MP Materials' stock tanks on 'misleading' policy shift report

MP Materials (MP) has become one of the most prominent names in the rare earth industry, a sector many investors might have known very little about at the beginning of last year.

The critical minerals gained much greater media coverage when Beijing cut off rare earth exports in April as retaliation for President Trump’s "Liberation Day" tariffs. This created a significant problem for US and its allies since China controls nearly 90% of the global production of rare earths.

In fact, China mined 270,000 metric tons of rare earths in 2024, compared to just 45,000 tons in the U.S.

Although Beijing relaxed some of the more extreme export restrictions after negotiations with the Trump administration, it has kept them in place for the US military, which relies on rare earth materials for building missile guidance systems and other tools. Rare earths are also the key building block of modern tech, powering everything from electric vehicles and semiconductors to robotics.

In the fallout from its trade dispute with China, the Trump administration has aggressively sought to ramp up domestic production of rare earth materials, which led to MP Materials entering into a 10-year public-private relationship with the Department of War (DoW) to accelerate rare earth mining in the U.S.

As part of the agreement, the DoW has agreed to purchase $400 million of a newly-created series of the MP Material’s preferred stock, which is convertible into shares of the company’s common stock.

There is also an option to purchase additional shares of the company’s common stock.

This investment makes the DoW the largest shareholder of MP materials.

Price floor comes into question

However, Reuters reported last week that the White House was "stepping back from plans to guarantee a minimum price for U.S. critical minerals projects," which "marks a reversal from commitments" that it had made to the industry.

According to Reuters, citing three people who were in the meeting, Trump officials told US mineral executives in a closed-door meeting that the projects they are working on "would need to prove their financial independence without government price support."

Audrey Robertson, assistant secretary of the U.S. Department of Energy and head of its Office of Critical Minerals and Energy Innovation, reportedly told the executives the the administration was "not here to prop you guys up."

US mining companies have pressed the White House for price floors in order to compete with China. A manufacturing price floor is a government-mandated minimum price set above the market equilibrium for goods, aimed at ensuring producer profitability by protecting industries from low-price competition.

MP Materials' stock fell 4.7% after the article was published. It fell another 5.4% on Friday and has sunk nearly 16% over the past five trading sessions.

But the company refuted the article by Reuters in a post on X, calling it "inaccurate, misleading, and inconsistent with the facts," which has "repeatedly mischaracterized government policy and caused unnecessary confusion in the marketplace."

"MP Materials has a binding, long‑term agreement with the U.S. Department of War that remains fully in force, including the Price Protection Agreement executed last year," the company said. "There has been no change whatsoever to our contract or to the government’s obligations under it.

"Any implication that the U.S. government has retreated from its commitments to MP Materials is simply false."

In a follow-up post, MP Materials accused Reuters of having "stealth-edited" the story by including a sentence indicating that the shift in policy "would guide future deals and does not affect MP's price floor, which the government agreed to as part of an investment package last July."

USA Rare Earth entered into a non-binding letter of intent (LOI) last week with the US Commerce Department in conjunction with the Department of Energy (DOE) that will include approximately $300 million in federal funding and a $1.3 billion loan.

The Commerce Department will also take 16.1 million shares of common stock and 17.6 million stock warrants, giving the US government a 10% stake in the company.