DOD Pumps $400 Million into MP Materials: Strategic Jackpot or Subsidized Illusion?
What a difference a day makes.
MP Materials MP 0.00%↑ has once again positioned itself at the center of U.S. rare earth ambitions, this time with a $400 million investment from the Department of Defense that makes the Pentagon its largest shareholder. This isn't just another grant or supply deal—this is the U.S. government placing a long-term bet on a company with a chequered past, a technically ambitious future, and a balance sheet that’s starting to show strain.
The deal includes preferred equity, warrants, and offtake agreements for neodymium-praseodymium (NdPr) magnets to be produced at MP’s upcoming “10X” facility, targeted for 2028. There’s also a guaranteed floor price of $110 per kilogram for NdPr oxides over a 10-year term, which acts as a backstop against market price volatility. Clearly, Washington is hedging against Chinese export restrictions—but the question is whether MP can actually deliver on the scale and sophistication demanded by a domestic “mine-to-magnet” supply chain.
A Company with Nine Lives
The story starts in the Mojave Desert at Mountain Pass, California, home to one of the richest rare earth deposits ever discovered. This mine was a global leader during the Cold War era but went dormant in the 1990s due to environmental violations and falling prices. Molycorp brought it back online in 2007 with big promises but even bigger capex. The company went public, built a costly separation plant, and filed for bankruptcy by 2015. That was the end of Molycorp but not of Mountain Pass.
In 2017, a group of distressed debt buyers, including JHL Capital and QVT Financial, acquired the mine out of bankruptcy for $20.5 million. They called the new entity MP Mine Operations LLC and sold a minority stake to China’s Shenghe Resources to get the operation running again. By 2020, MP Materials had gone public through a SPAC merger that raised over half a billion dollars, and Shenghe’s involvement—though still contentious—gave it a guaranteed buyer for its concentrate.
Since then, MP has gone through several stages:
Restarting concentrate production (Stage I),
Building out separation capacity (Stage II),
And now preparing to manufacture magnets (Stage III).
Each stage comes with exponentially higher complexity and capital intensity. So far, the company has delivered on the first. The second is in progress. The third is just beginning.
Market Performance and Strategic Momentum
From a market perspective, MP rode the post-COVID commodities wave hard. By 2022, it was booking $527 million in revenue and $289 million in net income. Rare earth prices were flying, demand was strong, and investors bought the narrative that MP could be America’s rare earth solution.
That momentum has cooled. Prices for rare earth oxides have fallen sharply, and MP’s 2023 revenue was cut in half. Net income nearly disappeared, and free cash flow turned negative as capital expenditures for downstream expansion ramped up. Despite maintaining output of over 45,000 tonnes of REO concentrate, the company began consuming more of it in-house, lowering third-party sales volumes. That’s the price of vertical integration.
However, it's not all downhill. The company began shipping separated NdPr oxide from its Texas facility in 2024, generating modest but symbolically significant revenue from finished product. It also deepened relationships with General Motors, Saudi Arabia’s Ma’aden, and now the Department of Defense. The strategic value of what MP is building appears to outweigh the near-term losses.
Production Profile: Still a Concentrate Play (For Now)
MP Materials produced 42,413 tonnes of REO in 2021, 42,499 tonnes in 2022, and approximately 45,455 tonnes in 2023. This output accounted for roughly 15% of global supply, making it a major player in volume—though not yet in value-added product.
Separation capacity came online in late 2022. NdPr oxide production began in earnest in 2023 and reached 1,294 tonnes on an annualized basis in 2024. However, that’s still far short of MP’s goal to produce over 5,000 tonnes per year by 2026.
Magnet manufacturing, the crown jewel of the “mine-to-magnet” plan, is just getting underway. The Texas facility has produced small volumes of NdPr metal but hasn’t yet shipped magnets at scale. Full commissioning is expected in late 2025, with the 10X facility targeted for 2028.
Profitability and Risk
The early years post-SPAC looked solid on paper. Adjusted EBITDA hit $388.6 million in 2022. Margins were strong, capex was limited, and the company had over $1.2 billion in cash. That picture changed quickly. By Q4 2023, MP booked a $16 million net loss and reported adjusted EBITDA of just $102 million for the full year. By mid-2024, the company reported a $65.4 million net loss year-to-date, including $22.3 million in Q2 alone.
Revenue from NdPr oxide shipments in early 2024 totaled just $5.2 million, illustrating how early the downstream business still is. Meanwhile, the cost structure ballooned due to hiring, R&D, commissioning delays, and the ramp-up of multiple facilities simultaneously.
Cash levels remain relatively healthy—$759 million at last check—but the burn rate is high. The DoD’s $400 million investment plus a $150 million loan facility will help finance downstream expansion, but they also raise questions about dilution and long-term return on capital.