THE BIG STORY

MOUNTAIN PASS, U.S. In the high desert of

Raw ore is loaded up after running Southern California, a vast open pit has become a
through a crusher at the Mountain Pass
Rare Earth Mine in California on May 9.
battleground in the global struggle for industrial
supremacy.
Giant yellow trucks are again shuttling ore from
the once-defunct Mountain Pass Rare Earth Mine --
and the revival is happening with a patriotic twist.
U.S. flag patches adorn workers’ uniforms. The
souvenir crystalline chunks of orange rare-earth
ore given to visitors proclaim “Made in U.S.A.” on
the warranty. A statement on the website of MP
Materials, the mine’s owner, reads: “Our Mission
is to restore the full rare earth supply chain to the
United States of America.”
The return of rare earths to this venerable
mining area pocked with cactuses and Joshua trees
is the product of both political and commercial
ambition. Mountain Pass is turning out essential
minerals for strategic industries from military
equipment to the devices that power the green
technology revolution.
The mine’s regeneration has received U.S.
government backing, including funding from the
Department of Defense. It is part of a Washington
plan to rebuild American presence in a metals
market forfeited to China’s lower-cost production
decades ago.
Mountain Pass’ new era is the creation of James
Litinsky and Michael Rosenthal, financiers in
their mid-40s who have known each other since
childhood. Now they are doing international deals
to supply companies such as Japan’s Sumitomo
Corp., as the worldwide race for rare-earth self-
sufficiency intensifies.

STRATEGIC
“Two hedge fund managers take over a mine
-- what could go wrong, right?” Litinsky joked to
Nikkei Asia. “But I will tell you that from day one,
we had a long-term vision. ... This was never like,

GROUND
‘Oh, we’re gonna run this for a few months and
then flip it.’ We never had that mentality. From the
very beginning, we were thinking about building a
great American company from scratch.”
MP Materials’ story highlights the complexities
How one mine in California of the U.S.-China relationship and of the mutual
is challenging Beijing’s dependencies that endure despite growing political
tensions. The U.S. company’s main customer
dominance in rare earths -- and its fourth-largest shareholder -- is China’s
state-backed, Shanghai-listed Shenghe Resources
YIFAN YU Nikkei staff writer Holding, a rare-earth miner and processor.

David Becker
All this makes the resurrection of MP’s mine
in the Mojave sands a microcosm of the world’s

Nikkei Asia - Special excerpt from July 10-16, 2023 Print edition. Nikkei Inc. No reproduction without permission.
 THE BIG STORY

The world of rare earths in 2022 (In thousands of tonnes of rare-earth oxide content, as of January 2023) Washington’s hope is that a radical change of rare-earths dream was over.

David Becker
policy will supercharge the American rare-earths Enter the Mountain Pass rescue party: Litinsky
GREENLAND
recovery. In 2021, President Joe Biden ordered and Rosenthal, both Florida-born investors. When
RUSSIA government agencies to evaluate the resilience they sat in meetings of Molycorp’s creditors
CANADA in 2014, they did not think it was the start of a
and security of the nation’s critical supply chains
and point to weaknesses. They found that U.S. journey in which they would swap their suits and
U.S.
CHINA “reliance on China for [rare-earth] raw material ties for a mining kit of dusty helmets, reflective
INDIA and magnet production” to be a key strategic safety vests and heavy boots. Litinsky, who sports
VIETNAM vulnerability. cropped brown hair and a look
BURUNDI Annual production* Biden warned Americans last of determination, was running
MYANMAR his own hedge fund, JHL Capital Matt Sloustcher,
year about “what happens when

Reuters
Reserves
THE FACT TANZANIA
THAILAND 40,000 BRAZIL we become dependent on other Group. Rosenthal, tall and MP Materials’ senior
IS THAT WE countries” for essentials such as mild-mannered, was covering vice president for
AUSTRALIA communications
CAN’T BUILD A MADAGASCAR
10,000 computer chips and key minerals. the global automotive sector
and policy.
“The fact is that we can’t build and China at New York asset
FUTURE THAT’S SOUTH AFRICA
1,000
NA 50 a future that’s made in America management company QVT
MADE IN *Estimates if we ourselves are dependent Financial.
AMERICA IF WE Source: U.S. Geological Survey
on China for the materials that The pair, who grew up
OURSELVES ARE power the products of today and together in Fort Lauderdale,
tomorrow,” he said. James Litinsky, a hedge fund partnered in not just a corporate
DEPENDENT manager and co-founder
central economic rivalry -- and of the bigger fight rescue but a metamorphosis.
ON CHINA FOR to save the planet. OUT OF THE PAST The of MP Materials. They won a battle for control of
THE MATERIALS “Rare earths and many other minerals out there Mountain Pass mine’s flagship the Mountain Pass operation by
THAT POWER are the foundation of the green transition we are role in the U.S. rare-earths push is the latest paying $20.5 million, with Litinsky and his hedge In 2022, the
seeing in China, the U.S. and everywhere,” said episode of an eventful history. The area around fund the two largest shareholders. They assembled Mountain
THE PRODUCTS
Subash Chandra, an energy analyst at New York- it first boomed in the 1860s when a “horde of a board with a strong strategic flavor. It includes Pass mine
OF TODAY AND based investment bank Benchmark Co. “And there prospectors swarmed over southern Nevada and Maryanne Lavan, general counsel of Lockheed
TOMORROW is no company you can compare MP Materials to
Nevada U.S.
southeastern California,” according to an official Martin, the U.S. defense contractor. Another
was the
Las Vegas
in the U.S.” Mountain Pass Rare Earth Mine government account. They found copper, lead, member is retired U.S. Air Force Gen. Richard source for
Joe Biden California

Rare-earth minerals increasingly drive the world
U.S. president
economy, used in devices from smartphones to
fighter jets. The magic of these lustrous but easily
tarnished metals is that they can make magnets
many times stronger than those traditionally
fashioned from iron. Without the rare-earth
elements such as neodymium, praseodymium
and lanthanum that MP Materials focuses on,
electric vehicle motors and computer hard drives
would not run.
Despite their name, most rare earths are
relatively abundant -- although they are not
always easy to extract. There are known reserves
across the world, from Burundi to Vietnam.
Some powerful countries, such as India, have big
holdings but barely tapped them last year.
China is now the world’s largest producer of
rare earths by far, thanks to its decadeslong effort
to develop the industry. Last year it accounted
for an estimated 70% of output, according to the
United States Geological Survey. China also has the
world’s largest reserves, totaling 44 million tonnes
of rare-earth oxide (REO) equivalent -- about
double those of Vietnam, Brazil or Russia.
The rare-earths story echoes that of chip
manufacturing, where Washington is also
scrambling to recover lost status. The task is, if
anything, even larger, given that the U.S. has
always retained significant capacity in advanced
chip design. For rare earths, by contrast, there was
zero production on U.S. soil as recently as 2017,
according to government figures.
By last year, Mountain Pass accounted for the
entire 14% U.S. share of world rare-earth output.
The scale is still relatively modest: U.S. rare-earth
reserves were just over 5% of China’s. The Asian
superpower also remains dominant in other
aspects of production and processing.
14%
gold, silver and zinc, before production tailed off Myers, a former chairman of the Joint Chiefs of
after World War I. Staff. Myers has said the lack of a sustainable and
The place gained a second lease of life after reliable supply of rare earths in North America
World War II with the discovery of rare-earth would “represent a single point of failure for of global rare-
oxides. The presence of europium in particular was national and economic security.” earth output
perfectly timed: The metal’s ability to emit red light Litinsky, MP Materials’ CEO, said he was Source: U.S.
made it a crucial ingredient in color televisions. As always “very bullish on the future of rare earths, Geological Survey
the visual media age exploded into life, so did the
Mountain Pass mineral extraction that fed it.
The result was that the mine became the world’s
leading source of rare earths. By 1974, it accounted China dominates global rare earth mining
(Percentage share of total production*, as of January 2023)
for 78% of global output. Then, in the mid-1980s,
100
China began to ramp up production. It pulled
Rest of the world
decisively ahead of the U.S. in the mid-1990s. 80
Mountain Pass’ decline accelerated when 60
China
a chemical waste spillage in 2002 forced it to 40
temporarily shut down. It then paused mining 20
U.S.
new ore because competition from China had
0
made it unprofitable. The mine restarted full 1960 ’65 ’70 ’75 ’80 ’85 ’90 ’95 2000 ’05 ’10 ’15 ’20
operations in the early 2010s but soon suffered Some figures do not add up to 100 due to rounding;
another blow when its parent company, China is known to have been producing rare earths since the mid-1980s, but U.S. Geological Survey data is
only publicly available from 1994 *Data in tonnes of rare-earth oxide (REO) equivalent content
Molycorp, filed for bankruptcy. It seemed the U.S. Source: U.S. Geological Survey’s Data Series 140 and Mineral Commodity Summaries

Nikkei Asia - Special excerpt from July 10-16, 2023 Print edition. Nikkei Inc. No reproduction without permission.
 THE BIG STORY
Mountain for obvious reasons now which weren’t so
Pass through apparent at the time.”
the years “I always jokingly say I made the mistake of
seeing all the assets because I couldn’t believe
Aerial photographs
of the rare-earth mine that it was just going to be wiped away,” he said.
in California, U.S. “There was tremendous value there given the
national security importance and the commercial
importance.”
Mountain Pass is a world apart from the bright
lights of Las Vegas, about an hour northeast on
the I-15 highway. During a visit on a sunny May
day, the mine was surrounded by greenery and
colorful flowers thanks to the unusually long
rains in California this year. The Stars and Stripes
fluttered alongside MP Materials’ flag, on which
two curved orange lines evoked the rocky peaks of
the facility’s elevated location.
1977
Rosenthal, MP Materials’ chief operating officer,
played host. Asked why he and Litinsky chose to
leave cushy Wall Street jobs to run a mothballed
mine in the sands, he answered pithily: “Because
no one else is doing it.”
Disused conveyor tracks and rusty cabins built
by previous owners served as a reminder of the
difficulties of running a U.S. rare-earth mine. A
single bulldozer worked the only pit, which is
about 600 feet (183 meters) deep. Piles of reddish
broken rocks lay waiting for heavy trucks to collect
them and load them into the crusher. They would
1991 then be sent to milling and flotation facilities
to turn them into powdered concentrate to be
shipped for further processing, in China.
2007
Photos courtesy
of MP Materials
Mountain Pass Rare Earth Mine
accounts for almost all rare-earth
production in the U.S.
“There’s nowhere else to send it,” Litinsky
noted. “That’s where it gets refined.”
Litinsky and Rosenthal first hired a management
team for Mountain Pass but later decided to
run the operation themselves. Employee stock
incentives and a safety record that has allowed
three years of uninterrupted operations have
helped turn a once uneconomic mine around,
Litinsky said. In 2022, the company’s revenues rose
59%, to $527.5 million, while net income more than
Getty Images
doubled, to $289 million.
LONG-TERM DISRUPTION Ramping up mine
production is just the first step that MP Materials
and the U.S. government need to take to achieve
their ambitions. The next challenge is much bigger:
building capacity to refine rare-earth concentrates
and turn them into competitively priced metals
and magnets.
“Rare earths themselves are prevalent -- they’re
not that rare,” said Tom Schneberger, CEO of
USA Rare Earth, an Oklahoma-based startup that
produces advanced magnets. “But what is difficult
is matching up the right technology, extracting
them and separating them, turning them into
saleable products that are usable -- and doing that
cost-effectively.”
The second stage of MP Materials’ strategy has
been to build the apparatus to separate and refine
some rare-earth concentrates at Mountain Pass.
The company told Nikkei during the May tour
that it would put the new processing capacity into
David Becker
A rare-earth mine at Bayan Obo Mining
District in China’s Inner Mongolia
Autonomous Region, pictured in 2011.
production in the second quarter of this year. It
said in late June it would provide an update on
progress when it announces its second-quarter
results in August.
MP Materials’ stage three project is to build
a factory to make refined rare-earth metals and
finished magnets. The company broke ground in
Texas last year on the project. It is scheduled to
start production later this year.
MP Materials’ strategy shows the scale of the
task needed for the U.S. to wrestle back control of
the rare-earths industry. Even more important than
China’s majority share of world production is its still
greater dominance further down the supply chain.
China has about 89% of the world’s separation
capacity, 90% of its refining capacity and 92% of
global magnet manufacturing, according to a U.S.
Department of Energy report published last year.
This near-hegemony has become a potent
weapon in China’s diplomatic arsenal. In 2010, it
temporarily cut rare-earth exports to Japan after
tensions rose over the Senkaku Islands, which are
administered by Tokyo but claimed by Beijing.
The suspension alarmed Japanese companies and
triggered government efforts to reduce the nation’s
reliance on China for supplies of the metals.
The threat of rare-earth restrictions reared up
again at the height of the U.S.-China trade war
in 2019. The Global Times, a Chinese state-run
newspaper, called the U.S. reliance on the minerals
“an ace in China’s hand.” It said the dependence
could be used to pressure then-U.S. President
Donald Trump.
Nikkei Asia - Special excerpt from July 10-16, 2023 Print edition. Nikkei Inc. No reproduction without permission.
Beijing has lately stepped up efforts to preserve What are rare
its dominant position in the face of U.S. moves to earths used for?
rev up its own rare-earth industry. In April, China’s
commerce and technology ministries proposed a
ban on exports of some rare-earth magnet-making
technologies.
MP Materials’ Litinsky claims not to be too
worried about the possibility of Chinese curbs
on rare-earth-related exports. His company has
“purposely avoided major buys of equipment and
technology from China for our Texas facility for this Night vision goggles
express reason,” he told an earnings call in May. Lanthanum’s main
uses are in imaging
Strained U.S.-China relations are far from the
applications, such
only difficulty facing MP Materials. For one, as camera lenses
scaling up the various elements of rare-earth and night vision
processing and magnet-making will be a big goggles. It is also
technical challenge, analysts warn. used in rechargeable
batteries.
“Techniques like fractional extraction require
longtime tests and experience,” said Leslie Liang,
senior consultant at Wood Mackenzie, a global
energy and natural resources consultancy. “[And]
any further process like metalization cannot be
established overnight.”
Competing on price with China is a further
conundrum. Wages, machinery and permits all
tend to be more expensive in the U.S. China’s Smartphone screens
rare-earths industry has also become more efficient Cerium is used in
over the years by automating refinery lines and smartphone screens
improving operational management, according to and enables energy
Wood Mackenzie’s Liang. efficiency in LED
lighting. It is also
“The problem is mining and processing is a found in cars’ catalytic
very low margin commodity [business],” said converters.
Pat Wilson, commissioner of the Department
of Economic Development in the U.S. state of
Georgia, which is trying to develop its own rare-
earths industry. “So you have this huge upfront
cost and you don’t make it back very quickly.”
Washington is trying to tilt the balance through
financial aid. In 2020, MP Materials received a $9.6
million grant from the Department of Defense
to build its light rare-earth elements separation EV motors
facilities at Mountain Pass. Neodymium and
praseodymium
Then, under a 2021 Biden administration
are used in strong
executive order, the Department of Defense in magnets that power
2022 awarded MP Materials a further $35 million. electric vehicles, wind
This was to help the company’s efforts to construct turbines and even
second-stage processing facilities such as drying mobile phones.
and roasting machines for ore at Mountain
Photos by Getty Images
Pass. The Pentagon is interested because heavy
and AP
rare-earth elements are critical for weapons and
vehicles such as missiles and submarines. The
 THE BIG STORY
WE’VE SAID
TO INVESTORS
FROM THE
BEGINNING
THAT WE
REALLY VIEW
OURSELVES AS
COUNTRY-FIRST Department of Defense did not respond to a
request for comment on this story.
CAPITALISTS More U.S. government financial support for
OR PATRIOTIC MP Materials is potentially in the pipeline. A bill
CAPITALISTS on rare earths is being discussed by Congress and
receiving bipartisan support. The law would create
James Litinsky
a production tax credit of $20 per kilogram or more
MP Materials co-founder
for rare-earth magnets made in the U.S.
MP Materials insists there is no conflict between
the U.S. government’s strategic policy aims and the
company’s commercial goals. It says it would be
profitable even without Washington’s help.
“This is a shareholder-driven public company,”
Litinsky said. “This is not a government solution.
We’ve said to investors from the beginning that we
really view ourselves as country-first capitalists or
patriotic capitalists.”
But company officials acknowledge that
Washington’s support has been very useful -- and
not just financially. The Pentagon interest helped
MP Materials build the stage two facilities in 18
months during pandemic labor shortages that
caused construction delays across the country.
“The benefits of having a Department of
Defense-sponsored project is they help with
the supply chain,” said Matt Sloustcher,
MP Materials’ senior vice president of
communications and policy. He added that
the Mountain Pass site is frequently visited by
government officials and that “one of
[their] most asked questions is:
How can they help?”
Courtesy of MP Materials
GLOBAL STAKES The tussle for rare-earths
ascendancy is much more than a U.S.-China affair.
MP Materials is seeking to deepen international
supply networks, notably across the Pacific.
In February, it announced a partnership with
Sumitomo Corp., the Japanese trading house in
which Warren Buffett’s Berkshire Hathaway has
been increasing its stake toward a maximum
9.9%. Under the agreement with MP Materials,
Sumitomo would become the company’s
exclusive distributor in the country, as Tokyo
looks to reduce its dependency on China.
“Outside the major rare-earth producing
countries, there are very few companies with a
track record of rare-earth production,” a Sumitomo
spokesperson told Nikkei. “As we looked for a
business partner, we evaluated companies based
on criteria including scale of operations. MP
Materials was at the top of the candidate list.”
Sumitomo currently relies on Chinese smelters
to extract rare-earth elements. Under the new
arrangement, MP Materials will handle not only
mining but also the smelting of ores and the
separation of various elements from them. Refined
metals will be sold to Japanese magnet makers.
The deal will supply Japan with roughly 30% of
the neodymium and praseodymium it needs.
Sumitomo is currently considering whether to
partner with MP Materials on its stage three project
to produce finished rare-earth metals and magnets.
The Sumitomo deal shows the limits as well
as the possibilities of the U.S. strategy to build
Drying and roasting machinery is used to
refine rare-earth ores for MP Materials.
Currently, this processing stage is highly
dependent on China.
its own rare-earth networks. It will be hard, if
not impossible, to completely eliminate China
from supply chains. In 2019, Japan bought 36% of
China’s rare-earth exports, with the U.S. taking
a further 33.4%, according to the Center for
Strategic and International Studies, citing Chinese
customs data.
That fundamental reliance is reflected in MP
Materials’ own China connections. The main buyer
of its unrefined rare-earth concentrate products
is Shenghe Resources, a smelting and separation
company that supplies domestic refiners. Shenghe
and its affiliates also own a stake of almost 8%
in MP Materials. Shenghe did not respond to a
request for comment.
MP’s Litinsky said there was no contradiction
between Shenghe’s shareholding and his business’s
aims -- or those of the U.S. government.
“If you are a publicly traded company, in the
United States of America, anyone can buy your
stock, anyone can own your stock,” he said.
“We do have an important mission. But you
know, we are a shareholder-driven, owner-
operator culture company where we want to make
money for investors.”
The U.S. and its allies face additional
obstacles in their attempts to build their own
rare-earth supply chains. One is the industry’s
environmental impact, a point highlighted by
the recent experience of Australia’s Lynas Rare
Earths. Lynas is the only large-scale producer of
separated rare-earth materials outside China -- it
accounts for 11% of the global market, according
to Wood Mackenzie.
Lynas is urgently setting up a plant in the
Western Australian gold mining town of Kalgoorlie
to carry out separation. The company is racing to
complete the facility, which was first announced in
2019. The need is pressing because of a Malaysian
government ruling in February that the company
should stop key activities at its facility in the
country. Kuala Lumpur cited concerns about
radiation levels in Lynas’ cracking and leaching
operations. The company said independent
scientific reviews had found its operations there to
be “low risk and compliant with regulations.”
Nikkei Asia - Special excerpt from July 10-16, 2023 Print edition. Nikkei Inc. No reproduction without permission.
David Becker
Lynas insists the Kalgoorlie plant was always Mining rare earths
intended to “complement not replace” its requires explosives
Malaysian operations, which exported to countries and heavy machinery,
making safety an issue.
including Japan and the U.S. But it admits the cost
of operating in Australia will be much higher. It
said on June 19 that labor shortages were hindering
its efforts to finish the Western Australia facility.
“If we put aside geopolitical issues, even the
pandemic has demonstrated that single-sourced
supply can be a risk in any area,” said Amanda
Lacaze, Lynas’ chief executive officer. “A singular
supply chain for rare earths is problematic,
particularly in a supply chain where the material is China
critical for success.” accounted for
Other fundamental commercial and political an estimated
uncertainties cloud the rare-earth industry
-- and these have manifested themselves in the
metals’ price volatility. Large untapped reserves 70%
of the minerals around the world remain to be of global rare-
exploited. Technological advances add to the
unpredictability of supply and demand: In March,
earth output
Tesla said it would eliminate rare earths from its in 2022
next-generation electric vehicles. Apple aims to use Source: USGS
entirely recycled rare-earth elements by 2025.
Back at Mountain Pass, not even the
management who returned the mine to life think
the U.S. will regain rare-earth hegemony anytime
soon. As with efforts to bring chip supply chains
back onshore, Washington and its allies face a long
hard quest to recover lost strategic ground.
“Let’s be clear that China dominates the rare-
earth supply chain,” Litinsky said, “and that they
will dominate it for many, many years to come.”
Additional reporting by Marrian Zhou, Mitsuru Obe,
Rurika Imahashi and Shunsuke Tabeta.