Lynas Rare Earths and Iluka Resources soar after rival MP Materials strikes Pentagon deal

The Pentagon has signed a multi-billion dollar deal with MP Materials and investors are betting this will be a shot in the arm for WA companies Lynas Rare Earths and Iluka Resources.

MP Materials welcomed a new number one shareholder after the United States’ Department of Defense agreed to acquire more than $606m of its stock and inked an offtake agreement to buy MP’s Californian production of rare earth materials at a set minimum price.

The price floor has been set to break China’s near-total control of the supply chain for rare earth elements, which are minerals needed to build the magnets that power military equipment like precision-guided missiles and fighter jets.

As part of the deal, Las Vegas-based MP will also build a second magnet factory in the US, with another currently under construction.

China’s market control over the end-product magnets has distorted prices of rare earth elements and given the Middle Kingdom a powerful bargaining chip over its biggest geopolitical rival.

New York-listed MP’s stock soared more than 50 per cent on the announcement and it had a ripple effect on local Australian producers and hopefuls during Friday trade.

Shares in Lynas finished 16.7 per cent higher and Iluka’s stock surged 22.9 per cent, with investors seemingly excited the Trump Administration has an appetite to buy rare earth production at a premium price, and that a new magnet factory could potentially take in some of Australia’s output.

It is particularly good news for mining billionaire Gina Rinehart, who has added more than $400m to her net worth in the space of 24 hours owing to major stakes in MP and Lynas.

Lynas has operations in WA and Malaysia with ambitions to build a rare earths refinery in Texas.

It secured a $US288 million commitment from the US Department of Defense under the Biden Administration, but there has been little progress in developing the refinery.

The Amanada Lacaze-led Lynas has run into wastewater permitting issues at the Texas site and wants the US taxpayer to foot the bill for a cost blowout — the scale of which has not been disclosed.

MP and Lynas were previously in takeover talks but they fizzled out in 2024.

Iluka, meanwhile, is developing the Eneabba rare earths refinery near Jurien Bay and as part of its $1.65 billion funding deal with the Australian Government has strict restrictions imposed on Eneabba’s future output being sold to China.

A raft of ASX-listed rare earths juniors like Arafura Rare Earths, Hastings Technology Metals, Northern Minerals, and Brazilian Rare Earths, the latter of which Mrs Rinehart also has a chunky stake in, made gains on Friday.

Like the US, Australia is keen to break China’s rare earth stranglehold. The Federal Government has plans to build its own critical minerals stockpile centred around rare earth elements.

Speaking on Thursday in the Goldfields, Federal Resources Minister Madeleine King said the plans to build the $1.2 billion stockpile were progressing but details over which minerals will be included have yet to be determined.