MP Materials CEO warns investors to approach rare earth projects with caution

Pentagon backed Multi-Purpose Materials this week warned investors to approach other rare earth projects with caution, citing the difficult economics of the sector.

Shares of US rare earth companies have fluctuated sharply in recent months as investors bet the Trump administration could make more deals in line with the landmark deal it signed with MP. Small retail traders get involved in stocks VanEck Rare Earths and Strategic Metals ETF It increased by 60 percent this year.

The Department of Defense took a stake in MP in July, setting a price floor for the company and signing a sales agreement with the rare earth miner and magnet maker in a bid to roll back China’s dominance in the sector.

CEO James Litinsky said he didn’t want “people to get burned” amid speculation. Litinsky warned investors to be “very careful about what the real structural economics are amid all the excitement.”

“The vast majority of the projects introduced today will not work at almost any price,” Litinksy said on the company’s third-quarter earnings call Thursday evening.

Litinsky said MP sees himself as “America’s national champion.” MP is the only active rare earth miner in the US and has offtake agreements with it. Apple And General Engines In addition to the Pentagon.

“We have a structural advantage because we are fully integrated vertically,” the CEO said. “We are years and billions ahead of others.”

Top rare earth producers have taken years to increase and stabilize their production and economies “despite what some supporters suggest,” Litinksy said. He said Lynas in Australia lasted about a decade and MP would reach normal production in about three years from the start of commissioning.

“The White House is not ruling out other deals related to equity stakes or price floors like we did with MP Materials, but that doesn’t mean every initiative we take will be in the form of an MP deal,” a Trump administration official told CNBC in September.

Litinsky described the rare earth industry as close to a “structural oligopoly,” a system with only a few major players. The government’s investment in dozens of facilities and businesses does not necessarily establish a supply chain, he said.

Litinsky said the Trump administration should continue to encourage the flow of private capital into the industry through loans, grants and other support. He said there was room for “many other players and supplies” but that the market would need “materially higher prices” for the sector’s structural challenges to change.

“If $X of capital can spur two or three X’s in private equity, they should do that as much as possible,” Litinsky said.

The CEO stated that he sees MP as a pioneer that will, over time, help create the conditions for a broader market that is not dependent on China.

“In the very short term, the administration ensured that we had a successful national champion as an MP,” Litinsky said. he said. “If you then try to understand how broader supply is coming online, we will kind of pave the way.”

Rare earths are crucial to making magnets, which are essential inputs in U.S. weapons platforms, semiconductor manufacturing, electric vehicles, clean energy technology and consumer electronics. Beijing dominates the global supply chain and the United States is dependent on China for imports.