In a show of the US government’s commitment to developing the domestic critical materials industry, the US Department of Defense (DoD) and MP Materials (MP) announced a comprehensive financing and off-take agreement.

The agreement between the DoD and MP provides security for the long-term operation and expansion of the Mountain Pass operation and associated processing facilities after the termination of mineral concentrate shipments to China earlier in 2025.

The expansion of NdFeB magnet production capacity to 10ktpy at both the Independence facility in Texas and the new magnet facility (“10X”) would make MP the largest NdFeB producer outside the Chinese market once ramped up, with the company targeting a 2028 commissioning timeframe.

The agreement provides a cash injection to MP in the form of US$400M in a newly issued class of convertible preferred shares and a US$150M loan to finance an expansion of heavy rare earth processing capabilities at Mountain Pass. In addition, warrants were issued to facilitate future cash injections.

Furthermore, the agreement has put in place measures to support MP’s ability to secure additional funding for its growth plans. For current and near-term operations, the agreement provides a US$110/kg price floor for Nd–Pr products for a 10-year period beginning in Q4 this year, where the DoD will compensate MP for the difference between benchmark Nd–Pr prices and US$110/kg, for all volumes sold or stockpiled.

For the magnet facility, the DoD is effectively acting as a 100% off-taker, with any production not procured by the DoD itself to be sold into the commercial market.

Here, the DoD has also implemented an effective floor, guaranteeing a US$140M EBITDA plus a 2% annual escalator for the 10X plant at capacity. For all these funding terms, the DoD has structured in price and earnings participation to the upside.

Technical hurdles do lie ahead for MP, however, as it expands its NdFeB product range to meet US consumer requirements. Nevertheless, the support from the DoD and other financial institutions potentially unlocks the development of additional rare earth processing and magnet production projects around the world.