from automotive to defense and causing a 75 percent drop in magnet exports. At that time, US Interior Secretary Doug Burgum confirmed that the Trump administration was exploring investments to bolster domestic producers.
Since 2020, the Pentagon has invested more than $430 million in building domestic rare earth supply chains, covering mining, separation, refinement, and conversion into metals and magnets.
As part of the latest deal, the Pentagon will purchase $400 million of newly created preferred stock in MP Materials, convertible to common shares at $30.03 each, and holds a warrant for additional share purchases. The agreement also includes an offtake arrangement guaranteeing the Department of Defense will buy all batteries produced by the new facility over the next decade.
MP Materials will use part of the investment to upgrade its Mountain Pass facilities, which were originally built with about $45 million in Pentagon funding.
Central to the deal is a price floor for neodymium-praseodymium at $110 per kilogram, protecting MP Materials from losses if market supply surges. This addresses concerns from Western miners who accuse Chinese competitors of flooding the market with excess supply supported by state subsidies, artificially depressing prices.
“This is the kind of long-term commitment needed to reshape global rare earth supply chains,” said Neha Mukherjee, rare earths research manager at Benchmark Mineral Intelligence. “The price floor alone could enable junior developers and marginal producers to enter the market, a game-changing policy move.”
