Last week, we reported on the Department of Defense’s $400 million investment in MP Materials, a rare earths producer, and the related off-take agreement designed to secure critical materials for US supply chains.
To get an industry perspective, Proactive spoke with David Merriman, who leads Rare Earth Research at Project Blue, a consultancy focused on this sector.
Merriman highlighted that MP Materials’ plans to expand production of neodymium-iron-boron (NdFeB) magnets to 10 metric tons per year at its Texas Independence facility.
And a new magnet plant, dubbed “10X”, would make it the largest producer of these magnets outside China once fully operational.
NdFeB magnets are essential components in everything from electric vehicles to military hardware.
A key feature of the agreement is a price floor for neodymium-praseodymium (Nd-Pr), two rare earth elements critical to magnet production.
Starting in the fourth quarter, the Department of Defense guarantees a minimum price of $110 per kilogram for these materials over a decade. If market prices fall below this, the DoD will compensate MP for the difference, covering all volumes sold or stockpiled.
The DoD has also committed to purchase 100% of the output from the 10X magnet plant, with any unsold production available for commercial sale.
Importantly, the agreement guarantees MP a minimum annual operating profit (EBITDA) of $140 million for the 10X plant at full capacity, increasing by 2% each year.
Merriman notes that this structure allows MP to benefit if prices or earnings exceed these minimums.
For instance, Namibia Critical Metals (TSX-V:NMI, OTCQB:NMREF) has a partnership with the Japanese government agency, JOGMEC, Japan's Organization for Metals and Energy Security.
NMI is developing one of the largest deposits in the world of the heavy rare earths, Terbium and Dysprosium. The Lofdal project is shovel-ready and fully permitted with a 25-year mining license and all environmental permitting.
Darrin Campbell, CEO of NMI says that the recent announcement on the DoD’s investment in MP Materials and providing a floor price of NdPr for 'ex-China supply' is a "fantastic development for the sector".
“We hope that this strategy will extend to the even rarer heavy rare earths Terbium and Dysprosium,” he said.