Best bet on Rare Earth - Currently priced to perfection, invest if thesis holds at $35-40

Vertical Integration, Sovereign Backing, and Asymmetric Upside. CURRENTLY PRICED TO PERFECTION - INTERESTING AT $35-40

MP Materials represents the highest conviction idea in the sector for 2026. The market is currently pricing MP as a mining company, ignoring its imminent transformation into a high-margin industrial manufacturer. The "10X Facility" partnership with the Department of Defense (DoD) 48 fundamentally de-risks the downside while providing explosive upside.

We have modeled three scenarios for MP Materials through 2030 to illustrate the potential re-rating.

Scenario Analysis: 2030 Financial Projections

Bear Case (Commodity Trap)

NdPr Price (Avg)$110/kg (DoD Floor)

Magnet ASP$140/kg

Magnet Volume5,000 MT (50% utilization)

Surplus NdPr Sales3,800 MT (Sold to 3rd party)

HREE Revenue$80M (Ramp delays)

Total Revenue$1.19 Billion

EBITDA Margin 35%

EBITDA$416 Million

Target P/E (2030)15x

Implied Market Cap~$6.2 Billion

Base Case (Industrial Champion)

NdPr Price (Avg)$135/kg

Magnet ASP$165/kg

Magnet Volume 8,500 MT (85% utilization)

Surplus NdPr Sales 2,600

MTHREE Revenue$160M (200MT @ $800/kg)

Total Revenue$1.91 Billion

EBITDA Margin 45%

EBITDA$860 Million

Target P/E (2030)20x

Implied Market Cap~$17.2 Billion

Bull Case

NdPr Price (Avg)$175/kg (Shortage)

Magnet ASP$200/kg

Magnet Volume10,000 MT (Full capacity)

Surplus NdPr Sales2,100 MT

HREE Revenue$200M (High pricing)

Total Revenue$2.56 Billion

EBITDA Margin 55%

EBITDA$1.41 Billion

Target P/E (2030) 25x

Implied Market Cap~$35.2 Billion

The "Backing" - Operational Reality vs. Market Perception

1. Revenue Growth: The Bridge to $2 Billion

Currently, MP Materials generates revenue primarily by selling separated oxides, with 2025 annualized revenue in the ~$250M range due to the transition away from selling concentrate to China. This artificially depresses current valuation multiples.

• The Catalyst: The Fort Worth magnet facility is scaling to 10,000 metric tons (MT) of finished magnets annually by 2028-2030.48
• The Math: 10,000 MT of NdFeB magnets equates to 10 million kg. At a conservative Base Case price of $165/kg (a premium over raw oxide due to manufacturing value-add), the magnet division alone generates $1.65 Billion in revenue.
• Surplus Oxide: Mountain Pass produces ~6,000-7,000 MT of NdPr oxide annually.49 The 10,000 MT magnet facility will consume approx. 3,300-4,000 MT of NdPr metal (equivalent to ~4,000-5,000 MT oxide). This leaves a surplus of ~2,000 MT of NdPr oxide to be sold into the open market. At a Base Case price of $135/kg, this adds $270 Million in high-margin revenue.
• Heavy Rare Earths: The new HREE circuit commissioning in mid-2026 targets 200 MT/year of Dysprosium (Dy) and Terbium (Tb). With Dy prices projected to hit $1,100/kg by 2034 3, a conservative basket price of $800/kg for Dy/Tb yields another $160 Million.

2. Profit Margins: The Vertical Integration Premium

• Current State: Mining margins are volatile. Q3 2025 saw reduced profitability due to ramp-up costs.
• Future State (2030): Vertical integration captures the spread between oxide ($135/kg) and magnet ($165/kg+). Furthermore, MP's "single-site" efficiency at Mountain Pass (co-located mining and separation) gives it the lowest cost structure in the West.
• DoD Floor: The 10-year price floor of $110/kg for NdPr acts as a guaranteed stop-loss on margins. Even in a Bear market, MP cannot sell below this price to the DoD, guaranteeing coverage of cash costs (estimated ~$47-$50/kg) and ensuring positive EBITDA.
• Target: We project long-term EBITDA margins to expand to 45-50%, rivaling high-end specialty chemical manufacturers.

3. Valuation Re-Rating

• Current: Trading at ~24x forward sales (distorted by low transition revenue).16
• Future: As MP proves its ability to manufacture magnets at scale, it will shed its "miner" multiple (typically 8-12x EBITDA) and adopt a "defense industrial" or "high-tech manufacturing" multiple (20x-25x P/E).
• Conclusion: In our Base Case, MP Materials triples its market capitalization by 2030. In the Bull Case, driven by a structural NdPr shortage, it offers 5x upside.