MP Materials Cautions Against Economic Viability of U.S. Rare Earth Projects

MP Materials has issued a stark warning to investors, asserting that most new rare earth projects in the U.S. lack economic viability. The company urges a measured approach, emphasizing the need to scrutinize the underlying economics before capitalizing on speculative trends. This comes amid volatile price swings in U.S. rare earth stocks, fueled by retail traders betting on imminent government deals.

The VanEck Rare Earth and Strategic Metals ETF has surged approximately 60% this year, attracting speculators anticipating a wave of national mining champions. In July, the Defense Department took a direct stake in MP Materials, establishing a price floor and securing an offtake agreement for rare earth minerals and derived magnets. The MOVE aims to reduce U.S. reliance on China, which dominates the global supply chain.

James Litinsky, CEO of MP Materials, delivered a sobering message during the company's third-quarter earnings call. "People need to be very clear-eyed about the structural economics amidst all this excitement," he said. Litinsky cautioned that the majority of promoted projects WOULD fail economically, regardless of price. Speculation, he warned, is distorting market expectations and could lead to significant losses for unprepared investors.