MP Materials vs. USA Rare Earth: What's the Better Long-Term Play?
Key Points
MP Materials owns and operates the only rare earth mine in the U.S.
USA Rare Earth owns the rights to the Round Top deposit in Texas, but it likely won't open a mine until 2028.
In today's high-tech world, much of modern life runs on a tiny sintered magnet made from rare-earth elements. Indeed, whatever device you're reading from right now -- unless you printed this on paper -- has one of these magnets, which links it to a global race for critical materials that the U.S. has struggled to keep up in.
Image source: MP Materials.
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Many of these high-performance magnets are produced in China, but two U.S. companies are both vying to become the U.S.'s main supplier of them: MP Materials (NYSE: MP) and USA Rare Earth (NASDAQ: USAR).
Between these two rare-earth miners, MP Materials has the clear advantage right now.
MP owns and operates the only large-scale rare earth mine in the U.S. -- the Mountain Pass mine in California. True, USA Rare Earth owns the rights to Round Top -- another site rich in rare earths -- but it hasn't started mining there, nor will it likely begin until at least 2028.
The mention of Round Top brings us to a subtle point. It's tempting to think that USA Rare Earth will open Round Top smoothly, and that it will, with the $3.1 billion it has in funding, overcome setbacks and meet the 2028 deadline.
But opening a new mine rarely happens without difficulty. Just look at Mountain Pass: It took over 50 years -- and caused one bankruptcy -- before it became what it is today. For USA Rare Earth, which has zero prior hands-on experience opening mines, the next two years will be anything but straightforward.
Not only does MP Materials have a working mine, but it also has a magnet factory. The company recently reported a profitable fourth quarter, and it's breaking ground on its second magnet factory in 2026.
To be sure, the U.S. rare-earth supply chain is weak enough that both companies could thrive together. That may happen in time. For the moment, however, MP Materials seems like the better long-term mining stock for sustaining growth.
Steven Porrello has positions in USA Rare Earth. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.