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  1. Deals Analysis
July 16, 2020

US rare earth miner to be listed on NYSE in $1.5bn deal

US rare earths miner MP Materials has announced that it will go public on the New York Stock Exchange (NYSE) by merging with Fortress Value Acquisition Corp. (FVAC), a special-purpose acquisition corporation, in a $1.47bn deal.

By Matthew Hall

US rare earths miner MP Materials has announced that it will go public on the New York Stock Exchange (NYSE) by merging with Fortress Value Acquisition Corp. (FVAC), a special-purpose acquisition corporation, in a $1.47bn deal.

The NYSE listing would be the first for a US rare earths miner in a decade. Molycorp went public in 2010 before filing for bankruptcy in 2015, with MP Materials buying the Mountain Pass mine and other Molycorp assets in 2017.

Understanding the deal

The merger and listing on NYSE will underscore the desire for the US to boost domestic production of rare earths, which are used across a variety of industries, being critical components in rechargeable batteries for electric vehicles, computers and smartphones, and more. Some rare earth minerals are essential in military equipment, from jet engines to missile guidance systems, missile defence systems, and satellites. The US currently relies heavily on China for its supply of rare earths – a reliance the US government has been keen to reduce, as escalating tensions between the two superpowers spark fears that China could use its dominance in rare earths as leverage in a heightened trade war.

China accounts for over 95% of the world’s production of rare earths, giving it the ability to place US industry and defence in a stranglehold, should it choose. It’s been a significant concern for President Trump’s administration, who have sought avenues to boost domestic production of rare earths. In 2019, the US Commerce Department recommended the US should take urgent steps to boost domestic rare earth production, and recommend stockpiling as a short-term measure, combined with longer-term measures to explore, develop and process more rare earth minerals.

MP Material’s Mountain Pass mine in California is the only operating rare earths mine in the US and has been the subject of much interest from the federal government for that reason. The listing will be a boon to the US government and US industry as a major step in reducing the reliance on China for rare earths.

MP Materials will net around $489m from the merger and a separate stock offering with other investors. The company will use the funds to upgrade outdated processing equipment at Mountain Pass, which has held over from the Molycorp era. Currently, MP Material’s lack of processing equipment means it has to ship over 50,000 tonnes of concentrated rare earths to China each year for processing.

Executives comment on the deal

Commenting on the merger, FVAC CEO Drew McKnight said: “We believe MP Materials is a compelling opportunity to invest in an irreplaceable, world‐class asset at a point in time when demand from electric vehicles, wind turbines, and other technologies is hitting an inflexion point, and while the need to find a reliable and resilient source for rare earths is crucial for the US and global supply chain.” McKnight will serve as a member of MP Materials ’ Board following the deal.

MP Materials co-chair James Litinsky said: “This business combination and becoming a public company is a key milestone in MP Materials ’ mission to restore the full rare earth supply chain to the United States of America. Drew and the Fortress team share our vision that having a Western champion in rare-earth magnetics is essential for the onshoring of jobs, national security, and a carbon‐reduced future. To achieve our mission, we must be economically competitive and hold ourselves to the highest standards for the benefit of our investors, employees, communities, country, and the environment.”

Mountain Pass overview

In the Californian desert sits the only rare earths mine in the US – no other rare earth operation has broken ground in the country. Mountain Pass has a long history, discovered in 1949 and owned by The Molybdenum Corporation of America – later Molycorp – for most of its history. Between 1965 and 1995, Mountain Pass supplied most of the rare earths consumption worldwide.

MP Materials , a venture majority-owned by two US companies, acquired the mine after Molycorp declared bankruptcy. A Chinese holding company, Shenghe Resources Holding , maintains a 10% stake in MP Materials , which has been a cause of concern for US government officials looking to use Mountain Pass as the starting point of US rare earths operations. In 2019, following the decision by the Chinese government to double import duties on rare earth concentrates to 25%, MP Materials said it would start its own domestic processing operation.

Related Companies

Verdict deals analysis methodology

This analysis considers only announced and completed deals from the GlobalData financial deals database and excludes all terminated and rumoured deals. Country and industry are defined according to the headquarters and dominant industry of the target firm. The term ‘acquisition’ refers to both completed deals and those in the bidding stage.

GlobalData tracks real-time data concerning all merger and acquisition, private equity/venture capital and asset transaction activity around the world from thousands of company websites and other reliable sources.

More in-depth reports and analysis on all reported deals are available for subscribers to GlobalData’s deals database.

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