MP Materials sees rare earths supply struggling to keep up with demand

Sep. 27, 2022 3:53 PM ETMP Materials Corp. (MP)LYSCF, ILKAF, ILKAYBy: Carl Surran, SA News Editor10 Comments

Wheel loader unloading sand into mining truck at the open pit

Maksim Safaniuk/iStock via Getty Images

MP Materials (NYSE:MP), the owner of the Mountain Pass rare earths mine in the U.S., is confident in the outlook for rare earths demand despite a recent pullback in prices, UBS analyst Dim Ariyasinghe said Tuesday following a call with the company.

MP Materials (MP) believes rising demand will more than accommodate both mine expansions and new projects over the next decade, especially outside China, with supply struggling to keep up with demand, the analyst said.

"While the company did acknowledge there would be challenges in the expansion downstream (and in particular with Stage 3), it was also quick to highlight that its objective of developing a fully integrated domestic rare earths supply chain generally held bipartisan policy support, with MP highlighting the positive news flow from the recent passing of the Inflation Reduction Act in the form of various tax concessions," Ariyasinghe wrote.

Along with the IRA, MP (MP) highlighted several other government initiatives to help support the sector, including the company's own $35M contract through the U.S. Department of Defense for the processing of heavy rare earths, the U.S. government's continued support for Lynas' (OTCPK:LYSCF) heavy earths separation facility in Texas and the Australian government's support for Iluka's (OTCPK:ILKAY) $1.2B rare earths refinery, Ariyasinghe said.

MP Materials (MP) is "a cash flow machine with phenomenal FCF margins," Andrei Ovidiu Gheorghe writes in a bullish analysis published on Seeking Alpha.

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