MP Materials has announced a multibillion-dollar deal with the U.S. government to increase rare earth magnet production and reduce China’s dominance in the industry. The U.S. Department of Defense will become the largest shareholder in MP, guaranteeing a floor price of $110 per kilogram for rare earths. MP will also build a new factory for magnets.

The deal aims to boost U.S. production of rare earths, essential for weapons, electric vehicles, and electronics. MP is the only U.S. rare earths mine operator, and the new factory will increase output to 10,000 metric tons annually by 2028. The price floor guarantees a higher price than the current Chinese market rate, encouraging investment in the sector.

MP Materials is investing $600 million in the expansion projects, with JP Morgan and Goldman Sachs providing a $1 billion loan for a second magnet manufacturing facility in the U.S. The DoD will purchase all output from the new facility for the next 10 years, ensuring a steady market for the company’s products.

MP’s shares surged nearly 50% after the announcement, reaching $43.95, the highest since April 2022. The stock had already doubled in value earlier in the year. The company aims to meet national security needs while maintaining a free-market approach, with plans to increase rare earth separation capabilities at its California facility.

Read more at Yahoo Finance: MP Materials seals mega rare-earths deal with US to break China’s grip