James Litinsky made a $100mn wager in 2015 on the distressed debt of a flailing pure assets firm.
His wager has now paid off spectacularly, after Donald Trump’s administration thrust the group to the centre of the US technique to counter China’s dominance in crucial minerals. Shares in Litinsky’s MP Supplies surged 48 per cent final week after the Pentagon agreed to take a $400mn, 15 per cent fairness stake in MP Supplies and purchase its output for 10 years at double the present market worth. The rally handed Litinsky a $200mn enhance to his private wealth, and introduced the group’s inventory to a three-year excessive.
The bizarre association alerts the Trump administration’s dedication to restoring home provide chains for 17 parts essential to defence and nationwide safety applied sciences — and a brand new strategy to deliver enterprise sensibility to the work of defending US pursuits.
“This seems to be fairly distinctive,” mentioned Invoice Greenwalt, former under-secretary of defence for industrial coverage within the George W Bush administration. “Often, the US authorities is reactive in making any funding within the personal sector.”
The uncommon earth parts are crucial to the manufacture of highly effective magnets utilized in every part from missile steering and satellite tv for pc communications to stealth coating. They’re important for US weaponry, together with the F-35 Lightning II fighter jet, unmanned Predator drones, nuclear submarines, Tomahawk missiles and bombing programs utilized by a number of branches of the armed forces. Additionally they have functions in civilian applied sciences resembling electrical autos, wind generators and smartphones.
The Pentagon didn’t reply to a number of requests for remark. Litinsky declined a request for an interview, and an organization consultant declined remark.
China accounts for 70 per cent of world manufacturing and 85 per cent of world processing of whole uncommon earth oxides, in response to Benchmark Minerals. And Beijing has repeatedly reduce off uncommon earth provides in periods of diplomatic rigidity with shopper nations, most lately in April. Each the Biden and Trump administrations have made reshoring uncommon earths a strategic precedence.
Litinsky grew up in Florida, with 4 brothers who he says “taught him how you can battle.” A ticket-scalping outfit in highschool was amongst his early endeavours, in response to a podcast he launched in April. After graduating from Yale, he labored at Allen & Co and Fortress Funding Group earlier than launching his Chicago-based hedge fund, JHL Capital Group, in 2006.
One wager concerned shorting financial institution shares throughout the monetary disaster. But it surely was the plunge in power costs in 2014 that despatched Litinsky trying “for infants within the bathwater”, which led him to pure assets group Molycorp and Mountain Go, its mine on the distant jap fringe of the Southern California desert.
Mountain Go was the world’s largest producer of uncommon earths within the Seventies and 80s. However intense competitors from China drove down costs a lot that it turned economically unviable. Mountain Go stopped manufacturing in 2002. After altering arms, Molycorp went public in an IPO in 2010, however filed for chapter 5 years later.
Litinsky had invested $100mn in Molycorp’s debt. Its Chapter 11 submitting kicked off a contentious chapter continuing, with collectors attempting to ship the mine to reclamation.
Litinsky mentioned he foresaw that the rise of Tesla and the rising variety of electrical autos on the highway made uncommon earths mining a smart wager, and in the end gained management of the mine. MP Supplies was based in 2017 to amass the mine and restart operations.
“It was like, congratulations, you’ve gained a busted mine,” he mentioned in a 2022 interview. “However we at all times believed within the long-term secular theme round electrification and its significance to nationwide safety.”
MP Supplies turned a publicly traded firm in late 2020, as a part of a Spac cope with Fortress Worth Acquisition Company, which raised $545mn. A $45mn grant from the Pentagon helped restart the mine, on prime of greater than $1bn of personal capital.
The corporate’s share worth misplaced greater than 70 per cent of its worth from 2021 to 2024 as China pushed extra provide on to the market and commodity costs plummeted.
However within the background, Litinsky was trying to Washington. After going public, the corporate accelerated its political spending, which reached $750,000 in 2024, in response to information from Open Secrets and techniques, a Washington non-profit that tracks the circulation of cash in politics.
MP Supplies “has been engaged on this for years behind the scenes”, mentioned Drew Horn, chief govt of GreenMet Advisory. “That is the end result of concepts and planning going again to earlier than the Trump marketing campaign gained the election.”
The corporate was rattled in April by China’s retaliatory 125 per cent tariffs on US merchandise, which prevented it from sending its uncommon earth ores there.
The cope with MP Supplies won’t clear up the US uncommon earths drawback completely. The geology of the mine implies that its primary output is gentle uncommon earths, and fewer of the heavy uncommon earths which might be important for everlasting magnets. It might should import some ores containing heavy uncommon earths, resembling dysprosium and terbium, in response to Gareth Hatch, principal guide on the Strategic Metals Advisory Council.
Regardless of the drawbacks, many say the deal has already remodeled the way in which American mining firms take into consideration working with the federal government.
The Pentagon’s funding “sends a fairly robust sign that the federal government is prepared to . . . take a step past simply typical safety” for industries and supplies crucial to nationwide safety and defence, mentioned Laura Taylor-Kale, former assistant secretary of defence for industrial coverage throughout the Biden administration.
“There’s at all times been all these interventions, however they’ve been slightly under the radar,” mentioned Todd Tucker, director of business coverage and commerce on the Roosevelt Institute think-tank. “I feel what’s totally different is that they’re being so express about it.”
Further reporting by Amelia Pollard and Camilla Hodgson
