The Pentagon has made a landmark move by investing $400 million in MP Materials, becoming the largest shareholder in the only U.S.-based rare earth mining company. This investment, through the purchase of preferred stock convertible to common shares, gives the Department of Defense a roughly 15% stake in MP Materials, surpassing the holdings of company founder James Litinsky and major institutional investors like BlackRock. The announcement led to a dramatic surge in MP Materials’ stock price, with shares jumping as much as 60% in premarket trading.

MP Materials operates the Mountain Pass mine in California, the only active rare earth mine in the United States. Rare earth elements such as neodymium and praseodymium are crucial for manufacturing high-strength magnets used in advanced military systems, including F-35 fighter jets, Tomahawk missiles, and Navy submarines, as well as in electric vehicles and wind turbines. The U.S. has long relied on China for these minerals, with China supplying about 70% of American rare earth imports and controlling 90% of global refining capacity.

The Pentagon’s investment is part of a broader strategy to reduce U.S. dependence on China for critical minerals, especially after recent Chinese export restrictions caused significant supply chain disruptions. The deal includes a 10-year offtake agreement for all magnets produced at a planned new facility, with a price floor of $110 per kilogram to protect MP Materials from market volatility caused by Chinese overproduction. The new magnet plant, expected to be operational by 2028, will further strengthen the domestic supply chain.

This funding mechanism is unprecedented for the Department of Defense, marking the first time the Pentagon has used an equity investment tool to support a strategic minerals project. The move is seen as a significant step in advancing American industrial policy and ensuring the security of supply for materials vital to both national defense and emerging technologies.