MP Materials is in the middle of a hard pivot: away from selling rare earth concentrate into China-linked channels and toward producing separated NdPr (the key magnet ingredient) and ultimately finished magnets in the U.S. In July 2025 the company ceased all sales to China , and in Q3 its rare earth concentrate revenue fell to zero . That’s the “break with the past.”
This pivot would normally be brutally risky for a miner, because you’re giving up near-term cash flow while commissioning complex processing and manufacturing. What makes MP investable (or at least different) is that the U.S. Department of War (DoW) has effectively stepped in to underwrite part of the downside and anchor returns, as long as MP executes.
The investment question is no longer “where will NdPr prices go?” so much as:
Can MP execute a multi-step industrial buildout and turn a mine into a reliable manufacturing platform?
1) What MP is today
MP has two main pieces:
- Materials (Mountain Pass, CA): mining + processing into refined rare earth products. This is where MP produces NdPr oxide, the key input to high-strength permanent magnets.
- Magnetics (Independence, TX): downstream production. Today it sells magnetic precursor products (inputs on the way to finished magnets), and it plans to make sintered NdFeB magnets.
In Q3, the Materials segment produced 721 metric tons of NdPr and sold 525 metric tons, at a realized price of $59/kg .
2) The pivot: from “selling concentrate” to “selling separated NdPr and magnets”
Historically, MP sold most of its concentrate into China-linked refining demand. The company now describes that demand as constrained to a limited number of refiners, “a significant majority of which are based in China” .
Then came the key move:
- July 2025: MP ceased all further sales of its products to China and will not extend the Shenghe offtake when it expires January 2026 .
- Q3 2025: concentrate revenue is $0 ; REO sales volume is zero .
That is a self-inflicted revenue hole, by design. Management is choosing to push more material through its own separation system and downstream chain instead. The 10-Q admits the cessation had “a material negative impact” in the short term .
This is what mining investors should recognize as a classic “value chain upgrade”: you give up easy volume today for harder, higher-value products tomorrow.
3) The big change: DoW contracts that reshape the economics
A) Price Protection Agreement (PPA): a floor under NdPr
Think of the PPA as a price-floor contract on NdPr products.
- It starts Oct 1, 2025 and runs through Dec 31, 2035 .
- Each quarter, MP can “designate” NdPr volumes as:
stockpile (produced but not sold), affiliate/internal sales, or third-party sales . - If the benchmark NdPr price is below $110/kg, DoW pays MP the shortfall per kg on designated volumes .
- Once the future “10X” magnet facility reaches full production, if benchmark prices exceed $110, MP pays DoW 30% of the amount above $110 .
For a miner, low commodity prices can kill a buildout. This structure is meant to keep MP funding and operating through low-price periods, while it builds separation, heavy capability, and magnets.
Important accounting note: MP will record the quarterly PPA benefit as “price protection agreement expense (income)” in operating income/expense, not as sales revenue . So reported revenue can look “meh” even while economics improve.
B) The 10X magnet offtake: a guaranteed profit floor for a new plant
DoW also signed a magnet offtake agreement tied to MP building a second magnet plant (“10X Facility”).
- DoW buys all magnets produced at 10X unless it allows third-party sales .
- DoW pays production costs + a guaranteed profit amount, and it guarantees at least $140 million of EBITDA per year after the plant reaches full production, rising 2% per year for inflation .
- (EBITDA is a “cash-like” profit measure before interest and some accounting charges.)
- DoW pays quarterly: 25% of that annual threshold, with an annual true-up .
- If MP sells to third parties after full production, DoW takes the first $30m of profit above the threshold, then 50% beyond that .
- DoW also assists with procuring heavy rare earths and reimburses working-capital costs for stockpiling heavies through commercial operation date .
This is closer to a “project with a contracted return” than a typical cyclical mine expansion. But it’s not free upside: the contract shares upside meaningfully.
4) Early evidence the downstream build is not just talk
The Magnetics segment has started generating revenue from precursor products:
- Q3 Magnetics revenue (precursor products): $21.9m
- These sales commenced in Q1 2025 under the long-term GM supply agreement
MP also signed a long-term Apple agreement:
- Apple agreed to $200m of milestone-based prepayments (no revenue recognized yet as of Sept 30)
The relevance for investors: these are real commercial anchors for a new manufacturing operation—especially important because magnet ramp-ups are usually where timelines slip and capital gets wasted.
5) Balance sheet: plenty of cash, but not “no strings attached”
As of Sept 30, 2025:
- Total cash, cash equivalents, and short-term investments: $1.94b
- MP recorded a “price protection agreement upfront asset” of $221.1m , reflecting the contractual economics of the PPA .
But the DoW financing also came with equity claims:
- Series A preferred convertible into 13.32m shares at $30.03 and a warrant for 11.20m shares at $30.03; together they represent 15% of shares outstanding as of July 9, 2025 (before issuance) .
So: MP has a war chest, but upside is partly shared, economically through contracts and structurally through the cap table.
The investment thesis (mining/materials framing)
Thesis 1: MP is trying to “de-commodity-ize” rare earths
Miners typically live on spot prices. MP is trying to move its earnings base toward contracted economics:
- A $110/kg floor on designated NdPr volumes
- A $140m annual EBITDA floor on the 10X plant post-milestone
If you believe the contracts will function as intended, MP’s downside sensitivity to NdPr collapses relative to a pure rare earth producer.
Thesis 2: The real prize is margin stack ownership (magnets), not NdPr alone
NdPr oxide is still a commodity-ish input. Finished magnets are an engineered product with higher switching costs and long customer qualification cycles. MP has already started precursor sales , and the Apple prepayment structure is designed to fund part of the build .
If MP executes, it stops being “a mine with a processing plant” and becomes “a domestic magnet supplier with internal raw material advantage.”
Thesis 3: MP becomes a hub that other projects must plug into
A recurring pattern in materials is that the bottleneck earns rents. Outside China, there are limited scaled routes from ore → separated products → magnet manufacturing. MP is attempting to be that route, and the DoW agreement explicitly pushes MP to build more downstream and heavy capability .
Over time, that can create optionality: third-party feed, recycling, heavy separation, things that don’t show up cleanly in near-term earnings but matter strategically.
What could go wrong (the real bear case)
This is not primarily a “NdPr price goes down” bear case—because the PPA is designed to mitigate price risk .
The true bear case is execution and build complexity:
- Commissioning risk: separation and magnet manufacturing are finicky; yields and quality can lag.
- Cost creep: capex and ramp inefficiency can eat returns, even with a price floor.
- Contract friction: upside sharing limits how much “blue-sky” you get; and government contracts can constrain flexibility.
- Dilution/claims: preferred + warrants + shared upside means common equity is not the only claimant on success .
Bottom line
MP is not a “simple rare earth miner” anymore. It is deliberately walking away from the old China-linked concentrate model and replacing it with a more complex but potentially more valuable structure: separated NdPr + U.S. magnet manufacturing + government-backed price/return support .
Investment Gems 
Leave a comment