In July, I pointed out the “most important IPO in emerging technology.”
It’s now been a month since this company went public. And investors are up 200%.
That’s just the start.
MP Materials Corp. (NYSE: MP) completed its reverse merger with Fortress Value Acquisition Corp. in mid-November. As expected, this was a big deal.
The company was able to quickly add $500 million to its balance sheet without much attention.
To recap, MP Materials is a rare earth metals mining company. In fact, its mine produces 15% of the entire world’s supply for these hard-to-pronounce metals.
Lanthanum, Neodymium and others classified as rare earths power some of the hottest products and companies in the market.
These metals are used in advanced electronic components, wind turbines and most importantly, electric vehicles.
On Tuesday, I told you how EVs are going to pressure copper supplies for the next decade and beyond. Their effect on rare earths is just as crucial.
Domestic EVs to Drive RE Prices
When I first broached this subject back in July, I noted that we simply wouldn’t have the likes of Tesla without rare earths.
Next-gen batteries, no matter if you’re talking about lithium-ion or solid state, require rare earths. The magnets in these batteries depend on these metals for both efficiency and longevity. There’s just no getting around it.
But here’s the problem. As Apple and other smart-device makers can attest, the only supply for these metals comes from China.
Source: MP Materials Investment Presentation
MP’s CEO James Litinsky recently compared this to oil in the Middle East. Prior to the boom in fracking, he notes, the world-over was dependent on Middle East oil.
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That’s China for rare earths. Litinsky said, “When you think about petrol states like Saudi Arabia, the new ‘electrostate’ is China.”
I think that’s a profound idea. From smart phones to electric vehicles, the world depends on Chinese mining companies. By opening up the mine at Mountain Pass, CA, MP Materials is the equivalent of what fracking did for oil.
Just as political tensions in the Middle East have been high for as long as anyone can remember, relations with China are becoming hot.
The Trump tariffs got all the headlines these past few years. But new rules regarding Chinese companies trading on U.S. exchanges, cybersecurity threats and more have begun splashing headlines of late.
And it is about the only issue both sides of our political aisle agree on. China is an economic threat.
Joe Biden has flatly said that he isn’t “going to make any immediate moves” on Chinese tariffs. And even when he does make any moves, his options are limited.
China has since signed the world’s largest trade deal. It includes 14 countries… but not the U.S.
So, as a pure geopolitical necessity, MP’s rare earth production goes from a nice domestic business to absolutely strategic.
This is certainly a driver for decades for the newly-public company. But for investors, right now, it has its own.
Mining isn’t cheap. And mining in California isn’t easy. But in the time since MP acquired Mountain Pass, it has already turned it into a profitable dynamo.
The company just did an exceedingly rare thing; it came to market after producing stable profits. And in just its most recent quarter, it saw its bottom line jump 159%.
That’s before the injection of new money it just received last month. And that’s crucial.
As noted back in July, beyond just mining rare earths, China also dominates the processing of them. That’s true for MP’s production too. At least for now.
During the most recent quarter, MP Materials completed the engineering design for its Stage II optimization. This optimization is one of the most massive projects in the mining world.
Production is one thing. But bringing a large, stable source of rare earths to the U.S. requires a huge investment in refining, separating and expanding to meet capacity.
Stage I was the production. Stage II is the refining and separating of ore. That’s where the company is at. With this new infusion of capital, it is already beating its estimates.
Stage III is to expand this process to become the main supplier for domestically-made EVs and advanced magnetics.
That’s huge. And it suggests a far higher stock price than $32.
The company may have tripled in a month. But this one still has only clear skies above it. It remains the most important IPO in emerging technology.
To your prosperity and health,
Joshua M. Belanger
Executive Publisher & Founder