…the Defense Department must have already been quietly negotiating with MP Materials to build a new magnet factory.
This is big news, on a very critical topic. I don’t recall other cases of the US buying stock and warrants - make a comment if I’m forgetting other cases. This situation may be special because it’s so important for national security.
Note: As I was reviewing this, I just heard another breaking news story today, 7/11. Here is a quick overview from Ai:
“A new rare earth mine, the Brook Mine, is opening in Wyoming, marking the first new coal mine in the state in decades and the first new rare earth mine in the United States in over 70 years. The mine, developed by Ramaco Resources, is located near Ranchester and is expected to produce rare earth elements crucial for various technologies and military applications”
screenshot is from breaking Fox News
Market Watch wrote about the MP Materials deal yesterday, July 10th. The day before, July 9th, MP stock went through the roof when the company announced that the Defense Department, which has agreed to loan them $150 million to build a new magnet factory, and buy $400 million worth of stock in the company.
Here’s a screenshot of the stock action on July 9th:
Specifically, the US is buying “newly issued preferred stock, which will be convertible into common stock, and a warrant to purchase additional common shares” to boost domestic magnet production.
It’s all about rare earth elements (REEs) and especially the importance of magnets alloyed with rare earth minerals. I wrote about it in Red Alert:
“Neodymium (neo) magnets, which are part of the rare earth magnet family, are popular for their extreme strength in a compact size and weight…Neo Magnets are the strongest magnets in the world – the higher the grade, the stronger the pull force of the magnet.”
“Four major automakers are racing to find workarounds to China’s stranglehold on rare-earth magnets, which they fear could force them to shut down some car production within weeks”
“Wind turbines and generators require very strong permanent magnets. Rare earth magnets, like neodymium magnets, are used in some of the largest wind turbines in the world. These magnets, made of neodymium, iron and boron, are the strongest type of commercially available permanent magnet. Neodymium magnets provide efficient electricity generation. They're used in wind-turbine designs to reduce costs, improve reliability, and lower the need for expensive maintenance.”
“MP Materials said the U.S. government will emerge as its largest shareholder with 15% of its stock as it works to build its new 10X Facility at a yet-to-be-announced location. The company, which bills itself as “America’s only fully integrated rare earth producer,” plans to open the magnet manufacturing plant in about three years and update its existing mine in Mountain Pass, Calif…JPMorgan Chase & Co.” emphasis mine - point being that this isn’t going to happen overnight - we’re still way behind China.
There’s private money in this too: JPM and Goldman Sachs “have pledged $1 billion in financing for building the…Facility.”
“The company will use the money to expand its existing rare earths separation and processing capabilities, as well as its existing location in Mountain Pass, Calif., it said.”
Here’s more, from an earlier, April article in Market Watch, which was a response to China’s restrictions on exports of rare earths - they have been relaxed during negotiations since then, but the threat remains:
“Rare earths have a wide range of technological uses. They are crucial components of smartphones, spacecraft, electric cars and medical devices such as magnetic resonance imaging machines.
Heavy rare earths, in particular, are “absolutely vital for our defense,” ... They’re used in F-35 fighter jets, submarines and Tomahawk missiles…
The F-35 combat aircraft requires more than 900 pounds of rare-earth elements, while an Arleigh Burke DDG-51 warship requires 5,200 pounds, and a Virginia-class nuclear-powered submarine needs 9,200 pounds, according to the U.S. Department of Defense.”
