Earlier this week, big news out of China sent shockwaves through the rare earth sector as the country announced it would be consolidating several mining operations in order to form a large, state-owned company focused on rare earth mining. This morning has brought an exciting new development, as MP Materials (NYSE:MP), a leading name in U.S. rare earth mining, will be partnering with another industry leader to help fill a growing supply chain need. MP stock has reacted well to this news, continuing what has been an overall solid week of growth.
What’s Happening With MP Stock?
Yesterday, it was announced that MP Materials would be partnering with General Motors (NYSE:GM) to supply rare earth alloy and magnets to the automotive producer, all sourced and manufactured in the U.S. All such materials will be used to help power GM’s Ultium Platform, an initiative that will be the cornerstone of the auto giant’s expansion into electric vehicle (EV) production. Additionally, MP will be constructing a new mining facility in Fort Worth, Texas. This news came in the form of one announcement, but it provides two reasons for MP sock to rise.
This morning began with MP shooting up, and although it’s come down a bit, it’s currently up 3.32%. Even with the recent news out of China, the stock is still up by more than 13% for the week. Despite some turbulence in late November, MP is still up by more than 20% for the month. The news has also been good for GM stock, which is up almost 3% today as of this writing.
Why It Matters
General Motors has been exploring the EV sector throughout the past year. It recently made headlines after acquiring a 25% stake in electric boat producer Pure Watercraft. The company is clearly focusing its efforts on establishing itself as a key player in the EV race, particularly as its rival Ford (NYSE:F) maneuvers to pull ahead.
This partnership will likely prove important for both companies, but particularly so for GM. A key component of the company’s Ultium Platform is the “flexible battery architecture” behind it. However, as we all know, the current supply chain crisis is posing complications for companies producing EV batteries and their components. EV stocks are booming, but the only thing that threatens to derail their progress is an inability to obtain the parts they need.
As MP CEO James Litinsky recently told CNBC’s Jim Kramer, though, this partnership could form a cornerstone of supply chain construction and strengthening in the U.S. That certainly could be true, and if it is, both MP stock and GM are likely to see significant growth.
What It Means
MP has drawn ire in recent years for outsourcing the materials it mines in the U.S. to China, specifically to Chinese firm Shenghe Resources, which owns a partial stake in the company. For the company to focus its efforts on helping domestic companies build the cars of the future on U.S. soil, though, this is likely exactly what the company needs to help boost both its image and stock prices.
Production of the factory will likely begin in 2023. According to the statement released by the company, the new facility will mine NdFeB alloy and magnets, which will have the potential to power “approximately 500,000 EV motors per year.” If that proves to be the case, it will indeed be good news for both companies. MP stock will be worth watching as the partnership takes shape.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.