The Pentagon is taking a big stake in a rare earth mining company, sending the stock up 60%

• MP Materials Corporation surged as much as 60% on news that the Defense Department is taking a stake.
• The company owns and operates the only rare earth mine in the US in Mountain Pass, California.
• The DoD has agreed to purchase $400 million of its preferred shares.

The move: MP Materials Corp surged as much as 60% on Thursday, jumping to $48.01.

The rare earth materials company is still up 188% year-to-date.

Why: The United States Department of Defense has agreed to purchase $400 million of the company's newly created preferred shares, making the Pentagon MP's largest shareholder.

The preferred shares can be converted into common stock, and the Department is also buying a warrant that will give it the ability to buy more of MP's common stock in the future. As of July 9, the Pentagon's total investment would represent a roughly 15% stake in MP Materials.

The move follows an announcement from Interior Secretary Doug Burgum, who highlighted the need for the Trump administration to make equity investments in critical mineral companies to reduce dependence on Chinese imports.

"We have to get back in the game," he stated. "It's not just drill, baby, drill. It's mine, baby, mine. If we don't do that as a country, we will not be successful. We will literally be at the mercy of others that are controlling our supply chains."

MP Materials said in a statement released on July 10 that it believes this public-private partnership with the DoD will "dramatically accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency."

What it means: This Pentagon decision shows that the White House is following Burgum's advice and doubling down on its efforts to strengthen the domestic critical mineral supply chain.

MP Materials isn't a household name, but it plays a key role in the US minerals market. As the owner of the country's only operational rare earth mine, it offers rare exposure to a commodity that the Pentagon is extremely interested in.

While the Trump administration has prioritized decreasing America's dependence on China, the stake in MP Materials is also about more than that. Rare earth minerals are crucial for many areas of technology, including electronics, defense systems, and robotics.