What do smartphones, laptops, washing machines, electric vehicles, televisions, power tools, and electric toothbrushes have in common? None of them would be possible without a tiny piece of hardware that most people have never seen: a high-performance magnet made from rare earth metals.
For years, the U.S. has been happy letting China handle the complex task of mining and processing the elements that go into those magnets. But that arrangement is starting to break down.
Trade tensions between the U.S. and China have led the former to invest substantially in certain mining companies that can help it shore up a domestic supply of metals. One of those is MP Materials (MP +2.99%), and it may be the company best positioned to fill that gap.
MP controls America's high-performance magnet supply
MP operates the Mountain Pass mine in California, one of the few rare earth mines of scale in the U.S. In addition to this, it runs the Independent magnet facility in Fort Worth, Texas, where it plans to integrate mining and magnet production into a single domestic chain.
Winding haul roads at the open pit mine at Mountain Pass. Image source: MP Materials.
Two partners have helped anchor MP's current dominance in the domestic rare earth market.
One is the Pentagon. In July, it agreed to invest about $400 million in MP through preferred stock, becoming in effect its largest shareholder. It also committed to buying all the magnets produced as its new magnet plant (10X Facility) for 10 years, while also agreeing to a generous price floor for rare earths neodymium and praseodymium.
NYSE: MP
Key Data Points
Days later, Apple (AAPL +0.47%) announced a separate $500 partnership. According to the deal, MP will supply American-made magnets from its Forth Worth plant starting in 2027, while Apple will prepay $200 million.
Near term, MP looks very much like a young company trying to expand. Third-quarter earnings showed a loss and zero revenue from concentrate sales after it stopped shipments to China under the new Pentagon agreements.
Still, for investors who think the U.S. is serious about shoring up critical minerals, MP is one way to play that policy bet directly.
