The Pentagon has launched a $1 billion buying spree to stockpile critical minerals, aimed at securing supply chains amid growing geopolitical tensions.

The Pentagon has launched a $1 billion buying spree to stockpile critical minerals, aimed at securing supply chains amid growing geopolitical tensions.

The Pentagon has launched a significant initiative to secure critical mineral supply chains, investing $1 billion to stockpile essential materials. This move is driven by growing geopolitical tensions and the need to bolster domestic production capabilities. The focus is on rare earth elements, which are crucial for defense technologies and electric vehicles.

One of the key players in this strategy is MP Materials (NYSE: MP), a rare earth mining and processing company. The Pentagon has invested $400 million in MP, acquiring a 15% equity stake and extending a $150 million low-interest loan. This investment includes a 10-year offtake agreement for MP’s magnet production, ensuring a floor price of $110/kg for NdPr oxide, which is nearly double the current Chinese market price .

The Pentagon’s investment is part of a broader effort to reduce reliance on Chinese imports. MP Materials has also secured a significant deal with Apple (NASDAQ: AAPL) to supply rare earth magnets for Apple’s devices. This $500 million agreement, which includes a $200 million prepayment, underscores the growing demand for domestic rare earth production .

MP Materials’ stock has surged in response to these deals, climbing from around $15 in January to the mid-$70s recently, and hitting an all-time high near $82 in August. The stock’s performance reflects investor enthusiasm and the strategic importance of securing a domestic rare earth supply chain .

Despite the company’s rapid growth, MP Materials remains in an investment phase and continues to report losses. However, the Pentagon’s investment and Apple’s offtake agreement are expected to drive profitability by 2026, as higher-margin magnet sales ramp up .

Analysts are cautiously optimistic about MP Materials’ prospects, with a "Moderate Buy" consensus and an average 12-month price target of ~$65–$70. The stock’s valuation is rich, trading at 25× forward sales, but many analysts argue that the strategic importance of MP Materials justifies a premium .

In summary, the Pentagon’s $1 billion buying spree is a significant step towards securing critical mineral supply chains. MP Materials, with its strategic partnerships and government backing, is poised to play a pivotal role in this effort.