My Brain Food This Week...

Dec 29, 2023

(Mansa Sithole)

Key takeaways:

The global transition to clean energy, EVs, and industrial automation is driving a surge in demand for rare earth elements. These elements, including Lanthanum, Cerium, Neodymium, and others, are essential for various technologies such as EV batteries, LED lighting, and permanent magnets used in motors for EVs and robots.
MP Materials, the only significant rare earth producer in the United States, is strategically positioned to capitalize on the increasing demand for rare earths. The company is implementing a three-stage approach to build a vertically integrated supply chain, culminating in the production of rare earth magnets. The third stage involves a joint venture with General Motors to manufacture these magnets in a facility in Fort Worth, Texas, making MP Materials the first fully integrated source of supply for rare earth magnets in the Western Hemisphere.
A confluence of factors, including the global effort to curb carbon emissions, the rise of EVs, and the increased adoption of robots, presents a significant market opportunity for MP Materials. With a focus on reducing supply chain risks and enhancing domestic U.S. production of rare earths, the company aims to secure a substantial market share, potentially leading to a Western hemisphere monopoly for rare earth supply. At an enterprise value of $4 billion, there is unrealised value for MP Materials, especially considering the anticipated growth in global manufacturing driven by these technological shifts.