Critical Minerals: A Game-Changing US Government Deal and New Investment Opportunities

For years, critical minerals have been surrounded by hype but delivered limited investable opportunities due to narrow markets, Chinese dominance, and pricing risks. That dynamic shifted dramatically in July 2025 with the US Department of Defense’s landmark public-private partnership with MP Materials. This insights piece explores the deal’s structure, why it represents a reset for the sector, and how GERAF is now actively evaluating similar opportunities under our Investment Mandate thematic.

Critical minerals

Critical Minerals Investment – A Game-Changing Deal and Its Implications

Critical minerals have attracted significant attention and government rhetoric for several years. However, much of the earlier enthusiasm lacked the economic substance needed for prudent equity investment. This has changed meaningfully in recent months as the US Government has moved beyond grants and permitting reform to take tangible, commercially sophisticated steps to rebuild secure domestic supply chains.

Previous Challenges in the Sector

Until recently, Western governments (including the US, Europe, and Australia) primarily supported critical minerals through non-dilutive funding and efforts to accelerate permitting. While helpful, these measures did not address core commercial hurdles:

• Narrow, bilateral markets — Unlike broad commodities such as oil or copper, many critical minerals are niche products sold to one or two major customers.

• Heavy reliance on China — China controls over 90% of global processing capacity and effectively sets prices, creating significant risk for producers and equity investors.

These structural issues made the sector unattractive for capital protection and alpha generation. As a result, GERAF had not prioritised critical minerals investments until now.

The Transformational MP Materials – DoD Deal (July 2025)

The US Department of Defense’s partnership with MP Materials (NYSE: MP), announced in July 2025, marks a clear policy pivot. This is not traditional subsidy support — it is a sophisticated, equity-like commercial arrangement that de-risks the entire supply chain.

Key elements of the deal include:

1. Price Floor and Profit-Sharing Mechanism — A 10-year offtake agreement for NdPr (Neodymium-Praseodymium) products with a pricing floor (reported at $110/kg) that provides revenue certainty while allowing shared upside. This directly underwrites the upstream development needed for magnet production.

2. Significant Financing Package —

   • $150 million direct loan from DoD for heavy rare earth separation expansion.

   • $400 million in convertible preference shares plus warrants, potentially making the DoD MP’s largest shareholder (up to ~15%).

   • $1.0 billion in committed financing from JPMorgan and Goldman Sachs for the new magnet plant.

   • A subsequent $650 million equity raise.

3. Downstream Offtake — A 10-year commitment for 100% of the magnets produced at the new “10X Facility.”

Together, these components provide the capital, offtake certainty, and pricing stability required to build a viable domestic industry. The deal enables MP to scale to approximately 10,000 tonnes per annum of NdPr production capacity, establishing the foundation for onshore rare earth magnet manufacturing in the US.

This announcement came shortly after China imposed further restrictions on rare earth exports, underscoring the strategic urgency.

Market Reaction and Broader Implications

The market has responded strongly — MP Materials’ share price has approximately tripled since before the deal was announced, putting US taxpayers “in the money” on their investment. This validates the commercial viability of the structure.

The deal represents a reset in how governments can support critical minerals:

• It shifts from grants to true public-private partnership with aligned incentives.

• It creates bankable revenue visibility, dramatically improving project economics.

• It reduces China dependency risk for both defence and commercial sectors (EVs, wind turbines, robotics, etc.).

GERAF’s Positioning

We view this as a pivotal development that opens a new investable universe within the critical minerals space. GERAF has begun dedicating significant research time to identifying similar opportunities — those with strong government or offtake backing, pricing mechanisms, and clear paths to de-risked cash flows. These will sit under our Investment Mandate (IM) thematic.

Conclusion

The MP Materials–DoD partnership demonstrates that critical minerals can transition from speculative hype to investable, strategically vital assets. As Western nations accelerate efforts to secure supply chains, we expect more structured deals of this nature. This creates exciting opportunities for disciplined investors who can separate policy-backed winners from the rest of the field.