To The Moon

$MP Materials Corp.(MP)$

In a world increasingly defined by competition over critical resources, the U.S. government has just made a bold bet on securing its future in one of the most strategic sectors of all: rare earth elements. MP Materials, America’s largest producer of rare earth metals, recently secured a $400 million government-backed loan to expand its domestic processing capabilities — a move hailed by policymakers as a milestone in reducing dependence on Chinese supply chains.

For investors, the headline is as intriguing as it is reassuring. With Washington effectively endorsing MP Materials as a linchpin in the national strategy for clean energy, defense, and advanced manufacturing, does this make the company a safe play in an otherwise volatile sector? Or is the rare earth market still too risky, even with the government’s stamp of approval?

This article explores MP’s latest windfall, the strategic implications of rare earth independence, the economics and risks of the rare earth sector, and what investors should consider as they weigh the promise — and perils — of betting on America’s rare earth champion.

MP Gets $400M: Strategic Bet on National Security

On June 30, MP Materials announced it had secured a $400 million loan commitment from the U.S. Department of Energy’s Loan Programs Office (LPO) under the Advanced Technology Vehicles Manufacturing (ATVM) loan program. The funds will support the development of MP’s facility in Fort Worth, Texas, where it plans to produce permanent magnets — a critical component for electric vehicle motors, wind turbines, and defense systems.

This isn’t the first time the government has extended support to MP. In 2022, the Department of Defense awarded MP a $35 million contract to enhance its processing capabilities at Mountain Pass, California — the only active rare earth mine and processing facility in North America.

The latest loan marks a significant escalation, signaling just how serious Washington is about building a fully domestic rare earth supply chain. As Deputy Energy Secretary David Turk put it, “Rare earths are the oil of the 21st century, and we cannot afford to rely on geopolitical adversaries for our most critical materials.”

Why Rare Earths Matter — And Why MP Is Critical

Rare earth elements (REEs) are a group of 17 metals that are indispensable to modern technology. Neodymium, praseodymium, and dysprosium — among others — are used in the permanent magnets that power everything from EV motors to missile guidance systems.

Despite their name, rare earths aren’t actually rare in the earth’s crust — but they are difficult to extract and process economically and sustainably. For decades, China has dominated global production and refining of rare earths, controlling an estimated 70–80% of global output and virtually all of the processing capacity.

That dominance became a glaring strategic vulnerability when, in 2010, China temporarily restricted rare earth exports during a diplomatic dispute with Japan. The episode was a wake-up call for the U.S. and its allies, underscoring how dependent they were on Chinese supply.

MP Materials’ Mountain Pass mine — once the world’s largest — is America’s only significant producer. But until recently, MP still sent its concentrate to China for final processing. The new Texas facility is designed to change that equation, creating a vertically integrated, end-to-end domestic supply chain.

Does Government Backing Make It Safe? Not So Fast

On its face, the government’s endorsement of MP seems to de-risk the investment. After all, few companies enjoy such direct alignment with national security and industrial policy priorities.

By providing cheap, long-term capital, the government helps MP accelerate its expansion while cushioning its balance sheet. That should reduce financing risk and enable the company to scale more quickly and competitively.

But “safe” is a relative term in the world of commodities — and rare earths are no exception. The sector is still characterized by boom-bust cycles, driven by volatile demand, unpredictable Chinese supply actions, and challenging environmental and regulatory hurdles.

Moreover, government support does not guarantee profitability. In fact, some critics warn that public subsidies can lead to overcapacity and lower returns, particularly if global demand growth lags optimistic forecasts.

The Economics: Attractive But Cyclical

MP posted solid financials in recent quarters. In Q1 2025, the company reported revenue of $121 million and net income of $38 million, with adjusted EBITDA margins above 50%. The company’s low-cost position at Mountain Pass and premium pricing for REE concentrates have supported strong cash flows, enabling it to fund much of its expansion from operations.

Yet, prices for rare earths have softened from their 2022 peaks, reflecting easing supply chain bottlenecks and slower EV sales growth in China. Neodymium and praseodymium oxide prices have declined roughly 15% year-over-year, pressuring margins.

Long-term, the demand outlook remains bright, driven by electrification, renewable energy, and defense needs. But in the near term, investors should brace for continued price volatility, particularly as new supply from Australia and other regions comes online.

Competitors And Global Dynamics

MP may be the U.S. champion, but it is not without competition. Australian producers like Lynas Rare Earths and emerging U.S. players like Energy Fuels are also expanding production and processing capacity.

China, meanwhile, remains a wildcard. Beijing has already announced new export restrictions on gallium and germanium and could theoretically extend such measures to rare earths in a geopolitical standoff. Such a move could boost prices — but also disrupt global supply chains in unpredictable ways.

The European Union and Japan are also investing heavily in rare earth independence, meaning MP will eventually face competition not just abroad but potentially at home, as allied partners develop their own capabilities.

Market Sentiment: Optimism Tempered By Caution

On Wall Street, analysts remain cautiously optimistic on MP Materials. The stock trades around 18x forward earnings, reflecting confidence in its dominant position and growth trajectory but also pricing in some execution risk.

In the past three months, analysts have trimmed earnings estimates modestly to reflect lower spot prices, but most maintain “buy” or “overweight” ratings, citing the government support and long-term demand trends.

Institutional investors have generally held or added to positions in 2025, but short interest has ticked up slightly, suggesting that not all market participants are convinced the rare earth story can deliver near-term upside.

Valuation: Not Dirt Cheap, But Not Excessive

At current levels, MP’s valuation sits in the middle of its historical range. The stock trades at roughly 10x EBITDA, compared to a five-year average of around 9–12x. On a price-to-earnings basis, it is more expensive than traditional miners but cheaper than many technology-linked materials plays.

The premium reflects MP’s unique strategic position, high margins, and growth potential — but also means investors are paying up for a company that remains exposed to commodity price swings.

Verdict: Hold — With a Watchful Eye

For long-term, risk-tolerant investors, MP Materials remains a worthy “hold” at current levels. The company’s dominant U.S. position in rare earth production, its low-cost operations at Mountain Pass, and now, its $400 million in government-backed funding make it a strategically valuable asset in a world that is steadily prioritizing resource independence.

However, a “buy” call today would require more confidence in rare earth pricing resilience and in MP’s ability to execute its downstream integration and expansion plans without hiccups — at a time when commodity prices are soft and competition is intensifying.

On the other hand, a “sell” would seem premature given its unique strategic moat, strong balance sheet, and clear alignment with U.S. industrial policy.

🔷 Bottom line: Hold for now. Accumulate on weakness if prices pull back meaningfully below historical valuation multiples, or if rare earth pricing stabilizes. Watch for Q3/Q4 execution milestones and global price signals to reassess.

Conclusion: Takeaways For Investors

MP Materials’ $400 million government-backed loan is a clear signal that Washington sees the company as central to U.S. industrial policy and national security. That backing de-risks some of the company’s financing and underscores its importance in a world where critical minerals are increasingly strategic.

For investors, the key takeaways are:

✅ Government support helps, but doesn’t eliminate risk. Rare earth prices remain volatile, and MP will still need to execute flawlessly on its ambitious plans.

✅ Long-term demand is strong, but near-term pricing may remain soft. Investors should have a multi-year horizon and tolerance for cyclical swings.

✅ Valuation is reasonable for a strategic asset. The stock is neither a bargain nor a bubble at current levels.

✅ Competition is coming. MP’s first-mover advantage may narrow as global rivals ramp up production.

✅ Diversification is prudent. MP may fit well in a portfolio as a small, high-risk, high-reward position — but it is not yet a “safe” core holding.

In short, MP Materials remains one of the most compelling ways to play the rare earth theme — but investors should remember that even government-backed bets on critical resources come with no guarantees. As always, patience, discipline, and a clear-eyed view of the risks are essential.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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