MP Materials to build a rare earth refinery in Saudi Arabia

MP Materials (MP) has established itself at the forefront of the Trump administration's push to accelerate rare-earth production the United States in order to cut into China's dominance.

This was evident when the Nevada-based company entered into a 10-year public-private relationship with the Department of Defense (DoD) in July to accelerate rare earth mining in the U.S.

The Defense Department also 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.

This investment made the DoD the largest shareholder of MP Materials, cementing the company's place in the hierarchy of the White House's rare-earth strategy.

But now, working again in partnership with the DoD, or the Department of War (DoW), MP Materials will be taking its manufacturing business far outside of America's borders.

The company announced on Wednesday that it will be working in a joint venture with the Saudi Arabian Mining Company (Maaden), the country's flagship mining company, to develop a rare earth refinery in Saudi Arabia. The Defense Department is a partner in the venture.

The agreement was reached during the visit by Saudi Arabia's Crown Prince Mohammed bin Salman to the White House this week.

Goldman sees a long runway of growth for MP

MP said in a press release announcing the joint venture that building the rare earth refinery in Saudi Arabia will be a "pivotal step toward rebalancing the global rare earth supply chain and aligns with U.S. economic and national security interests."

The company noted that there is "significant untapped rare earth resource potential" that exists in Saudi Arabia. The refinery will process rare earth feedstock that will be used for US and Saudi Arabian manufacturing and defense sectors and will also be marketed to allied nations.

“We are honored that the U.S. government asked MP to partner on a project of this magnitude and importance for America and its allies,” James Litinsky, founder and CEO of MP Materials, said in a statement.

“By combining MP’s technical expertise with the strategic vision of the U.S. Department of War and Maaden’s capabilities and scale, the pieces are in place to fundamentally strengthen and diversify the supply chain.”

According to Litinsky, the agreement "will be beneficial to MP and our industry, and it further aligns U.S. and Saudi interests," while demonstrating how MP's "fully integrated platform can project U.S. industrial capability abroad."

MP Materials and the Defense Department will hold an equity position of about 49% in the joint venture, with Maaden holding a position of no less than 51%.

The US contribution to the venture will be fully financed by the Defense Department.Shares of MP gained 8.6% on news of the deal.

But before the latest gain, three of the biggest names in the US rare-earth sector, USA Rare Earth (USAR), Ramaco Resources (METC) and MP, had seen their stocks drop 45% collectively over the past month, as Barron's noted.

The stocks had surged after China tightened exports of rare earth materials during the summer, with investors seeing it as beneficial to the fortunes of domestic manufacturers that suddenly became more critical to the supply chain.

But after the US and China eased their trade tension, and Beijing loosened its rare-earth export restrictions, the stocks suffered a pull back among investors.

Nonetheless, Goldman Sachs analyst Brian Lee initiated coverage of MP on Wednesday with a Buy rating and a price target of $77, calling the company "a strategic US supply chain asset with growth through decade-end."