In late April, on the back of China’s new export controls, the U.S. Department of Defense (DoD) and MP Materials began discussions on how to secure a U.S.-based supply chain of rare earth magnets — essential resources for the production of everything from F-35 jets to iPhones.

That discussion evolved into a deal that saw the DoD become the largest shareholder and customer of MP Materials, which is America’s only fully integrated rare earth magnets producer. This first-of-its-kind arrangement, in which J.P. Morgan was the sole financial advisor and lead left arranger on $1 billion of committed financing, carries key strategic implications for the U.S. and nearshores a critical industry at a time when the evolving geopolitical landscape could disrupt supply chains around the world.

The DoD rarely takes direct equity interests — it mostly issues loans or grants — so there was no blueprint for this arrangement, which included complex commercial, financial and regulatory elements.

A race against time  

The parties involved reached an agreement on scope early on: both the government and the client were interested in protecting MP Materials’ autonomy and continued growth as a private entity.

However, there were a few hurdles to overcome. For example, the project needed to include funds and planning for the new 10X facility, but things were moving so fast that a site had not even been picked yet, creating difficulties for milestone and timeline-setting.

“This administration wanted to move as absolutely fast as possible while being extremely thorough because we all knew what we were creating was going to be precedent-setting,” said Kevin Colborne, who oversees North American Mining for the Commercial & Investment Bank at J.P. Morgan. “We believe this transaction is intended as a possible blueprint for other industries and companies of national security interest.”

On the finance side, the complex deal demanded an entirely custom structure: a project-based, loan-oriented financing package with an acquisition element. “Everything was built from scratch, fit for purpose and just intense over those eight weeks. The way it came together in the end was extremely fitting for all parties, but intense to the last second,” Colborne said. 

A template for future public-private partnerships  

With the government looking to continue this manner of investment, Castaldo noted that the deal has positioned J.P. Morgan as an early expert in advising on and financing public-private partnerships. He said the firm will be looking to mobilize around other, similar situations in different sectors.

He also reflected that his biggest takeaways from the landmark deal was a sense of awe at the level of work and effort that happened behind the scenes from such a wide area of expertise — at the client, within the government and at J.P. Morgan. “A lot of people were involved,” he said. “And they were the right people.”