Rare earth mining company MP Materials Corp came public on the NYSE in November 2020 through a SPAC reverse merger backed by “SPAC King” Chamath Palihapitiya.
The company was able to sell itself to investors touting the fact that MP is the biggest rare earth producer in the western world and the only feasible competitor to Chinese producers.
In reality, we believe that this is nothing more than a smoke and mirrors show. We found that Shenghe, a related party that accounts for 99% of MP’s revenue, and a significant shareholder, can be traced back to the Chinese central government.
Biden’s plan to bring back rare earths theoretically would lead to MP as they are the only American producer. However, our research shows that MP in reality remains under the control of the Chinese government.
MP is the second iteration of the same mining venture (Molycorp) that previously ended in bankruptcy. However, Chamath and his friends were able to bring MP public again at a 300x valuation increase in only three years without significant business improvements.
When comparing MP and Molycorp side by side, it appears that MP’s current plan is almost an identical copy of Molycorp’s failed Project Phoenix from almost 10 years ago.
MP’s mine generates nowhere near the economic essence needed to support the current valuation due to the fact that MP mostly mines less valuable rare earth, namely Cerium and Lanthanum. It does not participate in the favorable trend in rare earth prices the same way competitors do.
The projections that MP puts forth seem completely unattainable, and the company needs to incur capital expenditures that might lead it back into bankruptcy.
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