Monsters of Rock: Crazy US government rare earths deal puts rocket under sector

• US DoD will spend billions to bankroll and subsidise oxide and magnet production from US rare earths miner MP Materials
• Deal includes price floor of US$110/kg NdPr – as much as double Chinese market prices
• Could provide Western price incentive for delayed mine developments and M&A: Canaccord Genuity

America’s Department of Defense has stunningly intervened in the rare earths market, promising a floor price of US$110 per kg for NdPr oxide and billions in investments to bankroll a magnet production line operated by New York listed MP Materials.

It’s a unique shift in the free-market ideology that has governed the American business community for decades, with the Trump Admnistration and Pentagon playing at China’s game by heavily subsidising the rare earths industry in the face of its strategic competitor’s market supremacy.

MP owns the Mountain Pass mine in California, the only light rare earths producer in the United States.

Previously it exported much of its material to China to be processed by Shenghe Resources, a major players in the rare earths market in the Middle Kingdom. Sales to China are no longer taking place.

Under the deal the DoD will enter a 10-year agreement to sell and stockpile rare earths with a US$110/kg price floor, around double the price of NdPr oxide in China – the jurisdiction which has previously set market prices with over 80% of the supply chain based in the Communist powerhouse.

That move could genuinely support a bifurcated market that could see Western markets support incentive pricing to build ex-China operations.

“Overall, we expect the deal to be a positive for the rare earth industry outside China broadly resulting in the imposition and adoption of floor prices for critical rare earths coupled with tariff regimes to enforce them,” analysts at Adamas Intelligence said.

“Although elevated prices may prompt some end-users to explore alternatives, this shift will free up rare earth supplies for mission-critical sectors like robotics, aerospace, and defense, ensuring availability in a future marked otherwise by constrained global supply.”

JPMorgan and Goldman Sachs will provide US$1bn of finance to support a magnet facility MP is operating to boost production to 10,000t after commissioning in 2028, while MP also expects to receive the proceeds of a US$150m loan from the DoD to expand its heavy rare earth production capabilities at Mountain Pass.

Heavy rare earths are almost entirely dominated by China, and were the subject of export controls that have hurt US automakers in the midst of a tariff cold war between Trump’s America and Xi Jinping’s China.

Strategic shift

The US government will now have skin very much in the game, purchasing $400m of convertible stock with a conversion price of US$30.03/sh, which once exercised will make the DoD the company’s largest shareholder with a 15% stake.

“The DoD’s role here isn’t isn’t about meeting it’s own demand, it’s about catalysing the build out of US manufacturing at scale to serve the broader US economy,” MP boss James Litinsky told analysts on a call on Thursday.

“It marks not just a milestone for, but a model for what’s possible when the public and private sectors come together with a shared purpose.

“We hope this milestone serves as a catalyst for continued collaboration, combining American ingenuity with sustained leadership from Washington to rebuild one strategic supply chain at a time.”

Analysts at Canaccord Genuity cautioned the broader implications of US government funding was yet to be fully understood.

But they argue the news was positive for rare earths, saying the floor price included in the deal could represent “the first step toward pricing bifurcation”.

China has previously been able to keep a lid on prices by lifting domestic mining and refining quotas, with NdPr oxide surging as high as US$173/kg in early 2022 before crashing to ~US$50/kg last year.

The metals are critical for modern technologies like EVs, wind turbines and robots, as well as drones, military tech, aerospace and aviation, highlighting why the US DoD is so concerned about securing its own supply chain.

CG said range-bound China pricing has been a handbrake on rare earths developers.

“We have previously highlighted that many RE development projects in the pipeline have NPV breakeven prices of >US$80/kg NdPr but we now note that the potential development of ex-China pricing could unlock financing avenues, and potentially enhance offtake/strategic investment,” the broker said in a note from Reg Spencer, George Gianarikas, Katie Lachapelle and Tim Huff.

“Moreover, the requirement for ex-China sources of heavy RE’s could boost the strategic/M&A value of advanced development projects that offer heavy RE production potential.”

Aussie project developers are now calling on the Australian Government to roll out similar measures, including the development of domestic magnet manufacturing supported by price floors.

“This is a potential big win for low capex, low-opex projects around the world,” said Rob Rutherford, the managing director of Queensland focused Red Metal (ASX:RDM).

Red Metal owns the Sybella project, a unique granite hosted rare earth deposit near Mt Isa it believes will be amenable to cheap heap leach processing methods.

“We are very confident our Sybella project will SING at this NdPr floor price.

“It is now up to other manufacturing nations like South Korea, Japan, Europe and even Australia to invest in expanded magnet capacity with REO supply guaranteed with similar price flooring mechanisms.

“I strongly believe the Australian Government should jointly fund and build magnet plants in these resource-poor manufacturing nations, government to government, on the provision they utilise Australian raw REO materials.”

ASX moves

The news lit a fire under Aussie rare earths stocks today, after a 51% lift for MP in New York overnight, enriching shareholders including Aussie iron ore magnate Gina Rinehart.

Fellow Rinehart-backed Lynas (ASX:LYC), which failed to nail a merger for MP last year, was over 17% higher.

The owner of the world’s largest ex-China rare earth operation at Mt Weld in WA also has agreements with the US DoD to develop light and heavy rare earths separation plants in Texas.

A Lynas spokeswoman would not be drawn on whether the company had discussed similar arrangements with the US Government.

“Lynas does not comment on other companies’ business,” she said. “Lynas continues to engage productively with the DoD with respect to our planned Texas facility.”

Its quarterly report and investor call will take place on July 24.

The $9bn Aussie miner, which became the first commercial scale producer of separated heavy rare earths outside China last quarter with the production of dysprosium and terbium oxide from its Kuantan plant in Malaysia, was not the only rare earths hopeful on a tear on Friday.

Locksley Resources (ASX:LKY), which owns the Mojave project just 1.4km from Mountain Pass, a potential source of rare earths and antimony, was close to 30% higher. Dateline Resources (ASX:DTR), which is exploring for rare earths at the 1.1Moz Colosseum gold mine within 10km of MP, rose 11% to continue its strong 2025 run.

Over in Brazil, where a number of juniors are promoting clay hosted deposits which could be brought online cheaper and quicker than hard rock mines like MP and Mt Weld, poster child Meteoric Resources (ASX:MEI) was up 16% to 14c.

Brazilian Critical Minerals (ASX:BCM), owner of the Ema project, ran 20% higher while Viridis Mining and Minerals (ASX:VMM) was up 15% and Hancock-backed Brazilian Rare Earths (ASX:BRE) was around 7.5% higher.

Aussie-focused explorers outside Lynas drew less interest, but a handful of mid-sized players were on the up, with Iluka Resources (ASX:ILU) – which will benefit from Western market pricing to justify its Canberra-backed Eneabba refinery – 23% higher, Arafura Rare Earths (ASX:ARU) more than 5% stronger, Australian Strategic Materials (ASX:ASM) up more than 10% and Northern Minerals (ASX:NTU) 10.3% higher.

Explorer Heavy Rare Earths (ASX:HRE) was up ~14%.

The ASX 300 Metals and Mining index fell 0.22% over the past week.

Which ASX 300 Resources stocks have impressed and depressed?

Making gains 

Iluka Resources (ASX:ILU) (mineral sands/rare earths) +22.9%

Lynas (ASX:LYC) (rare earths) +17%

Vulcan Steel (ASX:VSL) (steel) +15.9%

Liontown Resources (ASX:LTR) (lithium) +13.6%

Eating losses 

Northern Star Resources (ASX:NST) (gold) -12.9%

Ora Banda (ASX:OBM) (gold) -10.6%

Capstone Copper Corp (ASX:CSC) (copper) -10.4%

Emerald Resources (ASX:EMR) (gold) -9.8%

Iluka and Lynas were powered by the MP Materials news, while Liontown lifted after the official opening of its Kathleen Valley lithium mine.

Northern Star was the biggest faller among the ASX 300 Metals and Mining stocks, after a negative reception to its FY25 production numbers and FY26 guidance, which came in with higher than expected costs and capex.

At Stockhead, we tell it like it is. While Red Metal, Locksley Resources, Heavy Rare Earths and Brazilian Critical Minerals are Stockhead advertisers, they did not sponsor this article.