In a landmark move to fortify national security, the U.S. Department of Defense (DoD) has announced a $400 million investment in MP Materials—the operator of America’s sole rare earth mine—to establish a fully domestic supply chain for critical minerals. Rare earth metals, including neodymium and praseodymium (NdPr), are indispensable for advanced technologies like missile guidance systems, electric vehicles, and wind turbines. For years, China has dominated this sector by tolerating severe environmental degradation, allowing it to undercut global competitors and weaponize supply during trade disputes. Now, the Pentagon’s intervention signals a decisive shift toward self-reliance, combining financial muscle with industrial policy to neutralize a glaring vulnerability.

The Geopolitical Backdrop: How China Cornered the Market

China controls over 80% of global rare earth processing, a stranglehold achieved through what analysts term 'Geopollutical Warfare™'—leveraging lax environmental enforcement to subsidize production. As detailed in a recent New York Times investigation, Chinese refineries have long dumped toxic sludge into artificial lakes and stripped landscapes bare, circumventing costs that Western firms face under stricter regulations. This unfair advantage forced closures of mines elsewhere in the 1990s, leaving the U.S. defense and tech sectors perilously dependent. The consequences became starkly evident in 2024 when China restricted exports during U.S. tariff negotiations, threatening auto manufacturing and military readiness. As one defense expert noted:

'Free markets failed to price in environmental and security risks. China’s tactics turned rare earths into a choke point, proving that when national security is at stake, laissez-faire isn’t an option.'

Anatomy of the Pentagon Deal: Price Floors and Domestic Expansion

The DoD’s agreement with Nevada-based MP Materials is a masterclass in targeted industrial strategy. Beyond the equity investment—which grants the government a potential 15% stake via convertible preferred shares—the deal includes:
- A 10-year price floor of $110/kg for NdPr oxides, shielding MP Materials from volatile markets and ensuring stable cash flow.
- Commitments to purchase 100% of output from a new $1 billion magnet production facility (dubbed '10X') backed by financing from JPMorgan and Goldman Sachs.
- A $150 million loan to expand heavy rare earth separation at MP’s Mountain Pass mine in California, reducing reliance on China’s Shenghe Resources, previously its largest customer.

This holistic approach not only de-risks private investment but also internalizes the true cost of ethical production. Market reaction was emphatically positive: MP’s stock surged on the news, leaving the DoD’s warrants 'deeply in the money' and squeezing short sellers who had bet against the company.

Why This Matters for Tech and Security

For developers and engineers, this isn’t just a niche mining story. Rare earths are the unsung enablers of modern tech—powering everything from smartphone vibrations to AI-driven drones. By localizing supply chains, the U.S. mitigates disruptions that could stall innovation in sectors like renewable energy and quantum computing. Crucially, the deal reframes 'competitiveness' to include environmental and strategic resilience, setting a precedent for similar interventions in semiconductors or battery materials. Critics may decry it as industrial policy, but as trade tensions escalate, the era of pretending critical tech supply chains operate in a free market is over. The Pentagon’s stake in MP Materials isn’t a bailout; it’s a blueprint for reclaiming sovereignty in an age of geopolitical friction.

Source: Adapted from Doomberg's 'How It’s Done' (July 16, 2025), available at newsletter.doomberg.com.