MP Materials Says They’re Our Fastest Path To Re-Establishing The American Rare Earths Supply Chain

Rare earth elements (REEs) are a hot topic right now, since they’re in high demand for defense and high-tech applications, but almost entirely sourced from China. There’s stiff market and government pressure to break the U.S. free of China’s stranglehold over these vital minerals. In an earlier article, I highlighted the current state of play and potential paths forward. One company I mentioned in that piece, MP Materials of Mountain Pass, California, claims to offer our best and fastest path toward domestic production of these vital metals.

MP Materials is privately held by affiliates of two U.S. investment advisers, JHL Capital Group LLC of Chicago and QVT Financial LP of New York City, with Leshan Shenghe Rare Earth Co. Ltd. of Shanghai holding a 9.9% non-voting share.

That minority ownership stake by a Chinese firm has led to unfortunate disinformation about the company. For example, there was a recent report by The Japan Times that the U.S. Department of Energy (DOE) had instructed its scientists not to work with the company because of that affiliation. But that report is false. “The Department of Energy does not have a policy ‘blacklisting’ MP Materials,” said DOE spokeswoman Jess Szymanski. “To say so is inaccurate and a mischaracterization of the Critical Materials Institute Interim Director’s comments. The research and development of rare earth elements and collaboration with industry in this area remain high priorities for DOE.”

One part of MP’s claim that is indisputable is that they’re the only existing domestic extractor of REEs. Their Mountain Pass mine is indeed the sole American rare earths source currently in operation. MP has been operating it since 2017, and produces a rare earth concentrate product that amounts to in excess of 36,000 tons of rare earth oxide equivalent per year (or 15% of world rare earth market demand). The mine first opened in 1952 and was a strong domestic producer throughout the second half of the 20^th century, but overseas competition and ever-increasing regulatory hurdles forced its closure in 2002. The mine was reopened about a decade ago by an investor-led company, Molycorp Inc., but they went bankrupt in 2015 as a result of operational challenges and subsidy-supported REE price undercutting by China.

Now MP says they’ve got the answer to profitability. “We have an 8% concentration of REEs in our ore, one of the highest in the world,” said Jim Litinsky, MP’s Chairman. “We are the second largest producer in the world today (and largest outside of China), and, even with all China is doing, we’re still profitable. We’ve already proven that we’re a stable, economic source of supply.” The company currently has some 200 employees working at the Mountain Pass mine.

Having that domestic REE source has become an ever-greater priority in the past year. Chinese President Xi Jinping hinted at banning exports of REEs to the U.S. in May 2019 as retaliation for the trade war. More recently, China’s bad behavior and multiple supply chain problems related to the coronavirus crisis fueled a growing chorus calling for U.S. trade decoupling. For REEs specifically, China’s threatening behavior has led to both Congressional mandates as part of their defense reauthorizations, and administrative guidelines via Presidential Determinations, to source the critical metals from more reliable partners.

But the REE sourcing situation serves as a microcosm of our overall supply chain for manufactured goods, and the reality is that decoupling will take years (if we even have the wherewithal to make it happen at all). “A multi-billion dollar supply chain doesn’t move overnight,” Litinsky pointed out. While MP is indeed the only game in town for existing domestic extraction, the fact is that right now, 100% of the REEs they mine are sold to China, where they are further processed, refined and manufactured into critical high-tech products such as magnets and batteries. The reason for that is simple: there is no existing domestic capability for that post-extraction production.

MP is already working to address that situation. The former Molycorp assets they purchased at Mountain Pass included REE separation equipment, which is used to divide the intermingled multiple elements into individual REE components. Those systems as originally designed didn’t operate economically. Litinsky pointed out that in this case, technical know-how flowed into the U.S. rather than out of the country thanks to their Shenghe partnership. As a result of that collaboration, the systems are being upgraded to perform competitively. The company’s current goal is to have that part of the operation up and running by the end of 2021. At that point, as a Trump administration policy aide pointed out for my earlier article, the front end of the supply chain is secured.

Meanwhile, the company is moving forward with plans to build another plant to further refine the separated REEs into refined metals. It’s MP’s eventual goal to produce magnets domestically as well.