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American Rare Earth Elements Producer MP Materials

The date of: 2020-07-20
viewed: 4
American Rare Earth Elements Producer MP Materials Is Going Public And Raising $500 Million In Growth Capital


As I’ve covered extensively in previous articles, rare earth elements (REEs) are a hot topic these days. As critical components in crucial high-tech applications from electric vehicles to wind power to defense technologies, demand for REEs appears to be on the rise for the foreseeable future. But currently the U.S. is almost 100% reliant on China for the finished-product magnets and batteries REEs go into, as well as for a majority of REE ore extraction.

MP Materials is the front-running U.S. option for bringing the REE supply chain back to our shores. They’re currently the sole extractor in America, with their mine in Mountain Pass, California, providing about 15% of total world REE concentrate demand. This week the company announced a merger with Fortress Value Acquisition Corp., a special purpose acquisition company sponsored by an affiliate of Fortress Investment Group LLC. When the merger is completed (which is anticipated in the fourth quarter of this year), the combined company will be named MP Materials Corp. and will be listed on the New York Stock Exchange under the new ticker symbol MP.

The transaction includes a $200 million fully committed common stock private Investment in public equity (PIPE) deal at $10.00 per share, anchored by Slate Path Capital, Chamath Palihapitiya and Omega Family Office. The combined company will have an estimated post-transaction equity value of approximately $1.5 billion, with over $500 million in net cash to fund its growth strategy.

That strategy remains the same as what I covered in an article about MP Materials last month. “There’s no change in our mission,” said Jim Litinsky, the current Chairman of MP Materials who will serve as CEO of the post-merger combined company. “We intend to restore the American rare earths supply chain.” The company is in the midst of upgrading the REE separation equipment in the on-site processing plant it acquired along with the Mountain Pass mine in 2015, with a goal of re-starting those systems by 2022. After that their plan is to build another plant to further process the separated REEs into refined metals, with an eventual goal to produce magnets domestically as well. “We’re methodically making that happen,” Litinsky said. “This deal helps us move toward those goals.”

The deal also brings more talent to bear on those objectives, with former Chairman of the Joint Chiefs of Staff General Richard Myers and former Omnicom Group CFO Randy Weisenburger both joining the new company’s Board of Directors.

One thorny issue I reported on last month that will be put to rest by the merger is the minority ownership stake in MP Materials by Chinese company Leshan Shenghe Rare Earth Co. Ltd., whose 9.9% non-voting share of the company led to disinformation and criticism. “It’s fair to say this transaction will silence those critics,” Litinsky said. “We’re becoming a transparent public company, with a world-class Board of Directors.”

While the new funding and structure may not accelerate the company’s efforts to reshore REE product manufacturing, Litinsky remains happy with MP’s direction and with the additional resources the merger brings to the tasks. “This is a multi-year journey – you don’t move a whole multi-billion dollar supply chain overnight,” he said. “I’m proud of the American, free-market solution we’re bringing to the challenges our country has.”

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