Why the Pentagon is moving fast into US rare earths
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In a decisive shift from decades of free-market orthodoxy, the US Department of Defense has taken a direct equity stake in MP Materials, the largest rare earth mining company in the country. The $400 million investment marks the first time the Pentagon has purchased ownership in a publicly traded firm to strengthen mineral security. The deal grants the government a 15 percent equity position in MP Materials, board observation rights, and a guaranteed offtake agreement for neodymium-praseodymium oxide used in magnet production.
While government contracts are common in defense supply chains, direct ownership is highly unusual. It reflects growing concern within national security circles about long-term access to rare earths, materials essential for weapons systems, electric vehicles, wind turbines and smartphones. With China refining more than 85 percent of global rare earths, the US is now committed to reshoring strategic mineral production.
Securing a domestic mine-to-magnet supply chain
MP Materials’ integrated strategy centers on the Mountain Pass mine in California. Once dormant, the mine now produces nearly 16 percent of the world’s NdPr supply. The Pentagon’s investment will help accelerate MP’s “10X” magnet plant, expected to be fully operational by 2028 with a 10,000-ton annual capacity.
The plant will handle the entire process, from oxide to alloy to finished magnet, within US borders. The Department of Defense also issued a $150 million loan to expand heavy rare earth separation, critical for missiles, aircraft and naval propulsion systems.
With this funding, the Pentagon aims to cut China out of the rare earth magnet supply chain. Currently, firms such as China Northern Rare Earth and Shenghe Resources dominate the global market.
Strategic and economic rationale
The deal includes a 10-year price floor of $110 per kilogram for NdPr oxide, offering MP a guaranteed buyer and predictable revenue. That buffer protects the company from commodity price swings that have historically driven US rare earth firms into bankruptcy.
Markets responded immediately. MP Materials’ stock rose more than 40 percent after the announcement, reflecting investor optimism and broader confidence in reshoring efforts.
This deal fits within a larger policy pivot. US industrial policy, once sidelined in favor of market-driven economics, is making a return in strategic sectors. The Pentagon is applying tools similar to those China has long used, public capital, long-term planning and state-supported supply chains.
Implications for US industrial policy
Government ownership of a strategic supplier would once have sparked controversy. Today, it is seen as a response to geopolitical necessity. Industrial capacity has dwindled across sectors, and rare earths represent a textbook case of overreliance on foreign sources.
Critics question whether taxpayer money should underwrite commercial ventures. Others warn of market distortions. Yet the alternative, a supply chain dominated by a strategic competitor, has proven too risky.
This approach could expand beyond rare earths. Lithium, cobalt and graphite are already being evaluated for similar interventions. The shift in thinking is less about ideology and more about resilience.
The Pentagon’s stake in MP Materials is a signal of structural change in how the United States views its role in securing industrial capacity. While public equity positions in private firms were once reserved for crisis moments, the rare earth sector now serves as a proving ground for long-term, strategic intervention.
The deal is likely to prompt reevaluation across other segments of the critical minerals market. Investors, developers and policymakers will be watching to see whether similar approaches, guaranteed demand, targeted capital, and government involvement can close gaps in refining, alloying and component manufacturing.
Success, however, depends not only on funding, but on execution across multiple dimensions. Workforce readiness, permitting timelines, and technological scalability will all shape whether domestic supply chains become viable at the scale required. In a sector long defined by volatility and foreign dominance, predictability may prove to be the most valuable outcome this public-private partnership delivers.
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