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Why MP Materials Stock Popped 9% Today

By Rich Smith – Dec 9, 2021 at 5:40AM

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Rare-earth magnets: Soon, they may no longer all be made in China.

What happened

Shares of MP Materials (MP 2.06%) exploded higher Thursday morning, up 8.8% as of 9:50 a.m. ET, after the rare-earth metals miner announced plans to build a factory for rare-earth magnets in the United States. The company also said it has signed a long-term agreement to supply General Motors (GM 1.92%) with magnets for its electric vehicles (EVs).  

Rare earth magnets in various shapes.

Rare-earth magnets. Image source: Getty Images.

So what

MP Materials plans to build its first rare-earth magnets factory in Fort Worth, Texas, and to supply it with raw materials from its mine in Mountain Pass, California.

Production is due to begin in 2023, gradually ramping up in scale until MP can produce 1,000 tons of neodymium-iron-boron (NdFeB) magnets annually, sufficient to supply 500,000 EVs. As the company evolves from a miner of metals into a value-added manufacturer of magnets (and an alternative to magnets produced in China), the factory will also become the headquarters for its MP Magnetics division.

Now what

MP did not provide as much detail on its supply agreement with General Motors, noting only that GM is contracting with it to supply magnets needed to build the motors for more than a dozen models. But MP did hint that GM might not be its only customer for magnets, saying: "MP Materials' Fort Worth facility will consume less than 10% of the 6,075 tonnes of NdPr [neodymium-praseodymium] oxide MP Materials expects to produce annually at Mountain Pass. The company envisions building additional alloy and magnet capacity in the future to consume a greater percentage of its primary production and supply growing U.S. demand."

This speaks both to the company's ambition to grow its magnet production, and to the eventual addition of other auto companies to buy all of those magnets, helping MP achieve the astounding 66% long-term annual earnings growth that Wall Street has set for it.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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