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MP Materials Initiation Report

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The fundamentals in brief:

  • The company operates the Mountain Pass rare earths mine in California, responsible for 15% of global rare earths supply. It is the one of two substantial sources of rare earths outside China/ Myanmar. Rising geopolitical tensions have led to increased US government funding for critical material projects, putting a spotlight on this sector. The Biden admin recently imposed tariffs of Chinese supply, further elevating investor attention to stocks in this industry.

  • Gina Rinehart. The Aussie mining magnate holds a 5.31% stake. She also controls 5.82% of Lynas Rare Earths (LYSDY, LYC.AX), the other rare earths producer with mines in Australia and a processing facility in Malaysia.

  • Strategic entities (including Gina) own 26.2% of MP, with institutions holding a further 61%. This is a $2.9B market cap company with average daily volume of 4.15 million shares, which is about $73M in traded value. A return of investor interest should see the share price soar. Lynas has an OTC listing in the US, making it less accessible. US buyers are going to allocate to MP over Lynas. There is a rare earths ETF (REMX) but its top holding is a lithium producer and its AUM is under $350M, making MP a more convenient play. Also, the REMX ETF has a lot of exposure to China.

  • Rare earths are a terrible, terrible long term investment. But they spike as crazily as crypto when investor fever ratchets up. The primary trend is up, which makes this an opportune time to buy in.

An oversold stock in an uptrend. A rare beast.

Good Trading!


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